Hospital relentlessly sues poor
Nonprofit that owns collection agency brought 8,300 lawsuits for unpaid medical bills in 5 years
In July 2007, Carrie Barrett went to the emergency room at Methodist University Hospital, complaining of shortness of breath and tightness in her chest. Her leg was swollen, she’d later recall, and her toes were turning black.
Given her family history, high blood pressure and newly diagnosed congestive heart failure, doctors performed a heart catheterization, threading a long tube through her groin and into her heart.
Her share of the two-night stay: $12,109.
Barrett, who has never made more than $12 an hour, doesn’t remember getting any notices to pay from the hospital. But in 2010, Methodist Le Bonheur Healthcare sued her for the unpaid medical bills, plus attorney’s fees and court costs.
Since then, the nonprofit hospital system affiliated with the United Methodist Church has doggedly pursued her, adding interest to the debt seven times and garnishing money from her paycheck on 15 occasions.
Barrett, 63, now owes about $33,000, more than twice what she earned last year, according to her tax return.
By Wendi C. Thomas Viewpoint: CEO offers response. 4A
“The only thing that kept me levelheaded was praying and asking God to help me,” she said.
She’s among thousands of patients the massive hospital has sued for unpaid medical bills. From 2014 through 2018, Methodist filed more than 8,300 lawsuits, according to an Mlk50-propublica analysis of Shelby County General Sessions Court records. Older cases like Barrett’s, which dates back nearly a decade, remain on the court’s docket.
Other hospitals in Memphis and around the country also sue patients. According to a study published Tuesday in the Journal of the American Medical Association, researchers found more than 20,000 debt lawsuits filed by Virginia hospitals in 2017. More than 9,300 garnishment cases occurred that year, and nonprofit hospitals were more likely to garnish wages.
But Methodist’s aggressive collection practices stand out in a city where nearly 1 in 4 residents live below the poverty line.
Its handling of poor patients begins with a financial assistance policy that, unlike many of its peers around the country, all but ignores patients with any form of health insurance, no matter their out-of-pocket costs. If they are unable to afford their bills, patients then face what experts say is rare: A licensed collection agency owned by the hospital.
Lawsuits follow. Finally, after the hospital wins a judgment, it repeatedly tries to garnish patients’ wages, which it does in a far higher share of cases than other nonprofit hospitals in Memphis.
Its own employees are no exception. Since 2014, Methodist has sued dozens of its workers for unpaid medical bills, including a hospital housekeeper sued in 2017 for more than $23,000. That year, she told the court, she made $16,000. She’s in a court-ordered payment plan, but in the case of more than 70 other employees, Methodist has garnished the wages it pays them to recoup its medical charges.
Nonprofit hospitals are generally exempt from local, state and federal taxes. In return, the federal government expects them to provide a significant community benefit, including charity care and financial assistance.
Methodist does provide some charity
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This article was produced in partnership with MLK50, which is a member of the Propublica Local Reporting Network. Propublica is a nonprofit newsroom that investigates abuses of power. Sign up for Propublica’s Big Story newsletter to receive stories like this one in your inbox as soon as they are published. To read a longer version of this story, please visit Mlk50.com or Propublica.org care — and pegs its community benefits as more than $226 million annually — but experts faulted it for also wielding the court as a hammer.
“If Warren Buffett walks in and needs a heart-valve procedure and then stiffs the hospital, then yes, you should sue Warren Buffett,” said John Colombo, a University of Illinois College of Law professor emeritus who has testified before Congress about the tax-exempt status of nonprofit hospitals. “I can’t think of a situation in which thousands of your patients would fit that.”
Several nonprofit hospitals don’t sue patients at all, such as Bon Secours Hospitals in Virginia, which stopped pursuing debt suits in 2007, and the University of Pittsburgh Medical Center, which includes more than 20 facilities.
Some of Methodist Hospital’s cousins — health systems affiliated with the United Methodist Church — also don’t sue patients. That’s the case with Methodist Health System, which operates four hospitals in the Dallas area. The collection policy of the seven-hospital Houston Methodist system states: “At no time will Houston Methodist impose extraordinary collection actions such as wage garnishments,” liens on homes, or credit bureau notification.
“We are a faith-based institution and we don’t believe taking extraordinary measures to seek bill payments is consistent with our mission and values,” a Houston Methodist spokesperson said by email.
Methodist Le Bonheur, which says it is the second largest private employer in Shelby County, boasts on its website that it’s committed to a “culture of compassion.” Last year, Fortune magazine ranked the hospital among the 100 Best Companies to Work For.
Methodist declined repeated requests to interview its top executives.
Instead it sent a statement that said, “Outstanding patient debts are only sent to collections and then to court as a very last resort, and only after continued efforts to work with the patients have been exhausted.”
“We strongly believe in providing exceptional care to all members of the community — regardless of ability to pay.”
Beverly Robertson, who served on Methodist’s board from 2003 to 2012, said she was surprised to learn from a reporter about the hospital’s collection practices. During her lengthy tenure, she said, board members were never informed about the lawsuits against patients.
Lots of lawsuits and garnishments
Between 2014 and 2018, more than 163,000 debt lawsuits were filed in Shelby County General Sessions Court, primarily by debt buyers, auto loan companies and hospitals.
Only one plaintiff, Midland Funding, which buys unpaid debt, sued more frequently than Methodist. (Midland declined to comment.)
Methodist filed more than 8,300 lawsuits, compared with more than 6,700 filed by competitor Baptist Memorial Health Care and just over 1,900 by Regional One Health, the county’s public hospital. St. Jude Children’s Research Hospital, also headquartered in Memphis, doesn’t bill families for care not covered by insurance.
With $2.1 billion in revenue and a health system that includes six hospitals, Methodist leads the market: In 2017, it had the most discharges per year and profits per patient, according to publicly available data analyzed by Definitive Healthcare, an analytics company. Methodist says it has “a hospital in all four quadrants of the greater Memphis area, unparalleled by any other healthcare provider in our region,” plus more than 150 outpatient centers, clinics and physician practices.
The number of lawsuits Methodist files isn’t out of proportion to its size, at least compared to Baptist or Regional One. But where it does stand out is the share of cases in which it seeks a wage garnishment order, an action that can upend the lives of low-wage defendants.
A court-ordered garnishment requires that the debtor’s employer send to the court 25% of a worker’s after-tax income, minus basic living expenses and a tiny deduction for children under 15. The court then sends that payment to the creditor.
Methodist secured garnishment orders in 46% of cases filed from 2014 through 2018, compared with 36% at Regional One and 20% at Baptist, according to an analysis of court records by MLK50 and Propublica. It is unclear what explains this difference.
Turning to the legal system to settle
debts is a choice, not a mandate, said Jenifer Bosco, staff attorney at the National Consumer Law Center, a nonprofit focusing on consumer law for low-income and other disadvantaged people. “A lot of medical debts are just handled through the collections process,” she said. “Certainly some end up in court, but it seems like this hospital is especially aggressive.”
Financial assistance required, but is it offered?
The Affordable Care Act, former President Barack Obama’s signature health care legislation, is best known for expanding access to health insurance coverage. But it also imposed new requirements on nonprofit hospitals, namely that they have charity care policies and share them with patients.
But the rules do not specify how generous those policies must be — and Methodist is among the least generous in the state, according to Mlk50-propublica’s review of policies at Tennessee nonprofit hospitals.
While dozens of hospitals offer free or highly discounted care that helps shield low- and middle-income patients, regardless of insurance status, from crushing debt, Methodist does not.
That’s especially problematic for people with high-deductible health insurance plans, defined by the IRS as those with deductibles over $1,350 for an individual and over $2,700 for a family.
Methodist said it is required by insurers to collect co-payments and deductibles. That said, the hospital added: “We know some insured patients have high copays and deductibles that place a financial burden on the patient. As a mission-driven organization, we will work with these patients seeking assistance.”
Methodist’s financial assistance policy is outdated, said Michele Johnson, executive director of the Tennessee Justice Center, which advocates for expanded health care access.
“Methodist’s rules were written at a time when there was just not this epidemic of underinsured people in the state,” Johnson said. “The reality has changed faster than their policy has changed.”
Methodist said it offers 0% interest payment plans for insured and uninsured patients who have trouble paying their bills, but only offers those before court action commences. Methodist also noted that it provides an automatic 70% discount it provides to those who identify as uninsured and the free care to patients at or below 125% of the federal poverty guidelines, which for a single adult would be just over $15,600. Uninsured patients who earn more than that, but less than twice the poverty limit, are also eligible for discounts.
“We are committed to working with all patients who are struggling with medical expenses. Our desire is to work with patients early in the process to set up a payment plan that meets their individual need,” the hospital said in a statement.
The hospital’s contentions, however, do not match the text of its financial assistance, billing and collections policies or the frequently asked billing questions on the hospital’s website. None of those mention interest-free payment plans.
Methodist, like its peers, also gets assistance from the state of Tennessee to help offset its costs for providing uncompensated care. In the first three months of 2019, the state gave more than $31 million to qualifying hospitals. Of that, Methodist Le Bonheur Healthcare’s hospitals received nearly $5 million, according to a quarterly report submitted to the Tennessee General Assembly.
For years, nonprofit hospitals that sue hundreds of patients have been the subject of investigative reports and lawmakers’ scrutiny.
Aggressive debt collection practices are “contrary to the philosophy behind tax exemption,” Grassley wrote in a September 2017 op-ed for the medical and science news outlet Stat.
“Such hospitals seem to forget that tax exemption is a privilege, not a right. In addition to withholding financial assistance to low-income patients, they give top executives salaries on par with their for-profit counterparts.”
In 2017, Methodist paid its president and CEO, Dr. Michael Ugwueke, $1.6 million in total compensation. That same year, Gary Shorb, the hospital’s CEO from 2001 to 2016, earned more than $1.2 million for serving as Ugwueke’s adviser. In 2018, the hospital brought in $86 million more than it spent, according to an end-of-year revenue bond disclosure statement.
Debt that will follow her to the grave
During her January court hearing, Barrett was ordered to pay $100 a month to Methodist toward her debt.
If she’d had a chance, she said she would have told the judge she was perpetually late on her utility bill and sometimes, she’s had to let her car insurance lapse because she can’t afford it.
Between February and May, Barrett managed to make her payments on time, by shorting other bills and relying on payday loans. But this month, she missed her payment due date.
If Methodist doesn’t add any interest to Barrett’s debt and she pays as ordered, she will pay it off in 330 months. She will be 90 years old. Not long after her day in court, Barrett filed her 2018 taxes. She made $13,800. “It’s in the hands of God now,” she said. “There’s only so much I can do.”
Propublica news applications developer Lylla Younes and research reporter Doris Burke contributed to this report.
Wendi C. Thomas is the editor of MLK50: Justice Through Journalism. Email her at wendicthomas@mlk50.com and follow her on Twitter at @wendi_c_thomas.