Hospitals curb patient lawsuits

At Carolinas Medical Center in Charlotte, lawsuits against patients have dropped by about half since 2010.
At Carolinas Medical Center in Charlotte, lawsuits against patients have dropped by about half since 2010. rlahser@charlotteobserver.com

North Carolina hospitals have sharply curtailed their use of a controversial practice – filing lawsuits against patients who don’t pay their bills.

An analysis by The Charlotte Observer and The News & Observer of Raleigh found that lawsuits by the state’s hospitals dropped by more than 45 percent from 2010 through 2014 – from about 6,000 to 3,200.

At Carolinas HealthCare System, the state’s largest hospital system, the drop has been even sharper. The Charlotte-based hospital system filed about 1,400 lawsuits against patients last year – roughly half the number it filed in 2010.

One hospital, Iredell Memorial in Statesville, has stopped filing lawsuits against patients. In 2013, it was one of the state’s most litigious hospitals, filing about 270 bill-collection lawsuits. Last year, it filed none.

Lawsuits have also slowed to a trickle at two other hospitals: High Point Regional Hospital, which has recently joined UNC Health Care, and Lexington Medical Center, owned by Wake Forest Baptist Health.

Statewide, such lawsuits declined rapidly after a joint investigation into the state’s nonprofit hospitals by the two newspapers.

Those stories, published in 2012, showed that the state’s nonprofit hospitals had filed more than 40,000 bill-collection lawsuits against patients over a five-year period. Many of those patients were uninsured, and a significant number should have qualified for free hospital care.

Critics contended those hospitals were financially ruining people they could afford to help – and straying from their charitable missions. Most North Carolina hospitals are tax-exempt – a distinction that saves them millions each year. In exchange, these nonprofits are expected to provide financial help to those without the means to pay.

Adam Linker, co-director of the North Carolina Justice Center’s Health Access Coalition, said the reduction in lawsuits is “obviously positive for consumers.”

“Your health care provider coming after you is tremendously stressful,” he said. “Having thousands fewer people in that situation is a tremendous benefit for the people of North Carolina.”

Laws change practices

Experts attribute the changes to several developments. They say the newspapers’ investigation helped spur new scrutiny of hospital bill-collection practices.

State legislators responded by passing a law that requires hospitals to curb some of their more aggressive bill-collection practices. Among other things, that law prohibits hospitals from putting liens on houses co-owned by the spouses of patients – at least until one of the spouses dies.

It also bans hospitals from referring unpaid bills to collection agencies while a request for charity care is pending.

“I really think it’s the public scrutiny that’s causing (the reduction in lawsuits),” Linker said. “With the previous (newspaper) series, hospitals felt it hurt their credibility in the communities they serve and hurt their credibility with the legislature.”

The federal Patient Protection and Affordable Care Act, meanwhile, bans nonprofit hospitals from engaging in “extraordinary collection actions.” Rules recently adopted by the U.S. Treasury Department stipulate that nonprofit hospitals cannot file lawsuits against patients or put liens on their houses before determining whether they are eligible for financial assistance.

State Attorney General Roy Cooper said his office has seen a decline in complaints related to hospital billing and collection practices. In 2014, the office fielded 88 such complaints – down from 115 the previous year.

Still, spokesperson Noelle Talley says, the office has recently received some complaints from hospital patients that “have given us cause for concern.” Earlier this month, the Attorney General’s office notified five hospitals and hospital systems about possible violations of state billing and collection requirements.

Most North Carolina hospitals don’t regularly sue patients. Novant Health, the nonprofit chain that owns Novant Health Presbyterian Medical Center and 14 other hospitals, has a policy against doing so. Novant’s hospitals use collection agencies, though.

At Carolinas HealthCare, officials say they’re filing fewer lawsuits largely because they’ve made it easier for patients to pay their bills – with discounts, no- and low-interest payment plans and help qualifying for government programs such as Medicaid. Even when the system does sue, it never forces people from their homes, officials say.

At Iredell Memorial, the new state law governing collection practices prompted the hospital to stop suing patients, representative Kelley Daspit said.

“There are many areas of the law that remain unclear, and as a result, we decided as an organization not to pursue them any longer,” Daspit said.

UNC Health Care, which runs UNC Hospitals in Chapel Hill along with seven other hospitals, said it stopped initiating all new bill-collection lawsuits in 2007.

Like Carolinas HealthCare, UNC Health Care used to file renewals on old judgments, which typically expire after 10 years. It stopped doing so in January 2014.

“We analyzed the cost of filing renewals and decided it wasn’t worth the expense or time,” system spokesman Alan Wolf wrote.

Wolf said he expected UNC’s affiliated hospitals to follow the system’s financial assistance policies. High Point Regional, for example, has stopped filing small claims complaints, he said.

Statewide, hospitals have been generous to needy patients, providing more than $1 billion annually in charity care, the N.C. Hospital Association said.

“Hospitals are committed to their mission to provide care to everyone in the communities they serve, regardless of their ability to pay,” a representative of the association wrote.

That includes identifying patients who qualify for financial assistance from hospitals or from the government, the association said.

A kinder bill collector

The decline in lawsuits by North Carolina hospitals appears to mirror what is happening nationally, according to Mark Rukavina, a Boston consultant who is advising hospitals how to comply with new federal laws governing financial assistance, billing and collections.

He said a number of developments – including passage of the Affordable Care Act and the new IRS rules – have prompted hospitals nationwide to become more judicious in their debt collection policies.

Some hospitals say they will no longer sue patients, Rukavina said. Others say they will limit lawsuits to those who can clearly afford to pay.

Although hospitals say they’re offering more “patient-friendly” payment options, bill collection practices continue to raise questions about the way some patients are treated.

Charlotte bankruptcy lawyer David Badger said he hasn’t seen many patients being sued by hospitals lately. But many are still being pursued by collection agencies.

“The bill collector doesn’t go away,” Badger said, “but the bill collector is kinder and gentler.”

Alexander: 704-358-5060