Press Release
Despite State Funding to Treat the Poor, NY’s Nonprofit Hospitals Filed More Than 30,000 Lawsuits Against Patients from 2015 to 2019
CSS urges state lawmakers to pass legislation to protect patients
New York’s nonprofit hospitals receive billions of dollars in state support while paying no taxes. This support includes more than $1.1 billion in funding to offset uncompensated care losses and to encourage hospitals to provide financial assistance to uninsured and qualified low-income patients. Despite this significant financial support, a Community Service Society (CSS) analysis found that hospitals filed suits against more than 30,000 New Yorkers in the past four years for unpaid medical bills in the 26 counties analyzed.
The ten hospitals that sued the most patients in 2018 received $55 million more in state aid than they offered in financial assistance to uninsured and poor patients, according to a new CSS report, Discharged Into Debt: New York’s Nonprofit Hospitals are Suing Patients.
“It’s unconscionable that some of our hospitals, which are charitable institutions under the law and receive generous financial support and tax breaks from the state, choose to sue people for what amounts to peanuts,” said David R. Jones, President and CEO of the Community Service Society. “For low- and moderate-income patients, a default judgment of $300, $500 or even $1,000 is devastating. This is someone’s rent money, mortgage payment, tuition payment and food bill. Reform is needed to deter these practices and protect patients.”
Debt collection lawsuits allow hospitals to seize assets, garnish wages, freeze bank accounts and put liens on homes of patients who cannot pay for health care. Hospitals use professional debt collection firms in court proceedings while most patients are unrepresented, resulting in large numbers of default judgments. Most hospitals permit patients only 8 months to apply for financial assistance and yet under state law, the hospitals have up to six years to sue patients—and at a punishing 9 percent commercial interest rate. A CSS review of 370 civil court cases determined that many suits are brought against patients for vague or confusing bills. For example, one bill included a charge of $6,120 for something itemized as “medical services.” The court case files rarely include any documentation indicating how the suing hospital arrived at the amount claimed.
“In the midst of the biggest public health crisis we’ve ever experienced, hospitals and state officials should establish a moratorium on patient debt collection,” said Elisabeth R. Benjamin, Vice President of Health Initiatives at CSS and co-author of the report. “Worry about racking up debts should not prevent a patient from getting diagnosed or treated for the novel coronavirus.”
“No one should be scared to seek healthcare because of costs,” said Amanda Dunker, Senior Health Policy Associate at CSS and co-author of the report. “These patients turned to New York’s nonprofit hospitals for help at a vulnerable moment in their lives and ended up in court. New York must start holding these hospitals accountable for their billing and debt collection practices.”
In response to consumer complaints about increased aggressive collection practices from nonprofit hospitals, CSS conducted a review of 30,818 civil cases filed against individuals by 139 nonprofit hospitals located in 26 counties throughout New York, from 2015 to 2019. CSS researchers used the New York State E-courts public database to create a list of hospitals in each county, analyze the disposition of cases and determine litigation patterns. Researchers also pulled 370 cases from local court houses in the five boroughs. From this data, researchers were able to understand who was being sued, for what amount, where they lived, and case outcomes.
Overall, CSS found that:
- Just a handful of hospitals account for the majority of the 30,000 lawsuits, for example, Northwell Health and its affiliates are responsible for 52 percent of all lawsuits against patients
- Suits are brought for vague and confusing bills often for a relatively small amount – the median amount hospitals sued for was $1,900. The amounts quickly compound; patients can be sued for medical bills up to six years after treatment at a commercial interest rate of nine (9) percent.
- The hospitals that sue patients do not provide enough financial assistance, and most disturbingly, receive more money from New York’s Indigent Care Pool to provide uncompensated care to patients than they actually provide in financial assistance to patients.
- Hospitals use professional debt collection law firms while patients are unrepresented, resulting in large default judgements.
- Given the racial disparities in medical debt burdens in parts of the state, defendants in hospital lawsuits are more likely to be people of color for whom the financial repercussions of court judgements may have a disproportionate impact.
The Patient Medical Debt Protection Act
The practice of suing patients for medical debt is a choice made by individual hospitals and health systems. Many of New York’s peer nonprofit and charitable hospitals throughout the country have agreed to discontinue or reduce the practice of suing patients or to erase patients’ medical debt. They include University of Virginia Hospital, Methodist Le Bonheur in Memphis and University of Pittsburgh Medical Center.
Recognizing the need to level the playing field between litigious hospitals and their patients, the Cuomo Administration has proposed reducing the statutory interest rates in civil judgments from nine percent to the one-year U.S. Treasury rate. The governor has also proposed reducing New York’s statute of limitations for medical debt lawsuits from six years to two years. While these are important steps, New Yorkers need better protections before they end up with medical bills they cannot pay.
CSS supports full adoption of the Patient Medical Debt Protection Act (S6757/A8369), legislation currently moving through the New York State legislature. One of the legislation’s requirements is that hospitals consolidate charges by all providers into one detailed itemized bill provided within seven days of discharge. Other parts of the bill would prevent patients from being charged facility fees that are unrelated to any medical service, being forced to sign vague liability forms, or receiving surprise out-of-network bills.
The legislation would also eliminate the ability for hospitals to evade the spirit of the state’s Hospital Financial Assistance Law by requiring hospitals to adopt one uniform standardized application and modernizing the law’s eligibility standards. As the threat of coronavirus stokes fears of exposure across the state, CSS is calling for a moratorium on lawsuits for medical debt so that patients are not deterred from seeking medical care due to outstanding default judgments.
Economic security is an important component to overall patient health. It is time for New York State policymakers and hospital industry leaders to re-evaluate patient medical debt collection practices to ensure that patients are treated fairly and compassionately, even after discharge.
On November 13, 2020, CSS VP of Health Initiatives Elisabeth Benjamin joined The Capitol Pressroom with David Lombardo to discuss how the COVID-19 pandemic has exacerbated the medical debt crisis.