While Memphis waits for Methodist Le Bonheur Healthcare to complete a promised review of its debt collection practices, the National Consumer Law Center (NCLC) has advice on what the city’s largest nonprofit health system should consider doing next.
Methodist recently announced the hospital was suspending court collection activities for 30 days amid a furor over suing its own employees for unpaid medical bills and a pattern of aggressive collections that mired low-wage, insured workers in crushing debt linked to hospital fees, plus court costs and interest payments.
There are steps Methodist should take to correct the situation, said Jenifer Bosco, a staff attorney at NCLC who wrote the Model Medical Debt Protection Act, which has been partially adopted in Oregon, including extending sliding scale assistance to patients whose household income is “more than 200% of the federal poverty guidelines and not more than 400 percent of the federal poverty guidelines.” The 2017 act aims to encourage states to pass laws that strengthen the type of financial assistance provisions already found in the Affordable Care Act and offer common sense debt collection practices.
“They could immediately decide to stop suing patients,” Bosco said. “They could decide to stop garnishing wages. It’s not that they have to do those things.”
The revelations about the hospital’s practices came after a monthslong investigation by ProPublica-MLK50 that found Methodist filed more than 8,300 lawsuits in Shelby County General Sessions Court over a five-year period, outpacing collections lawsuits filed by other local hospitals. Only one other entity, Midland Funding, which buys unpaid debt, filed more frequently in General Sessions Court.
Methodist flouted IRS rules mandating that financial assistance policies be posted prominently in nonprofit hospitals’ public spaces, and the healthcare system owns its own debt collection agency, which experts said is rare but not unheard of. All this was happening while Methodist, affiliated with the United Methodist Church, brought in $86 million more than it spent in 2018, bond revenue statements show. Because nonprofit hospitals are generally exempt from federal, state and local taxes, the federal government expects them to offer substantial community benefit, which includes charity care and financial assistance for patients who have trouble affording their hospital bills.
Bosco shares the top five actions Methodist can take during its 30-day review period to come out with new policies and procedures in keeping with its mission and federal law.
1. Stop using the courts.
In addition to uncovering Methodist’s aggressive pursuit of payments through the courts, the investigation also found Methodist secured garnishment orders in 46% of cases filed from 2014 through 2018, compared with 36% at Regional One and 20% at Baptist.
Indeed, hospitals do have discretion in these matters. As previously reported by MLK50, the St. Joseph, Missouri, Heartland Regional Medical Center, now Mosaic Life Care, changed its financial assistance policy following a ProPublica investigation that revealed the nonprofit hospital was quietly suing thousands of low-income patients. Mosaic instituted a medical grace period, NPR reported, and 3,342 people got a total of $17 million in debt relief.
2. Cap runaway interest.
Methodist has the option of capping interest rates at no more than the Federal Reserve rate, which is currently 2.25% to 2.5%, or eliminate interest altogether.
“Nobody’s making them charge interest,” Bosco said.
3. Extend financial assistance to the insured.
Unlike peer hospitals throughout the country, Methodist’s financial assistance policy is an outlier because it ignores patients with any form of health insurance, regardless of those patients’ out-of-pocket costs. Methodist can stop limiting its financial assistance policy to the uninsured only and provide assistance to people who have low and moderate incomes. One particular conundrum underinsured patients find themselves in is being referred by their in-network hospital to an out-of-network provider, whose charges aren’t covered by insurance, leaving patients with large bills.
“They could provide much stronger financial assistance policies than they have,” Bosco said. “It looks like they have the bare minimum, and it only applies to uninsured people who are low or moderate income. The Model Medical Debt Act recommends some assistance for people with incomes up to 600% of the federal poverty level. A lot of people who have medical debt are basically underinsured.”
For example, the federal poverty level for a household of one is $12,490. Under the Model Medical Debt Act, a single-person household could earn up to $74,940 yearly and still qualify for financial assistance. Moreover, the federal poverty level for a household of two people is $16,910. That means that household could bring in $101,460 a year and still qualify for help.
4. Rein in the Methodist-owned debt collection agency.
As Methodist reviews its debt collection practices, Bosco said officials shouldn’t overlook what it is asking of its own debt collection agency, Consolidated Recovery Systems, a subsidiary of Revenue Assurance Professionals. Chances are a cultural shift among the very people who pursue these unpaid medical debts is critical to the change Methodist may be seeking in its review process.
“Their focus shouldn’t be garnishing $3.66 from a person who works at T.J. Maxx,” Bosco said about aggressive collection practices Carrie Barrett, 63, was subjected to when she was sued by Methodist. Her two-night hospital stay grew to $33,000 from $12,019, the investigation found. She’s never made more than $12 an hour.
“I certainly have heard of others who do try to work things out with debts and approach things in a more fair manner,” Bosco said. “If the hospital is in charge of the collection subsidiary, it might be up to them to decide what approach they want to take in how aggressive they want these employees to be.”
5. Do a thorough job of screening for financial assistance eligibility.
It’s one thing to have a strong policy on the books; it’s another to implement it well, Bosco said.
One example of the incongruence of policies vs practices is a hospital Bosco recalls that required patients to sign a document before treatment promising to pay their bill. That same hospital used that agreement as a bludgeon to try and force poor patients to pay up.
“The hospital could make a commitment to do a thorough and careful job of screening patients for financial assistance before billing them for services,” she said.
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The Methodist Debt Machine Series
This story is brought to you by MLK50: Justice Through Journalism, a nonprofit reporting project on economic justice in Memphis. Support independent journalism by making a tax-deductible donation today. MLK50 is also supported by the Surdna Foundation, the Southern Documentary Project and Community Change.