Crippling medical debt, and litigation, in report from Duke, state treasurer

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(The Center Square) – A 70-year-old North Carolina couple was billed more than $91,000 for a heart surgery that ballooned to $192,384 with interest charged by Atrium Health. They now expect to work the rest of their lives with no hope of paying off the bill.

“They told me that they would help us, they told me we wouldn’t lose our house,” the unidentified wife told staff at the state treasurer’s office. “Well, that didn’t happen. The hospital took our house.”

In another case, Mission HCA charged a widower $11,232 in interest on an $83,000 bill for colon cancer treatment. Despite insurance through BlueCross BlueShield, the trauma of his wife’s death, and a payment plan in place, the hospital system secured a judgment and seized nearly $92,000 from the sale of the family’s home.

Another 80-year-old couple did not even know there was a judgment worth roughly $90,000 against their house until contacted by the Treasurer Dale Folwell’s office.

The scenarios are among numerous examples outlined by the treasurer’s office Wednesday to illustrate the crippling impact of medical debt on North Carolina residents and what they described as predatory tactics employed by hospitals to collect.

Folwell presented the selected interviews with patients involved in hospital lawsuits alongside research from Duke University Law School that puts the scope of the problem in perspective.

“Quite often, these are the most vulnerable citizens in our state,” Folwell said. “These patients can’t even see the prices they are paying before consuming the product.”

Researchers found North Carolina hospitals brought 5,922 lawsuits against at least 7,517 patients and family members over medical debt from 2017 to 2022, with five hospital systems responsible for 96.5% of the lawsuits. That handful was Atrium Health, Mission Health, Sampson Regional Medical Center, Community Health Systems and Caromont Health.

Atrium responded to questions from The Center Square with a statement from spokeswoman Kate Graier, which in part said, “As a current practice, Atrium Health does not file any lawsuits against patients, nor do we execute on any liens or foreclose on property that were filed previously.”

The statement did not say when the Charlotte-headquarter health system began the practice.

Atrium, Duke researchers and the state treasurer say, was the most aggressive, accounting for almost 2,500 of the lawsuits. The company merged with Advocate Aurora last year to create a multistate system with $27 billion in annual revenue.

The actions, brought in a variety of state courts, generated 3,449 judgments for hospitals totaling $57.3 million, or an average of $16,623 per judgment. Hospitals leveraged the state’s allowance to charge 8% annual interest on judgments, along with fees, to rack up $20.3 million or more than 35% of the judgments awarded.

The $16,623 average judgment included $10,732 in principal, $5,180 in interest, and $711 in other costs and fees.

“This in many ways is our most significant finding,” Duke University Law School researcher Barak Richman said of the interest charges.

He authored the study with the help of Sara Sternberg Greene.

“Many of these cases were refiled.” Richman said, “That is, they were judgments that otherwise would have elapsed if the hospital plaintiff had not reissued a lawsuit.”

The research showed nonprofit hospitals initiated 90.6% of all of the lawsuits examined, though Richman stressed that the study reveals only the “tip of the iceberg” of questionable medical billing and collections used in North Carolina. Other research from the Kaiser Family Foundation, for example, shows some hospitals have routed hundreds of thousands of patients to private equity backed lenders that finance patient loans with up to 13% interest.

“Hospitals that filed more than 40 lawsuits – which we denote as ‘litigious hospitals’ – exhibited an average charge-to-cost ratio (a metric of price markups) of 480.5%, compared to a national average of 417% in 2018, and an average net profit margin of 12% from 2017 to 2022,” the Duke researchers wrote. “These hospitals also offered less charity care than the estimated value of a nonprofit hospital’s tax exemption.”

Patient interviews found some debt targeted by the lawsuits were consequences of failures in charity care, from “surprise bills,” and from charges to patients who unknowingly or unavoidably received care from out-of-network providers, sometimes in in-network facilities.

“Some families may not even know they’ve been sued,” Green said. “One of the key findings of our data is that the default rate (of judgments awarded when the patient doesn’t show up in court) is 59.8, so nearly 60%.”

She outlined how the lawsuits trigger a cascade of other negative impacts on patients’ credit scores, work and home life, physical health, and ability to retire or leave an inheritance for their children.

Previously disclosed data shows one in five North Carolina families are in medical debt collections. Eastern North Carolina in particular is home to some of the highest concentrations of medical debt in collections in the nation, with rates in some counties ranging between 38% to 44%, or about three times the national average.

Changing the dynamic will require more price transparency, nonprofit hospitals to match charity care with tax breaks, and hospitals revising their collection tactics, Folwell said. He pointed to the Medical Debt De-Weaponization Act pending in the General Assembly as a major step to force hospitals into action.

Hospital officials have pushed back against reports about charity care shortfalls, and taken issue with the title of the legislation, but have not testified in committee to oppose the bill.

The Medical Debt-DeWeaponization Act, Senate Bill 321, cleared the Senate by unanimous vote in May and is now pending in the House rules committee.

“The speaker and leadership have the opportunity to take up maybe five minutes of legislative time in this long session to protect consumers of this state,” Folwell said.

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