For decades, Maryland hospitals have sued patients with unpaid bills, amassing hundreds of millions of dollars in judgments since 2000. But this year, something curious happened.
The judgments virtually stopped, according to an analysis of court data by The Baltimore Banner. Why is not entirely clear. Bad publicity could be a factor — hospitals have scaled back legal action in the past when under scrutiny for suing some of their poorest patients. There’s also a new state law requiring hospitals to offer payment plans patients can afford before they sue.
Now advocates and observers wonder what steps hospitals will take to collect on unpaid bills or if they will start suing again. Medical debt is expected to tick up this year as Marylanders lose Medicaid coverage they’d been allowed to keep during the coronavirus pandemic.
“What we’ve been hearing is hospitals are much more aggressive in debt collection,” said Marceline White, head of Economic Action Maryland, a consumer group that pushed for patient protections.
“It’s like toothpaste,” she said. “If you tamp down one part of the tube, you squeeze it out the other end.”
Maryland’s health care system relies on collecting debt to keep overall rates from ballooning — the state’s nonprofit hospitals charge all patients extra to compensate for those who can’t pay. Without repercussions, there could be “millionaires getting nose jobs” for free, said Emanwel Turnbull, an attorney who has represented patients.
The system, however, has pushed hospitals to collect from those least able to pay, some advocates say. That has led to wrecked credit, barriers to home ownership and other problems for patients.
Policies confuse patients
Michele Gregory’s family was sued in 2006 by what was then called Peninsula Regional Medical Center in Salisbury after her husband, Chris, had a stroke at 32. She said she was thankful for the care her husband received. Then came the bills, the calls, a knock and, eventually, the lawsuit.
“I remember them serving the papers,” said Gregory, a mother of three. “We had just put $20,000 in other expenses on his grandmother’s credit card to survive those months. I thought, we owe this, but I don’t know how we’re going to pay it.”
Gregory called her experience a “mass trauma event” for her family that took years to dig out from. Her children were young, one disabled. Her husband, facing months of therapy to regain basic functions, provided the family’s sole income throughout his recovery.
The rural Eastern Shore hospital, now operated by TidalHealth, did not respond to a request for comment about Gregory’s experience or its collection policies.
Gregory was motivated in 2019 to run for her hometown city council and helped push for changes in state law that, among other things, ban wage garnishments for low-income patients, prevent liens on homes and require hospitals offer income-based payment plans that don’t exceed 5% of their annual income.
The details are still being worked out, meaning many patients like Gregory, who has returned with her children multiple times to the hospital, don’t know if they qualify. Hospitals don’t always know, either.
Low-income patients have long been legally entitled to free or discounted care at Maryland hospitals, all nonprofits, when it’s an emergency or medically necessary. But there is some gray area there, too.
A recent report from state regulators estimated hospitals billed up to 60% of patients who should have received free care in 2017 and 2018, and 1% of them paid, amounting to tens of millions of dollars each year. Advocates don’t know the extent to which the hospitals still try to collect from low-income patients, or how much medical debt is affecting people who don’t qualify for assistance.
Aleithea Warmack, a spokeswoman for the Maryland attorney general’s office, said the agency’s Health Education and Advocacy Unit, continues to receive complaints from people who believe they are eligible for charity care but received a bill.
“We encourage anyone who believes that they were wrongfully billed, wrongfully denied financial assistance or just needs help understanding their rights, to contact the HEAU so that we may work toward a resolution on their behalf,” she said.
Jeff Sirody, a bankruptcy lawyer, said his clients are still receiving collection calls and letters from hospitals for unpaid medical bills.
They also are still getting sued for other unpaid debt — from credit cards, student loans and housing. He noted national consumer debt has reached an all-time high, with credit card debt hitting $1 trillion.
“Most people these days are so inundated with debt that their medical bills aren’t very high on their priority list,” Sirody said.
Sometimes the accumulated debt is from multiple medical bills.
Rachel Chernow, a Johns Hopkins Medicine therapist, gave birth twice via C-section at Johns Hopkins Hospital and found insurance covered much of the first but far less of the second. She was pleased with her medical care but shocked by a $3,000 bill in 2019.
The Owings Mills mother had prepared for health expenses by opening a health savings account. But there were other unexpected medical bills, including a surgery for her older son. The younger one now needs his tonsils removed. That’s on top of a mortgage and other routine expenses.
Chernow said she has slowly paid down the debt to Hopkins to about $1,800. The hospital turned her account over to a collection agency this year. It did not offer her a payment plan, like the one now required of hospitals, and Chernow hasn’t asked.
“I see that Virginia area code on my phone while I’m at work every day,” she said about the agency’s repeated calls. “It’s obnoxious.”
She was relieved to learn hospitals at least temporarily stopped suing patients but worries about her credit. She could see some relief there, too.
Advocates have long derided medical debt credit reporting for harming people’s ability to buy a home, get a car loan and even get a job. This year, credit agencies voluntarily stopped considering medical debts of up to $500, and federal regulators are working to have medical debt removed altogether.
Johns Hopkins Medicine won’t comment about specific patients, though in a statement officials said the system stopped initiating new lawsuits in 2020. Officials said the system also takes “extensive steps to help them [patients] understand our financial assistance policies, as well as their payment options.”
The statement said patients are typically contacted more than a dozen times by mail or phone and are encouraged to talk to hospital financial counselors to see if they qualify for assistance.
Hospitals lean on courts
Nearly all hospitals in Maryland have turned to the courts in the past for judgments and to garnish wages from patients who don’t pay their bills. Peninsula Regional has led since 2000 with 36,000 judgments, totaling $47 million, The Banner analysis found.
Hopkins-operated Suburban Hospital in Bethesda won slightly more from 14,400 judgments for $48 million. LifeBridge’s Sinai Hospital in Baltimore won $41 million from about 18,000 judgments.
Judgments in favor of hospitals totaled $400 million, the vast majority for medical debt.
It’s been big business for hospitals’ attorneys, too. Thirty-eight attorneys have won at least $1 million in judgments for Maryland hospitals, and nine have exceeded $10 million. Two attorneys were responsible for 37% of all judgments since 2000, The Banner analysis showed.
The average hospital debt in Maryland, based on court judgments in The Banner analysis, was about $2,300. Most debtors live in poorer neighborhoods. About half of all judgments awarded to Maryland hospitals since 2012 were won in cases against defendants with addresses in Census tracts with some of the lowest median incomes.
The judgments ranged from about $750,000 to just 17 cents.
Turnbull, the patients’ attorney, said even small-dollar lawsuits can be devastating. A $100 suit can double with court costs and accrue interest if not paid immediately. To pay judgments, or even pay bills directly, patients may turn to high-interest loans.
The new laws will offer some protections to patients, though they don’t explicitly ban lawsuits. In addition to requiring payment plans and barring some liens, they expressly prohibit hospitals from reporting debt to credit-rating agencies or filing civil actions to collect within 180 days after the first medical bill is provided.
Sharon Boston, a LifeBridge spokeswoman, said the system no longer sues over medical debt. Its policy changed after “ongoing conversations with patient advocacy groups over the years as well as recent legislation.” A University of Maryland Medical System spokesperson, on the other hand, said the new law didn’t influence its policy to end lawsuits. He wouldn’t say what did, only that legal action, which stopped in 2019, wasn’t in line with the system’s approach to financial assistance.
MedStar Health, another large health system in Maryland, did not respond to requests for comment about lawsuits against patients or its collection practices. Its online policies do not disavow legal action but say the system first pursues patients through calls, letters and referrals to collections, among other tactics.
Advocates note, however, that regulations guiding the new laws aren’t fully implemented, and lawsuits could still resume.
It’s happened before. Legal action from Carroll Hospital, for example, ebbed in 2005 and 2012, only to rise again and peak in 2019 before trending down and cratering during the coronavirus pandemic. Judgments virtually ended in 2020.
Lawsuits from Hopkins slowed after a 2008 investigation into hospital billing by The Baltimore Sun only to rise again. They dropped again after a report from the union National Nurses United and the AFL-CIO in 2019. Hopkins said it stopped suing patients in 2020, just after another analysis of the hospital’s legal practices by the investigative news outlet ProPublica.
A national study of tax-exempt hospitals’ charity policies before and after the pandemic found many hospitals had become more generous, including raising the thresholds to take legal action. But the research published last year in JAMA Network Open said “unpublicized or vague eligibility criteria” makes it hard for patients to know if they qualify for free or discounted care.
For their part, Maryland hospital officials say they don’t want to create undue hardships and have several ways to reach patients about financial assistance.
Some offer assistance at higher thresholds than what’s legally required: free for those earning below 200% of the federal poverty level (or about $29,000 annually for individuals) and discounts for those earning below 300% (about $43,000).
“Maryland’s hospitals focus on patient care and support, rather than exacerbating financial burdens,” said Meghan McClelland, chief operating officer of the Maryland Hospital Association.
“To align with legislation and pending regulations, hospitals are actively exploring alternative solutions to address medical debt equitably and with compassion.”
She did not say what those alternatives may be.
McClelland said medical debt reflects a larger issue in health care. She pointed to increasingly common high-deductible health insurance plans, which can leave patients with substantial out-of-pocket costs when they have unexpected hospital visits. “This is a complex issue and needs broader attention.”
Del. Lorig Charkoudian, who sponsored some of the patient protection legislation, agreed more attention to the problems is needed.
“What all these people with debt tells us is that financial assistance is not offered to those eligible in a way that’s effective,” she said. “Some people were pursued and even paid bills because they didn’t know they qualified.”
She said legislation may be needed to ban small-dollar medical debt lawsuits altogether, curb other aggressive collection tactics, and more broadly address overall health care costs and out-of-pocket obligations.
Observers and patients like Gregory and Chernow say battling with collections agents chips away at the goodwill doctors, nurses and others engendered from having expertly and decently cared for them or their families. It also belies efforts many routinely make to find medical and nonmedical resources for patients in their communities.
Advocates note the amount of unpaid debt is small compared to overall hospital budgets: About 4.3% of about $20 billion in patient revenue statewide is estimated to go unpaid this year. That’s according to data from the Health Services Cost Review Commission, which oversees billing practices and sets hospital rates charged to all patients under an agreement with federal authorities.
Nationally, too, only a small percentage of hospital bills goes unpaid, said Gerard Anderson, a professor of health policy and management, and director of the Johns Hopkins Center for Hospital Finance and Management.
That amount has also shrunk as more people gained insurance under the federal Affordable Care Act and the Medicaid health plan for low-income residents. Anderson said fewer U.S. hospitals may be resorting to lawsuits because “they recognize that they’re not getting as much money as anticipated from people because they can’t ask people to pay astronomical amounts.”
Anderson said it wasn’t likely a collective decision by Maryland hospitals to pause lawsuits; rather, they followed the leaders. Some will likely resume, he said.
He noted under the unique system in Maryland, hospitals don’t actually lose money when patients don’t pay because all other patients pay extra to cover unpaid debt. There is also a pool of money providing further compensation to hospitals in more impoverished areas with higher levels of unpaid bills.
The commission overseeing hospital budgets, however, says hospitals must make “reasonable” efforts to collect debt from those who don’t qualify for aid to maintain the system. The agency cited the 1990s collapse of a similar compensation pool in New Jersey partially due to rising numbers of people who didn’t pay.
Hospitals find loopholes
Hospitals generally don’t do a good job telling people they qualify for charity care, said Jared Walker, head of Dollar For, a nonprofit that helps people nationwide determine eligibility for assistance and get it.
“They make it the patients’ responsibility instead of the hospitals’ responsibility,” he said.
Patients often don’t know their right to assistance and sign forms during the fog of an emergency visit. When they do ask about aid, calls often go to a billing, not financial aid, department where agents don’t always know about assistance policies.
Some Maryland hospitals also exclude people from charity care if they live outside of the local community. MedStar, for example, limits charity care to certain ZIP codes, among the practices regulators say falls in a gray area that needs to be clarified.
Walker said he represents three patients who were denied charity care by Holy Cross Hospital in the Washington, D.C., suburbs because hospital officials didn’t consider delivering babies medically necessary.
The hospital did not respond to requests for comment about medically necessary services or general collection policies. Regulators have since said limiting services of this type isn’t within the rules.
“You have to be watching them all the time,” Walker said. “Will they start suing again? I’m pretty sure they will.”
The statute of limitations is three years, though one patient discovered there are loopholes.
Andrea Lohman said she frequented LifeBridge Health’s Carroll Hospital over the years and was sued in 2016 for unpaid bills. Unbeknownst to her, she had signed a financial form with the words “under seal.” That meant, under a little-used state law, the hospital had 12 years to sue for breach of contract, which she had done by failing to pay.
Lohman said she’s still not sure how many visits ended up included in her debt, but in the years prior to the suit, she was a nursing student and did not work consistently. She doesn’t recall anyone mentioning possible financial assistance during or after emergency visits.
The court ended up excluding some charges, bringing down her debt from about $10,000 to about $2,000, some of which was garnished from her bank account, court records show.
LifeBridge Health, which took over Carroll in 2015, said it does not use seals on forms. The hospital system, like others, does not comment on specific cases.
Lohman said she’s still scared by the legal action.
“They send you to the finance office and tell you what forms to fill out, but they are impossible to understand,” she said.
“I got the bills and couldn’t pay them,” she said. “The experience, it all stayed with me. I don’t want to sign anything. I don’t even want to ever go to the hospital.”
This work was supported by the McGraw Center for Business Journalism at the Craig Newmark School of Journalism at the City University of New York. Learn more about our analysis and reproduce our findings by visiting our GitHub page.
Banner reporter Brenna Smith contributed to this report.
Correction: This story has been updated with the correct spelling of Emanwel Turnbull’s first name, and Del. Lorig Charkoudian’s surname.