Investigation: Maryland Hospitals Aggressive on Debt Collection

The Baltimore Sun this week published a three-part series, titled "In Their Debt," examining debt collection practices by Maryland hospitals. Summaries of the articles in the series appear below.

• "In Their Debt": An eight-month investigation by the Sun found that over the past five years, 46 not-for-profit hospitals in the state received millions of surplus dollars from a unique payment system even as they filed lawsuits against tens of thousands of patients over unpaid medical bills. Under the payment system, a state agency sets hospital rates for all patients, and the patients help cover the costs of charity care through the rates they pay. Last year, hospitals received $921 million to cover charity care costs, according to the most recent state records. According to the Sun, "Officials at several hospitals said they routinely sue patients a year or more after writing off their bills and building those losses into their rate requests." The officials say that money recovered from lawsuits is deducted from requests in later years and that aggressive collections help them obtain payments faster. Hospital administrators also said that they must pursue unpaid bills because all patients cover the costs of those bills under the Maryland system and that they must balance charitable missions against the need to pay for services. The Sun noted that many of the patients that hospitals file lawsuits against live in the lowest-income areas of the state. Gov. Martin O'Malley (D), responding to the findings of the investigation, ordered a review of hospital debt collection practices, to be completed by early February 2009 (Schulte/Drew, Baltimore Sun, 12/21).
• "Their Day in Court": Almost one-third of the 132,000 lawsuits filed over unpaid hospital bills in Maryland during the last five years have been filed in city District Court, which serves an area of people "living on the margins," according to University of Maryland law professor and former Legal Aid lawyer Michael Millemann. The hospitals have won $100 million in judgments against patients in the last five years and put liens on at least 8,000 homes in the state, "despite national hospital industry guidelines that caution against the wholesale use of that practice," according to the Sun investigation. According to the Sun, some hospitals have won judgments against Medicaid beneficiaries for bills the government would not pay, even though the practice is prohibited under Maryland law. In addition, "Hundreds of patients have filed complaints with state regulators over billing issues, including allegations that hospitals tried to collect amounts beyond what they agreed to accept under insurance company contracts by going directly after patients," the Sun reports. The Sun investigation also found that "some hospitals have sued patients three or more years after their stays ended, raising questions about whether the statute of limitations had expired" (Schulte/Drew, Baltimore Sun, 12/22).
• "Loose Rules": Maryland is the only state where the government sets hospital rates for all patients, and the survival of this system "is a tale of ideology, political power and supporters' assertions that regulation has helped nearly all of Maryland's nonprofit hospitals thrive," the Sun reports. Hospital policies for determining who is eligible for no-cost or reduced-cost care vary widely, but "the hospitals' trade group has fought off efforts in the General Assembly to make these standards uniform, as they are in some other states," according to the Sun. Former state Delegate John Hurson (D), who attempted to change the rules to place less financial stress on low-income residents, said, "The hospitals may be nonprofit, but they are very much about the buck." He added, "What they have in the rate-setting commission is a life-preserver." The Sun examines the creation of the Maryland system and past efforts to change it. The article also examines other states' regulation of hospital debt-collecting practices (Drew/Schulte, Baltimore Sun, 12/23).