Report calls on health care providers to provide more help to patients in debt

After a respite in the first year or two of the COVID-19 pandemic, some Wisconsin health care providers have resumed suing patients who have fallen behind on their bills, according to a new report, which charges that providers and medical groups do too little to head off the problem and help them.

“Medical debt lawsuits pit unrepresented patients against a coordinated medical debt collections industry,” states the report, produced by ABC for Health, an advocacy group and nonprofit law firm that links patients and families with programs to help them afford health care.

In the first year or two of the COVID-19 pandemic, some hospitals and health care groups suspended taking patients to court when they didn’t pay their bills, according to the report, which is titled, “Medical Debt & Collections in WI — Restarting the Collections Machine.” 

“The slowdown in collections by some providers was good news for patients in Wisconsin, but as our analysis noted, certain systems were poised to jump-start collections activity after public scrutiny and press inquiries subsided,” the report observes. 

Providers that have resumed the practice started doing so anywhere from late 2021 to early 2022, the report states. In addition, policies handed down by the federal government or implemented voluntarily by some providers during the pandemic that may have forestalled hardship for cash-strapped patients are expected to end soon.

“While the impact of the COVID-19 pandemic is still being felt by Wisconsin families, ongoing collections actions increase stress and harm the communities served by medical providers,” the report states. “Medical debt lawsuits by medical providers should be a rare exception and not a commonplace tactic against people who can’t afford their medical bills.”

Bobby Peterson, executive director and public interest attorney for ABC for Health, said the report also takes an initial look at how some providers are transferring their debt to a third party firm that sues patients rather than the health care provider doing so, Peterson said in an interview.

But even if they don’t get sued, patients in debt may face other problems, he added.

“Just because you don’t get hauled into court doesn’t mean that providers aren’t contacting you,” Peterson said. Medical debt can damage a person’s credit rating, he noted, although the federal Consumer Financial Protection Bureau has taken on medical debt collection as an issue. In response, credit reporting agencies have begun changing how they treat some medical debt in constructing credit reports.

Peterson said providers should broaden their financial assistance plans to be available to anyone regardless of their insurance coverage. Some plans consider anyone with insurance ineligible, “even if it’s crappy insurance,” he said.

The IRS requires nonprofit hospitals to make “reasonable efforts” to establish whether a patient is eligible for financial assistance before sending a bill to collections or going to court to force the patient to pay, the report notes. 

But in representing clients, ABC for Health has found “that not all hospitals appear to fully comply with these IRS requirements,” the report states. “ABC identified cases where certain hospitals stretch the definition of a ‘reasonable effort’ to determine eligibility, often merely providing a patient with an application as part of a stack of other forms, or even just directing a patient to their website.”

The issue gets complicated by ambiguity over the accuracy or applicability of various hospital charges. 

According to the report, current rules allow a hospital to refer a patient to collections while it is processing an application for aid under the hospital’s aid program. As a result, “the mere threat of collections can easily scare low-income patients into paying debts that they do not owe” because the debt would be covered by the aid program.

The complexity of billing as well as the aid programs themselves can be daunting for patients, Peterson said. “They get trapped in this sort of electronic debtor’s prison, where it can be a pretty miserable place to be.”

The report includes more than a dozen recommendations for hospitals and other  health care providers with patients who are in debt. Among those, it urges providers to:

• Refer patients to community advocates who can help them.
• Provide “clear and unambiguous eligibility criteria” for hospital financial assistance programs, and remove application deadlines and geographical restrictions.
• Tell patients about financial assistance policies “whenever they express concerns about their ability to pay, even if a patient has already been given an application. Hospital encounters are stressful situations, and patients might not have fully processed previous notices, especially during intake.”
• Process financial assistance applications promptly and be flexible in what documents are required for patients to verify they are eligible.