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12/19/2014 From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages ProPublica
http://www.propublica.org/article/hownonprofithospitalsareseizingpatientswages 1/8
From the E.R. to the Courtroom: How Nonprofit Hospitals AreSeizing Patients’ WagesOne Missouri hospital has sued thousands of uninsured patients who couldn’t pay for their care, then grabbed a hefty portion of theirpaychecks to cover the bills. “We will be paying them off until we die,” one debtor said.
by , ProPublica, and Chris Arnold, NPR, Dec. 19, 2014, 5 a.m.Paul Kiel
Northwest Financial Services first sued Keith and Katie Herie when they couldn't afford the $14,000bill for Katie's emergency appendectomy. Since 2006, the Heries have had almost $20,000 takenfrom their wages to repay medical bills and still owe at least $26,000, with interest mounting.(Steve Hebert for ProPublica)
This story was copublished with .NPR
On the eastern edge of St. Joseph, Missouri, lies the small city's only hospital, a landmarkof brick and glass. Music from a player piano greets visitors at the main entrance, andinside, the bright hallways seem endless. Long known as Heartland Regional MedicalCenter, the nonprofit hospital and its system of clinics recently rebranded. Now they'recalled Mosaic Life Care, because, their promotional materials say: "We offer much morethan health care. We offer life care."
Two miles away, at the rear of a lowslung building is a key piece of Mosaic—Heartland'svery own forprofit debt collection agency.
When patients receive care at Heartland and don't or can't pay, their bills often end uphere at Northwest Financial Services. And if those patients don't meet Northwest'sdemands, their debts can make another, final stop: the Buchanan County Courthouse.
From 2009 through 2013, Northwest filed more than 11,000 lawsuits. When it secured ajudgment, as it typically did, Northwest was entitled to seize a hefty portion of a debtor'spaycheck. During those years, the company garnished the pay of about 6,000 people andseized at least $12 million—an average of about $2,000 each, according to a ProPublicaanalysis of state court data.
Many were uninsured Heartland
patients who were eligible for financial Debt Collection Stories
UnforgivenThe Long Life of Debt
12/19/2014 From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages ProPublica
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patients who were eligible for financialaid that would have eliminated ordrastically cut their bills. Instead, theywere charged full price for their care,without the deep discounts negotiatedby insurers, according to courtrecords, interviews and data providedby Heartland. No other Missourihospital sued more of its patients.
Blue collar workers, Walmart cashiers, nursing home aides, clerical staffers—these typesof patients have long been the most vulnerable to unexpected debt. They can't affordinsurance, yet they're not poor enough for Medicaid. Even after the 2010 Affordable CareAct, about 30 million Americans remain uninsured, in part because some states, likeMissouri, have not expanded Medicaid to cover more of the poor.
Earlier this year, ProPublica and NPR reported that the wages of millions of U.S. workersare diverted to pay off a variety of consumer debts. Most states, like Missouri, allowcreditors to take a quarter of aftertax wages—an amount that government surveys showis unaffordable for lowerincome families.
Consumer advocates say the laws governing wage garnishment are outdated and overlypunitive, regardless of the debt's source. But the consequences are especially dire whengarnishment is used to collect unavoidable health care bills—with interest and legal feespiled on.
No one tracks how many hospitals sue their patients and how frequently, but ProPublicaand NPR found hospitals that routinely did so in Kansas, Oklahoma, Nebraska, andAlabama, as well as Missouri. The number of suits is clearly in the tens of thousandsannually. In Missouri alone, hospitals and debt collection firms working for them filedmore than 15,000 suits in 2013.
Court records also revealed stark differences in how hospitals within each state pursuedpatients who couldn't pay their bills. In Missouri, a handful of hospitals, Heartlandforemost among them, accounted for an outsized portion of suits. But many others,including the state's largest hospital, rarely, if ever, sued.
Heartland's aggressive tactics aren't because the hospital is strapped for cash. Despitebeing based in an economically struggling county of just 90,000, Heartland reported a$45 million profit last year and paid its chief executive $1.2 million, according to itsannual report. The hospital declined to discuss Northwest's finances.
As a nonprofit, Heartland pays no income taxes and no property taxes on the acres ofland it owns. In exchange for these tax breaks, it is expected to provide a benefit to thecommunity—most crucially by providing care to lower income patients who can't affordto pay.
Tama Wagner, the hospital's chief brand officer, said the hospital does everything it canto fulfill that mission. Patients are offered multiple opportunities to qualify for financialassistance and avoid the possibility of legal action, she said, adding that it's better foreveryone "if we attempt to work on things before it gets to this level."
But if patients don't utilize those resources, she said, the hospital must take action. "Noone goes into this with the goal or the desire to ruin someone's life," she said. "But at thesame time, the services were rendered, and we have to figure out how to get them paidfor."
Asked why the hospital sues more patients than any other in the state, Wagner said, "Idon't know."
Chi Chi Wu, an attorney with the National Consumer Law Center, said Heartland'stactics ran counter to its mission. Nonprofit hospitals are given taxexempt status"because they are supposed to be serving the public and especially the poor," she said.
But if hospitals are charging lowincome, uninsured patients "even more and thengarnishing their wages on the basis of these inflated amounts," there ought to beconsequences, she said. "They should lose their taxexempt status."
Debt Collection Stories
Ẅě ǻșķěđ řěǻđěřș țǿ țěŀŀ ųș ǻbǿųț țħěįřěxpěřįěňčěș běįňģ șųěđ ǿvěř đěbț. Ħěřě ǻřě ǻ fěẅ ǿf țħěįř șțǿřįěș »
.Ħǻvě ỳǿų běěň pųřșųěđ bỳ đěbțčǿŀŀěčțǿřș? Șħǻřě ỳǿųř șțǿřỳ ħěřě
12/19/2014 From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages ProPublica
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The center has recommended that federal regulators prohibit debt collectors fromgarnishing wages based on the high prices hospitals charge uninsured patients.
In interviews, former patients said they'd run updebts to Heartland mostly because, in anemergency, it's their only option. They neverexpected the hospital to seize their wages if theycouldn't pay.
Northwest first sued Keith and Katie Herie whenthey couldn't afford the $14,000 bill for Katie'semergency appendectomy. While Northwest wasseizing Keith Heries' pay for that suit, it sued himagain over another hospital visit. Since 2006, theHeries have paid almost $20,000 and still owe atleast $26,000, with interest mounting.
ProPublica and NPR shared Herie's case andother findings with Heartland's board of trustees,which is now reviewing the hospital's debtcollection practices.
"Make it so people can make a dent in it," saidHerie, 51, a drill operator. "There's a lot of peoplewho want to be able to pay their medical bills…But they're not going to jeopardize theirhousehold for it."
Docket filled with patients
On a morning last month inside Buchanan County's historic courthouse, the docket wasstocked with more than two dozen Northwest cases.
"You have quite a few today," the judge noted with easy familiarity to Northwest'sattorney, who last year filed more than 1,000 such suits.
In 2013, Northwest won judgments in 77 percent of its cases, usually because thedefendants didn't show up, court records show. Only 3 percent of those sued had anattorney. And all of the judgments tacked on a 9 percent interest rate to the debt, themost allowed under Missouri law.
Most of the defendants who made it to court that day waited glumly, not entirely surehow the proceedings were supposed to go. Some had been served with lawsuits at work: Denny's, Walmart, a pig slaughterhouse, a local charity. A woman and her daughter hadboth been sued.
Whether debtors show up or not, the outcome seldom varies.
Some former patients agree to payment plans to avoid garnishment. But since Northwestrequires these arrangements to be renegotiated or paid "in full" after six months, theplans are not a guaranteed reprieve from court action. A Heartland spokeswoman wouldonly say the periodic reviews were company policy.
When her case was called, Tammy Berry, who earns $8.20 an hour working at the fastfood chain Taco John's, told the judge incredulously, "They're already garnishing mypaycheck." The judge acknowledged that might be true. But not, he said, for the case onthe docket that day.
Berry, 48, and her husband Keith, 47, were first sued by Northwest in 2009. Since then,Northwest has garnished $4,500 from Tammy Berry's pay, almost all of it going to payoff interest (Keith Berry said he does not work and is applying for disability payments).The couple still owes $7,000 on that debt. The couple has had a number of ailmentsincluding issues with Keith's heart, but they are unclear on which led to the suits.
Then, while still being garnished for those bills, Berry said she fell ill with pneumonia
and went to Heartland for treatment again. Northwest sued them for $4,600 more.
Heartland Regional Medical Center, a nonprofit, is the only hospital inSt. Joseph, Mo. The hospital and its system of clinics recently rebrandedas Mosaic Life Care. (Steve Hebert for ProPublica)
12/19/2014 From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages ProPublica
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"We're living paycheck to paycheck," said Tammy Berry. She and her husband, Keith, were first suedby Northwest in 2009. (Steve Hebert for ProPublica)
Federal law only protects the poorest of the poor from garnishment, and Tammy Berry isnot poor enough. If she takes home more than $870 a month, her wages can begarnished. On the weeks she works fulltime, the garnishments bring her takehome paybelow the minimum wage.
The Berrys had qualified for charity care at Heartland for bills at other times, so thehospital has known that their finances were precarious, yet they were charged full pricefor Tammy Berry's treatment for pneumonia. Heartland spokeswoman Tracey Clarkdeclined to explain this, but said "information has to be a twoway street."
At the judge's urging, the Berrys said they met with Northwest's attorney and offered topay $20 every two weeks. The attorney told them he was not authorized to accept such alow offer and they would have to ask Northwest directly, the Berrys said. In the end, theyagreed that they owed the debt and Northwest received a judgment against them.
Outside the courtroom, the couple slumped on a bench dejectedly and said they wereuncertain how they would absorb this latest blow.
"We're living paycheck to paycheck," said Tammy Berry.
Low-income patients often sued
Nonprofits, which make up nearly 60 percent of U.S. hospitals, have a history ofaggressive debt collection.
In the early 2000s, several faced lawsuits challenging their taxexempt status based ontheir use of such tactics. In 2003 the Wall Street Journal ran a series of articles detailingthe frequent use of garnishments by hospitals, including the prestigious YaleNew HavenHospital.
"When the public saw that, they were shocked," said Rick Wade, then the spokesman forthe American Hospital Association.
The AHA asked its members to review their debt collection policies. Many hospitalexecutives were surprised by what they found and decided to revamp their practices,Wade said.
A handful of states subsequently passed laws either restricting how nonprofit hospitalscan collect on debts or dictating how much financial assistance they must provide.
But in most states, there are no clear guidelines, and over time, public scrutiny has faded,said Nancy Kane, a professor with Harvard's School of Public Health. "Hospitals are notlooking for opportunities to give away charity care."
12/19/2014 From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages ProPublica
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looking for opportunities to give away charity care."
Under federal law, nonprofit hospitals must offer care at a reduced cost to lower incomepatients, a service often called charity care. But crucial details—how poor patients needto be, how much bills are reduced, and how policies are publicized—are left to thehospital. The Affordable Care Act empowered the IRS to set new requirements forpublicizing this information, but those have yet to be finalized.
At Heartland, uninsured patients with household incomes up to double the poverty line($23,340 for a single person without dependents) . Those withincomes between 200 percent and 300 percent of the line (up to $35,010) are billed at arate similar to what an insurer pays, then have their bills cut in half.
qualify for free care
Last year, about 8,700 Heartland patients had their bills cut or zeroed out, according todata provided by Heartland. About half were uninsured, while the rest were spared fullpayment of deductibles or other obligations not covered by their insurance.
But uninsured patients like the Berrys who don't receive charity care—either becausethey were turned down or never applied—are billed at Heartland's standard rates, thesticker price that insurers never pay. In 2013, more than twothirds of the accountsNorthwest handled involved uninsured patients, according to data provided byHeartland.
If a patient can't pay and Northwest obtains a judgment, it's too late. Hospital policy says, the patient is ineligible for
charity care, regardless of earnings.once the collection agency has "incurred legal fees" on a case
Charity care, Clark said, is reserved for patients who "seek it and legitimately work withus."
Court data shows that in 2013 Northwest garnished the wages of hundreds of lowerincome patients—including more than 50 employees of fast food restaurants such as McDonald's and more than 100 Walmart employees. Heartland's Clark said thatWalmart employees constituted "only 3.6 percent" of the thousands of patients currentlybeing garnished by Northwest.
The employees of a local pig slaughterhouse were Heartland's most frequent target. Oneof the largest employers in St. Joseph, Triumph Foods processes 6 million hogs a yearand has 2,800 employees, according to its website.
In 2013, at least 255 Triumph employees had their wages garnished by Northwest—aboutone of every 11 employees.
Eight years of garnishments, no end in sight
Just after Christmas in 2004, Katie Herie got sick and then sicker with sharp pains in herstomach, nausea and vomiting. "I was running a fever," she said. "It was bad."
But Herie was uninsured, so for four days she held off going to the hospital. Finally, shesaid, "enough was enough."
Her appendix had ruptured. Surgeons operated at 2 a.m., Herie recalled. After fournights at Heartland, she was discharged. The pain was gone. But in its place was a bill formore than $14,000—including a charge of nearly $3,000 for the room alone, accordingto court records.
It was a staggering debt for the Heries. At the time, Keith Herie worked as a truck driver,earning around $30,000 annually, and his job didn't come with insurance. The couplehad two young children.
When the surgery took place, Heartland's financial assistance policy restricted aid tothose with household incomes below the federal poverty level. For a family of four, thatwas $18,850, so the Heries didn't qualify.
Monthly payment plans were also out of reach, they said. , for
instance, that balances up to $5,000 should be repaid within 18 months. For a $5,000balance, that would be a minimum of $278 per month, a sizeable burden for lower andmiddle income families. There's nothing in the guidelines about still larger balances.
Heartland's guidelines state
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Patients who can't pay the minimum may be eligible for a "special contract agreement,"but that could add on 9 percent interest.
In a statement, Heartland's Clark said the interest is added because "more operatingcosts are incurred the longer an account is active." Patients have a host of options to pay,she said, including credit cards or loans "from family/friends."
"They will tell you to borrow the money from somebody to pay the bill. They don't care,"said Katie Herie.
Clark said records show that Northwest spoketwice with Keith Herie about a payment plan in2005, but that he "would not commit to anarrangement." Herie said he doesn't recall thoseconversations, only feeling overwhelmed at theprospect of repaying the debt.
So, in March 2006, Northwest sued the Heries,but not just for the appendectomy. The suitincluded a host of other outstanding bills, from a2001 chiropractor bill for Keith Herie to a $10pediatrician's bill for their son. It turned out thatNorthwest handled accounts for local medicalpractices as well as Heartland. ProPublicareviewed hundreds of Northwest cases andalmost all of them involved at least oneHeartland debt.
The Heries' total debt stood just shy of $17,000.But then came the interest. To start, there was$1,654 of "prejudgment interest," and, for as long as the balance remained outstanding,the Heries would incur interest on it at a rate of 9 percent a year.
Shortly after winning a judgment, Northwest moved to garnish Keith Herie's pay. It didthe same to Katie Herie, who had begun work at Sam's Club. Missouri law allowsNorthwest to sue both spouses, regardless of who received the medical care. An
for Northwest states that both spouses should be named in a suit if thebalance exceeds $1,500.operations memo
Over the years, the garnishments have tracked the couple, following Keith to a betterpaying job, where he operates a drill for a firm that inventories coal stockpiles. Most ofthe time, Northwest has taken 10 percent of his aftertax pay, a break Missouri givesdebtors with children.
Unfortunately for the Heries, other visits to the hospital followed—for chest pains, for theflu. For these Heartland visits, the Heries would have qualified for charity care if theyhad applied because Heartland had changed its policy to include patients making up tothree times the poverty line. But the couple says no one told them.
In 2010, when the Heries were still being garnished as a result of the first suit, Northwestsued the couple again for $17,630, including a nearly $1,600 attorney fee and about$2,900 in interest.
Over the past several years, the Heries' wages have been garnished almost continuously,with the money sometimes going to pay down one debt, and sometimes the other. Theyhave chipped away, paying nearly $20,000, but still owe more than $26,000.
Northwest also has a lien on the Heries' home, meaning that they are unable to sell it orrefinance their mortgage without resolving the debt. According to the company
, this is done in all cases in which the company has won a judgmentexceeding $1,000.operations memo
"It's like a never never plan – you're never going to get rid of it and you're never going toget ahead of it," said Keith Herie.
Some hospitals rarely sue over debts
Keith Herie has considered declaring bankruptcy, but said he hasfocused mostly on working his way out, piling up as much overtime ashe can. (Steve Hebert for ProPublica)
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Other hospitals in Missouri have found ways to avoid suing lowincome patients.
BJC HealthCare, a nonprofit, operates a chain of 12 hospitals, including BarnesJewishHospital in St. Louis, the largest in the state. In 2013, Northwest filed about 2,300lawsuits in Missouri courts. BJC filed 26.
Unlike Heartland, BJC automatically slices 25 percent off its standard rates foruninsured patients and never includes interest on payment plans, said June Fowler,BJC's spokeswoman.
As recently as only a few years ago, one BJC hospital often pursued patients in court. ButBJC's CEO Steven Lipstein said the chain's new policies are both more efficient and morein line with its charitable mission. Patients who can pay a portion of their bills are morelikely to, he said, if they learn about financial assistance and payment options early in theprocess.
Mark Rukavina, a Bostonarea consultantwho advises hospitals on billing issues,said many nonprofits actively seek toidentify lowincome patients who mightqualify for help because they don't want totry to collect from those who can't pay.
At BJC, patients are often classified aseligible for financial assistance based onfactors like their workplace, job title, orwhether they live in a zip code with a lowaverage income, Fowler said. While thesepatients might never complete theapplication process and be officiallygranted financial assistance, the hospitaldoes not attempt collections on theaccounts, she said.
At the end of each year, BJC writes offtens of millions of dollars in bad debt itbelieves comes from lowincome patientswho should have received charity care. Bycontrast, in its 2013 tax filings, Heartlandsays that none of its nearly $17 million inbad debt came from patients who wereeligible for financial assistance.
For Natalie Elardo, 44, who has also been sued twice by Northwest over debts incurred atHeartland, policies like BJC's would have helped. Elardo had back surgery in 2000 andlater received followup care for continued pain. She and her husband have paid morethan $19,000 in garnished wages since being sued by Northwest in 2001. Their debtsnow exceed $80,000.
"I assume we will be paying them off until we die," she said.
Weighed down by similar medical debts, Keith Herie has considered declaringbankruptcy, but said he has focused mostly on working his way out, piling up as muchovertime as he can.
"I've been putting it on hold, because I keep believing that somewheres I can make adifference, I can get ahead of this," he said.
The lawsuits and garnishments have had collateral effects. Herie's current job providesinsurance for him, and he has added his children, but there is not room in the budget toadd Katie. He has nothing saved for retirement.
Recently, Herie asked Northwest for a printout of all his debts. It ran to four pages filledwith rows of charges in tiny type. It made him think bankruptcy may be the only answer.
"I'm catching up to 52 years old come spring, and I don't think I got another 10 years ofthis," he said. "I'm tired. I'm just mentally tired."
Ŀǻẅșųįțș ǻňđ Ǻmǿųňț Ģǻřňįșħěđ bỳ MįșșǿųřįĦǿșpįțǻŀș įň 2013
Plaintiff Amount Garnished Suits Filed # Beds
Northwest Financial Services* $2,921,418 2,282 352
Berlin Wheeler** $1,053,571 969 N/A
North Kansas City Hospital (public) $898,652 1,619 415
CoxHealth (nonprofit) $688,518 857 864
New Liberty Hospital (public) $572,684 1,101 220
Șǿųřčě: Mįșșǿųřį čǿųřț đǻțǻ, PřǿPųbŀįčǻ ǻňǻŀỳșįș, Ǻměřįčǻň ĦǿșpįțǻŀĐįřěčțǿřỳ.
*Ňǿřțħẅěșț Fįňǻňčįǻŀ Șěřvįčěș șųěș ųňđěř įțș čǿřpǿřǻțě ňǻmě,Mįđẅěșțěřň Ħěǻŀțħ Mǻňǻģěměňț. Țħě čǿmpǻňỳ įș ǿẅňěđ bỳ Mǿșǻįč ĿįfěČǻřě, ẅħįčħ ǻŀșǿ ǿẅňș Ħěǻřțŀǻňđ Řěģįǿňǻŀ Měđįčǻŀ Čěňțěř. Ǻŀmǿșț ǻŀŀ ǿfțħě Ňǿřțħẅěșț čǻșěș řěvįěẅěđ bỳ PřǿPųbŀįčǻ įňvǿŀvěđ ǻ Ħěǻřțŀǻňđ đěbț.Țħě ňųmběř ǿf běđș șħǿẅň įș fǿř Ħěǻřțŀǻňđ.
**Běřŀįň Ẅħěěŀěř įș ǻ čǿŀŀěčțįǿň ǻģěňčỳ țħǻț čǿŀŀěčțș đěbțș ǿň běħǻŀf ǿf ǻvǻřįěțỳ ǿf đįffěřěňț ħǿșpįțǻŀș, ǻččǿřđįňģ țǿ čǿųřț řěčǿřđș.
Țħě đǻțǻ fǿř ČǿxĦěǻŀțħ įňčŀųđěș țẅǿ ħǿșpįțǻŀș: Čǿx Měđįčǻŀ Čěňțěř Șǿųțħǻňđ Čǿx Měđįčǻŀ Čěňțěř Břǻňșǿň.
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this," he said. "I'm tired. I'm just mentally tired."
Jonathan Stray contributed to this story.
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