In Alabama, A Public
Hospital Serves the Poor — with Lawsuits
Public hospitals can be among the most
aggressive in collecting debts from poor
patients, not only garnishing their wages,
but cleaning out their bank accounts. “It
makes me sick,” said one legal aid attorney.
By Paul Kiel
December 24, 2014 "ICH"
- "Pro
Publica" - -
More than a century ago, Alabama enshrined a
basic protection in the state’s constitution
shielding its poorest citizens from being
forced to pay debts they couldn’t afford.
But a public hospital in
the mostly rural southeast corner of the
state has found a way around the law. Before
patients can receive treatment at Southeast
Alabama Medical Center, they must sign a
form waiving that legal protection, clearing
the way for the facility to seize funds from
their pay or bank accounts to cover medical
debts.
ProPublica and NPR reported
last week that
nonprofit hospitals, which are legally
required to offer discounted care to the
poor, often sue low-income patients and
garnish hefty portions of their pay.
But ProPublica found
similar tactics are wielded by public
facilities that often serve as hospitals of
last resort.
About a fifth of U.S.
hospitals are public, operating under a
patchwork of local and state authorities and
balancing two potentially competing
mandates: They must provide care to those
who can’t get it anywhere else while
spending as little public money as possible.
Southeast Alabama Medical
Center (SAMC), the only public hospital in
the small city of Dothan, meets the first
mandate by having a generous financial
assistance policy. But it also ranks among
the area’s most aggressive debt collectors,
relentlessly pursuing payment even from
patients who would have been eligible for
reduced or free care had they applied for
it.
Over the past three years,
SAMC has filed more than 4,000 suits against
its patients. And those who tumble through
the hospital’s safety net often are stuck
not only with care billed at full price, but
with interest and legal fees from the court
action.
Other public hospitals in
Alabama and other states use similar
tactics. In Missouri,
two of the three hospitals that file the
most debt-collection suits are public.
Chi Chi Wu, an attorney
with the National Consumer Law Center, said
it is “outrageous” for a public entity to
take “this kind of heavy-handed action”
against poor people already grappling with
unavoidable health care emergencies.
Ronald Owen, SAMC’s chief
executive, said the hospital has “the
mission and the responsibility” to care for
the uninsured. Hospital staffers, he said,
try to notify patients who qualify for
financial assistance. “We’re going to be as
compassionate as we can.” But there is a
limit.
“Now, if you don’t
identify yourself and you don’t take
advantage of that, then we’re going to
pursue collection,” he said.
Before Treatment, Sign Here
On paper, SAMC’s
financial assistance policy covers just
about any lower-income patient. Uninsured
patients with income up to four times the
poverty line ($46,680 for individuals with
no dependents) qualify to have their bill
slashed. Those earning below twice the
poverty line qualify for free care.
But before checking in at
SAMC, patients are handed
a “Condition of Treatment” form. It is
two pages of the sort of waivers and
releases that have become common in American
healthcare. There is no mention of financial
assistance on the form.
In the midst of item
number seven, “Financial Agreement and
Assignment of Insurance Benefits,” are two
crucial details. Near the end of one
sentence, the patient agrees to pay
“reasonable attorneys fees.” And then,
there’s this: “Further, the undersigned
waives as to this debt all rights of
exemption under the constitution and laws of
Alabama or any other states as to personal
property.”
It is the sort of language
only a lawyer might understand. But when
low-income patients sign their initials at
the end of the item 7, they waive their
right under the state constitution to
protect $1,000 per paycheck from seizure if
they are sued over a debt. Typically, the
protection ensures that workers who earn
around $30,000 or less annually are immune
from garnishment.
Even without the waiver,
SAMC could still sue low-income patients and
attempt to garnish their pay. That’s because
the $1,000 protection isn’t automatic—it
must be asserted by the debtor. Usually,
only lawyers know about it, said Sara
Zampierin, an attorney with the Southern
Poverty Law Center.
With the waiver in hand,
SAMC is assured that should a lower-income
debtor ever attempt to invoke the state law,
the hospital can proceed with garnishment.
Using such a waiver would
be problematic in any context, said
Zampierin. But a hospital “doing this at a
time people are under great stress” and
desperate for care is particularly
objectionable.
SAMC declined to answer
questions about the waivers, saying instead
in a statement that its practices complied
with all applicable laws.
“How am I gonna pay my bills?”
Suffering from a kidney
infection, Annie Helms of Dothan signed and
initialed the “Condition of Treatment” form
in August 2009 prior to receiving care at
SAMC. A single mother who then worked as a
nanny, she was a prime candidate for
financial assistance. But no one at the
hospital told her about it, she said.
SAMC executives say they
publicize the hospital’s financial
assistance policy by putting up signs,
posting information on the website, and
including a line at the bottom of billing
statements.
Yet the low-income
patients the hospital sues commonly don’t
understand they are eligible for aid, said
Mitchell Dobbs, an attorney at Legal
Services Alabama in Dothan who often
represents SAMC patients in court. The
notice on billing statements, for example,
is in tiny print at the bottom and only
says, “You may be eligible for financial
assistance under the terms and conditions
the hospital offers to qualified patients.”
When Helms, 35, could not
pay her more than $700 bill, SAMC referred
her account to the collection agency that
handles its past-due accounts. The company
is owned by a local law firm, Lewis, Brackin,
Flowers and Johnson. The firm rejected
Helms’ offer to pay $25 a month towards the
debt, she said, and then sued her, serving
her with the papers at the school where she
had found work as a custodian.
“I was actually in tears,”
she said, “because you know I’m a single mom
with two kids and I’m like, how am I gonna
pay my bills?”
But that wasn’t all. As
part of the suit, an attorney with Lewis,
Brackin asked to tack a “reasonable
attorney’s fee” onto Helms’ debt, which he
said was 25 percent of the balance owed, or
an additional $219.
A review of SAMC suits
shows the firm has asked for and received
the same 25 percent fee in dozens of cases,
sometimes adding several thousand dollars to
patients’ debts.
Lewis, Brackin did not
respond to a request for comment. In a
statement, SAMC declined to discuss Helms’
case or any other “in order to protect the
privacy of its patients.”
Helms’ balance came to
almost $900, since the suit also included an
earlier, smaller bill that was outstanding,
plus the attorney fee and $85 in interest.
SAMC began taking a
quarter of her take-home pay after she
started a new job making about $20,000 a
year. Things were already tight, Helms said,
but the deductions meant she couldn’t cover
her basic bills. “My car almost got repo-ed.
It was a disaster, honestly.”
Unfortunately, Helms said,
by that time, she had been forced to make
another visit to SAMC after she came down
with the flu.
So, one month after Helms
finally finished paying off the debt from
the first garnishment, in November 2012 SAMC
filed a second suit for more than $4,000 in
outstanding bills. With Lewis, Brackin’s
$1,000 attorney fee and interest, she faced
a debt of $5,400 and years more of
garnishments.
Public Hospitals Often Sue
Since 2012, SAMC has filed
well over 1,000 debt collection cases each
year. A ProPublica review found that among
those whose wages had been garnished were
low-level employees of a local poultry
processing plant, Walmart and a variety of
fast food restaurants.
Taking it one step
farther, SAMC sometimes cleans out former
patients’ bank accounts as well. In one
case, after securing a judgment of $10,700,
the hospital cleared the remaining $859 out
of the debtor’s Wells Fargo account.
Although Alabama state law caps wage
garnishments at 25 percent of after-tax
income, there are no such
limits on what creditors can take from a
debtor’s bank account.
Only a handful of other
Alabama hospitals file suits against
patients as often as SAMC, according to
ProPublica’s review of state court filings.
Few of those hospitals, however, added in
attorney fees or required a waiver of
Alabama’s protections against garnishment,
the review showed.
The most frequent filer
was DCH Health System, a public hospital
network that operates four hospitals in
western Alabama, including Tuscaloosa.
Together, its hospitals filed more than
4,400 suits between 2012 and November of
this year.
In a statement, DCH
spokesman Brad Fisher said that the
hospitals follow “industry practices to
ascertain a patient’s ability to pay” and
attempt to deal with debts through payment
plans.
Also near the top of the
list was a for-profit chain, Community
Health Systems, which operates 11 hospitals
in the state, including the only other
hospital in Dothan. Flowers Hospital, which
has about half the number of beds as SAMC,
has filed more than 2,000 suits against
patients since 2012.
CHS did not respond to a
request for comment.
Debts Often Lead to Bankruptcy
SAMC’s Owen said the
financial reality for public hospitals
forces them “to be responsible and try to
collect the debts that are there.” The
hospital’s county-appointed board has
supported these efforts, he said.
SAMC has been in the black
for several years—last year it had a profit
of $9.3 million—but Owen said it’s been
getting more difficult for the hospital to
maintain that. Medicaid and Medicare payment
rates are low, he said, and Blue Cross Blue
Shield insures a huge portion of Alabamians,
giving the company substantial leverage to
negotiate for lower prices at the hospital.
The 2010 Affordable Care
Act hasn’t made a sizeable impact on the
hospital’s financial situation, Owen said,
in part because Alabama is not among the
states that have expanded Medicaid, so only
extremely poor adults qualify for the
program.
But hospital consultants
and legal aid attorneys say financial
pressures don’t excuse or explain public
entities’ legal pursuit of low-income
patients.
Public hospitals “really
need to look at what they’re collecting from
some of these patients who may have limited
financial means,” said Mark Rukavina, a
consultant and expert on hospital billing
issues. In most cases, he said, the damage
to patients’ lives is considerable, while
the dollars extracted most likely aren’t.
Dobbs, the Legal Services
Alabama attorney, said if SAMC provided
financial aid to all the patients eligible
for it, he and his colleagues would rarely
have any of them as clients. Only low-income
clients qualify for the office’s free
services.
Typically, by the time
SAMC patients reach his office, Dobbs said,
their wages have been garnished and they are
desperate. Often bankruptcy is the only way
out of a debt that began with an unavoidable
health crisis.
Helms, who found her way
to Legal Services Alabama after being served
with her second SAMC suit, was told by Dobbs
that it was her best option. She declared
bankruptcy last year.
SAMC debts are “probably
the number one reason we file bankruptcies
in this office,” Dobbs said.
It’s not an easy decision,
he added. Despite the threat of not being
able to support their families, his clients
often are mortified by their inability to
meet their financial obligations.
“Somebody who went to the
hospital, feeling shame because they can’t
pay that bill? It makes me sick,” Dobbs
said. “There’s no reason to be ashamed.
Sometimes it’s the other side that ought to
be ashamed for not helping more.”
Paul Kiel covers business
and the economy for ProPublica, reporting on
the foreclosure crisis, consumer debt and
other financial issues.
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