One third of hospitals take legal action against patients with outstanding medical bills, study finds

Nearly 50% of U.S. adults report struggling to keep up with the cost of healthcare, with four in ten ringing in the new year with medical debt. Medical debt is a major burden that often forces people to delay–and sometimes forgo–access to care. Not only do outstanding medical bills undermine health, but they also represent the most common type of collections, with estimates ranging anywhere from $81 to $140 billion

With problematic hospital practices gaining national media attention – including rejecting appointments for patients with outstanding medical bills and going so far as to sue such patients – the issue of medical debt is front and center for many Americans.

A glimpse into the state of hospital billing practices

Hospital watchdogs have started collecting valuable data on hospital billing practices to inform patients about these practices and potentially put pressure on hospitals to improve.

In an effort to capture the varied nature of hospital billing and collection practices, the Lown Institute is building a database of financial assistance policies and billing and collection practices across 2,500 hospitals with the support of Arnold Ventures. Initial results are expected to be available in mid-2024 with a full report issued in 2025. 

Also interested in evaluating the current state of hospital’s financial practices, in 2021, the Leapfrog Group added questions to their hospital survey around billing and collections. Researchers from the Leapfrog Group, Northwestern University Feinberg School of Medicine, and Johns Hopkins University School of Medicine published a recent analysis of this data in JAMA where they found that many hospitals are still falling short when it comes to billing ethics. Although the data set of 2,270 hospitals was not nationally representative, it provides an interesting glimpse into the billing practices of some U.S. hospitals.  

Here are the key takeaways: 

  • 754 hospitals (33.2%) reported that they “take legal action against patients for late payment or insufficient payment of a medical bill.” Rural hospitals were 38% more likely than urban hospitals to take legal action against patients. 
  • 1,020 (44.9%) hospitals did not routinely send patients itemized bills within 30 days of final claims adjudication or date of service for patients without insurance.
  • 125 (5.5%) hospitals did not provide access to billing representatives capable of investigating billing errors, offering price adjustment, and establishing payment plans.

Ultimately, only 38% of surveyed hospitals reported meeting all three proposed billing quality standards. Interestingly, hospitals with worse Leapfrog safety grades were less likely to meet all three billing standards compared to hospitals with better grades. It’s not clear what’s behind this pattern, but it could be an issue of capacity (hospitals with more resources and staff have an easier time abiding by safety protocol and billing standards), or potentially profiteering (hospitals more concerned with making money may be both understaffing hospitals and suing patients).

So, how can we encourage better billing practices and reduce harm caused by medical debt?

The JAMA study authors recommend standardizing measurement and reporting of hospital billing practices to “increase accountability, reduce variation in billing practices, and reduce barriers in access to care in the US.” 

Some states are taking these recommendations to the policy-level, working to make healthcare more affordable for patients. To date, eight states limit medical debt interest and two states restrict credit reporting of medical debt. Current policy proposals on the docket include New York’s Senate Bill S5909B, which seeks to ban hospitals from suing patients making less than 400% of the federal poverty level (FPL).

This research is important to not only provide further insight into how hospitals financially support, or undermine, their patients, but also inform policy efforts to improve healthcare affordability and hospital accountability moving forward.