How to stop hospitals suing patients

In the 2019 Shkreli Awards, we called out several nonprofit hospitals for suing their patients for unpaid medical bills, garnishing their wages and repossessing their assets. Does this kind of public awareness make it less likely that hospitals will sue their patients in the future? A new study from researchers at Johns Hopkins University provides evidence that it does.

Hospitals sued less after media attention

Researchers looked at the billing practices of 67 Virginia hospitals, and found that they filed 59% fewer lawsuits and 66% fewer wage garnishments after a media and advocacy campaign drew attention to egregious billing practices. Eleven hospitals stopped suing patients altogether due to the public attention.

One reason this project was so successful is that it involved partnerships and collaborations within multiple sectors. It wasn’t just a research article that got hospitals to stop lawsuits, but collaboration with media outlets, a grassroots advocacy campaign, and a patient awareness project. While articles were being published about the lawsuits, a group of clinicians, students, and lawyers visited Virginia courthouses within the state to advocate for patients who had been sued by hospitals. A student film project also shared the stories of patients who had been sued, to bring more public attention on the patient side.

Nonprofits in the spotlight

The researchers also underscored the fact that 72% of the Virginia hospitals that sued patients were actually nonprofit hospitals. Under the Affordable Care Act, nonprofits are banned from taking extraordinary actions to collect unpaid debts for patients unless they confirm that the patient is not eligible for financial assistance. However, it appears that some hospitals are ignoring this rule.

“Our finding that some hospitals sue and garnish the wages of many patients who are likely low-income workers suggests that some hospitals might be engaging in extraordinary collection actions banned in the IRS 501(r) rule,” the study authors write.

Another recent study also shows that many nonprofit hospitals are not following the ACA’s rules around Community Health Needs Assessments. Hospitals are required to complete an assessment of their community’s health needs every three years, make the document available online publicly, and include an implementation plan with specific information about how they will improve community health.

In a random selection of 500 hospitals, almost all of them reported to the IRS that they completed a CHNA and implementation plan. However, when researchers checked hospitals’ websites, only 60% actually had these documents publicly available. Many of the documents were also missing required information, like an evaluation of how hospital programs have impacted community health (42% of CHNAs did not include this element).

“Federal policy makers have an opportunity to improve hospitals’ accountability and transparency,” the study authors write. Perhaps CHNA transparency and quality should be the next topic for media attention and public awareness, to help improve compliance at nonprofit hospitals.