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December 28, 2019; Kaiser Health News

The last year saw a spate of reporting on hospital debt collection practices. As reported on this site, leading nonprofit hospitals such as the University of Virginia Health System and Methodist Le Bonheur in Memphis were aggressively pursuing patients—sometimes even including their own low-wage staff—garnishing wages, seizing tax refunds, and sometimes even taking their homes.

In its most recent reporting, Kaiser Health News calls out the American Hospital Association, a trade association for about 5000 nonprofit hospitals, for staying mum on this issue. AHA has no guidelines for its members regarding billing and collection. As a result, practices across the country vary enormously.

KHN points to Atlantic Health System, a New Jersey hospital system, whose CEO Brian Gragnolati is chair of AHA. In 2019, Atlantic sued patients 8,000 times to collect unpaid bills. Among those patients was the Mechan family of Maywood, NJ. The Mechans have three children with the chronic lung disease cystic fibrosis and owed $7,982 for the care of their 18-year-old son, Jonathan.

Tricia Mechan works two jobs to try to keep up with the bills. She cleaned out a savings account and borrowed money to settle Jonathan’s bill for $6,000. Another son is paying off a $4,200 bill at $25 per month.

Another member of AHA is Yale-New Haven Hospital. Yale-New Haven may send patients to collections, says Patrick McCabe, the system’s senior vice president of finance, but the hospital doesn’t take legal action. “I have not signed off on a legal action since 2015,” he told KHN.

This variability in collection policies is the result of vague laws and the lack of any other clear guidelines, including from AHA. Nonprofit hospitals are required, under the Affordable Care Act, to provide “community benefits,” including charity care, to receive tax exemptions, but there are few specifics.

Ge Bai, a health policy professor at Johns Hopkins, explains, under federal law “there is no requirement” for minimum hospital charity. “You design your own policy. And you can make it extremely hard to qualify.”

Some states have stepped into this void. In California, for example, patients with incomes less than $90,000 for a family of four must be offered discounted or free care. New Jersey law requires Atlantic and other hospitals to offer free care to patients with an income for a family of four of less than $51,000.

Despite more widespread insurance coverage that has resulted from the Affordable Care Act, hospitals say more patients are struggling to pay their bills. The cost of care keeps going up, incomes have plateaued, and many people have high-deductible insurance plans, which requires families to pay thousands of dollars before their insurance kicks in.

In this situation, it is incumbent upon hospital leadership to rethink their policies, and not throw families into a cycle of debt, poverty, and sometimes even prison, as a result of catastrophic illness.

“There could be a broader message coming out of hospital leadership” about harsh collections, Erin Fuse Brown, a law professor at Georgia State University, told KHN. “It seems unconscionable if they are claiming to serve the community and then saddling patients with these financial obligations that are ruinous.”

Rick Pollack, CEO of the American Hospital Association, told KHN, “We are reevaluating the guidelines [for collections and financial assistance] to ensure they best serve the needs of patients.” With Iowa’s Senator Charles Grassley having taken an interest in this issue, perhaps it is time for the hospital association to move more quickly.—Karen Kahn