Aggressive hospital bill-collection is on the rise in New York—but many patients don’t realize they are trapped in the cycle until the interest has already piled up.
A patient sued for medical debt may not know about the lawsuit for years, as hospitals regularly serve the notice to the wrong house or person. Since cases are adjudicated in civil court, patients are not guaranteed defense, and the vast majority do not hire professional counsel. And with 9 percent interest on medical debt, patients often find themselves saddled with debt far larger than the initial bill.
Sometimes, patients find themselves caught in a snarl of legal action for owing as little as $25.
Linda Brown is fastidious about her credit score, so she was surprised, late last month, when she noticed a sudden 28 point drop. Brown, a home health aide in Syracuse, New York, looked through her credit report and found a new account set up to collect on a $25 debt. The debt, she learned, was from a co-pay for two kidney stone surgeries she underwent in late January at Crouse Health Hospital in Syracuse, New York.
Brown has spent the months since the medical procedures steadily paying off the $3,000 deductibles in weekly payments ranging from $50 to $75. In all her communication with Crouse about the procedures and payments, Brown said, no one notified her of the unpaid $25 before placing that debt into the hands of Joel Melnicoff, Crouse’s debt collector and lead attorney on every case the hospital has filed in 2020. Melnicoff did not respond to repeated requests for comment.
“I couldn’t believe it. I just couldn’t believe it,” Brown said. “They can’t say that they don’t have my phone number, don’t have my address, because they do. They could have told me. You want to pay your part, but then they knock you down.”
This is not Brown’s first run-in with surprise medical debt and hospital-hired debt collectors. In 2009, Brown received an X-ray and a CAT scan for back pain, also at Crouse. The bill for the procedures was $2,300, which was supposed to be automatically covered by Medicaid. Ten years later, in 2019, Crouse filed suit against Brown, claiming she owed them $5,400: $2,300 from the original bill, and $3,100 in interest.
A friend connected Brown to Trista O’Hara, an attorney for Legal Services of Central New York. According to O’Hara, Crouse claims they served Brown a judgment in 2010, but Brown disputes this. The hospital’s record of service includes a physical description of Brown that is too inaccurate to affirm Crouse’s claim the Brown was properly served, O’Hara said.
Crouse Health Hospital
Crouse Health Hospital is one of the most lawsuit-happy hospitals in New York state. Between 2015 and 2019, Crouse sued 5,546 patients for medical debt.. The hospital is currently engaged in 873 lawsuits against patients, some dating back to 2008.
Because patients are seldom represented in court, Crouse nearly always wins these suits by default.
During the COVID-19 pandemic, medical debt has continued to burden patients. On March 7th of this year, New York declared a state of emergency. But the courts didn’t close until March 22nd—and in the intervening two weeks, a June 2020 CSSNY report found, hospitals filed at least 122 lawsuits against patients. When the courts resume, the report warned, there will likely be a “tsunami of medical debt cases.”
In June, Crouse delivered Tara Rowser, a Syracuse resident who underwent treatment two decades ago at the age of 18, a $15,000 bill—$5000 for the original treatment, and $10,000 in 9 percent annual interest.
Upon delivering the bill, Crouse began garnishing Rowser’s wages.
“I didn’t even know the bill was there,” Rowser said.
Crouse Health claims that they properly served the notice of debt in 2005. But according to Rowser’s attorney, the hospital sent the bill to her father’s house, where she was no longer living. In 2015, unaware of the debt, she returned to Crouse Health to give birth to her first child. When she was billed, she said, she was told nothing of her ongoing debt.
As a result of the pandemic, Rowser has been furloughed and works dramatically reduced hours. Crouse continues to garnish the reduced wages she does earn.
The cost of doing business
Bob Allen, a representative of Crouse Hospital, said the lawsuits are just the cost of doing business.
“If you’re going to be a fiscally responsible hospital, you need to make every effort to pay your expenses,” Allen said in an interview with New York Focus.
But many financially healthy hospitals in the state do not file lawsuits over small debts, and few approach Crouse’s lawsuit rates.
Just a handful of the state’s hospitals are responsible for the vast majority of lawsuits against patients, CSSNY found. Out of the 139 hospitals researchers studied, just 25 were responsible for 93 percent of medical debt lawsuits in New York between 2015 and 2019. 55 hospitals had not filed any medical debt lawsuits at all.
Medical debt delinquency disproportionately affects people of color. In Onondaga County, where Crouse Health is located, 41 percent of people of color have unpaid medical debt, compared to 14 percent of white people, according to an Urban Institute study.
Patient advocates said that the lawsuits are especially troubling considering that many of the hospitals receive funding through New York’s Indigent Care Pool, money that is required by state law to be used to offer free or discounted treatment to low-income and uninsured patients, including reduction or elimination of copays and deductibles. Based on case files studied by CSSNY, the subsidies are not reliably used to alleviate financial burdens of qualified patients.
On March 9, a day before the state put a moratorium on medical debt lawsuits, Aubrey Picciano, a school bus driver in Syracuse, was served a notice from Melnicoff’s office giving her one month to pay $2,000 in owed medical bills and $400 in interest. If she failed to pay within the month, her wages would be garnished. Picciano says that she was never offered any financial assistance.
Picciano scraped up the money, giving a much-needed financial cushion to Crouse. When schools went virtual, she was laid off from her job.
“It’s pretty shitty. We get hit with this pandemic and then like, here you go, pay $2,400 by the end of the month,” Picciano said.
Crouse finished 2018 with $4.7 million in unused ICP funds. This figure is dwarfed by the unused ICP funds of some other hospitals: New York Presbyterian finished 2018 with nearly $20.5 million in unused ICP funds, and North Shore University Manhasset had over $14.5 million in unused ICP funds. Neither hospital responded to requests for comment.
Crouse Health is an affiliate of Northwell Health, the largest healthcare system in New York State. Northwell’s partner hospitals are responsible for 51 percent of the state’s patient medical debt lawsuits between 2015 and 2019. Northwell Health denied responsibility for Crouse Health’s medical debt lawsuits.
A bill “to get rid of all of that opacity”
In an effort to address many of these issues, Assemblyperson Dick Gottfried and Senator Gustavo Rivera introduced the Patient Medical Debt Protection Act in September 2019. If passed, the legislation will standardize and simplify the hospital billing process for patients and ban unexpected charges for out-of-network health care, often referred to as “surprise billing.” The legislation would also reduce the interest rate on medical debt from its present rate of 9 percent to the rate of one-year United States treasury bill interest, currently 1.62 percent per year.
The bill also includes the expansion of the online All-Payer Database (APD), a cost transparency tool which will enable patients to compare the cost of procedures between medical treatments, including the amounts covered by different insurance rates.
“The objective is clarity, transparency, and understandability, so that people will no longer be victim to medical parlance and obscure code methods and bundled charges,” said a legislative staffer speaking on background. “Our objective is to get rid of all of that opacity.” The staffer expects the bill to come under more serious discussion on the floor of the Senate in January.
The staffer said that several forces within the insurance and hospital industries are pushing to avoid implementation of the APD and other moves aimed at standardization and transparency in the hospital billing process. Because hospitals are competing for the best insurance rates, they charge different prices depending on who is paying. As a result, the staffer said, hospitals do not want other hospitals to know how much they charge or patients to know what options they have. Current public data only shows the frequency of procedures that each hospital carries out.
But while these provisions may reduce levels of medical debt and the frequency of lawsuits, Rivera and Gottfriend have more ambitious legislation in mind. “We have a healthcare system that needs to be ground up, thrown out, and needs to begin again,” Rivera said, pointing toward the New York Health Act, of which both he and Gottfried are sponsors, which enacts a single-payer healthcare system in the state.
As for Brown’s case, O’Hara is optimistic that the judgment will be reopened and dismissed. According to O’Hara, defendants often win medical debt lawsuits when they are represented by attorneys.
But Brown’s professional legal representation is uncommon: in 97 percent of medical debt cases studied by CSSNY, the defendants had no legal representation.