In This Kansas Courtroom, the Hospital Dominates the Docket

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A Rural Crisis: Medical Debt in America's Heartland

More than 15 million Americans have medical debt, and the issue of collection is particularly tough in rural America. More than 15 million Americans have medical debt, and the issue of collection is particularly tough in rural America

By Shannon Najmabadi  The Wall Street Journal  May 26, 2024 

 

PRATT, Kan.—Last summer, a rural hospital on the Kansas plains began filing dozens of lawsuits against patients who hadn’t paid their medical bills.

In July and August 2023, four of every five sheriff-delivered court summonses in Pratt County were from Pratt Regional Medical Center. In September, 95% of civil cases set to be heard in Magistrate Judge Ronald Sylvester’s Pratt courtroom were brought by the hospital. By December, it had sued some 400 people in a county of 9,000—more than it had in the past five years combined. 

“If it makes you feel any better,” Cynthia Mehlhorn recalls an officer telling her when she got her court summons for $5,619 in outstanding hospital bills last year, “you’re not the only one.”

The debt-collection spree is an example of how some hospitals in recent years have become more aggressive in recouping bills from the estimated more than 15 million Americans who have medical debt. The issue can be particularly acute in rural areas like Pratt, where residents are more likely to be older and uninsured, and hospitals are under financial stress

More than 150 people in Pratt had wages ordered garnished in 2023, from employers that included Walmart, the hospital, the county clerk’s office and the school district. Most were ordered to pay 12% interest after judgment, an amount set in statute.

There was more than $49 billion in outstanding medical bills in collections last June, according to a Consumer Financial Protection Bureau estimate based on credit-report statistics. Other analyses peg the amount of medical debt closer to $200 billion. Major credit bureaus have in recent years begun removing medical debt from consumers’ credit reports. 

Pratt Regional Medical Center’s chief executive officer, Tammy Smith, said last year’s increase in lawsuits stemmed from the pandemic, when it fell behind with filings. The hospital realized some 700 accounts needed payment in the summer of 2023, with some cases bumping up against a five-year statute of limitations. 

“As long as patients continue to communicate with us to develop an assistance plan, we do not turn their accounts over to debt collection or attempt legal action,” Smith said. The hospital takes further action only after it has spent more than 10 months trying to contact them, she said. 

It has seen an increase in operating costs and in high-deductible health plans that leave patients with higher out-of-pocket expenses, she said.

Kansas is one of 10 states that hasn’t expanded Medicaid, which advocates say would bolster hospitals’ financial margins. Four of five rural Kansas hospitals recently reported losing money on patient services, according to the Center for Healthcare Quality and Payment Reform, a national policy organization. 

Some states have responded to patient blowback over medical debt lawsuits by capping interest rates at 3% or blocking hospitals from placing liens on homes.

A nationwide increase in debt-collection cases has drawn scrutiny from some attorneys and judges who say they eat up court and law-enforcement resources. In nine states with easy-to-access court data, debt cases—including those for medical bills, credit cards, and auto and student loans—made up 29% of civil dockets in 2013, compared with 42% in 2021; debt claims were the most common civil cases in 13 of 16 states that year, according to the nonprofit Pew Charitable Trusts.

Courts are “choking on these cases; the volumes are massive” said David Freeman Engstrom, a professor at Stanford University’s law school. He helps lead a center focused on making the civil justice system more accessible and transparent. 

“Big institutional plaintiffs are, in effect, assembly lining these cases through the courts,” he said. 

Technology that automates the preparation and filing of legal pleadings has also made it easier for companies to file large volumes of cases, Engstrom said. 

For the respondents, there is no right to an attorney in most civil cases. Rules that limit the practice of law to lawyers have impeded the growth of self-help legal tools, he said.

“I was struggling just to get by day to day,” Mehlhorn said. 

Mehlhorn agreed to pay $20 a month toward her bill, which now includes more than $2,300 in interest.

This year, Mehlhorn’s 71-year-old mother, Jewell Duncan, received a court summons notifying her that she too was being sued by Pratt Regional for two of her grandson’s hospital trips where she signed his intake paperwork. She appeared in Sylvester’s court, accompanied by Mehlhorn. 

“I would like specific account #s and itemized statements since I have never received a bill for him,” Duncan wrote on one of her legal filings.

Duncan’s case was dismissed after she got help from Matthew Keenan, executive director of Kansas Legal Services, which helps low-income residents. 

Patients can appeal to the hospital to reduce their bills—nonprofit hospitals must offer their community some amount of charity care in exchange for their tax breaks—but patients often aren’t aware of that option or of how to apply

Pratt Regional’s financial-assistance policy says it guarantees free care to those living at or below 200% of the federal poverty level. It is referenced in bill statements and signage by the hospital reception desk, Smith said.

Mehlhorn and Duncan think they would have qualified but didn’t know about it. The hospital spent about 0.2% of its total expenses on financial assistance in its fiscal 2022, less than it spent on collections and billings.

Duncan worked at the hospital before she was furloughed, making around $12 an hour working in medical records, she said. About $60 was being withheld from her bimonthly paychecks to cover a past medical visit, and she doesn’t think it was fully paid off, she said. 

“They’ll probably be taking me to court again before long,” she said.

Write to Shannon Najmabadi at shannon.najmabadi@wsj.com



 


 
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