Treasurer: Study shows how hospital bills become medical debt nightmares for thousands of North Carolinians

Treasurer: Study shows how hospital bills become medical debt nightmares for thousands of North Carolinians

By Rose Hoban

Thousands of North Carolinians struggle under debt accumulated because they went to their local hospital for care and wound up with bills that were beyond their ability to pay. 

Even some people with insurance were overloaded with medical debt after seeking care.

Those are the topline findings of a study released Wednesday morning that was conducted by researchers from North Carolina Treasurer Dale Folwell’s office and the Duke University School of Law.

The researchers interviewed one patient who did not realize that Charlotte-based Atrium Health had taken her to court. The hospital system won a judgment and placed a lien on the woman’s house — which she did not know until she and her husband went to refinance their home. 

“We found out that they had sued us and that there were two liens on our house. They didn’t contact us or nothing,” said the woman, identified in a second report featuring patient testimonials only by her case number: 20-CVD-2733.

The study also found that between 2017 and 2022, North Carolina hospitals filed 5,922 lawsuits to recoup unpaid bills from patients and their family members, with five systems comprising 96.5 percent of all the lawsuits. 

Those five systems, Atrium Health, Gastonia-based CaroMont, Sampson Regional Medical Center in Clinton, Asheville-based Mission Health and two locations owned by the national company Community Health Systems — Lake Norman Regional Medical Center in Mooresville and Davis Regional Medical Center in Statesville — brought lawsuits that resulted in average judgments of $16,623. Nearly one in four of the lawsuits were for more than $20,000.

All told, the hospital systems received $57.3 million in judgments from patients. 

Graphic showing the five hospitals responsible for 96.5 percent of lawsuits filed between 2017 and 2022 against patients for medical debt in North Carolina as found in a new report from State Treasurer Dale Folwell’s office. (Note: CHS is Community Health Systems, a national hospital company that owns Davis Regional Hospital and Lake Norman Regional Hospital.) Credit: Office of the State Treasurer

The lawsuits are emblematic of a wider national trend of hospitals — particularly nonprofit hospitals — using aggressive tactics to extract payment for bills from patients, leaving as many as 100 million Americans with medical debt. 

But the problem is likely worse in North Carolina than in some parts of the country. Research conducted by the Urban Institute has found that medical debt is more common in the South and among people in low-income ZIP codes.  

Many of the people sued are low-income workers who fall into the coverage gap created by North Carolina’s failure to expand Medicaid. Others make only a few dollars more than the thresholds where charity care policies kick in. Some actually are insured, but the portion of the bill they’re responsible for was so large that they fell behind and were pushed into collections categories.

Nonprofits hospitals lead the legal charge

To reach its conclusions, the research team compiled all of the administrative court records from the state from 2017 to 2022. 

”We looked for cases in which the plaintiffs are a hospital, and we used all of North Carolina’s hospital names,” said Barak Richman, a professor at Duke’s law school who studies hospital financing. “We weren’t searching for any particular hospital system. This was not intended by any means as a gotcha strategy.”

The team’s findings mirror what’s been shown in national research, that nonprofit hospitals, which receive tax breaks from local, state and federal taxes for hospital operations, are often more aggressive in pursuing patients for payment.

Top of the list in North Carolina was Atrium Health, which filed close to 2,500 lawsuits over the course of the study period. 

Atrium Health disputed that. In an email to NC Health News, an Atrium spokeswoman said that the system provides free care for an average of 275 people a day, totalling more than $437 million each year.

“As a current practice, Atrium Health does not file any lawsuits against patients, nor do we execute on any liens or foreclose on property that were filed previously,” she concluded. (See Atrium’s full email here.)

Atrium, indeed, has been suing fewer people over the past few years. But in 2017, the system filed 787 lawsuits against patients. By 2018, that number had decreased to 688 and the system filed even fewer lawsuits each subsequent year. The last year of data provided by the Treasurer’s office showed the system filed 101 lawsuits in 2022.

Folwell’s team also found that in many instances patients did not know they were being sued or couldn’t make it to court, leading to a default judgment against them. To collect on those judgments, the court can issue a lien on a patient’s property. 

Richman noted that in North Carolina, the court system immediately starts to charge up to 8 percent interest on the amounts in those default judgments that also goes to the hospital. 

“We are uncovering what I consider to be some real problems in the North Carolina court system,” Richman said. “Some automatic features that really victimize patients.”

Even if Atrium is not currently suing patients, the system was chasing patients for payment at the same time as it was receiving tax breaks because of its nonprofit status. Prior reporting in NC Health News detailed how Atrium avoids millions annually in property taxes, even on properties that have little or nothing to do with the provision of health care. 

The system owns more than 100 properties such as houses and commercial properties in Mecklenburg and surrounding counties. One property owned by the system in Charlotte is home to a PDQ Tenders chicken restaurant. 

Another system, CaroMont Health with two locations in Gaston County, was responsible for 1,783 lawsuits over the study period. NC Health News reached out to CaroMont Health for comment by phone and email and did not receive a response by publication time.

Has your hospital been suing patients? Check our spreadsheet.

In all, 90.6 percent of the lawsuits filed in North Carolina were filed by nonprofit hospitals, all of which receive tax breaks, even as the hospitals are mandated to provide community benefit. 

“These hospitals also offered less charity care than the estimated value of a nonprofit hospital’s tax exemption,” the researchers noted.

Burdened by debt

Even if patients aren’t sued by hospitals, they still can end up in financial trouble. Increasingly, hospitals are encouraging patients to sign up for “medical credit cards,” which have interest rates of up to 18 percent. 

The researchers found that Atrium has encouraged more than 63,000 patients to sign up for such credit through the company AccessOne, a private-equity backed company. On the hospital’s website, Atrium notes that AccessOne “helps patients to manage their medical bills by offering easy ways to make monthly payments.”

On a website advertising its services, AccessOne touts how it can help hospitals avoid the messy business of dealing with distraught patients: “Mobile options provide discretion so there’s no reason to talk to a patient when they can’t afford a bill.”

That amount of debt represented by such new credit mechanisms — which have proliferated in recent years — was not captured by the research team. But an investigation by the national KFF Health News found that “patient financing is now a multibillion-dollar business. 

“By one estimate from research firm IBISWorld, profit margins top 29 percent in the patient financing industry, seven times what is considered a solid hospital margin,” KFF reporters wrote.

In the past, many hospitals offered interest-free financing to patients to cover their medical debts, but these new financial instruments sock patients with high interest. 

The Urban Institute used millions of records from a national credit bureau to estimate that about one in five North Carolinians carry some form of medical debt. Experts fear that the real number is much higher. 

shows county level data on medical debt in North Carolina
Debt, which can stem from credit or unpaid bills, often burdens families’ and communities’ financial well-being. This map shows the geography of medical debt in North Carolina. Credit: Urban Institute

In part, that’s because there are other sources of medical debt, such as private medical practices, ambulance companies or other health care providers.

A survey by KFF (formerly known as the Kaiser Family Foundation) has found that 41 percent of U.S. adults say they currently have some level of debt from medical or dental bills topping $250. A quarter of those people reported having debt totaling more than $5,000. 

The interest and fees can add up quickly. At an annual interest rate of 8 percent, that $5,000 can accumulate about $400 in interest. At an annual rate of 18 percent, a year’s interest is $900.

The accumulation of interest is what happened to one elderly couple who were hit with more than $90,000 in bills after the husband had a heart attack.

“I was making $27,000, and my husband wasn’t making anything. We were just over the threshold to qualify. We applied for everything and were denied,” the wife told the treasurer’s staff members. 

The couple, identified by their case number 21-CVD-200, now “owes $100,627.60 in interest to Atrium Health for medical bills that are more than a decade old. These interest charges doubled the size of their original $91,402.24 debt to a total of $192,384.84.”

Patients encouraged to fight back

Marshall Allen first learned about medical debt when he was an investigative reporter at the nonprofit news organization ProPublica. 

“This is a moral and ethical issue, where these hospitals are violating the trust that the patients put in them,” he said after being sent the treasurer’s report. “Hospitals are supposed to be healing people, not harming them financially.”

Eventually, Allen wrote the book “Never Pay the First Bill,” and he conducts workshops about how to help patients fight back when they’re sued by their hospital. He said lawsuits are the most extreme form of the predatory behavior by hospitals, that and the practice of garnishing wages and placing liens on people’s property.

“The high prices, the unjustified prices are predatory in and of themselves,” Allen continued. “Most hospitals are not suing patients, or garnishing their wages or putting liens on their houses. That’s a smaller percentage that are doing that. But all hospitals are overcharging working Americans and making them pay more than people who are on Medicare or Medicaid.”

Allen had bits of advice for patients who find themselves facing large medical bills: the first was to always ask for an itemized list of charges, because charges that a patient did not incur frequently show up on bills.

That was noted by Folwell, too, during his news conference on Wednesday. The state treasurer recounted how a member of the state’s employee health plan had been charged $30,000 by a hospital for a bill they did not incur. 

“These people had already paid $3,000, toward the $30,000,” said Folwell, whose office challenged the charges. “At the end of the day, we got this facility to refund the $3,000 that they had paid because the whole $30,000 was in error.”

Author Marshall Allen’s advice for challenging medical bills:

  • Get an itemized bill with the billing codes. 
  • Check to make sure everything on the bill actually happened.
  • Get your medical records to compare them to the bill. 
  • Then contest the bill, and always ask for a discount. 
  • Turn the tables: Sue the hospital in small claims court.

“My argument is we need to go on offense to protect ourselves and small claims court is a good venue for the patient to protect themselves against these predatory bills,” Allen said. 

— Source: Never Pay the First Bill

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