Their day in court

Hospital debt collection lawsuits can zoom through the courts, pitting experienced law firms against ill-informed defendants

In Their Debt

December 22, 2008|By Fred Schulte and James Drew | Fred Schulte and James Drew,

Every Wednesday at noon, debt collection lawyers take their seats behind a thick wooden table in a downtown Baltimore courtroom for a ritual they call the "rocket docket."

It's one way officials at the city District Court try to unclog a backlog of consumer debt lawsuits, including thousands filed by hospitals over unpaid bills.

Lawyers call up debtors one at a time to work out payment plans in rapid, on-the-spot settlements. Other days, lawyers haggle with debtors in the courthouse hallways. When cases go to judges, hospitals typically win after hearings that last a few minutes or less.

Nearly one-third of the 132,000 lawsuits that Maryland hospitals have filed against patients in the past five years over unpaid bills have been filed in the city District Court, which serves an area where many debtors are "living on the margins," as University of Maryland law professor and former Legal Aid lawyer Michael Millemann puts it.

These lawsuits have played out even though hospitals' costs of unpaid bills and provision of free care to the poor are supposed to be covered by the rates paid by all patients, under Maryland's unique rate-setting system. Some of the hospitals that have filed the most lawsuits have received millions of surplus dollars from the payment system.

Maryland hospitals have won at least $100 million in judgments against patients in the past five years and placed liens on at least 8,000 homes across the state, despite national hospital industry guidelines that caution against the wholesale use of that practice, an investigation by The Baltimore Sun found.

Some hospitals have won judgments against patients covered by Medicaid for bills the giant government health plans didn't pay, despite a Maryland law outlawing that, The Sun found in sampling more than 200 court files. Hundreds of patients have filed complaints with state regulators over billing issues, including allegations that hospitals tried to collect amounts beyond what they agreed to accept under insurance company contracts by going directly after patients.

And some hospitals have sued patients three or more years after their stays ended, raising questions about whether the statute of limitations had expired, The Sun found.

The court processes can overwhelm debtors, who rarely have lawyers to assist them and often don't even try to defend themselves. At the "rocket docket" and other settlement forums, patients negotiating against hospital lawyers "have no comprehension of the potential defenses that they may have," said Millemann, also a former chief of the civil division of the Maryland attorney general's office.

Daniel L. Hatcher, an assistant professor at the University of Baltimore School of Law, said debt collection cases of all types are "completely overwhelming" the district courts. "Even the best judge won't have the resources to give each case justice," he said.

Court records don't make clear how much of the judgments were actually collected by the hospitals. It's also not possible to know whether hospitals are suing the same patients whose debts they've already written off as part of the rate-setting system, because state regulators do not require them to itemize write-offs. The hospitals insist that they don't collect debts twice.

The hospital industry argues that state regulators expect them to pursue those who can pay their bills, so those costs don't get passed on to all patients through higher rates. But some hospitals have filed thousands of lawsuits while others of similar size have filed just a few hundred. Maryland law, unlike the law in some other states, imposes few controls on when and how hospitals can sue patients.

Carmela Coyle, president of the Maryland Hospital Association, said its members only press people with the ability to pay. That's not always easy to determine, she said, especially when patients or their families don't share full details of their finances.

Though she said the number of suits was small compared to the total number of patients hospitals treat, she said: "I'm sure you'll find examples of bad practices. We won't defend those."

One collection attorney, while saying that most debts pursued are legitimate, conceded that mistakes occur. Patients can face a lawsuit because a hospital "failed to fill out insurance forms correctly," said Bruce H. Cherkis, a Gaithersburg lawyer. "There are a lot of ways to fall through the cracks."

Robert B. Murray, who heads the state Health Services Cost Review Commission, said the volume of lawsuits against patients is "troubling," especially since some hospitals appear to sue much more than others.

"We hope and expect that hospitals are charitable institutions and they know where to draw the line," Murray said.

Lawyers specialize

The lawsuits have brought in money not just for the hospitals, but also a cadre of specialized law firms that handled the bulk of cases filed by Maryland hospitals against patients over the past five years.

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