Courts try to revise debt settlement for hospitals

January 26, 2009|By James Drew | James Drew,

Maryland district court officials want to give defendants in debt collection lawsuits new access to legal help and change the way that settlement conferences are handled, in response to criticism that hospitals, credit card companies and other creditors often have an unfair advantage.

The courts are responding to an investigation into hospital debt collection practices published last month by The Baltimore Sun. That report, as well as a University of Maryland law school study released in November, found that defendants are confused by the court process, do not understand that they sometimes have legitimate defenses and assume that they must accept whatever terms are dictated by hospital lawyers in settlement conferences. The Sun also found that hospitals almost always win cases that go before a judge, simply by presenting an affidavit that the person was treated there.

The district court system is considering setting up "self-help centers" so that people who cannot afford attorneys can get legal advice. It is also considering using computers to show simulated meetings between attorneys and unrepresented defendants in civil cases, said Ben C. Clyburn, the chief judge of Maryland's district courts.

The first change will take effect in two weeks, when defendants assigned to the so-called "rocket docket" in district courts in Baltimore and in Montgomery and Prince George's counties receive new notices about their rights - including that a judge will consider their case if they don't want to, or can't, reach a settlement with creditors' attorneys. That follows a recommendation in the University of Maryland study.

During the past few years, attorneys who file large numbers of debt collection lawsuits in those three jurisdictions have been given weekly access to courtrooms to try to work out agreements with defendants. These sessions are known as "rocket dockets" because they encourage rapid, on-the-spot settlements. Court officials have said the goal is to reduce the size of trial dockets.

"We will explain the process a lot better and put citizens in a better position to understand what they need to do, so they are prepared at these conferences," Clyburn said.

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 Baltimore District Court, which serves many lower-income debtors. The Sun found that some hospitals have won judgments against patients covered by Medicaid, despite a Maryland law prohibiting that. Some hospitals have also sued patients three or more years after their stays ended, raising questions about whether the statute of limitations had expired.

Last year, 15 students in consumer law clinics at the University of Maryland School of Law observed rocket docket sessions in the three jurisdictions. They found that the process confuses many people because they are summoned for "trial." When the defendants arrive, they walk into a courtroom where a bailiff sits in the judge's chair and a clerk calls them to meet with creditor attorneys at a large table.

In Baltimore, defendants receive both a trial summons and a notice about the "007 docket" - a reference to the courtroom in which the rocket docket is held - that states: "This proceeding is not a hearing; a judge will not be present in the courtroom."

The University of Maryland study termed the two documents "confusing, misleading and contradictory."

The new notice written by the state district courts makes it clear that the rocket docket is a "resolution conference" and states: "Speaking with the plaintiff's attorney can help bring about the resolution of your case, but you are not required to speak with the plaintiff's attorney. It is your option and will not be held against you."

Many defendants are not aware of the legal consequences if they acknowledge that they owe a debt, that there are limitations on fees and interest rates that can be charged, or that collection can be barred by a statute of limitations, said Daniel L. Hatcher, an assistant professor of law at the University of Baltimore.

"Negotiation only works if there is a power balance," said Michael Millemann, a Maryland law professor who co-wrote the study. "Creditor attorneys have a real interest in resolving these cases promptly, even if they don't get 100 cents on the dollar. What is missing is the counterweight for the defendants."

Tom McCray-Worrall, a Maryland law student who witnessed several rocket dockets, said he saw many instances in which attorneys for creditors said the defendant owed the debt, then asked if the person preferred a payment plan or a lump sum. No proof of the amount of the debt was presented, McCray-Worrall said.

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