Book Details History of Predatory Debt-Collection Practices by Nonprofit Hospitals 

By Consumers for Quality Care, on August 21, 2024

In his book Your Money or Your Life, Dr. Luke Messac chronicles nonprofit hospitals’ long history of engaging in aggressive debt collection practices at the detriment of consumers, according to HealthAffairs.  

Dr. Messac, an emergency-room doctor, didn’t know how his previous employer collected on unpaid medical bills. He soon learned, however, that predatory debt-collection tactics were widespread and that nonprofit hospitals had been known to sue patients or garnish their wages when they couldn’t afford to pay.  

According to a 2021 JAMA Network study, the average consumer owes more than $400 in medical debt, more than any other kind of debt combined. Furthermore, medical debt disproportionally affects vulnerable populations, such as communities of color, the disabled, and those in states that have not expanded Medicaid. “Like other hardships in American life, [medical debt and aggressive collection] rises as one moves further down the steep gradient of historically determined inequality,” writes Dr. Messac. 

Over the last four decades, hospitals have aggressively gone after debtors. More than two-thirds of hospitals have policies that outline how to take legal action against consumers that owe debt. 

Medical debt takes more than just a financial toll on consumers. It makes patients more likely to delay or stop seeking medical care for fear of going further into debt, which can hurt health care outcomes. It also erodes the patient-doctor relationship, as consumers lose trust in an industry that strips them of their livelihood. As Dr. Messac writes, “How likely are you to listen to a doctor when you suspect their recommendation, if followed, will land you in a courtroom or cause you to lose your home?” 

Dr. Messac found that nonprofit hospitals are just as likely as for-profit hospitals to sue consumers over debt. This is despite the fact that n​onprofit hospitals are incorporated as charitable organizations. In many instances, the business practices of nonprofit hospitals are far from charitable. Under IRS rules, nonprofit hospitals are required to provide charity care. But the rules don’t specify how much charity care should be provided, and federal agencies do little to enforce the rules’ more specific requirements. Worse, nonprofit hospitals sue consumers that are financially eligible for charity care, neglecting to screen them first. “Even when hospitals had charity-care policies in place, many qualifying patients were pursued for these debts,” Dr. Messac writes, “often because they had not been informed about financial assistance or did not have the wherewithal to complete the application.” 

CQC urges nonprofit hospitals to hold up their end of the bargain to better serve their communities and deliver care for patients when they need it most. Furthermore, CQC urges lawmakers and regulators to take action to put an end to predatory medical debt collection tactics that harm consumers and exacerbate the medical debt crisis.