Hospitals should not garnish their patients' wages

Some time ago, I compiled a list of five better ways hospitals could collect on patient debt, concluding that "dunning and then suing patients with low incomes and few resources to respond is extraordinarily short-sighted, if not mean-spirited."

A new investigative report by ProPublica and National Public Radio suggests that hospital executives apparently pushed any misgivings about being short-sighted and mean-spirited aside in order to experience the supreme feeling of more coin in their clutches.

Their report, on the garnishment of wages in the U.S., concludes that the practice is on the rise in recent years. One in 10 working adults now has his or her wages garnished, particularly those earning $25,000 to $40,000 a year, which is below the national median income.

Although the report did not provide specific data for hospitals, the story leaves little doubt that hospitals are big garnishers. For example, the report points to a visit to a courtroom in Missouri that handles debt litigation and makes specific mention of a hospital suing a patient, and the report noted that medical bills make up a large portion of garnishment proceedings.

Collecting debts against those with moderate incomes makes a sort of Darwinian sense. Most people of modest means and resources won't show up in court to dispute a debt, leading to an automatic default judgment. That was the case in the Missouri courtroom profiled by ProPublica/NPR, where most cases were immediately ruled in favor of the plaintiff.

As you might recall, Missouri's St. Luke's Medical Center filed liens against nearly 200 insured patients injured in car accidents because the hospital had tried and failed to get bigger payouts from their automobile carriers instead. Logic suggests that some of those cases led to garnishments.

Also, a ProPublica supplementary report about the state-by-state differences on garnishment made the astonishing disclosure that in virtually all cases North Carolina does not garnish wages--unless the debt is owed to a hospital or ambulance company.

It makes me wonder what role Carolinas Healthcare--which as you might recall, sued 12,000 patients over sometimes nominal sums owed to just one of its hospitals--played in sneaking that little legal loophole onto the books.

For those hospital managers that see garnishment as a perfectly legal tool in extracting money from patients, let me outline the big picture:

  • A large majority of garnishments are against middle-aged and moderate income people--groups always on the cusp of serious health problems.

  • If you are or have collected their money every other week, they will assume that you are no longer willing to treat them, or are angry at them. They will then avoid seeking care until they have no choice.

  • Because of this deferred health maintenance, you will treat them for far serious--and expensive--medical conditions than you otherwise would have had to handle.

  • They will be unable to pay these newly incurred debts.

  • Repeat.

There are solutions to this. If your charity care program consumes less than 5 percent of your overall revenue, bump it up. Hire more staff to get uninsured patients qualified or coverage. And send a memo out to everyone saying that the organization will freeze wages for a year because the institution has lost sight of its community mission. The nurses and other front-liners see these patients every day. I would hope they would understand.

The garnishment report also suggests that activity is heaviest in states that have yet to expand Medicaid. If hospitals contribute tens of billions of dollars to the state's economies, they can scrounge up the $50 to $100 million required to give the bum's rush to the lawmakers that refuse to expand Medicaid. Given the billions to tens of billions of dollars being passed up by the states each year in federal funding to expand program eligibility, the return on such an investment is phenomenal.

And as I said more than two years ago in this space--don't sue a patient, ever. Your mission is to heal, not traumatize.--Ron(@FierceHealth)