RALEIGH – North Carolina hospitals sued 7,517 patients and their family members to collect medical debt from January 2017 through June 2022, according to a new study jointly authored by Duke Law School faculty and the Office of State Treasurer (OST).
Many of these legal actions resulted in default judgments in state district courts and included awards of 8% interest charges on patients’ medical debt. In total, interest charges and other added fees accounted for 35.4% of the $57.3 million in total judgments owed by patients. Nonprofit hospitals were responsible for 90.6% of the 5,922 lawsuits against patients. State Treasurer Dale R. Folwell, CPA, cites the study as a new reason to call on the state House of Representatives to pass Senate Bill 321, the Medical Debt De-Weaponization Act.
The bill would protect patients and their families by capping interest in medical debt collection, requiring more transparency in medical bills and providing patients with additional consumer protections, the treasurer said. The Senate unanimously passed the bill despite opposition from hospital lobbyists.
“This is tantamount to elder abuse,” said Treasurer Folwell. “Hospitals are supposed to care for patients — not overcharge them, sue them and take their homes. These hospitals are destroying the upward mobility of whole families, hurting cancer patients’ recovery, and creating intergenerational poverty. They must be stopped.”
The Treasurer was joined by Duke University Law School professors Barak Richman, J.D., Ph.D., and Sara Sternberg Greene, J.D., Ph.D., during a press conference Wednesday, Aug. 16, to release the study, along with a collection of patient interviews independently conducted by OST.
The study found that five hospital systems — Atrium Health, Caromont Health, Sampson Regional Medical Center, Community Health Systems and Mission Health — were responsible for filing 96.5% of the 5,922 lawsuits against patients, and that the state was home to eight “litigious hospitals,” defined by the authors as systems that brought more than 40 lawsuits during the 4.5-year sample.
Patient interviews revealed that having health insurance was not enough to protect them from lawsuits, and some patients did not even know they had been sued. One 80-year-old couple did not know about a $90,000 lien against their house until contacted by OST researchers. Another 70-year-old couple cannot retire because Atrium Health has a $192,000 lien against their house, despite earlier assurances of help with the bills.
“We see a system that fails to deliver due process from start to finish,” Richman said. “Patients are charged inflated prices that they neither see nor assent to pay, they get sued in a process that delivers default judgments, and they suffer immediate penalties such as interest payments and liens against homes. Some of these patients never knew they were being sued in the first place.”
In North Carolina, medical debt judgments can last up to 20 years, and judgments can automatically act as liens against patients’ homes. The study revealed that hospitals won default judgments across a majority of the cases filed in district court. Patients reported that even when they did try to fight the lawsuits, they lacked the information needed to understand the hospital bills.
“By suing some of their most vulnerable patients, hospitals exacerbate long-standing racial wealth inequalities,” said Sara Sternberg Greene. “Black families have only one-tenth of the wealth of white families, making it difficult to pay for unexpected medical bills. These lawsuits are extracting patients’ intergenerational wealth through liens on their homes and steep interest charges.”
“Many of these hospitals are overcharging patients. These patients couldn’t see the price, but they get sued anyway,” said Treasurer Folwell. “This is a continuation of the transfer of wealth from sick people to multibillion-dollar nonprofits and their multimillion-dollar executives.”
North Carolina hospitals sued 7,517 residents over medical debt and won a total of $57.3 million in judgments from January 2017 through June 2022.
- The average judgment was $16,623.23, but almost one in four judgments was worth more than $20,000. Some patients owed as much as $192,000.
Interest charges, attorney fees and court fees accounted for 35.4% of the total value of all judgments against patients.
- Hospitals used the court system to charge 8% annual interest on medical debt judgments, burdening some patients with more than a decade of accumulated interest.
- Interest fees exceeded $10,000 across more than one in ten judgments (463 out of 3449), and the majority of hospital judgments charged patients at least $1,000 in interest (2,162 of 3,449). The average interest amount was $5,179.98.
Five hospital systems were responsible for 96.5% of all lawsuits.
- Atrium Health filed a full 41.9% of the cases against patients. Atrium Health is now the fifth largest hospital system in the nation after its recent merger with Advocate Aurora Health. Atrium Health filed 2,482 lawsuits against North Carolinians and won an average judgment of $22,953.99.
- Litigious hospitals marked up their chargemaster “sticker prices” by an average 480.5% from their costs. At least 40% of litigious hospitals had charge-to-cost ratios higher than 500% each year from 2017 to 2021.
- More than half of litigious hospitals exhibited double-digit net profit margins for every year except 2018, and they recorded an average net profit margin of 15.9% in 2019 — far higher than the national average of 6.52%.
Nonprofit hospitals were responsible for 90.6% of the lawsuits against patients, calling their charitable mission into question.
- Nonprofit hospitals receive lucrative tax exemptions to care for disadvantaged patients, but the majority of litigious hospitals spent less on charity care than the estimated value of their tax exemptions.
- The value of a nonprofit hospital’s tax exemption is estimated to be 5.9% of expenses. More than 60% of litigious hospitals spent less than that on charity care each year during our sample, and in 2021, 84% of the litigious hospitals spent less.
Patients are uniquely vulnerable to medical debt lawsuits. Unlike in almost all other sectors of the economy, patients lacked critical pricing information that would have helped them protect their financial health. Furthermore, hospitals sued patients over surprise bills and benefited when patients did not appear to defend themselves in court.
- Hospitals won default judgments across 59.8% of the judgments in district court. Default judgments are typically awarded when one party does not respond to a court summons or appear in court.
- Some of these patients were unaware of the legal proceedings against them. For example, an 80-year-old couple learned of a lien of approximately $90,000 against their house only after being contacted by OST researchers.
- Black defendants received 26% of default judgments, and Black and Hispanic defendants were both disproportionately represented among the patients who incurred larger amounts of interest.