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Senate Criticizes Debt Collection Practices of Hospitals


The United States Senate has issued a public warning to non-profit hospitals subjecting their patients to abusive and harassing debt collection practices. Under federal law hospitals seeking to claim tax-exempt status are required to provide care to low income individuals who would otherwise be unable to afford that care, in exchange for the tax subsidization. However, not all hospitals are adhering to this duty. At least one non-profit hospital has generated such a reputation as a bully to its low-income patients with outstanding bills that it was called out publicly by a US Senator and felt compelled to change its name. Mosaic Life Care—formerly Heartland Regional Medical Center—garnished the wages of some 6,000 low-income patients between 2009 and 2013, seizing approximately $12 million. Mosaic received national attention when Sen. Charles Grassley sent a letter to the institution pointing out that its failure to properly care for its poor patients may mean that it is in violation of federal law. Sen. Grassley pointed out that the hospital regularly fails to identify the patients in its care who are eligible for financial aid, subsequently forcing those low-income individuals to the stresses and credit destruction of collections. In fact, Mosaic has created its own for-profit debt collection organization called Northwest Financial Services. While Mosaic had a financial aid system in place, the program was not well-publicized, and it required patients to submit applications on their own initiative, whether or not the hospital had already identified them as low-income and qualifying for financial aid.

In addition to the duties held by nonprofit hospitals to ensure that their poorest patients are not forced to pay, federal laws impose a duty on all hospitals to provide assistance to those who qualify. The 2010 Affordable Care Act includes a provision which requires hospitals, before suing the indebted patient for his or her unpaid bills, to make “reasonable efforts” to find out if the patient qualifies for financial aid. Additionally, the IRS has issued a set of rules to clarify the requirements imposed on hospitals to investigate patients’ ability to pay prior to sending those patients to collections.
Medical debt remains a crushing burden on many Americans and is responsible for the largest share of personal bankruptcies filed, even despite the fact that 75% of those filing for bankruptcy had health insurance. According to a study conducted by the Harvard Medical School, the percentage of bankruptcies attributable to medical issues rose by 49.6% between 2001 and 2007.

If you find yourself struggling with an overwhelming amount of medical debt and need experienced, professional help in managing that debt, contact the Maryland consumer law and bankruptcy attorneys at Haeger Law for a free consultation at 888-463-3520.