An “especially aggressive” nonprofit hospital system in Memphis that made $86 million after expenses in 2018 and pays virtually no taxes has spent years relentlessly suing thousands of low-income patients over medical debts, according to a new investigation by ProPublica and local reporting-network member MLK50.
Methodist Le Bonheur Healthcare runs six hospitals around Memphis, a city in which about 25 percent of residents live below the poverty line. The hospital system, which made $2.1 billion in revenue, charges low-income patients interest on their bills and regularly garners their meager wages when they don’t pay up. The hospital system owns its own collection agency to pursue debtors.
From 2014 to 2018, Methodist filed more than 8,300 lawsuits for unpaid medical bills. Through the courts, it secured garnishment orders in 46 percent of those cases.
Methodist is far from the only hospital system to pursue unpaid medical bills. But many nonprofit hospitals have stopped the practice. And of those that still files lawsuits, Methodist stands out for the number of cases it pursues, its application of interest, and its persistence at clawing wages.
“A lot of medical debts are just handled through the collections process,” Jenifer Bosco, staff attorney at the National Consumer Law Center, told ProPublica and MLK50. “Certainly, some end up in court, but it seems like this hospital is especially aggressive.”
The investigation highlighted the case of Carrie Barrett, who owed $12,109 to Methodist for a two-night stay in 2007 after experiencing shortness of breath and tightness in her chest. Barrett, who has never made more than $12 an hour, has struggled to pay off the debt. Even though the hospital is aware that she is a low-income patient, the hospital sued her in 2010 and has applied interest charges to her debt seven times in amounts ranging from $46 to $7,340. She now owes around $33,000.
Methodist secured a garnishment order on Barrett’s wages and has tried to collect money on many occasions from various employers. But in most instances, the hospital system was denied a cut of her pay because Barrett simply doesn’t make enough to clear an earning’s exemption (which legally protects $217.50 per week of after-tax income for living expenses). Barrett earned a total of $13,800 in 2018.
For Methodist’s latest attempt to garnish wages, Barrett appeared in court in January. Barrett had fallen behind on her $40 per month payments after she quit her job to care for her ill sister, who passed away in November of cancer. Barrett wanted to reinstate the $40 monthly payment, but one of Methodists’ attorneys pushed for the payment to be increased to $100. The judge agreed.
Since the increase, Barrett has made payments using payday loans, which have an effective annual interest rate of more than 240%.
In a statement, Methodist said:
Outstanding patient debts are only sent to collections and then to court as a very last resort, and only after continued efforts to work with the patients have been exhausted… We strongly believe in providing exceptional care to all members of the community — regardless of ability to pay.
Previous media attention on nonprofit hospitals aggressively suing patients has led to hospital policy changes as well as political pressure.
In 2017, Sen. Chuck Grassley, R-Iowa, wrote an op-ed on the issue, noting that relentless debt pursuit and uncharitable treatment of poor patients is “contrary to the philosophy behind tax exemption.” He went on:
The arrangement is a compact between tax-exempt hospitals and the entities that grant tax exemption. Federal, state, and local governments forgo billions of dollars in taxes to tax-exempt entities that have been deemed to meet a pressing societal need.
Yet Grassley noted that government investigations have found that nonprofit hospitals and for-profit hospitals provide similar levels of uncompensated care. Nonprofits also tend to pay their executives’ salaries on par with their for-profit counterparts.
In 2017, Methodist’s president and CEO earned $1.6 million in total compensation.