March 15, 2022

Unanswered questions over hospital debt despite policy changes

When Adriann Barboa’s 14-year-old daughter, Amarisa, needed surgery after contracting appendicitis eight years ago, Barboa wasn’t too concerned about the cost. She had a good job by New Mexico standards, and she had health insurance.

So after Presbyterian Hospital rescheduled Amarisa’s surgery for the following morning and suggested that the teenager stay overnight so doctors could keep an eye on her, Barboa consented. The surgery was successful, and the Barboa family went home.

“Then I got a bill for $15,000 dollars because it was an overnight stay, and my insurance didn’t cover that,” said Barboa, New Mexico policy director for Forward Together, a progressive health policy nonprofit. “Nobody ever asked me or told me that I would have this kind of charge. I could not afford that $15,000 bill, and it’s been on my credit since then.”

Amarisa, now 22, is healthy. Presbyterian didn’t take Barboa to court over the copay. The health network doesn’t sue patients over unpaid bills, according to the hospital network.

But the massive debt ruined Barboa’s credit score. Because of her low score, she could not co-sign on loans for her daughter’s college, for a new car, for her son’s first apartment or a home loan until last year, when it finally dropped from her record following seven years of nonpayment.

The state’s Debt Collection Protection Act put a stop to the most egregious collection practices for low-income patients whose income falls within 200 percent of the poverty threshold ($25,764 or less for a single adult and about $53,000 for a family of four). But health care advocates and some Democratic lawmakers say there are still unanswered questions about what hospitals use that funding for, and why there’s still so much medical debt despite public funding and tax exemptions that save millions for nonprofit hospitals.

The debate was revived after Rep. Roger Montoya, D-Velarde, sponsored a memorial during the 2022 legislative session that called for a hearing on hospital charges for uninsured patients and data on how hospitals spend county indigent care funds. That information is already required by SB 71 of 2021, now the Debt Collection Protection Act. But it’s not yet available pending a Human Services Department rule.

“Too many New Mexicans are without health insurance,” Montoya said. “When they don’t have it, they enter a system that is potentially further debilitating their health and wellness. The stress, the debt collection, the notion that they may not get regular check ups … it creates this backlog of treatment that is more costly down the road. And if there is an inequity at the level we’re describing, it needs to be uncovered.”

According to the New Mexico Center on Law and Poverty, nonprofit hospitals including Presbyterian Healthcare Services realized $55 million in state and federal tax benefits in 2011, the most recent data available. In 2015, hospitals submitted applications for $122.5 million to reimburse costs from unpaid medical bills and $31.7 million in federal payments to hospitals to cover costs associated with Medicaid and uninsured patients. Counties meanwhile spent $59.7 million on unpaid medical bills through indigent care funds. The center does not have more recent data.

Despite that funding, hospitals are “still going after uninsured patients” who become “caught up in a whirlwind” of economic damage, said Isaac Dakota Casados, Montoya’s chief of staff. 

IRS reports from 2019 show that more than 35 percent of New Mexico nonprofit hospitals’ bad debt, on average, stemmed from patients who likely would have qualified for help paying their bills, according to Nicholas Cordova, an attorney with the Center on Law and Poverty.

Some hospitals report even higher bad debt percentages. In 2019, Presbyterian reported 66 percent of their bad debt came from people who likely qualified for financial assistance. Almost 56 percent of Gerald Champion Regional Medical Center in Alamogordo and 60 percent of Holy Cross Medical Center’s bad debt were attributable to patients in financial need that same year, according to Cordova.

“The picture is pretty bleak. We don’t have a fair system, and it needs to be more equitable,” Cordova said.

Cordova said the state doesn’t yet have a grasp on whether state and federal matching funds and county funding is enough to cover medical costs for low-income individuals who don’t qualify for Medicaid, or if hospitals routinely recover debts through lawsuits and collection agencies. What’s more, Cordova said, hospitals tend to charge higher prices for people paying out-of-pocket than what they charge insurance companies.

He gave an example of a man bitten by a brown recluse spider that landed him with a $60,000 bill after being treated by Lovelace Women’s Hospital. The hospital’s self-pay discount brought the bill down to $18,000, but Cordova said they still charged the man — who wished to remain anonymous — “substantially more than what insurance companies would pay,” including ten times the cost for a blood test that BeWellNM (a state insurance marketplace plan) would pay for the same service.

Whitney Marquez, a spokeswoman for Lovelace Health System, declined an interview. Marquez said in a statement, “Privacy regulations prevent us from discussing the care of any patient. However, it is important to understand there are many factors that influence the cost of hospital care, especially as it relates to emergency treatment involving expensive, rarely utilized drugs.

“We are committed to working with uninsured patients to make care more affordable through discounts, financial counseling and assistance with enrollment in government programs,” she continued.

Troy Clark, president and CEO of the New Mexico Hospital Association, called Montoya’s memorial “duplicative.” He also said indigent care funds from counties and other state and federal funding is not anywhere near enough to cover the cost of medical care for low-income patients. 

“It is below cost, so no, obviously, it would take more to cover the actual cost of care that’s provided than what they receive,” Clark said.

It’s in hospitals’ interest to work with patients to access county funding for low-income patients, but patients often don’t end up filing that paperwork, Clark said. As a result, hospitals many times don’t even receive county indigent care funds for which they’re eligible, he said.

And the reason hospitals charge uninsured patients more than they charge Medicaid is because Medicaid doesn’t reimburse for the full cost of medical services, Clark said. The hospital lobby CEO did not address the optics of charging uninsured patients more than what the federal government pays.

But it’s a problem for thousands of state residents who make too much to qualify for Medicaid but not enough to afford quality insurance.

Although the number of people without health coverage in New Mexico declined by 58 percent since 2010, roughly 214,000 people in the state still lack insurance, according to a 2020 estimate from the Urban Institute, a think tank and research nonprofit funded by the Annie E. Casey Foundation and the Ford Foundation. 

The group estimated that about 18 percent of New Mexico residents have medical debt in collections. But it isn’t spread equally. The rate is 20 percent for communities of color compared to 12 percent for white communities despite the average household income being $53,554 compared to $82,553 for white New Mexico residents.

Even for people with insurance, debt can spur people to drain their savings, face expensive lawsuits, garnished wages or to postpone needed medical care, said Sarah Collins, vice president of health care coverage for the Commonwealth Fund, a private healthcare advocacy group.

“Hospitals are charging prices that are driving costs up,” Collins said. “Something clearly needs to be done about prices. Prices are significantly higher in most parts of the country than what Medicare pays for the same service.”

Laura Calkins, a financial executive for Presbyterian Healthcare Services, said the hospital network “does not pursue legal action against patients over unpaid bills,” but they “may place the matter with an outside collection agency if no other solution can be found.”

Calkins said low-income patients who qualify for aid “are not responsible for the cost of their care.” She added, “Presbyterian provides 100 percent financial assistance to all patients with incomes below 200 percent of the Federal Poverty Guideline.  Presbyterian also provides emergency and other medically necessary care free or at a discount for individuals who are uninsured, underinsured, ineligible for government programs, or otherwise unable to pay.”

Marquez at Lovelace Health System did not respond to a follow-up question inquiring whether its hospitals regularly pursue legal action over unpaid bills. Christus St. Vincent Regional Medical Center and a spokesman for University of New Mexico Hospital in Albuquerque did not respond to requests for interviews or statements.

Lawsuits have been rampant in other states, particularly those that declined to expand Medicaid under the Affordable Care Act or for cases stemming from debt incurred prior to the expansion.

Kaiser Health News reported that the University of Virginia medical system filed 36,000 lawsuits in recent years. Methodist le Bonheur Healthcare in Memphis, Tenn., brought 8,300 lawsuits against patients between 2014 and 2018, ProPublica reported.

A 2019 study published in the Journal of the American Medical Association found that more than 20,000 debt lawsuits were filed by Virginia hospitals in 2017. Hospitals garnished more than 9,300 people’s wages that year, and nonprofit hospitals were found to garnish people’s wages more often than private hospitals, according to the study. 

“There are some people who are not terribly wealthy and are uninsured and can be charged anything under our law right now,” said state Sen. Katy Duhigg, D-Albuquerque, who was among the Debt Collection Protection Act bill sponsors.

Duhigg said she’s concerned about the amount of bad debt hospitals claim from uninsured patients — especially in light of public funding for them and tax exemptions for nonprofit hospitals.

“That said, until we see the data and we know what’s going on, I’m hesitant to make any claims about any entity in particular. But it is certainly something we need to know about as a state so we can make sure that taxpayer dollars are being appropriately spent, and so we know what policies need to be adopted or are working in order to keep New Mexicans healthy.”

Correction: This story originally referred to Lovelace as a non-profit.