Bigger hospital companies are also exploiting the refund seizure systems, taking advantage of historical links to municipal or county hospitals that now may be mostly formal.
Atrium Health, a not-for-profit originally established as the municipal Charlotte-Mecklenburg Hospital Authority in North Carolina, capitalized on its status as a public entity to snare $5.4 million from South Carolina patients’ refunds in 2017. The South Carolina law allows public providers in other states to use its setoff system. Atrium reported $5.9 billion in revenue in 2018.
“This process is used as a last resort, and only after exhausting all other avenues to settle a patient’s account and ensuring that the patient can but has refused to pay the debt,” Atrium said in a written statement.
Allina Health, which reported revenue of $4.3 billion in 2018, uses a provision of the Minnesota revenue recapture law allowing licensed ambulance services, public or private, to seize refunds for unpaid bills. It’s garnered nearly $5.7 million from more than 15,000 claims over the past five years.
Mark Anderson, director of finance for Allina Health Emergency Medical Services, acknowledged that the statutory provision originally was written to help struggling volunteer ambulance services in rural parts of the state. Still, Allina has used the system in its Minneapolis-St. Paul service area.
Allina only seeks a patient’s tax refund after repeated letters and at least one phone call to the patient to try to work out a payment arrangement, he said. It first makes sure the person doesn’t qualify for charity care or financial assistance and has the ability to pay. Anderson wasn’t sure if the letters specifically warn people that their tax refunds may be seized.
“The typical ambulance bill is about $2,000, and taking people to court isn’t very cost-effective,” he said. “No one wants to create hardships for anyone, but some individuals just don’t cooperate.”
CentraCare, a six-hospital system serving central Minnesota, has collected $3.2 million over the past five years, on nearly 9,800 claims by two of its small rural hospitals whose buildings are leased from local government.
“We make sure our patients are well aware of the (revenue recapture) program, and many have told us they rely on the program to pay their bills,” said Kathy Parsons, vice president for revenue cycle and risk contracting at CentraCare, which reported $1.5 billion in revenue last year.
Consumer advocates aren’t sold. They say these state laws need to be reconsidered because the process lacks adequate protections against people’s money being taken wrongly.
“The government is putting a lot of faith in hospitals doing the right thing,” Pfeil of South Carolina Legal Services said.
Ames, of the South Carolina Hospital Association, said his organization is willing to discuss reform legislation, including addressing whether larger, private, urban hospitals should be able to use the setoff program. “There needs to be a clear understanding of when this can be used,” he said.
But Essentia’s Wilson argues that more states should establish tax refund seizure laws for medical debts, and the system should be available to more providers.
“People say everyone should have healthcare, but when it comes to the priority of paying, we are placed at the very bottom, below the joys of life,” she said. “This is just a small way to ensure that people who can pay should pay.”
