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Nearly 30% of bad hospital debt in North Carolina was charged to poor patients who likely qualified for charity care, according to research prepared for state Treasurer Dale Folwell’s office.

Medical debt can be daunting to people who can’t afford to pay.

From harassing phone calls to hits against their credit, slow payers are inundated by demands to pay up – even when they’re destitute.

During the pandemic, some of North Carolina’s prominent nonprofit hospitals failed to provide transparency in billing and charity care eligibility. Without strict standards, it is easy for hospitals to get over on billing poor patients that would otherwise qualify for free care.

Candice Grant owed about $80,000 in medical debt when she was hospitalized for kidney disease in 2006. When she couldn’t afford to pay, she and her husband were sued by debt collectors and went to court. In the end, they lost the case and had to pay.

“We received a judgment against us for that and it's something that we now pay monthly on still,” Grant said.

Unpaid medical debt can lead to huge consequences from impacting personal credit to lawsuits by debt collectors. North Carolina lawmakers are looking to make medical payments fairer and more affordable for poor patients through the Medical Debt De-Weaponization Act. The bill would hold hospitals accountable for presenting an itemized bill and make it easier for patients to cover expenses without penalties for not repaying.

What many patients don’t know about unpaid medical bills are the people behind it as well as where that debt goes.

‘Hospital cartel’
At North Carolina Treasurer Dale Folwell’s request, researchers from the State Health Plans, Johns Hopkins Bloomberg School of Public Health and Rice University Baker Institute of Public Policy analyzed hospitals in North Carolina.

In 2019, North Carolina’s nonprofit hospitals billed $149.2 million to disadvantaged patients instead of providing free or discounted care, according to the North Carolina Hospitals: Charity Case Report.

Nearly 30% of bad hospital debt was charged to poor patients who were most likely qualified for charity care. The report identified 18 out of 105 nonprofit hospitals falsely billing patients under their own policies including Atrium Health, Novant Health, Duke Health, UNC-Chapel Hill, and Wake Forest Health.

In 2019 Atrium Health University City provided about 8% in charity care/expenses and had a net profit margin of 31%. Novant Health Presbyterian Hospital Huntersville provided less with 6% in charity care and expenses with a 34% net profit margin.

Folwell, who has clashed with health care providers over charitable care, refers to their debt collection efforts as the “hospital cartel.”

“They control the quality of this product,” he said. “They control the access to this product. They set the price of this product and if you don't pay for this product that you would rather not have consumed because [it] would mean you're healthy, they will break your kneecaps and weaponize your credit score until you pay.

“There's only one hospital in North Carolina that received a thumbs up as far as trying to match the charity care with the needs of the patient.”

That, according to Folwell, would be Wake Forest.

In North Carolina, there are no standards in place that require hospitals to release data on charity care expenses and total net profit.

“This industry has been 40 years building up this cloud of secrecy,” Folwell said. “With no oversight, no regulation, and no one enforcing any of these rules regarding charity care or medical debt or the weaponization of their medical debt…no one.”

Sixteen percent of hospitals in the state provided reliable data while many are not required to publish any data at all.

The COVID-19 pandemic has only intensified the problem of health debt with one in five families in collections in 2020 according to the Urban Institute.

Earlier this year, Dominique Batiste was rushed to the hospital after suffering a stroke that landed her about $50,000 in debt. Her husband Louis Bryant started a GoFundMe to help cover expenses.

She didn’t have health insurance and now must apply for Medicaid.

“I got a radiology bill for $7,000,” Louis Bryant said.  “I had to fill out other paperwork before I had to get Medicaid. So that's where we're at.”

Anywhere between 31% to 48% of medical debt should have been covered by charity care in 2020 but some patients who qualified for financial assistance ended up having to pay, according to the state treasurer's website.

“These cartel hospitals make billions of dollars during this COVID period,” Folwell said. “When people have such a fear of medical debt, that they don’t seek the medical attention that they need, which puts them in a vortex they can’t get out of.”

When patients don’t qualify for charity care, hospitals collect on unpaid debt, sometimes damaging people’s credit scores, garnishing their wages, suing patients, or persuading them to apply for a medical debt credit card that can charge higher interest rates.

Once hospitals give up on collecting money owed, they write off the cost as bad debt and reap the benefits. Charity care is supposed to protect patients from these tactics, but the Internal Revenue Service does not set restrictions for charitable spending and eligibility.

At the start of the pandemic, many hospitals received COVID relief funds from the federal government to offset costs. While North Carolina’s rural hospitals suffered, wealthy urban hospitals increased their profits and reaped $7.1 billion growth in cash and investments during the pandemic, according to the report. In 2021:

• Atrium Health, which took home the most taxpayer relief with $589 million, earned a net profit of $1.2 billion in 2021, according to the analysis.

• Novant Health received $261.4 million and earned $821 million.

• Duke Health, which accepted $180.1 million from the government, pulled in $1.8 billion in net profit, higher than Atrium Health.

• UNC Health had $145.4 million with a net profit of $891.1 million.

• WakeMed had $36.7 million in relief funds sitting on a $135.9 million net profit.

Atrium Health stated its COVID relief funds went toward testing, vaccinations and to prevent workers from being laid off.

“We worked within the rules that were established to make sure we could protect the quality of care we are able to offer and protect the health of our communities,” Atrium Health stated in an email. “These funds allowed us to go directly into underserved communities with covid testing and vaccines – helping to eliminate the disparities of care in communities of color.

“Our patient base is heavy with people who are low-income or are frontline essential workers – people at the highest risk for COVID. When the surges happened and our beds were full, we weren’t getting paid, as many were uninsured or qualified for charity care. Having the provider relief funds available has helped us sustain the levels of care needed for very complex and serious complications that were brought on by COVID-19. We needed – and still need – every nurse, every doctor, every teammate who works the floor at the hospital, and then some. This funding helped us ensure that no-one was laid off or furloughed and that our front line health care workers were properly protected with appropriate PPE.”

In 2021, Atrium Health returned $2.46 billion in community benefits for covering the cost of patients on Medicare, Medicaid, uninsured and underinsured, as well as support for other initiatives.

Novant Health said nearly half of their profits went toward charity care and the report Folwell is referring to was inaccurate.

“In 2020 alone, Novant Health provided $179 million in charity care – which represented nearly 50 percent of our net income in 2020,” the company said in a statement.
“While charity care is an important metric, and we are proud to provide hundreds of millions of dollars to our community members in need, it is only one part of our total community benefit. Reports like the North Carolina Hospitals: Charity Care Case Report rely on faulty methodology to draw inaccurate conclusions because they do not fully represent the breadth of programs and services systems like Novant Health provide to meet a wide array of needs across our communities.”

In 2021, Novant Health provided $1.1 billion in community benefits, up from $1 billion the previous year. The company provided 17% in traditional charity care, 10% in unpaid cost of Medicaid, 8% in community benefit programs, and 65% in unpaid cost of Medicare.

Although hospitals are paid by the government to provide care to people on Medicare and Medicaid, it does not cover the full cost, which means they lose money. For example, Atrium Health incurred $1.1 billion in losses last year to treat patients on government-funded health programs.

De-Weaponization Act
Folwell favors the Medical Debt De-Weaponization Act. But N.C. Rep. Carla Cunningham, a Charlotte Democrat, is against it.

“I do have issues with some of the things that's in there,” she said, “especially looking at that 400% of federal poverty [threshold]. Now, that sounds like it’s for rich people. I mean, some of that [bill] would be good, but some of it's already in place.

“I don't know who this would be beneficial to,” Cunningham added.  “If these are people that don't have insurance at all and just are poor, basically making the least salary, I don't see how it'll be that beneficial to them.”

Cunningham, a nurse by training and profession and vice chair of the House Health Committee,  is a proponent of granting the poor more debt forgiveness since they can’t afford regular health insurance and out-of-pocket expenses.

“I think they should until we expand Medicaid,” she said. “The hospitals already give a certain amount of charity care, but they could possibly ask them to increase their amount of charity care.

“What are we waiting on? If we want to help people in the space of not getting into financial debt or having to file bankruptcy, let's go ahead and expand Medicaid.”

America’s major credit reporting bureaus – Equifax, Experian, and TransUnion – have volunteered to remove 70% of medical debt from consumers’ reports. As of July 1, consumers now have a year to pay or arrange to pay medical debt before their account is sent to collections to increase credit scores and improve borrowing terms.

But there’s a catch. Starting in 2023, they will erase just $500 of medical debt, leaving consumers on the hook for the remainder.

“The average medical debt in collections is around $700,” said Berneta Haynes, an attorney at the National Consumer Law Center. “A lot of people have medical debt on their credit reports that are at that $500 threshold or less, and they will see some benefit from having those removed from your credit report.”

Haynes believes North Carolina lawmakers need to start holding hospitals more accountable for overcharging patients.

“I think hospitals should absolutely be required to improve their charity care and financial assistance program by being required to screen folks for their eligibility and even if they're not eligible for charity care,” she said, “screening for eligibility can reveal that they’re eligible for things like retroactive Medicaid and other kinds of public health insurance.”

Many hospitals do not inform patients who qualify for charity care and the Affordable Care Act fails to establish standards for those eligible for free healthcare.
The De-Weaponization Act will require health care facilities to develop ways for poor patients to pay back medical debt. Hospitals will have to enact certain steps under the legislation. For instance, screening patients eligible for financial assistance, posting prices online, and offering discounts to those between 200%-400% of the federal poverty line.

Grant doesn’t have health insurance to help pay for medical bills, medications, and appointments. The proposed bill would still require her to make payments on what’s already accumulated.

Aaliyah Bowden, who covers health for The Post, is a Report For America corps member.

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