Over a span of five and a half years, an analysis of courthouse records reveals that North Carolina hospitals initiated approximately 6,000 lawsuits against nearly 7,500 patients and their relatives in pursuit of payments, according to recent research.
Hospital Victories and Medical Debt Recovery: A North Carolina Court Analysis
- Conducted by scholars from Duke University School of Law and North Carolina’s Office of State Treasurer.
- Analyzed 5,922 lawsuits within North Carolina’s civil court system from January 2017 to June 2022.
- Nearly 50% of cases ended with judgments favoring hospitals.
- Hospitals collected a total of $57.3 million in medical debt from these cases.
- Average judgment value in favor of hospitals was $16,623 per case.
In the report outlining their findings, the researchers reflect on the fundamental concerns about the efficiency and fairness of our legal framework when it comes to settling financial debts. Moreover, the report prompts a critical examination of the roles that hospitals, particularly nonprofit institutions, should undertake within our economic system, healthcare policy, and society as a whole.
The study unveiled that a significant portion of the legal proceedings was instigated by a small group of hospitals in the state. Remarkably, only five hospital systems accounted for 96.5% of the collection actions during the study period. These institutions, which included Atrium Health, CaroMont Health, Sampson Regional Medical Center, Community Health Systems, and Mission Health, maintained control over 18.5% of the state’s hospital beds as of 2021. Curiously, all except one of these systems, Community Health Systems, were registered as nonprofit organizations.
Atrium Health, responsible for 41.9% of the cases, held a unique legal status due to its origin as a municipal hospital corporation. This designation exempted it from operational and property taxes under specific conditions, and also offered protections against certain antitrust laws at state and federal levels.
Hospitals that displayed a propensity for litigation, referred to as “litigious hospitals,” were observed to allocate less than the average amount for charity care. These establishments also enjoyed higher-than-average net profit margins. In terms of billing practices, they exhibited an average charge-to-cost ratio of 480.5%, surpassing the national average markup of 417% noted in 2018.
North Carolina hospitals leveraged a state provision that sanctioned an annualized interest charge of 8% on medical debts. This resulted in nearly a third of the patient debt, equivalent to $17.7 million, being attributed to interest. Accounting for additional expenses tied to judgments, such as legal fees and court charges, the total escalated to $20.3 million.
The researchers noted that a considerable number of judgments in district court were rendered as default judgments, implying that a judgment favored the hospital when the defendant didn’t engage with the court summons or attend the proceedings. In terms of racial demographics, the report indicated that Black individuals were slightly overrepresented among those receiving default judgments. Additionally, Black and Hispanic defendants were disproportionately impacted by substantial interest charges.
However, the analysis had limitations. It excluded lawsuits initiated by third-party debt collectors and private medical practices, thereby providing a partial view of the landscape.
