Laws that were once well-intentioned but are now outdated often remain on the books. The laws that allow hospitals to take out liens on the property of poor patients are an example. Some policy experts have proposed that each law or regulation should have a “sunset clause” that gives a date on which they expire unless they are passed again. Another solution to the lien practice would be if all hospitals were managed on the basis of ethical side-constraints. They would then not take advantage of the perverse incentives that the lien laws create.
Even without ethical side-constraints, exploiting the outdated lien laws would be harder if greater competition between hospitals created greater transparency about shady practices–the reputation of unethical hospitals would suffer, and they would lose patients.
(p. A1) When Monica Smith was badly hurt in a car accident, she assumed Medicaid would cover the medical bills. Ms. Smith, 45, made sure to show her insurance card after an ambulance took her to Parkview Regional Medical Center in Fort Wayne, Ind. She spent three days in the hospital and weeks in a neck brace.
But the hospital never sent her bills to Medicaid, which would have paid for the care in full, and the hospital refused requests to do so. Instead, it pursued an amount five times higher from Ms. Smith directly by placing a lien on her accident settlement.
Parkview is among scores of wealthy hospitals that have quietly used century-old hospital lien laws to increase revenue, often at the expense of low-income people like Ms. Smith. By using liens — a claim on an asset, such as a home or a settlement payment, to make sure someone repays a debt — hospitals can collect on money that otherwise would have gone to the patient to compensate for pain and suffering.
They can also ignore the steep discounts they are contractually required to offer to health insurers, and instead pursue their full charges.
The difference between the two prices can be staggering. In Ms. Smith’s case, the bills that Medicaid would have paid, $2,500, ballooned to $12,856 when the hospital pursued a lien.
“It’s astounding to think Medicaid patients would be charged the full-billed price,” said Christopher Whaley, a health economist at the (p. A19) RAND Corporation who studies hospital pricing. “It’s absolutely unbelievable.”
The practice of bypassing insurers to pursue full charges from accident victims’ settlements has become routine in major health systems across the country, court records and interviews show. It is most lucrative when used against low-income patients with Medicaid, which tends to pay lower reimbursement rates than private health plans.
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Hospitals have come under scrutiny in recent years for increasingly turning to the courts to recover patients’ unpaid bills, even in the midst of the coronavirus pandemic. Hospitals, many of which received significant bailouts last year, have used these court rulings to garnish patients’ wages and take their homes.
But less attention has been paid to hospital lien laws, which many states passed in the early 20th century, when fewer than 10 percent of Americans had health coverage. The laws were meant to protect hospitals from the burden of caring for uninsured patients, and to give them an incentive to treat those who could not pay upfront.
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When states have permissive hospital lien laws, some hospitals take advantage in ways that hurt patients. These hospitals tend to be wealthier, The New York Times found, and many of those that received hundreds of millions of dollars in federal bailout funding during the pandemic are among the most aggressive in pursuing payment through hospital liens.
Community Health Systems, which owns 86 hospitals across the country, received about a quarter-billion in federal funds during the pandemic, according to data compiled by Good Jobs First, which researches government subsidies of companies.
One of its hospitals in Tennessee refused to bill Medicare or the veterans health insurance of Jeremy Greenbaum after a car crash aggravated an old combat wound to his ankle. Instead, the hospital filed liens in 2019 for the full price of his care, records show.
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(Note: the online version of the commentary was updated Feb. 12, 2021 [sic], and has the title “The Upshot; How Rich Hospitals Profit From Patients in Car Crashes.”)