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Alysa Gummow didn’t know what to think in October when the letters from bankruptcy law firms arrived in the mail. She had filed for bankruptcy in 2017 to restructure nearly $50,000 in debt — mostly stemming from a hip surgery two years earlier. But that was resolved. Why was she getting these letters now?
The 37-year-old opened one of the envelopes to learn that Froedtert South hospital said she owed about $1,000 in medical bills. The Kenosha, Wisconsin hospital was suing her to recover costs that her high-deductible health insurance did not cover.
A man visited her home a few days later to make the lawsuit official. He seemed pleasant enough, Gummow recalled, before he delivered the stilted message: “You’ve been served.”
Although the coronavirus was increasingly infecting and killing Wisconsinites — and spiking hospitalizations — the man serving papers from the hospital wasn’t wearing a mask. Still recovering from an April bout with COVID-19 that she called a “nightmare” but “manageable,” Gummow wasn’t concerned about catching the virus. But encountering a stranger without a barrier between them felt odd, so she spoke to him through a window before reaching around the door to accept the legal papers.
In April, Froedtert South said it would make debt lawsuits “rare” during the pandemic. But the hospital has since filed at least 231 lawsuits in small claims court against debtors like Gummow. In fact, it filed more in 2020 than it did in 2019 — 314, compared to 282.
This year’s lawsuits collectively seek to recoup about $1.1 million in alleged debt, ranging from $555 to $9,970 per lawsuit, according to a WPR/Wisconsin Watch analysis of filings in small claims court. At least eight defendants this year filed for bankruptcy, the analysis found.
A previous Wisconsin Watch/WPR investigation found that hospitals statewide sued dozens of patients during the early weeks of the pandemic. Two hospitals — Froedtert Memorial Lutheran in Milwaukee and Green Bay-based Bellin Health Systems — dismissed some of those lawsuits after the investigation was published on April 1. They were among several hospitals — including Froedtert South — that pledged to pause or at least slow down aggressive debt collection during the public health crisis.
“As a general matter, Froedtert South has suspended filing small claim suits during the COVID-19 pandemic,” J. Thomas Duncan III, the hospital’s vice president and chief operating officer, wrote in an April 1 email. “However, in rare circumstances, certain small claim suits may be filed to preserve Froedtert South rights. For example: If a medical debt has been in existence for 6 years, and the statute of limitations is about to end.”
The hospital filed just four debt lawsuits in April and two in May before initiating a torrent of litigation in more recent months. Duncan declined to comment for this story.
“After internal review and on advice of counsel, we do not comment on litigation matters,” Duncan wrote in a Dec. 11 email.
Froedtert South is not the only Wisconsin health care provider to sue over debt in recent months, court records show, although it stands out in volume.
Friendship-based Gundersen Moundview Hospital and Clinics filed at least 15 small claims suits after telling a reporter in March that it paused the lawsuits. Spokesman Chris Stauffer called the lawsuits inadvertent — and now discontinued — during a pause in “all legal activity through collection agencies,” adding: “We regret the oversight.”
Affiliates of Wisconsin-wide SSM Health — mostly Dean Medical Group in Madison — have filed nine debt lawsuits since April, when the network said it would pause some cases and evaluate its policies.
The lawsuits likely involve unpaid bills from before 2020, said Kim Sveum, an SSM Health spokeswoman. Recognizing that families are struggling during the pandemic, the system changed its collections policy.
“The intent of the policy is to not proceed with any collection matters against unpaid accounts for services that occurred in 2020,” she wrote in an email.
Some hospitals stopped suing patients even before the pandemic, following investigative reporting by MLK50, ProPublica and other news organizations. One Tennessee hospital executive called the lawsuits rarely worth the court costs.
But suing patients remains a “tried and true way of recovering on debt” in health care, said Nicholas Bagley, a University of Michigan law professor — even if the practices might seem to conflict with the nonprofit spirit of community service. Nearly half of U.S. hospitals operate as nonprofits, exempt from paying most sales, income and property taxes.
But many hospital systems are multi-million, if not billion-dollar operations. That includes Froedtert South, whose most recent tax filings list $530 million in “land, buildings, and equipment” among its assets.
In exchange for the tax breaks, nonprofit hospitals agree to serve their communities by working to bolster public health, conducting research and providing care to people experiencing poverty.
Buried by debt
Medical debt has long triggered major financial stress and bankruptcies in the United States. Gummow and many other indebted patients are underinsured, meaning their insurance doesn’t cover much of their bills. About 366,000 nonelderly people in Wisconsin lack any insurance coverage.
Consumer advocates say many financially struggling patients remain unaware of a hospital’s financial assistance program, or they are overwhelmed by paperwork necessary to qualify. Bills can be hard to decipher and confusing to pay. And when medical debts end up in court, most defendants haggle directly with lawyers representing hospitals, unable to afford legal help and unaware of free assistance.
“It’s absurd that we have to go into debt to be healthy. And if we don’t have the money, we can’t go to the doctor,” said Gummow, who still has a slight cough from her spring coronavirus infection. “I don’t agree with that.”
The Affordable Care Act (ACA), the landmark 2010 federal health care overhaul, required nonprofit hospitals to hold a “widely publicized” written financial assistance policy and to make “reasonable efforts” to determine whether patients qualify for help — before suing patients or selling their debt.
But the law defines no metrics for that requirement, experts say, meaning hospitals are rarely penalized even when critics argue they fall short.
Confusion, bills and payment
Gummow accrued her debt to Froedtert South over two years of ordinary office visits and lab work to treat her attention deficit disorder, depression and anxiety.
Kostka and Associates, a Wausau-based debt collections firm that sued Gummow on the hospital’s behalf, shared a detailed list of the charges when she requested proof. Law firms must provide proof of debt upon request, but the firm did not include it in the initial letter.
Gummow said she faced hurdles while previously trying to pay her bills. The first came in trying to arrange a payment plan. The hospital — previously called United Hospital System — changed its name following a late 2017 operating agreement with Froedtert Health. Gummow said the payment system required her to enter into separate plans for debt owed to pre-agreement United Hospital System and post-agreement Froedtert South.
“It was kind of a mess for them,” Gummow recalled. “They couldn’t combine them.”
Gummow said she agreed to pay $25 a month, but each new bill would continue to list the full amount she owed. “It was very confusing,” she said, adding that she also struggled to use an online payment portal. When she called last July to sort it out, she learned the hospital kicked her debt to a collections agency.
Froedtert South would not comment on its billing practices.
Kostka and Associates filed the suit against Gummow on Oct. 14, a day it filed 13 other lawsuits on the hospital’s behalf. The firm declined to comment for this story, citing client-lawyer confidentiality rules.
Gummow wants to avoid a legal judgment that could prompt the law firm to garnish her wages or damage a credit score, further jeopardizing her dream of one day buying a house. But even lawsuits without a judgment can harm someone’s credit history — trapping them in something of “an electronic debtors’ prison,” said Bobby Peterson, executive director of ABC for Health, a nonprofit public interest law firm in Madison.
“It’s basically saying your credit report — your credit score, is going to keep you tied to paying this bill before you can really move forward.”
Gummow said she proposed paying $100 monthly after a paid-off furniture bill freed room in her budget. The law firm insisted on $193 per month, she said.
Seeing no other choice, Gummow agreed to the terms, which included $160 in additional fees. Kostka and Associates agreed to dismiss the case if she pays off the debt in time.
‘Willing to ruin people’s lives’
Doing so will remain a challenge for Gummow. The single mother’s bills — rent, car payments, utilities, health insurance and WiFi — eat up most of the $2,470 she makes monthly before taxes while working for a technology logistics company. That doesn’t include food, gas and medical prescriptions for herself and her 17-year-old daughter. She has relied heavily on credit cards to keep up.
Gummow navigated the lawsuit without a lawyer, believing she could not afford one. The vast majority of debt defendants lack legal representation and don’t appear in court, according to Mary Fons, a consumer protection lawyer in Stoughton. The result, Fons said: A hospital will win a default judgment — regardless of whether the debtor was properly billed.
“We’re willing to ruin people’s lives — ruin their financial lives, for 20 to 40 years so hospitals can get paid,” Fons said. “And not that they shouldn’t get paid. But we have to figure out a fairer way.”
Jesse Guadarrama, another patient Froedtert South sued this year, doesn’t have specifics about that debt. The 34-year-old Kenosha auto technician figures he forgot to update his billing information when switching credit cards. Guadarrama, who has always been insured, said he wanted to investigate what his insurance did and did not cover but felt it was too late to ask once he learned about the lawsuit.
Before the lawsuit, Guadarrama said he tried negotiating down his roughly $2,200 in charges — offering to pay the hospital $1,800. The hospital countered with $2,100, but they didn’t reach an agreement before the coronavirus shuttered businesses around the state and his wife delivered a baby girl — the sixth child in the couple’s combined family. (“It’s like the Brady Bunch,” Guadarrama joked.)
The medical bill came at an inopportune time: He and his wife were working fewer hours due to the pandemic and having a newborn just as they were saving to buy a house. Guadarrama delayed paying, hoping the hospital might drop it considering the pandemic.
Instead, the hospital sued.
The couple were both recovering from COVID-19 — which left Guadarrama weak and bedridden for several days — when a man showed up at their door to serve the legal papers.
“Nobody wants to be served papers, especially around your neighbors and stuff like that. It’s embarrassing,” Guadarrama said, adding, “How can I be getting served papers when we’re going through a pandemic, right?”
Kenosha-based Guttormsen and Hartley, which sued on the hospital’s behalf and declined comment for this story, would not accept anything less than $2,237.48, which included court fees, Guadarrama said. He did not seek a lawyer and dipped into savings to eliminate the debt in a single payment. That dismissed the case.
“Fortunately we had enough money in savings to pay it off, but I can just imagine what others are going through,” he said.
Froedtert South would not share details about its arrangements with debt collection firms.
Hospitals typically allow collection agencies to keep a large percentage of what they collect. Or hospitals sell firms the debts outright, often at a steep discount, Peterson said.
“The hospital is getting really very little,” he said.
RIP Medical Debt, a New York-based nonprofit that buys and forgives debt of people experiencing poverty, tells donors that a $100 donation can retire $10,000 in debt. (The nonprofit in December received a $50 million gift from Mackenzie Scott, an author and ex-wife of Amazon founder Jeff Bezos.)
Bagley, the Michigan professor, said profitability in collections depends on volume; a few hundred dollars collected here and there adds up if firms pursue enough debts.
“Hospitals will hire collection agencies, and then more or less wipe their hands of debt and leave it to the collection agencies and the law firms they hire to go chase people down,” Bagley said, adding that the relationship gives collectors “real incentives to be pretty hard-nosed.”
Oliver Adjustment Company, a firm in Kenosha and Racine that initially handled Gummow’s debt, said it does not purchase debt.
“We collect for a contingency fee for all our clients,” said spokesman Chris Cope. “Our rate structure is confidential.”
But Internal Revenue Service regulations state hospitals are “held accountable” for contractors’ “extraordinary collection actions,” like suing patients. Hospitals are responsible for any billing errors and are supposed to ensure firms comply with collections guidelines.
Scrutinizing charity care
Most hospitals provide uncompensated care as part of their commitment to serve their communities. Froedtert South in 2019 provided about $3.27 million in at-cost charity care, accounting for about 1% of its total expenses. That is in line with other major Wisconsin hospitals, according to a Wisconsin Hospital Association Information Center report.
Kelly Lietz, a Wisconsin Hospital Association spokesman, said hospitals in the state often provide financial help to patients earning less than twice the federal poverty level, although some set more generous policies.
“Hospitals in Wisconsin write off more than $1 billion in charges each year for bad debt and charity care, which shows that their policies are effective in helping those most in need,” Lietz said.
Had she applied in time, Gummow may have qualified for free care at Froedtert South. The hospital allows patients earning up to two and a half times the federal poverty level to apply for free care. Those earning up to four times the poverty level can get discount care.
Gummow’s income falls beneath the lower threshold, but she said she didn’t learn about the program until it was too late; a hospital representative told her she could not apply to forgive bills already sent to collections, although she might consider the program for future bills.
“They told me it’s pretty hard to do,” Gummow recalled. “It’s a lot of paperwork. And when they sent it to me — half of the stuff I can’t even understand.”
Froedtert South says it promotes its charity care offerings to its patients.
“We encourage patients who anticipate difficulty paying their portion of their hospital bill to meet with one of our financial counselors,” the hospital says on its website. “Our counselors will make every effort to assist patients who are uninsured or who have financial challenges that prevent them from paying for healthcare services.”
Froedtert South added information to its website, including a link to its complete financial aid policy, after a reporter asked about its commitment to widely publicizing the details.
Whether any hospital does enough under ACA to publicize its charity care offerings is a matter of opinion. That is because Congress offered “no clear metrics” for compliance, says Ge Bai, an associate professor of accounting and health policy and management at Johns Hopkins University.
Bagley says hospitals can satisfy charity care requirements largely by documenting what they are doing.
The looming outcome of a U.S. Supreme Court case could further shape how hospitals deal with patient debt. The justices in November heard arguments in a Republican-led challenge to overturn the ACA.
Some 21.1 million Americans would lose insurance — including 112,000 in Wisconsin — if the court strikes down the health reform law, according to an Urban Institute analysis.
“And as soon as you see higher rates of uninsured, hospitals have more of an incentive to go after people they provide services to,” Bagley said. “Wisconsin hospitals could be under more financial pressure as a result.”