Hospitals Suing Patients: How Hospitals Use N.C. Courts to Collect Medical Debt

Authors

Barak Richman, Duke Law SchoolFollow
Sara Sternberg Greene, Duke Law SchoolFollow
Sean Chen, Duke Law SchoolFollow
Julie Havlak

Document Type

Report

Publication Date

2023

Keywords

Medical debt, Hospitals, North Carolina, Patients

Abstract

From January 2017 through June 2022, North Carolina hospitals brought 5,922 lawsuits to collect medical debt against 7,517 patients and family members. These actions were brought in small claims court, state district, and state superior courts, and generated 3,449 judgments for hospitals totaling $57.3 million, or an average of $16,623 per judgment.

Hospitals took advantage of North Carolina’s allowance of 8% annual interest on judgments, including by refiling actions to sustain judgments issued ten years earlier. These interest charges and other additional fees totaled an estimated $20.3 million, or 35.4% of the judgments awarded. Some patients faced more than a decade’s worth of interest charges, and 463 families owed more than $10,000 in interest alone. There is also evidence that patients had little say in these judicial proceedings, as 59.8% of all judgments in state district courts were default judgments.

A small subset of North Carolina’s hospitals were responsible for a vast majority of lawsuits. Five hospital systems filed 96.5% of the collection actions over the studied time period. Additionally, nonprofit hospitals initiated 90.6% of the lawsuits against patients. Hospitals that filed more than 40 lawsuits — which we denote as “litigious hospitals” — exhibited an average charge-to-cost ratio (a metric of price markups) of 480.5%, compared to a national average of 417% in 2018, and an average net profit margin of 12% from 2017 to 2022. These hospitals also offered less charity care than the estimated value of a nonprofit hospital’s tax exemption.

Courthouse records and patient interviews conducted by the North Carolina Office of State Treasurer add texture to these empirical findings. Some of the medical debt targeted by these lawsuits were reportedly consequences of failures in charity care, from “surprise bills,” and from care encounters in which patients unknowingly or unavoidably received care from out-of-network providers.

Patients also described how the financial stress from hospital lawsuits negatively impacted their physical health and deterred them from seeking future medical care. Under North Carolina law, a judgment automatically triggers a lien against real property, and many expressed fear of losing their main source of equity. Some were also unaware that their hospital judgment resulted in a lien on their home.

Citation

Barak Richman et al., Hospitals Suing Patients: How Hospitals Use N.C. Courts to Collect Medical Debt (2023)