December 2008: Reporting and Analysis by the Baltimore Sun
Every Wednesday at noon, debt collection lawyers take their seats behind a thick wooden table in a downtown Baltimore courtroom for a ritual they call the "rocket docket."
It's one way officials at the city District Court try to unclog a backlog of consumer debt lawsuits, including thousands filed by hospitals over unpaid bills.
Lawyers call up debtors one at a time to work out payment plans in rapid, on-the-spot settlements. Other days, lawyers haggle with debtors in the courthouse hallways. When cases go to judges, hospitals typically win after hearings that last a few minutes or less.
Nearly one-third of the 132,000 lawsuits that Maryland hospitals have filed against patients in the past five years over unpaid bills have been filed in the city District Court, which serves an area where many debtors are "living on the margins," as University of Maryland law professor and former Legal Aid lawyer Michael Millemann puts it.
These lawsuits have played out even though hospitals' costs of unpaid bills and provision of free care to the poor are supposed to be covered by the rates paid by all patients, under Maryland's unique rate-setting system. Some of the hospitals that have filed the most lawsuits have received millions of surplus dollars from the payment system.
Maryland hospitals have won at least $100million in judgments against patients in the past five years and placed liens on at least 8,000 homes across the state, despite national hospital industry guidelines that caution against the wholesale use of that practice, an investigation by The Baltimore Sun found.
Some hospitals have won judgments against patients covered by Medicaid for bills the giant government health plans didn't pay, despite a Maryland law outlawing that, The Sun found in sampling more than 200 court files. Hundreds of patients have filed complaints with state regulators over billing issues, including allegations that hospitals tried to collect amounts beyond what they agreed to accept under insurance company contracts by going directly after patients.
And some hospitals have sued patients three or more years after their stays ended, raising questions about whether the statute of limitations had expired, The Sun found.
The court processes can overwhelm debtors, who rarely have lawyers to assist them and often don't even try to defend themselves. At the "rocket docket" and other settlement forums, patients negotiating against hospital lawyers "have no comprehension of the potential defenses that they may have," said Millemann, also a former chief of the civil division of the Maryland attorney general's office.
Daniel L. Hatcher, an assistant professor at the University of Baltimore School of Law, said debt collection cases of all types are "completely overwhelming" the district courts. "Even the best judge won't have the resources to give each case justice," he said.
Court records don't make clear how much of the judgments were actually collected by the hospitals. It's also not possible to know whether hospitals are suing the same patients whose debts they've already written off as part of the rate-setting system, because state regulators do not require them to itemize write-offs. The hospitals insist that they don't collect debts twice.
The hospital industry argues that state regulators expect them to pursue those who can pay their bills, so those costs don't get passed on to all patients through higher rates. But some hospitals have filed thousands of lawsuits while others of similar size have filed just a few hundred. Maryland law, unlike the law in some other states, imposes few controls on when and how hospitals can sue patients.
Carmela Coyle, president of the Maryland Hospital Association, said its members only press people with the ability to pay. That's not always easy to determine, she said, especially when patients or their families don't share full details of their finances.
Though she said the number of suits was small compared to the total number of patients hospitals treat, she said: "I'm sure you'll find examples of bad practices. We won't defend those."
One collection attorney, while saying that most debts pursued are legitimate, conceded that mistakes occur. Patients can face a lawsuit because a hospital "failed to fill out insurance forms correctly," said Bruce H. Cherkis, a Gaithersburg lawyer. "There are a lot of ways to fall through the cracks."
Robert B. Murray, who heads the state Health Services Cost Review Commission, said the volume of lawsuits against patients is "troubling," especially since some hospitals appear to sue much more than others.
"We hope and expect that hospitals are charitable institutions and they know where to draw the line," Murray said.
The lawsuits have brought in money not just for the hospitals, but also a cadre of specialized law firms that handled the bulk of cases filed by Maryland hospitals against patients over the past five years.
The University of Maryland Medical System paid Towson-based Bloom and Associates more than $1.6 million in 2006 to handle collections cases, according to Internal Revenue Service records. Some firms accept a percentage of the recovery instead of being paid an hourly rate.
The firms file so many cases that they can profitably handle ones seeking very small amounts. Some lawsuits are filed over as little as $30; in many of these smaller cases, the amount of interest and court costs can exceed the amount of the debt.
One of the largest firms handling hospital debt cases is Wolpoff and Abramson, which from its start in Silver Spring more than three decades ago grew into a collections behemoth with dozens of offices and affiliates across the country.
In Maryland, Wolpoff attorneys filed more than 11,000 lawsuits against patients during the past five years on behalf of the Johns Hopkins Hospital and Johns Hopkins Bayview Medical Center, court data show. Its other clients include Sinai Hospital of Baltimore.
The firm - which went through a merger in July and is now known as Mann Bracken LLC - has faced more than 200 federal court lawsuits since the start of 2005 alleging violations of fair credit and debt collection laws, mostly over credit card or other bank debt.
Among the 44 such lawsuits against the firm this year are several alleging high-pressure and deceptive collection activities and filing of lawsuits after the statute of limitations had expired. The firm has denied the accusations, and most of the cases are pending.Others were settled confidentially.
Nickia Kelly encountered Wolpoff lawyer Rahsaan J. Dickerson, representing the Johns Hopkins Hospital, at a "rocket docket" session in October. The hospital had sued Kelly over a $1,102 charge from an emergency room visit more than four years ago.
Dressed in jeans and a dark stenciled sweat shirt, Kelly was hoping to avoid a near-certain court judgment and steep interest charges on top of the debt. She stepped up to the table and sat down to face off with the pinstripe-suited lawyer and his paralegal.
Tense at points, their brief meeting ended when Kelly agreed to pay $100 a month. The hospital, in turn, wouldn't press Kelly for nearly $600 in interest and other fees it had sought.
"I'm just getting slammed," said Kelly, a Baltimore International College culinary student, as she hurriedly left the downtown courthouse on Fayette Street. "What can you do?"
What Kelly didn't realize, without having a lawyer to help her, is that she might have had a defense - that Maryland has a three-year statute of limitations on debt. Hopkins filed suit against her in March 2008, more than 3 1/2 years after she was treated. Statute-of-limitation cases can sometimes be less than clear-cut, however, because the clock can restart if a debtor has any contact with a debt collection agent.
Kelly said she had no idea that debts can expire after three years until a reporter told her this month. "Are you serious? I just sent in my first payment," said Kelly, who said she has put past trouble with the law behind her and plans to manage a restaurant some day.
Dickerson referred questions to Mann Bracken's Rockville office, but nobody there would agree to an interview. Johns Hopkins officials declined comment.
Records show that in cases filed by the Wolpoff firm, hospitals routinely seek to add interest at the legal maximum of 12 percent a year on judgments, starting 60 days after the patient was discharged. That is legal under a Maryland law that applies to hospitals. But the practice is criticized as unnecessarily aggressive even by some other debt collection lawyers. The Maryland Constitution sets interest rates at 6 percent for most debts, but hospital debts are exempt.
In a suit filed in April 2005 against Edward Brashears, a computer programmer at the Social Security Administration, Sinai Hospital through Wolpoff and Abramson demanded 12 percent interest dating back more than three years. The hospital had actually sued Brashears twice before, but failed to serve Brashears both times, so the cases were dismissed. By the time the third suit was filed, Brashears had died of colon cancer, court records show.
"They kept sending statements here, and I sent them the death certificate to let them know I can't do anything about it," said James Brashears, the dead man's brother.
John M. Colmers, secretary of the state Department of Health and Mental Hygiene and a former executive director of the hospital rate-setting commission, called it "quite disturbing" for hospitals to seek pre-judgment interest. "The commission should look into that," Colmers said.
Johns Hopkins officials said in an e-mailed statement that the Wolpoff firm canceled its contract with the hospital to handle new cases in February 2007 and that the hospital has filed significantly fewer lawsuits against patients since then. But Mann Bracken continues to represent Hopkins; Dickerson appeared for the hospital in "rocket docket" cases in Baltimore District Court as recently as Dec. 10.
In the Baltimore City court and other district courts, judges routinely grant judgments based almost entirely on the hospital's presentation of an affidavit stating that the services were "medically necessary." The charges are always considered "reasonable" because they derive from rates set by Maryland regulators.
Patients who want to dispute the bills must file a "notice of intent to defend" within 15 days of receiving a copy of the lawsuit. Most never respond, and the hospitals win the cases by default as a result. Yet failing to satisfy a judgment, even a small one, can lead to a denial of credit, a home mortgage or an apartment lease. It can also prompt an employer to reject a job candidate and even lead to suspension of a driver's license in some circumstances.
Maryland law treats hospital bill lawsuits the same as those filed by credit card companies or banks, even though some states recognize that most people don't incur medical bills voluntarily.
American Hospital Association guidelines put out in April 2006 cautioned hospitals against filing liens on patients' homes as a matter of course. Yet at least 29 of 47 Maryland hospitals have placed liens over the past five years, The Sun found.
Suburban Hospital in Bethesda has filed at least 1,700 property liens, most of them in Montgomery County Circuit Court.
"Any time we receive a judgment we file a lien," said Donald J. Crawford of the Annapolis firm of Adelman, Sheff and Smith, which represents Suburban.
Liens can make it more difficult to sell property or refinance mortgages, and also show up on credit scores used to screen applicants for jobs, credit, and rental housing.
The Sun found at least $101 million in liens and court judgments from hospital collection lawsuits from the start of 2003 through the end of June 2008, without even counting many judgments of less than $2,000.
The University of Maryland Medical Systems won $35.7 million in judgments from more than 10,000 lawsuits filed across the state. Baltimore City courts issued nearly half the judgments, records show.
Bloom and Associates, headed by Neil Bloom, filed most of those lawsuits - and also filed cases for relatively small amounts on behalf of other hospitals. About one-third of the 153 cases the firm filed on behalf of Mercy Medical Center in Baltimore on Feb. 23, 2007, were for $500 or less, for instance. Only one case was over a bill that exceeded $1,000.
Bloom could not be reached for comment despite repeated attempts. University of Maryland officials declined interview requests but said in a statement that they try to "work with patients" to find ways to pay bills and avoid lawsuits.
"Unfortunately, there are patients who do not communicate with us or respond to our efforts to collect unpaid bills. In those cases, we cannot know their financial situation or whether they may qualify for programs that might reduce their financial burden," according to the statement.
Herbert A. Thaler is another one of the state's most active hospital collectors and a fixture in the District Court. A solo practitioner, Thaler has filed about 13,000 lawsuits for nearly a dozen hospitals since the start of 2003, according to court data.
Thaler says debtors can save themselves a lot of grief by simply communicating better with the hospital or its attorney.
"When you do [these lawsuits] in volume, it doesn't matter. I'm doing my job. If I have to go to court on one or 10, it doesn't matter," Thaler said, adding: "We proceed on these cases even for small balances."
Reporters for The Sun who observed Thaler hash out payment plans with debtors on several occasions in Baltimore's District Court found him to be courteous and sometimes affable, even when facing people who were suspicious and hostile.
"You don't have to be a bastard," he says.
When people say they can't pay, Thaler says, he advises them to ask the hospital for financial assistance. Most can pay at least something, he says, especially on small debts.
He said the hospitals decide when to sue. "It's not up to me," he said.
After he wins a judgment, Thaler said, it's up to the patient to work out a payment plan. People who are employed face the prospect of a court order to garnish their wages.
"When they refuse to communicate, we file for a garnishment," said Thaler. "Sure, it's routine."
Tamara Byrd was driving home from her job at the city Department of Social Services on Sept. 9, 2003, when a teenage driver collided with her car, sending Byrd's car smashing into a house. She spent seven days in the trauma center at Sinai Hospital in Baltimore with rib fractures and internal bleeding.
"When I first came home, my parents literally had to tuck me into bed every night. My mother had to bathe me. She had to help me get dressed," said Byrd, 40, who lives in Randallstown.
Byrd thought her bill was covered by her HMO. But more than two years later Sinai, through Thaler, sued her for $21,595. Byrd's case was on the docket on July 16, 2006. Thaler met her prior to the hearing to discuss a possible settlement.
She recalls encountering a traffic jam of sorts as lawyers for hospitals sought to find the people they were suing to set up conferences. "It was like a total business," said Byrd.
Byrd agreed to pay $100 a month after talking to Thaler. She complained to the judge that she didn't think it was fair to be stuck with the bill when she had insurance, but thought she had little choice but to settle. Judge Dorothy J. Wilson marked Byrd's case settled, remarking: "Well, good luck to you, ma'am," according to a transcript.
Two months later, Byrd found out that she never legally owed the bill to begin with.
A friend advised Byrd to file a complaint with the Maryland Insurance Administration, which ruled in September 2006 that Byrd was not liable for the charges.
Byrd's HMO had agreed to pay the charges once it was billed by Sinai. But the hospital failed to send the bill within six months as required by state law. Instead, it sued Byrd on Dec. 22, 2005, stating in court papers that she "refuses to pay the sums due."
The insurance administration ruled that the hospital acted improperly in suing her, adding that hospitals can't bill patients for covered services that their health plans decline to pay. Officials call these sorts of disputes "balance billing."
Byrd said she had agreed to settle her court case only because she didn't know that balance billing was improper.
The ruling instructed Byrd to file a complaint with the Maryland attorney general's office if the hospital kept trying to collect from her. "I have heard nothing since then," Byrd said.
Thaler said the hospital had mistakenly believed an auto insurer would cover the bill. He said that once he saw the insurance department ruling, he "backed off."
Bill Gruhn, chief of the consumer protection division for the Maryland attorney general's office, said state law prohibits hospitals from billing patients for services covered by their insurer.
"When we've seen it, we've taken action to stop it," said Gruhn, adding: "That is something that we would look into."
Gruhn said that since the start of 2005, the agency has received about 200 complaints concerning hospital billing matters, including balance billing.
Medicaid and Medicare
People who are eligible for taxpayer-funded health plans such as Medicaid, which treats the poor, and Medicare, which cares for the elderly, aren't supposed to get sued at all. Maryland law prohibits a hospital from knowingly pursuing collection cases against patients who are covered by Medicaid; it is considered another form of balance billing.
Hospitals maintain that they sometimes don't figure out a person is eligible for Medicaid until after the matter has been through the courts. It is legal in Maryland to sue while Medicaid is determining eligibility for benefits, but illegal if the hospital knows the patient is on public assistance.
Yet Bernice Starks, of Baltimore, says that happened to her.
She ended up at the University of Maryland Medical Center on March 6, 2007, after suffering a heart attack and kidney failure.
She took a hospital worker's suggestion and applied for Medicaid. She received retroactive coverage. But the hospital sued her in February, demanding that she pay the $20,140 bill, according to court records. Starks contends that the hospital sued her after she informed it she had been approved for Medicaid.
Starks and her husband showed up at an 8:30 a.m. hearing on May 20 and tried to explain things. A court clerk told her she needed proof that Medicaid would pay the bill and only then could call back and request a new hearing date, according to court filings.
The couple left confused, not realizing that the case was going on without them. The court entered a judgment against her for the full amount of the bill, records show.
"Most people don't know their rights," said Louise Carwell, a senior attorney with the Legal Aid Society of Maryland. She persuaded the hospital to undo the judgment against Starks and to collect the bill from Medicaid.
"There's a lot of judgments entered that need not be entered," Carwell said, adding: "Those bills can be really significant down the line. It totally messes up their credit."
Phil Donlin, a disabled former forklift operator on Medicare, also needed legal help after Johns Hopkins Bayview Medical Center sued him - even though he can barely afford the taxes on his modest Dundalk home.
Donlin, 61, spent a week at the hospital in October 2005 after his wife called 911 because he couldn't breathe.
Less than two months later, he received a letter from a state contractor saying that his $10,000 bill would be covered. But in August 2006, Johns Hopkins sued.
Donlin, who must travel with portable oxygen, struggled to make it to the Baltimore County District Court in Towson to defend himself.
"He would walk 10 steps and we'd have to stop," said his niece, Janet Ballistreri, who went along. By the time Donlin made it, the hearing was over.
The judge didn't ask about Donlin's insurance coverage before ruling that he owed the $10,736 bill, plus interest of $1,542, according to court records. At the time, Donlin and his wife, Bettie, lived on disability checks of $1,619 a month, court records state.
The University of Baltimore School of Law Civil Advocacy Unit filed an appeal for him. The case ended when the hospital agreed to bill Medicare for all but the $912 deductible and to collect that from Donlin in increasing installments starting at $25 a month. Johns Hopkins officials declined to comment on the case.
While he was struggling to make payments to Hopkins Bayview, which won't end until March 2009, Donlin's water was shut off a few months ago because he fell behind on his bills. Last month, he fell in the kitchen. Unable to walk, he slept on a couch. A few days later, his wife called an ambulance, which took him back to Bayview.
Donlin's wife, Bettie, said doctors found cancer in his lungs, spinal cord, and kidneys - and told her husband that the cancer is terminal.
While she waits for a shipment of kerosene paid for by a state program, Bettie has used the oven to heat the Dundalk rowhome.
"This will be the worst Christmas we'll have. There will be no presents, no lights, and no tree," she said.
To examine debt collection practices by Maryland hospitals, The Baltimore Sun compiled a database of 132,000 collection lawsuits filed by hospitals across the state from January 2003 through June 30 of this year. The Sun also compiled a partial database of judgments after state officials didn't respond to repeated requests for a complete file. The incomplete database contained $101 million in such judgments without counting most judgments of less than $2,000.
Reporters reviewed samplings of court files in several busy court districts, observed the collection process play out in the busiest of these courts in Baltimore City, and interviewed lawyers and patients involved in those proceedings. The Sun also obtained five years of financial records and other documents from the Maryland Health Services Cost Review Commission, which over a period of several months provided the newspaper with four different sets of data, each time contending the previous version contained inaccuracies.