In their debt

Willie Mae White began worrying how she'd pay the $36,224 bill from Johns Hopkins Bayview Medical Center a few weeks after having emergency brain surgery. She lived off Social Security and food stamps after decades working as a housekeeper. So she was thrilled when Bayview informed her in writing that her bill would be forgiven, at least in part. The hospital had little to lose, since it can recover its costs of free and unpaid care under a unique state program. Instead, the hospital sued her 15 months later to collect the bill. Fearing she'd lose her Waverly rowhouse and too sick to defend herself in court, she agreed to pay $500 right away plus $50 a month. At that rate, it would have taken her 59 years to get out of debt.

"It wasn't fair. But what could I do? I said, 'Lord, it's in your hands,'" said White, 66, who remains too weak to work.

"All my life, I try to do the right thing. I have been working since I was a child."

On Wednesday, two months after The Baltimore Sun asked Johns Hopkins officials about her case, the hospital wiped out the debt and agreed to pay White $2,207.Even though her debt was resolved, Willie Mae White's case illustrates the ordeal that some needy people face even though Maryland's hospital regulation system was designed to protect them.

Three decades ago, Maryland officials devised a novel system - now the only one of its kind - in which a state agency sets hospital rates for all patients. It was designed in part to guarantee hospital care whether patients could afford it or not. Hospitals received $921 million last year to cover costs of providing free and unpaid care, according to the most recent state records, and all hospital patients in Maryland contribute through the rates they pay.

But an eight-month investigation by The Sun found that over the past five years some of Maryland's 46 nonprofit hospitals have received millions of surplus dollars from the payment system even as they sued tens of thousands of patients over unpaid bills.

Many of these suits have been filed against patients in the poorest areas of the state.

The investigation found:

• Hospital debt collection lawsuits spiked sharply between 2003 and 2006 before falling slightly last year. In all, hospitals filed more than 132,000 of these suits in the past five years, winning at least $100 million in judgments.

• In some cases they added annual interest at twice the rate allowed for other types of debts. And despite national hospital industry guidelines that caution against routinely placing liens on houses, Maryland hospitals placed at least 8,000 liens in the past five years.

• Maryland, unlike some other states, lacks uniform standards and practices to determine who is eligible for free or reduced-price care at hospitals. Some people wind up facing lawsuits even though they have little means to pay their bills.

• State officials have never resolved critical gaps in the system. For instance, they don't monitor debt collection practices to ensure that patients are being treated fairly, and they cannot be sure hospitals aren't getting paid twice for some of the same bills. Hospitals deny they collect bills twice.

• A majority of Maryland's hospitals have received surpluses from free and unpaid care in recent years, even though the system is supposed to ensure that they merely break even over time, according to state figures.

Gov. Martin O'Malley, responding to The Sun'sfindings, ordered an "immediate and thorough review" of hospital debt collection practices and said he wants it completed by early February.

"Assuring the public that all hospitals are pursuing reasonable collection practices consistent with their missions and are not unduly profiting from the system is an essential step to continuing the system well into the future," O'Malley wrote earlier this month to the Health Services Cost Review Commission, the panel that oversees rate setting.

Carmela Coyle, president of the Maryland Hospital Association, said in an interview that hospitals typically sue only patients who can afford to pay and who ignore numerous efforts to make payment arrangements. She noted that hospitals statewide sue only about 0.5 percent of the patients they treat. "Nobody would pay their bills" if hospitals didn't sue to enforce collection, she said.

"The shame about this is ultimately what is happening in the courtroom is what hospitals want to happen in the billing office," Coyle said. "Sometimes, it is the weight of the law that brings people to that conversation."

Hospital administrators said they need to pursue unpaid bills because all patients cover the costs of those bills under Maryland's rate-setting system. Hospitals also argue that they must balance their charitable missions against the need to be paid for services.

"The board of trustees expects us to have prudent business practices," said Ronald R. Peterson, president of the Johns Hopkins Health System. "We could have bad behavior from people who are in that category of deadbeats."

But former Gov. Marvin Mandel, who helped set up the rate-setting system in the early 1970s, said that he was "astounded" by the number of lawsuits and worried that the system has veered off its mission to help the poor.

He expressed concern that some hospitals may be sending unpaid bills to debt collectors "who don't distinguish between those who don't pay and those who can't pay."

"Maybe the system has gotten too good," he said. "In their minds, everybody can pay."

'Responsibility is zero'
White, the Baltimore woman sued by Johns Hopkins, expected to pay for getting sick for a long time.

A housekeeper for more than four decades, White had grown so infirm from headaches and dizziness that she had a tough time getting up and down the stairs in her home.

In June 2005, her daughter took her to the hospital, where tests spotted a brain aneurysm, a potentially deadly condition in which blood forms a pocket in the brain. She spent 10 days in Johns Hopkins Bayview recovering from the surgery to collapse the aneurysm and restore blood flow.

White had health insurance, but it didn't cover the bulk of her care. When bills started showing up about a month after her discharge, she signed up for the financial assistance program commonly called charity care.

A few months after her discharge, Hopkins sent her a ruling on her request for assistance that read, "Your responsibility is zero," according to court records.

White said she rejoiced.

"I was saying, 'Oh gee, thank the Lord, because any time you have an operation like this, you know it's going to be a lot,'" she said.

But the bills kept coming. When her daughter asked why, the hospital said that charity care only covered one day's charges.

Hopkins officials said it was possible for charity care to be approved for one day.

In January 2007, Bayview sued White in Baltimore City Circuit Court, stating in part that she "refuses to pay the amount due." That comment bothered White, who mailed a typed note to the court stressing that she "never refused to pay the bill," but simply didn't have the money to do so.

She said that she was "grateful" to the Hopkins surgeon who "saved my life" but that she and her husband, Charles, got by on $1,080 a month from Social Security and $152 in food stamps. "I have a little checking account that I pay my bills from. There is a little over $1,000 in that; so you see I'm in no position to pay all this money for the hospital bill," she wrote.

A month later, White asked the hospital again for financial aid, but was told the bills were "too old" to be eligible, according to hospital records.

Fearing she could lose her home, White accepted terms outlined over the phone by the hospital's attorney to keep a court judgment off her record. Hopkins spokesman Gary Stephenson said Friday that the hospital "recognized a mistake had been made" but would not elaborate. He said the hospital had returned all the money she had paid with interest.

No standard policies
White's plight illustrates how standards and practices for offering charity care vary among hospitals, and how the court system can overwhelm patients.

Hospital association officials said all of their members, at a minimum, offer free care to patients who have less than $10,000 in net assets and incomes below 150 percent of federal poverty guidelines, set this year at about $33,300 for a family of four.

But the association has resisted efforts by Maryland lawmakers to standardize those policies. As a result, they vary significantly, even among hospitals that serve some of the same areas and populations. For instance, patients at Bon Secours Hospital Baltimore may be granted free or reduced-price care with income of about $42,000 for a family of four. At Maryland General Hospital, about than two miles away, income levels to qualify are about $11,000 less.

The situation gets even more complicated when a person owns property, is employed, or has assets such as a bank account. To hospitals, that can signal that a person may be able to shoulder some if not all of the bill. On the other hand, someone with a higher income may be judged unable to pay if the bills are large enough.

"There is as much art as there is science" to determining who is eligible for charity care, said Jeff Karns, director of patient financial services at Peninsula Regional Medical Center in Salisbury.

Maryland Hospital Association guidelines dating to September 2003 require each hospital to "clearly communicate" their policies and to "re-evaluate the patient's financial condition" prior to suing over an unpaid bill.

But court records show that communication can break down, leaving some patients uncertain about when they may be held responsible for paying.

Take the case of Renee D. Alisea, a single mother and hairdresser. She faces a lawsuit by Franklin Square Hospital over a $10,800 bill. Like many patients taken to court, she had insurance, but it didn't pay for surgery.

Alisea had a hysterectomy in August 2006 because her sister was dying from ovarian cancer and a genetic test suggested that she could suffer the same fate without surgery.

In court pleadings, Alisea maintained that her surgeon - who had also treated her sister - promised her that his services would be free because of her "poverty" and said he had "made arrangements" for the hospital to waive its charges. Alisea, who had previously received state assistance to pay her son's medical bills, contended that she would have declined the surgery if she had thought she would receive a hospital bill.

Hospital officials would not comment on the case, which is set for trial in Baltimore County Circuit Court in March.

"My battle is I am paying $2,500 for a lawyer fee I cannot afford, but it's either that or pay an $11,000 bill. I have been at my job for 17 years. I work hard. If I never had the surgery, I never would have been sued, but I was looking at my sister lying there dying of cancer," said Alisea, 43, who lives in Essex.

Linda M. Zerance, a Baltimore homemaker, racked up a half-million-dollar hospital bill after suffering injuries in a car accident in October 2006. Insurance covered all but $154,267. But only after the University of Maryland Medical System sued her in Baltimore City Circuit Court in June 2007 did it qualify her for charity care to cover all but $26,000. She paid that amount from an auto insurance settlement.

Zerance said the lawsuit might have been avoided had she been told about charity care earlier.

"I didn't hear about financial aid until the hospital said they would take a plea bargain," said Zerance, who is still recuperating from her injuries.

Officials at several hospitals said they routinely sue patients a year or more after writing off their bills and building those losses into their rate requests. They said that money recovered from lawsuits is deducted from requests in subsequent years but that aggressive collections get them paid faster.

"I'd rather have cash today than wait two years for it, because I can make money on it," said Bruce Ritchie, vice president for finance at Peninsula Regional Medical Center.

Routine lawsuits
That philosophy is reflected in more than 16,000 collection lawsuits Peninsula has filed since the start of 2003, making it among the hospitals that sue most frequently, court records show.

Johns Hopkins Hospital, Maryland's largest hospital, and Johns Hopkins Bayview Medical Center have filed about 14,000 collections lawsuits between them over the past five years. In a written statement, the Hopkins system said it sues fewer than 1 percent of its patients and that it now sues less often than it did several years ago - although it acknowledged that it consistently refers about 20 percent of its patients to collection agencies. It said it sues only those patients who have the ability to pay.

Maryland hospitals have attached liens to the homes of more than 8,000 patients, court records show, despite American Hospital Association guidelines cautioning against wholesale use of the practice. That doesn't include homes in Baltimore City, where property liens are automatically entered in all civil judgments.

By contrast, several institutions are reluctant to take patients to court no matter how much they owe.

Bon Secours filed fewer than 400 collection cases from January 2003 through June 2008. Officials said their religious beliefs and desire for social justice keep lawsuits to a minimum.

Executives at Washington Adventist Hospital in Takoma Park said they sue patients as a "last resort" when they are certain the person has the means to pay the bill. The court data reflect that view. Adventist rarely sues, even though it lost $5.3 million last year on unpaid and charity care, the most of any Maryland hospital.

"We don't go out and start suing people. We know people are going through very stressful times. We don't want to cause a further burden on them," said William G. "Bill" Robertson, president and chief executive officer of Adventist HealthCare.

In 2006, the cost review board surveyed hospitals on their debt collection practices. The written responses showed that practices vary widely.

When asked under what circumstances it sues, Mercy Medical Center replied it does when a collection agency finds "monetary assets."

"Then we have to wait to see what happens. ... Many will pay if they are trying to purchase a large item. Many patients have jobs with good benefits, but do not wish to have the insurance coverage, especially government employees."

Carroll Hospital Center said it sues based on debts over $500, credit rating, and work history. "A mortgage is an indicator for suit," the hospital wrote.

Calvert Memorial Hospital said it will seek a lien on a home or car if the debt is $500 or more. And Garrett County Memorial Hospital said it considered the ownership of two cell phones and a savings account as evidence a person could pay bills.

'Created to help people'
When state officials began regulating hospital rates in 1974, they saw the system as a model for the nation; a way to hold down soaring health care costs and prevent hospitals from "dumping" patients who were poor or lacked insurance. The system made it worth the hospitals' while to treat all comers.

"In order to take care of losses in the emergency room, they were raising costs in the hospital," Mandel said. "The hospitals, including Hopkins, were not created to lose money, but they weren't created to be moneymakers. They were created to help people."

Today, the system that Mandel helped create is run by the Health Services Cost Review Commission in Baltimore, whose seven volunteer members are appointed by the governor, mostly from within the health care industry. The current commission includes the chief executive of Holy Cross Hospital in Silver Spring, a medical director at University Specialty Hospital, a former trustee of the Greater Baltimore Medical Center, and a retired physician who is former president of the Health Insurance Association of America - an early supporter of rate regulation. The panel doesn't have a consumer representative.

Members proudly tick off the system's accomplishments, arguing that hospitals' costs in Maryland are now below the national average and that state regulation of rates has allowed hospitals for the most part to benefit financially. They say that uninsured people in Maryland pay far lower hospital rates than in other states. In other states that encourage hospitals to compete against each other over prices and services, they argue, a number of institutions have been forced out of business, causing catastrophe in the communities they served.

Yet it's difficult to tell whether the compensation formula for free and unpaid care is working as intended.

Robert B. Murray, the cost review commission's longtime executive director, said he could not explain why the commission's formula underpaid eight Maryland hospitals for unpaid care for five straight years while providing surpluses to Johns Hopkins Hospital and Suburban Hospital in Bethesda each year. The formula envisions that hospitals will make money in some years but not in others, with the bottom line for each hospital evening out over time.

"It is a function of some things that are not quantifiable, like how efficient are they and how aggressive the individual hospitals are going after people," he said.

When The Sun asked the commission for data on revenue and costs of charity and unpaid care, the commission changed the figures three times over a period of two months, claiming that each previous set was wrong. The latest set of data shows that the hospitals as a group lost $6.6 million on unpaid and charity care in 2007, though they made surpluses in earlier years.

Twenty-five of the 47 hospitals are listed in the latest state database as having surpluses from free and unpaid care over the five-year period - and some of these institutions are among those that sue patients most often.

Each hospital reports to the commission annually the value of charity care it provided in the previous year, as well as a figure for "bad debt," the sum of bills which hospitals either can't or don't collect. The commission then uses a complex formula to estimate how much each hospital needs to add to its charges the following year in order to recover those losses.

But the hospitals do not report actual income from the rate formula. The commission does not know whether its revenue figures within a particular year are completely accurate, Murray and other commission officials acknowledged. "We don't know exactly what they collected," Murray said.

In a memo to its members, a copy of which was obtained by The Sun, the hospital association said that this lag can leave hospitals with losses on unpaid care if their costs increase faster than the revenue based on the rate formula. It also said that costs of charity and unpaid care have been increasing because of the poor economy and a rise in insurance plans with high deductibles that patients cannot afford to pay.The hospitals also say they collect less than the state's figures show.

Still, Johns Hopkins officials acknowledged in interviews that they generate surpluses from the system. Hopkins, Bayview and the University of Maryland Medical Center showed combined surpluses of at least $130 million in the past five years in the final numbers provided by the commission.

Officials at the University of Maryland, which reported about $55.7 million of that surplus, declined to be interviewed for this article. In an e-mailed statement to The Sun, officials said that the payments even out over time and that any surpluses are reinvested into "patient care activities" at the hospital.

"There are periods when hospitals are not compensated in their rates for the charity care they provide, and there are also periods when the rates bring in more than the charity care provided," the statement said.

Murray said the agency relies on the hospitals to deduct any money they collect from judgments from the numbers they submit for recovery through the rate-setting process. Coyle, the hospital association president, insisted that hospitals do so faithfully.

"Anything we collect from a lawsuit is offset against our payments in the future, so there is no double-dipping here," Coyle said.

Commission officials said that while some hospitals report income from debt collections to them every year voluntarily, others don't.

The commission has never required this information, so officials aren't sure if every hospital is deducting these collections from their claims for unpaid bills.

Murray, a staunch proponent of rate setting, concedes that it might be time for the commission to turn its attention to how patients are faring, especially as the economy worsens and more people struggle to pay their bills.

He acknowledged that the commission's policy of "macro regulation" has left it in the dark about debt collection practices.

"Sometimes we don't see things," Murray said. But he added that the commission has "broad authority to investigate." and collect data. It also has the power to compel hospital officials to appear and explain debt collection and charity care policies in full.

"We can bring people in and say, 'Show us this. This isn't right. We need to change this,'" Murray said.

Commission chairman Donald A. Young said the agency will do a thorough review. "We need to find out exactly what is going on," he said.

What we found
• Hospitals filed more than 132,000 debt collection suits in the past five years, winning at least $100 million in judgments.

• Hospitals sometimes added annual interest at twice the rate allowed for other types of debts.

• Hospitals placed liens on houses 8,000 times in the past five years.

• Maryland lacks uniform standards to determine who qualifies for reduced-price or free hospital care.

• The state doesn't closely monitor hospitals' debt collection practices.

• A majority of Maryland's hospitals have received surpluses from free and unpaid care in recent years, though they are supposed to break even in the long run.

The reporting
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. Thousands of computerized court docket entries were analyzed to identify hospitals and lawyers filing large numbers of these lawsuits as well as document cases that ended in judgments, liens or other actions against patients. 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 that the previous version contained inaccuracies.

The series
Tomorrow: How hospitals and their lawyers pursue unpaid bills in court against patients with few legal and other resources.

Tuesday: Why holes in the rate-setting system have persisted even as other states fixed similar problems.