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Nonprofit Hospitals that Sue their Patients

Is it against the law? Is there something in the FDCPA that addresses it? What happens when a nonprofit hospital sues their patients due to their inability to pay their medical expenses?

This is something that is happening in Minnesota and everywhere. Nonprofit hospitals do not operate for profit, therefore they take every dime seriously.

There is one hospital in a small community that everyone knows well. Many of the children in the community have been born there and it is the first place people go when they are sick or hurt. Unfortunately, there is another reason why the hospital is well-known and that’s because it is known as the hospital that has sued thousands of people within the community over hospital bills. Wage garnishment is one of the ways in which the hospital has had money paid back. However, the low income levels of many of the individuals could have qualified them to have their bill forgiven completely, but the hospital had their wages garnished anyway.

ProPublica and NPR have been investigating the hospital and the increase in wage garnishment that has been tied to them. But what was found was that the practice is very widespread among nonprofit hospitals.

First of all, nonprofit hospitals receive rather large tax breaks, as they are considered charities and don’t pay state or federal income tax or local property tax. In exchange for these tax breaks, they are required to provide “charity care” or financial assistance to the lower income patients that they serve.

Some nonprofit hospitals don’t go as far as wage garnishment, just in rare cases. However, others have been shown to sue hundreds of patients annually. Another hospital was found to have garnished the wages of 6,000 people between 2009 and 2013.

After the hospital wins a judgment against an individual in court, it is allowed to take a large portion of the patient’s wages, 25 percent of their after-tax pay, in order to pay off the hospital bill. For patients that are head of household, they must tell the court or hospital that they are head of household so that the garnishment is limited to 10 percent of the paycheck.

But one hospital often sues both of the adults in the household, garnishing one at the full 25 percent and garnishing the other at 10 percent. The hospital also charges a 9 percent interest rate.

What does this do to some people? They would pay the bills if they could. The fact is that they cannot even afford 25 percent, which is why they have not paid that. They are then forced to do such things as file bankruptcy in order to stop wage garnishments and get on with their life financially. Unfortunately, a person doesn’t always have a choice of whether or not to go to the hospital. When that choice does exist, a person does a great disservice to their health for the sake of avoiding a bill.

One of the questions has been whether or not wage garnishment has been worth it for hospitals and the answer is that the practice has been doing well. One nonprofit made $45 million in 2014 and much of that is due to the fact they recovered payment through wage garnishment.