On the eastern edge of St. Joseph, Mo., lies the small city's only hospital, a landmark of modern brick and glass buildings. Everyone in town knows Heartland Regional Medical Center — many residents gave birth to their children here. Many rush here when they get hurt or sick.
And there's another reason everyone knows this place: Thousands of people around St. Joseph have been sued by the hospital and had their wages seized to pay for medical bills. Some of them, given their income, could have qualified to get their bill forgiven entirely — but the hospital seized their wages anyway.
NPR and ProPublica have been investigating the increase in so-called "wage garnishment" by credit card and other companies. For this story, we looked specifically at nonprofit hospitals and found the practice widespread in five different states around the country.
Nonprofit hospitals get huge tax breaks — they are considered charities and therefore don't pay federal or state income tax or local property tax. In exchange, they are obligated to provide financial assistance or "charity care" to lower-income patients.
Some nonprofit hospitals around the country don't ever seize their patients' wages. Some do so only in very rare cases. But others sue hundreds of patients every year. Heartland, which is in the process of changing its name to Mosaic Life Care, seizes more money from patients than any other hospital in Missouri. From 2009 through 2013, the hospital's debt collection arm garnished the wages of about 6,000 people, according to a ProPublica analysis of state court data.
After the hospital wins a judgment against a former patient in court, it's entitled to take a hefty portion of the patient's paychecks going forward: 25 percent of after-tax pay. For patients who are the head of household, if they tell the hospital or court that information, the hospital can seize only 10 percent of each paycheck.
But Heartland, through the debt collection company Northwest Financial Services, often sues both adults in a household — garnishing one at the 10 percent rate and the other at the full 25 percent of their pay. The hospital also charges patients 9 percent interest, the maximum allowed under state law.
Back in 2005, Keith Herie was working as a truck driver making about $30,000 a year. His wife, Kathleen, was a stay-at-home mom with their two kids. The couple says they couldn't afford health insurance and Keith's employer didn't offer it.
But sometimes you have to go to the hospital anyway. That's what happened when Kathleen doubled over with a burst appendix and needed an emergency operation. "I felt sharp pains, I was vomiting, I was running a fever," she says. "It was bad."
That operation meant upwards of $14,000 in medical bills. It was a staggering debt for the Heries. They say the hospital told them they could apply for financial aid, but when he went to inquire about that, Keith says, "they basically told me I made too much."
Just a few months after the operation, the hospital expanded its charity care policy. The Heries, given their income, would have qualified under the new policy. But the hospital didn't make the change retroactive.
In 2006, the hospital sued the Heries and got a court judgment against them for the full bill plus legal fees — more than $18,000 in total. Ever since, the hospital has been taking 10 percent out of Keith Herie's paychecks.
He says that has also hurt his credit score. "Where I should be making a $250-a-month car payment, I'm making $368 in payments," he says. Likewise, the mar on his credit has prevented him from refinancing his mortgage to take advantage of lower interest rates. "It affects everything," Keith says.
To make some more money, Kathleen Herie got a low-wage retail job at Sam's Club. But then Heartland hospital began seizing 25 percent of her paychecks after taxes — meaning both she and her husband were now getting their pay docked at the maximum level allowed under state and federal law. On top of that, the hospital placed a lien against their home — which also prevents them from refinancing. According to a Heartland operations memo, this is done in all cases in which the company has won a judgment exceeding $1,000.
"They're greedy," Kathleen says. "I owe more in interest on those bills than I do the bill alone."
Court records show that the couple has now paid more than $15,000 on this debt. But because the hospital has been charging them 9 percent interest on that large bill for going on 10 years now, the interest has added up — so the couple still owes $10,000 more.
"It's like a never-never plan," Keith says. "You're never going to get rid of it and you're never going to get ahead of it."
Is Seizing Wages Worth The Effort For Hospitals?
As far as the hospital's finances go — it's doing well. Heartland made $605 million in gross revenues last year, and $45 million of that was profit. "We've been very successful in terms of being profitable and being a good community asset," says Tama Wagner, chief brand officer for Heartland.
In fact, the hospital brings in so much money that all of this wage garnishment turns out to be a minor item on its balance sheet. Totaling up all the money the hospital seized from patients' wages last year, according to court records, shows that wage garnishment brought in just half of 1 percent of its revenues.
Other hospitals in Missouri have found ways to avoid suing low-income patients. BJC Healthcare, a nonprofit, operates a chain of 12 hospitals, including Barnes-Jewish Hospital in St. Louis, the largest in the state. In 2013, the BJC hospital chain filed just 26 lawsuits. Unlike Heartland, BJC automatically slices 25 percent off its standard rates for uninsured patients and never includes interest on payment plans, said June Fowler, BJC's spokeswoman.
By comparison, Heartland hospital's debt collection arm filed over 2,200 lawsuits in Missouri courts in 2013. "It's not fair to those who are paying to not be aggressive with those who have the ability and aren't paying," Wagner says.
She says the hospital does everything it can to fulfill its mission as a nonprofit, charitable institution. Patients are offered multiple opportunities to qualify for financial assistance and avoid the possibility of legal action, she says. It would be better for everyone, Wagner says, "if we attempt to work on things before it gets to this level."
In recent years, the hospital has made its charity care policy more generous. Heartland's policies state that anyone making less than three times the poverty line can qualify to be billed at a reduced rate, similar to what an insurance company pays, and then get that amount cut in half. If they make less than twice the poverty line, the entire bill is forgiven.
The hospital makes every effort to let patients know that they may qualify for help, Wagner says. "Financial counselors are available if a patient asks for that." But if patients don't utilize those resources, she says, the hospital must take action.
"No one goes into this with the goal or the desire to ruin someone's life," Wagner says. "But at the same time, the services were rendered, and we have to figure out how to get them paid for."
Asked why the hospital sues more patients than any other in the state, Wagner said, "I don't know."
Last year, about 8,700 Heartland patients had their bills cut or zeroed out, according to data provided by Heartland. About half of those were uninsured, while the rest were spared full payment of deductibles or other obligations not covered by their insurance.
But uninsured patients like the Heries who don't receive charity care — either because they were turned down or never applied — are billed at Heartland's standard rates, the sticker price that insurers never pay. In 2013, more than two-thirds of the accounts the hospital's debt collection division handled involved uninsured patients, according to data provided by Heartland.
Suing Patients Who Qualify For Free Or Reduced-Cost Care
In 2010, Heartland sued Keith and Kathleen Herie again. Keith was experiencing chest pains, had tests done and ended up with new bills totaling upwards of $10,000. But this time, based on his income on his tax returns, the couple could have qualified to get their entire bill forgiven under the hospital's financial aid policy.
But they say nobody told them that. They didn't formally apply for aid. So the hospital charged them the full bill and garnished their wages again. Altogether, over the years, the couple has paid $19,779 through garnishments, according to court records. They still owe $25,739.
The Heries' case highlights a key point: When a hospital garnishes patients' wages, it learns how much they make. But even if the patient is very low-income, Heartland doesn't consider that. Once you get sued, you no longer qualify for assistance. "The time to do that would have been back when you got the bill or when the bill initially went to collections," Wagner says. Hospital spokesperson Tracey Clark says charity care is reserved for patients who "seek it and legitimately work with us."
Meanwhile, the hospital is seizing the wages of many patients who could qualify for free or reduced-cost care. Just last year, Heartland garnished the pay of more than 400 people who worked at Wal-Mart, fast-food restaurants such as McDonald's and a local pig slaughterhouse, according to court records. Clark said that Wal-Mart employees constituted "only 3.6 percent" of the thousands of patients currently being garnished by the hospital's debt-collection arm.
The employees of the local pig slaughterhouse were Heartland's most frequent target. One of the largest employers in St. Joseph, Triumph Foods processes 6 million hogs a year and has 2,800 employees, according to its website. In 2013, at least 255 Triumph employees had their wages garnished by Heartland's debt-collection arm — about one of every 11 employees.
Tammy Berry, who earns $8.20 an hour working at the fast food chain Taco John's, has been sued by Heartland repeatedly. Berry, 48, and her husband Keith, 47, were first sued in 2009. Since then, the hospital has garnished $4,500 from Tammy's pay, almost all of it going to pay off interest. (Keith Berry says he does not work and is applying for disability payments). The Berrys still owe $7,000 on that debt.
The couple have had a number of ailments, including issues with Keith's heart, but they aren't sure which hospital visits led to the suits.
Then, while still being garnished for those bills, Tammy said, she fell ill with pneumonia and went to Heartland for treatment again. The hospital's debt collection arm sued them for $4,600 more.
Federal law only protects the poorest of the poor from garnishment, and Tammy is not poor enough. If she takes home more than $870 a month, her wages can be garnished. On the weeks she works full time, the garnishments bring her take-home pay below the minimum wage.
But like the Heries, the Berrys are poor enough to qualify for free care under Heartland's official financial aid policy. In fact, the Berrys had qualified for charity care at Heartland for bills at other times, so the hospital has known that their finances were precarious. Yet, they were charged full price for Tammy's treatment for pneumonia. Clark, the Heartland spokeswoman, declined to explain this, but said, "Information has to be a two-way street."
Outside a courtroom in the county courthouse on a recent Wednesday morning, the couple slumps on a bench dejectedly. They say they're uncertain how they will absorb this latest blow.
"We're living paycheck to paycheck," Tammy says.
Under The Affordable Care Act, A Tougher Standard
If a nonprofit hospital gets too aggressive with debt collection these days, "they're putting at risk their federal tax exemption," says Mark Rukavina. He runs Community Health Advisors, a consulting firm that helps hospitals comply with the Affordable Care Act.
The ACA actually sets a new and higher standard for debt collection.
"The statute is quite clear," Rukavina says. "It says nonprofit hospitals should not engage in extraordinary collection actions before making a reasonable effort to determine whether someone is eligible for financial assistance."
And if a hospital is garnishing wages of many low-income residents in their community, Rukavina says, "it's really questionable whether that is in compliance."
Chi Chi Wu, an attorney with the National Consumer Law Center, says Heartland's tactics appear to run counter to its mission. Nonprofit hospitals are "given tax-exempt status because they are supposed to be serving the public and especially the poor," she says.
The NCLC has criticized hospitals in the past for charging uninsured patients higher prices than the hospitals charge insurance companies. The insurance companies negotiate reduced rates from hospitals. Wu says if hospitals are charging low-income patients more than they charge insured patients, "and then garnishing their wages on the basis of these inflated amounts," there ought to be consequences. "They should lose their tax-exempt status," she says.
The center has recommended that federal regulators prohibit debt collectors from garnishing wages based on the higher prices hospitals charge uninsured patients.
Heartland's Board Reviewing the Hospital's Practices
After NPR and ProPublica brought all this to Heartland hospital's board of directors, the board says it is reviewing the hospital's debt collection practices. Mark Rukavina says nonprofit hospitals around the country should do the same.
RENEE MONTAGNE, HOST:
We're going to take a look now at a striking trend in this country. Millions of Americans are getting their wages seized because they owe money. NPR News has reported on this in the past and now we have more on nonprofit hospitals forcing patients to pay medical bills by going to court to seize funds right out of their paychecks. Steve Inskeep spoke with NPR's Chris Arnold and ProPublica reporter Paul Kiel.
STEVE INSKEEP, BYLINE: Gentlemen welcome back.
CHRIS ARNOLD, BYLINE: Hiya, Steve.
PAUL KIEL: Thanks.
INSKEEP: How widespread is this?
ARNOLD: Well, we believe it is quite widespread. There's no good national data, but we looked at six different states and in state after state after state we saw nonprofit hospitals suing hundreds of their patients. And what Paul was able to do in Missouri, the state of Missouri in particular, was to get very, very good data. He got all the debt collection cases for the entire state of Missouri so we could get a really good look at what's going on there.
INSKEEP: OK, so an opportunity to use one state as a case history - what's happening in Missouri, Paul?
KIEL: Well, we found quite a few hospitals that's were suing in the hundreds. But we found some hospitals that go after patients a lot more. And in fact we found one hospital in St. Joseph - it's up in the northwest corner of the state - it's suing thousands of patients a year, over 2,000 patients a year. And seizing three times more money than any other hospital in the state. And that hospital's called Heartland Regional Medical Center.
INSKEEP: Well, now what's wrong with this - because, of course, people run up bills. They're supposed to pay them.
ARNOLD: Well, Steve, nonprofit hospitals get a huge tax break and in return they're supposed to provide financial assistance, or charity care it's called, to lower income patients.
INSKEEP: Oh, people who can't pay the bill, but they need the medical care.
ARNOLD: Right and that's sort of the tray off. They don't have to pay taxes, but, you know, they're supposed to help out lower income people. But when we took a close look we found that some patients who seemed like they should qualify for financial assistance aren't getting it. And instead they're getting sued by their local hospital and getting their wages seized.
INSKEEP: So what are some of the cases of individuals that you found when you were looking at this?
ARNOLD: Paul and I went to St. Joseph, Missouri, and we met first with Keith and Kathleen Herie at their house in St. Joe. Back some years ago, he was working as a truck driver. She was a stay-at-home mom with their two kids. Keith Herie was making around $30,000 a year then and he said he just couldn't afford health insurance on that kind of income. But sometimes things happen and you have to go to the hospital, like when their 2-year-old got into a jar of lamp oil.
KATHLEEN HERIE: It was the night of my sister's wedding. We used lamp oil for her alter. We was bringing things home and they were sitting on my table and then a curious 2-year-old walked up and he drank it. I was like oh, crap, are you serious? And that's when he kind of laid down and his eyes rolled back into the back of his head. And then we took him to the hospital.
(SOUNDBITE OF DOG BARKING)
ARNOLD: You can hear their little dog - he's named Peaches - in the background there. Their son, whose name is Chance, we should absolutely say was OK, but soon the family was back at Heartland Hospital. Kathleen this time had doubled over with a burst appendix and needed an emergency operation.
KATHLEEN HERIE: I felt sharp pains. I was vomiting. I was running a fever. It was bad.
ARNOLD: That operation went upwards of $14,000 in medical bills. The couple says the hospital told them they could apply for financial aid.
KATHLEEN HERIE: Keith did go out there at one time and tried to get things set up, but we, apparently, did not qualify.
KEITH HERIE: They basically told me I made too much.
KATHLEEN HERIE: He made too much money.
ARNOLD: So the hospital sued the Heries in 2006 and got a court judgment for the full bill plus legal fees for more than $18,000 total and, ever since, the hospital has been taking 10 percent out of Keith Herie's paychecks. He says that's also hurt his credit score.
KEITH HERIE: Oh, definitely. You know, where I should be making a $250-a-month car payment, I'm making $368 payments. When I talk to mortgage places and it shows I got thousands and thousands of dollars of medical bills they won't touch you, so it affects everything.
ARNOLD: To make some more money Kathleen Herie got a low-wage retail job at Sam's Club. But then Heartland Hospital began seizing 25 percent of her paychecks after taxes too. And on top of that the hospital placed a lien against their home.
KATHLEEN HERIE: They're greedy. I owe more in interest on those bills than I do the bill alone.
ARNOLD: The hospital's also been charging them the maximum interest rate allowed under state law - that's 9 percent.
KEITH HERIE: So it's, like, a never-never plan. You're never going to get rid of it and you're never going to get ahead of it.
ARNOLD: As far the hospital's finances go, it's doing well. Heartland brought in $605 million in revenues last year and 45 million of that was profit.
TAMA WAGNER: We've been very successful in terms of being profitable and being a good community asset.
ARNOLD: That's Tama Wagner, Steve. She's the chief brand officer for Heartland Hospital, which is in the midst of changing its name to Mosaic Life Care. One thing the hospital's done - in recent years it has gotten more generous with its financial aid policy. So under the current policy, anyone making less than three times the poverty line can qualify to get their bill cut in half and if they make less than twice the poverty line the entire bill is forgiven. And she says that the hospital makes every effort to let patients know that this is the kind of help that they can qualify for.
WAGNER: Financial counselors are available if a patient asks for that.
ARNOLD: But in 2010, Keith and Kathleen Herie, the couple we were just talking to, they were sued again by the hospital. Keith Herie had chest pains and tests done and another big bill. And this time, based on the income on their tax returns, they could've qualified to get their entire bill forgiven, but they say that nobody told them that and they didn't formally apply for aid. The hospital went ahead and sued them and in total this couple now owes more than $25,000 to this hospital.
INSKEEP: But this is a family the hospital has some experience with, Chris Arnold. Weren't they aware that this is a family that's pretty low income at this point?
ARNOLD: Well, that's right and this is a key point. This is a family that they've not only had contact with, but they've sued. And when a hospital sues a patient and garnishes their wages it learns how much the patient makes, but even if they're low income, Heartland Hospital doesn't consider that. Once you get sued, Tama Wagner says, it's the hospital's policy that you no longer qualify for assistance.
WAGNER: The time to do that would have been back when you got the bill or when the bill initially went to collections. It should never really have to get to court.
ARNOLD: But the world's not a perfect place and if it does get to court and someone owes 20-grand and they're really poor and they qualify for charity care, I mean, why not give them the charity care?
WAGNER: Can I check on that to see...
ARNOLD: At this point another hospital spokesperson, Tracey Clark, breaks the silence, but then the brand officer, Tama Wagner, answers again.
WAGNER: If he was somebody who's making $10 an hour and they have a $20,000 debt, you know, we don't want to be punitive or ridiculous. And so it would make sense that we would figure something out. Common sense would tell you that.
ARNOLD: Maybe, but one patient we interviewed, Steve, said that she was making $8 an hour working at Taco John's. And according to court records, the hospital's been garnishing her wages for years. Just last year, Steve, this hospital seized the wages of more than 400 former patients who work at Walmart, fast food places, such as McDonald's, and a local pig slaughterhouse. That's according to court records.
INSKEEP: So you've done this case history, Chris Arnold and Paul Kiel, - what happens if a hospital does go too far, Paul Kiel?
KIEL: Well, we asked that question of Mark Rukavina. He's an expert who works with hospitals on these issues.
MARK RUKAVINA: If a hospital gets too aggressive with debt collection, they're putting at risk their federal tax exemption.
ARNOLD: And, Steve, we brought this to the board of Heartland Hospital to make sure they knew what was going on here. And after we did that, the board says it is now reviewing the hospital debt collection practices. Mark Rukavina, our expert here, says that nonprofit hospitals around the country should do the same.
INSKEEP: Chris Arnold of NPR news and Paul Kiel of ProPublica, thanks to you both.
ARNOLD: Thanks, Steve.
KIEL: Thanks. Transcript provided by NPR, Copyright NPR.