NY Hospitals Discharge Patients Into Debt

NY attorney Robert Friedman discusses rights of patients sued by hospitals.

Good Morning. I am Bob Friedman attorney with Friedman & Ranzenhofer, PC. Welcome to the October 14th , 2020 edition of the Legal Survival Channel: Today’s Legal News You Can Use.

Just because all of New York’s hospitals are nonprofit does not necessarily mean that they are charitable to poor patients who cannot pay their bills. In fact, hospitals sometimes illegally obtain judgments against patients ruining their lives.

Stories about nonprofit hospitals suing patients who cannot afford medical care have recently received national attention. All of New York’s hospitals are nonprofit, charitable institutions—yet many engage in this same practice. Debt collection lawsuits allow hospitals to seize assets, garnish wages, freeze bank accounts, and place liens on the homes of patients who cannot pay for health care. Patients accrue hospital bills in times of serious illness and frequently without any ability to plan ahead or shop around for the best deal.
Often, patients have little medical expertise, billing proficiency, or insurance literacy. Nonetheless, when a nonprofit hospital sues a patient, the courts view that patient’s inability to pay as failure to honor a commercial contract.

These medical debt court cases often ruin patients’ lives by wrecking their credit and threatening their economic security. In response to consumer complaints about increasingly aggressive collection practices used by nonprofit hospital systems, The Community Service Society (“CSS”) reviewed nearly 31,000 civil cases filed against individuals by 139 hospitals located in 26 counties throughout New York. Their analysis revealed the following:

1. A handful of hospital systems are responsible for most patient lawsuits.
2. The court process unfairly favors nonprofit hospitals over patients. Suits are brought for vague or confusing bills and often for a relatively small amount—the median amount hospitals sued for was $1,900. These amounts quickly compound patients can be sued for medical bills up to six years after treatment at an interest rate of 9 percent per annum.
3. The hospitals that sue the most patients provide insufficient financial assistance. In fact, these hospitals receive more money from the state’s Indigent Care Pool to provide uncompensated care to patients than they provide in financial assistance.
4. Hospitals use professional debt collection law firms while most patients are unrepresented, resulting in large numbers of default judgments.
5. There are racial disparities in the medical debt burden in some parts of New York State. In communities with litigious hospitals, defendants are more likely to be people of color and that the financial repercussions of court judgments may be falling disproportionately against people of color.

The 31,000 cases CSS reviewed are just one symptom of New York’s affordability crisis. There are thousands more New Yorkers being sued by individual hospital departments or providers or being put into collections by hospitals that stop short of the ultimate action of a lawsuit.

In civil court, defendants are protected by rules governing how people are notified of lawsuits against them. So why did most New Yorkers fail to answer summons against them for medical debt? A report issued by MFY Legal Services and the Legal Aid Society found that 71 percent of people being sued over debt had not been served at all or had been improperly served. In some cases, process servers had filed false affidavits of service. In 2008, the New York Attorney General sought to vacate over 100,000 default judgments debt collection agencies had obtained without properly serving the defendants in the first place. Here, the analysis of hospital court case files reveals that almost all process servers reported serving papers to either a co-tenant or a relative rather than the person being sued. Accordingly, the large number of medical debt default judgments may indicate that New Yorkers are not getting properly served in the first place.

According to attorney Sam Alba, there is a restitution provision available for anyone whose wages have been garnished. Because many of our clients in situations such as this did not know that they were sued, there New York Civil Practice Law and Rules, 5015, allows a court to vacate a default judgment for improper service of process. It is common for us to discover when we examine the affidavits of service that our clients were served at the wrong address.

This discrepancy means we can have the entire lawsuit dismissed and our clients are paid restitution for any money that was wrongfully collected. Results like these are not guaranteed, but most 5015 motions that we have filed have had a favorable result for our client, resulting in a vacatur of the default judgment. Garnished wages are nothing to be ignored, and those affected are not helpless. There are still many defenses available.

Contact New York attorney Sam Alba at 716.542.5444 if your wages are being wrongfully garnished.