A report from the Consumer Financial Protection Bureau (CFPB) estimates that consumer credit reports include $88 billion in medical debt as of June 2021. The cause is a “complicated and burdensome” medical billing system that creates hard-to-fix errors that increase patient debt and reflect poorly on credit scores.

According to CFPB Director Rohit Chopra, “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.” Chopra describes Americans as often being “caught in a doom loop between their medical provider and insurance company.”

The report describes a variety of circumstances that feed this doom loop, including:

• Unexpected and emergency events that are subject to opaque pricing and involve complicated insurance or charity care coverage and pricing rules.
• Patients in emergency situations who cannot sign a billing agreement until after receiving treatment.
• Patients with chronic illnesses or who are injured or ill, whose desperation for medical care forces them into treatment at any cost.

The Unfortunate Impact on Consumers

The report notes that the impact of medical debt is especially harmful for Black and Hispanic communities, low income individuals, veterans, older adults, and young adults regardless of race or ethnicity.

Consider these statistics:

• Tens of millions of U.S. households (about 1 in 5) report having medical debt
• 58% of bills in collections are medical bills
• The distribution of past-due medical debt is uneven: Black (28%), Hispanic (22%), White (17%), Asian (10%)
• Medical debt is more common in the southeastern and southwestern U.S., in part because states in these regions did not expand Medicaid coverage

CFPB Action Plan

The CFPB intends to take decisive action to ensure that the consumer credit reporting system is not used coercively against patients and their families to force them to pay questionable medical bills.

Specific actions include:

• Holding credit reporting companies accountable. The CFPB expects the Big Three credit agencies to adhere to Federal law by blocking hospitals that routinely report inaccurate information and contaminate the credit reporting system from accessing their systems.
• Working with federal partners to reduce coercive credit reporting. In addition to partnering with the U.S. Department of Health and Human Services to ensure that patients are not coerced into paying bills more than the amounts due, the CFPB issued a compliance bulletin in January reminding debt collectors, credit reporting companies, and others, that it is illegal to collect or report as owing a debt that is not legally due and owing, including where the billed amount violates the No Surprises Act.
• Determining whether unpaid medical billing data should be included in credit reports. The CFPB will conduct additional research to assess whether consumer credit reports should include data on unpaid medical bills.

Consumers having issues resolving medical debts or facing problems with other consumer financial products or services can submit an online complaint or call the CFPB at 855-411-CFPB (2372).

The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) have done almost nothing over the past decades to protect market competitiveness and consumer interests in healthcare. Employers continue to grapple with ever-rising plan costs as members bear the brunt of fewer healthcare options at a higher cost.

The DOJ and FTC have allowed massive and ongoing acquisitions and mergers by (and sometimes between) hospitals and health systems, pharmacy benefit managers, pharmacies, and insurance carriers to go unchecked. This has fostered monopolies and cartels in these sectors, reducing competition and increasing prices for medical services, drugs, and health insurance.

Consider the following:

In the early days of COVID, America’s nurses were rightly celebrated as heroes. Many nurses had hoped that such long overdue recognition might lead to needed reforms, but that optimism seems to have faded. In fact, nurses are leaving hospitals in droves. Some are even abandoning the profession.

The convenient explanation for this phenomenon is that we’re beginning another year of the pandemic and its attendant stresses – physical, mental, and emotional. In truth, COVID has simply revealed what nurses have known all along — that the root cause of the nursing crisis is chronic understaffing by profit-driven hospitals.

What Nursing Shortage?

This opinion video from The New York Times reveals that rigid and unrealistic staff-to-patient ratios, especially in critical care units, are to blame for the current crisis. To maximize profits, hospitals have intentionally understaffed nurses for decades, long before the pandemic. There are actually more licensed nurses in the country now than ever before. It’s just that hospitals aren’t hiring them and they’re not willing to work at the bedside under these conditions.

In addition to the devastating impact on health care workers, patients often pay the ultimate price for corporate greed. The chances of dying increase by 7% with every additional patient assigned to an individual nurse. As one nurse eloquently put it, “If you push me past my limit, past my capacity for being able to multitask, something’s going to get missed. And when I say something, I’m talking about your mother. I’m talking about your father. I’m talking about your husband and your wife.”

Follow the Money

A provocative video from PBS | Amanpour and Company exposes the practice of hiring travel nurses to temporarily boost hospital staffing during this crisis. While this helps ease staffing burdens, it also creates discontent because travel nurses are paid up to three times more than resident staff.

The traveling nurse featured in this video insists we need full financial disclosure from hospitals regarding where the money is going. “They say that they will not pay nurses and doctors more because they can’t afford it. Yet they still keep giving million dollar bonuses for their CEOs every year. So how exactly is the money being distributed? If it’s not being distributed to the heart of the hospital, which is doctors, nurses, and patients, where is that money going?”

Staff-to-Patient Ratios are Key

Nursing professionals agree that regulating staff-to-patient ratios is key to improving patient safety, protecting burned out health care workers, and retaining skilled and experienced nurses. California put such a law in place in 2004 with positive results, but it has been an uphill journey elsewhere. A recent initiative in Massachusetts was defeated thanks to a $25 million misinformation campaign funded by the hospital lobby, but laws are currently under consideration in Illinois and Pennsylvania.

Hospitals and the for-profit health care industry need to start respecting the expertise of our nursing professionals. These laws could save patient lives and create a more just work environment for a vulnerable generation of nurses, the ones we pledged to honor and protect at the start of the pandemic.

Many school systems rely on property taxes for most of their budget. When a school district in Chester County, Pennsylvania challenged the charitable results of three nonprofit hospitals owned by Tower Health, they exposed the unethical practices that allow many nonprofit hospitals to beat the system. The school district won.

Nonprofit hospitals are supposed to provide acceptable levels of free care to the community in exchange for not paying property taxes. The judge in this case concluded that the results for three Tower Health hospitals “did not show a substantial donation of services” and ordered the hospital to start paying taxes.

The basis for this decision is indisputable:

• Phoenixville Hospital | A mere 0.00076 percent of patients received free services (only 162 of 199,405 people to whom services were rendered last year)
• Brandywine Hospital | Just 0.052 percent of patients received free services
• Jennersville Hospital | Only 0.053 percent of patients received free services

The judge also ruled that lucrative executive bonus plans tied to financial performance disqualified the hospitals from a tax exemption. The compensation plan was clearly a pass through of tax savings to hospital executives.

Questionable Accounting

Another revelation from this case reinforced that writing off bad debt does not equal donated services. “An institution that treats patients efficiently and at a cost lower than the stated reimbursement percentage gets the same payment as an inefficient institution,” the judge stated. “To write off bad debts is not charity when the hospitals decide not to pursue the collection of these accounts even though there was, in the hospitals’ determination, a means to pay. The bad debt write-offs do not equal an increase in donated care.”

The court also ruled that the hospitals’ reliance on a “master charge sheet” — a common feature in hospital finance offices — was meritless because the hospitals’ own witness testified that this charge master has no meaning or value. The witness stated, “The numbers, essentially, are pulled out of thin air and are created only because [the hospital] is required to have a charge sheet to satisfy federal requirements.”

The hospitals contended they had each lost money, revealing that Tower Health had charged them fees in excess of $43 million in 2020 alone. The court rightfully questioned the company’s administrative structure and executive compensation schemes that drained “huge sums…from the [hospitals and to Tower Health], resulting in the hospital ‘showing’ a large net loss.”

A Sign of Things to Come?

Although the Tower Health decision will likely be appealed, it sounds a warning bell for nonprofit hospitals and health systems that have avoided taxes for decades. The decision is a judicial duck test. If a nonprofit organization looks, acts, and compensates itself like a for-profit company, it may be treated like a for-profit company. At the very least, it won’t be treated like a “charity.”

It’s time for hospitals to become efficiently run, tax-paying citizens with rationale cost accounting and transparent pricing — especially those that aren’t living up to their mandate as charitable, nonprofit entities.