WWYD: When Debt Collection Over-Reaches
By Shel Horowitz
It wasn’t a story Roger Harris relished seeing on the front page of the local paper. As communications director for a non-profit group of hospitals that prided itself on serving charity cases, he winced as he read. Elaine Peters, an 82-year-old living on Social Security, had seen half her monthly income vanish without her permission – garnished from her checking account by the hospital’s collection agency.
In Minnespta, debt collectors were legally permitted to dip into bank accounts without filing a lawsuit or obtaining court approval, even for medical debts. But such collections couldn’t be made from those relying on government aid. In this case, Peters – who was uninsured – had disputed the bill years earlier, and thought she’d settled it. Now she was talking to a reporter. And the attorney general.
As Harris put the paper down, he turned to memos about the AG investigation underway, plus class-action lawsuits alleging harassment. How should the health care system respond?
Ned Barnett, CEO, Barnett Marketing Communications, former hospital PR director, Las Vegas, Nev.
Having worked for hospitals for 25 years – on management boards that dealt with these kinds of problems – I would emphasize the hospital should not have a policy of going after Social Security income.
If the collections agency made a slip-up, the hospital should write off this woman’s debt. It could also set up a donor fund (through the hospital auxiliary) to cover such bills, and might work with local churches to help boost this fund. The hospital could work behind the scenes to help such a person file for bankruptcy, or obtain a reverse mortgage. It can also put a lien on her estate, so it can recover from heirs.
For a hospital settled in its community, the bad image from taking such a person’s Social Security is far more costly than any money recovered. The fact is, hospitals write off millions. A few more would be nothing.
In this case, business ethics and being good to people coincide. Because hospitals save lives, they need not apologize about recovering legitimate debts, especially if the alternative is throwing the burden onto taxpayers. But there are times (this is one) when it makes sense to bite the bullet.
What Actually Happened
Like all “What Would You Do?” cases, this one is real. Since it appeared in the press, we’re revealing that the hospital is part of Fairview Health Services in Minneapolis. “Elaine Peters” is Elsie Iverson, one of many Fairview charity patients alleging high-pressured collection tactics. Iverson got her money back, while other charity patients had to go to court. The story appeared in the Minneapolis Star-Tribune, Dec. 19, 2004.
Fairview spokesperson Ryan Davenport (the fictional “Roger Harris”) said the hospital welcomed the investigation – which went beyond Fairview to affect over 80 hospitals – as an opportunity to make things right. Fairview was reviewing each case. It had always taken steps to assure patients in need were considered for charity care: posting policies at entryways, offering sliding fees, and working to enroll needy patients in support programs. “We have no set limit on the amount of charity care we can provide each year. All of our patients deserve to be treated with respect and dignity,” Davenport said. “One of our challenges is distinguishing between those who do not have the means and those who have the means and choose not to pay.”
He added, “Two-thirds of the patients who come in without insurance go away with insurance, because we’ve helped them enroll.” He said a federal judge dismissed a class-action against Fairview, although a state court case has yet to be heard.
How much oversight does Fairview give the collection agency? “The agency has to operate ethically and legally,” he said. “We have a dialogue on any outstanding accounts.” It’s not unusual for the business office to reclaim an account or write it off. Will pre-emptive garnishment continue? “We’ve asked the collection agency to stop that practice while we’re reviewing,” Davenport said.
Shel Horowitz (email@example.com) is author of Principled Profit: Marketing That Puts People First, and a Hadley, Mass., consultant in marketing who initiated the Business Ethics Pledge movement; www.principledprofits.com.
This article was originally published in the Spring 2005 edition of Business Ethics magazine.