If you look closely, beyond the white coats and operating rooms, you'll find your hospital is a debt collector chasing millions in unpaid bills.
At Sutter General Hospital in Sacramento, on a floor most people will never see, Myranda Aguilar works as a billing specialist. She manages about $10.5 million in accounts for patients who haven't paid off their bills. She's on the phone most of the time at her cheery cubicle.
One patient she talked with had an outstanding bill of almost $90,000 for surgeries related to a pregnancy and a four-day hospital stay. Aguilar said in this patient's case, it's the best-case scenario -- she's eligible for government insurance because of her low income. There are other ways to help some patients who are uninsured or underinsured pay their bills as well, like state-mandated discounts or even charity care.
But if the patient doesn't qualify for any of this and doesn't work out a payment plan with the hospital, the debt collecting apparatus is launched. Aguilar says the process is pretty complicated and involves the hospital turning the patient's account over to a collection agency.
"We don't want to send anyone to collections," Aguilar said. "We really don't."
But Aguilar says since the recession, more patients can't pay off their bills. She said one-quarter of the patients she sees have lost their job and health care benefits. And some get so depressed they end up being readmitted to the hospital.
"I've had a lot of patients cry with me and get very emotional, you know, because of the hospital bill," she said.
Is Bill Collecting Effective?
So, does all of this time-consuming effort to collect on the bills work? Not really, according to Michael Taylor, Aguilar's boss, and regional director of patient services for Sutter Health Sacramento Sierra Region. He said between five and 10 percent of patients actually pay off their outstanding balances. So, Taylor said he turns to collection agencies for help. But the recession is hurting them too.
"They were collecting 25 percent," Taylor said. "But now a successful collection agency is collecting 12 percent."
Take last year, for example. Sutter contracted with collection agencies to recover $58 million in bad debt for its Sacramento Sierra region. But they collected just $3.5 million. So why even bother, if you get such a low return? Maybe they could give those financially-squeezed patients with no other options a break. Well, to a certain extent they can, and charity care is on the upswing.
But it turns out there are statutes in place that require hospitals to make collection efforts. Medicare is one of the biggest payers to hospitals and it says that hospitals must try to collect money from every patient. And if they don't? Medicare won't pay off its bills. Todd Nelson with the Healthcare Financial Management Association said that leaves hospitals in a tough spot.
"They're spending more and more resources to collect less and less money and so their collections are lower and lower," Nelson said.
Creative Options for Debt Collections
So, some hospitals are getting creative, and morphing from mere debt collectors to Wall Street-like brokers. Here's how it works: the collection agencies will buy the debt from the hospital for maybe seven cents on the dollar. And then they can bundle it, slice it up and resell it on the markets. This practice isn't common but Michael Taylor, with Sutter Hospital, is seeing it more and more.
"I mean, in the industry, there are a lot of people that call me asking me to sell them accounts, and do seconds. And that's probably more aggressive than it's been in quite a few years," he said.
If a hospital is cash-strapped, selling off debt might look like a pretty good option. But all this talk of markets, bundling and slicing sounds a bit excessive to Vivian Wu, a health care economist at the University of Southern California. She said bad hospital debt is only three to four percent of total patient revenue.
"I do not think that the hospitals are in a desperate position that they should go selling their debt, using collection companies and collecting their debt," she said. Wu pointed out that many hospitals are non-profits and get substantial tax breaks.
She also said that, in the last decade, hospitals have jacked up their prices to help offset these losses. Still, that being said, she acknowledged that the economic slump has hurt hospitals, and there's no doubt it has hurt patients too.
This story was produced by KQED and the California HealthCare Foundation Center for Health Reporting.