Ambulance services can receive state money once declared essential services.
When someone with a medical emergency calls 911, they expect an ambulance to show up.
But sometimes, there simply isn’t one available.
Most states don’t declare emergency medical services (EMS) to be an “essential service,” meaning the state government isn’t required to provide or fund them.
Now, though, a growing number of states are taking interest in recognizing ambulance services as essential — a long-awaited move for EMS agencies and professionals in the field, who say they hope to see more states follow through. Experts say the momentum might be driven by the pandemic, a decline in volunteerism and the rural health care shortage.
EMS professionals have been advocating for essential designation and more sustainable funding “for longer than I’ve been around — longer than I’ve been a paramedic,” said Mark McCulloch, 42, who is deputy chief of emergency medical services for West Des Moines, Iowa, and who has been a paramedic for more than two decades.
Currently, 13 states and the District of Columbia have passed laws designating or allowing local governments to deem EMS as an essential service, according to the National Conference of State Legislatures, a think tank that has been tracking legislation around the issue.
Those include Connecticut, Hawaii, Indiana, Iowa, Louisiana, Maine, Nebraska, Nevada, Oregon, Pennsylvania, South Carolina, Virginia and West Virginia.
And at least two states — Massachusetts and New York — have pending legislation.
Idaho passed a resolution in March requiring the state’s health department to draft legislation for next year’s legislative session.
Meanwhile, lawmakers in Wyoming this summer rejected a bill that would have deemed EMS essential, according to local media.
“States have the authority to determine which services are essential, required to be provided to all citizens,” said Kelsie George, a policy specialist with the National Conference of State Legislatures’ health program.
Among those states deeming EMS as essential services, laws vary widely in how they provide funding. They might provide money to EMS services, establish minimum requirements for the agencies or offer guidance on organizing and paying for EMS services at the local level, George said.
The lack of EMS services is acute in rural America, where EMS agencies and rural hospitals continue to shutter at record rates, meaning longer distances to life-saving care.
“The fact that people expect it, but yet it’s not listed as an essential service in many states, and it’s not supported as such really, is where that dissonance occurs,” said longtime paramedic Brenden Hayden, chairperson of the National EMS Advisory Council, a governmental advisory group within the U.S. Department of Transportation.
More financial support
There isn’t a sole federal agency dedicated to overseeing or funding EMS, with multiple agencies handling different regulations, and some federal dollars in the form of grants and highway safety funds from the Department of Transportation. Medicaid and Medicare offer some reimbursements, but EMS advocates argue it isn’t nearly enough.
“It forces it as a state question, because the federal government has not taken on the authority to require it,” said Dia Gainor, executive director for the National Association of State EMS Officials and a former Idaho state EMS director. “It’s the prerogative of the state to make the choice” to mandate and fund EMS.
In states that don’t provide funding, EMS agencies often must rely on Medicaid and Medicare reimbursements and money they get from local governments.
Many of the latter don’t have the budgets to pay EMS workers, forcing poorer communities to turn to volunteers. But the firefighter and EMS volunteer pool is shrinking nationally as the volunteer force ages and fewer young people sign up.
Overhead for EMS agencies is expensive: A basic new ambulance can cost $200,000 to $300,000. Then there are the medicine and equipment costs, as well as staff wages and farther driving distances to medical centers in rural areas.
“The fact that people expect it, but yet it’s not listed as an essential service in many states, and it’s not supported as such really, is where that dissonance occurs.”
– Paramedic Brenden Hayden, chairperson of the National EMS Advisory Council
By contrast, police departments are supported and receive funds from the U.S. Department of Justice along with local tax dollars, and fire departments are supported by the U.S. Fire Administration, although many underserved areas also rely on volunteer firefighters to fill gaps.
“We need more if we’re going to save this industry and [if] we’re going to be available to treat patients,” Hayden said. “EMS in general represents a rounding error in the federal budget.”
What’s more, reimbursements only occur if a patient is taken to an emergency room. Agencies may not receive compensation if they stabilize a patient without transporting them to a hospital.
Gary Wingrove, president of the Paramedic Foundation, an advocacy group, has co-authored studies on the lack of ambulance service and on ambulance costs in rural areas. The former Minnesota EMS state director argues that reimbursements should be adjusted on a cost-based basis, like critical-access medical centers that serve high rates of uninsured patients and underresourced communities.
A rural crisis
About 4.5 million people across the United States live in an “ambulance desert,” and more than half of those are residents of rural counties, according to a recent national study by the Maine Rural Health Research Center and the Rural Health Research & Policy Centers. The researchers define an ambulance desert as a community 25 minutes or more from an ambulance station.
Some regions are more underserved than others: States in the South and the West have the most rural residents living in ambulance deserts, according to the researchers, who studied 41 states using data from 2021 and last year.
In South Dakota, the Rosebud Sioux Reservation covers a 1,900-square-mile area in the south-central part of the state.
State Rep. Eric Emery, a Democrat, is a paramedic and EMS director of the tribe’s sole ambulance station, providing services to 11,400 residents.
Emery and his colleagues respond to a variety of critical calls, from heart attacks to overdoses. They also provide care that people living on the reservation would otherwise get in the doctor’s office — if it didn’t take the whole day to travel to one. Those services might include taking blood pressure measurements, checking vital signs or making sure that a diabetic patient is taking their medicine properly.
Nevertheless, South Dakota is one of 37 states that doesn’t designate emergency medical services as essential, so the state isn’t required to provide or fund them.
While he and his staff are paid, remote parts of the reservation are often served by their respective county volunteer EMS agencies. It would simply take Emery’s crew too long — up to an hour — to arrive to a call.
“Something I wanted to tackle this year is to really look into making EMS an essential service here in South Dakota,” Emery said. “Being from such a conservative state that’s very conservative when it comes to their pocketbook, I know that’s probably going to be a really hard hill to climb.”
Ultimately, Wingrove said, officials need to value a profession that relies on volunteers to fill funding and staffing gaps.
“We’re looking for volunteers to make decisions about whether you live or die,” he said.
“Somehow, we have placed ourselves in a situation where the people that actually make those decisions are just not valued in the way they should be valued,” he said. “They’re not valued in the city budget, the county budget, the state budget, the federal budget system. They’re just not valued at all.”
Issue: Medical debt negatively affects many Americans, especially people of color, women, and low-income families. Federal and state governments have set some standards to protect patients from medical debt.
Goal: To evaluate the current landscape of medical debt protections at the federal and state levels and identify where they fall short.
Methods: Analysis of federal and state laws, as well as discussions with state experts in medical debt law and policy. We focus on laws and regulations governing hospitals and debt collectors.
Key Findings and Conclusion: Federal medical debt protection standards are vague and rarely enforced. Patient protections at the state level help address key gaps in federal protections. Twenty states have their own financial assistance standards, and 27 have community benefit standards. However, the strength of these standards varies widely. Relatively few states regulate billing and collections practices or limit the legal remedies available to creditors. Only five states have reporting requirements that are robust enough to identify noncompliance with state law and trends of discriminatory practices. Future patient protections could improve access to financial assistance, ensure that nonprofit hospitals are earning their tax exemption, and limit aggressive billing and collections practices.
Introduction
Medical debt, or personal debt incurred from unpaid medical bills, is a leading cause of bankruptcy in the United States. As many as 40 percent of U.S. adults, or about 100 million people, are currently in debt because of medical or dental bills. This debt can take many forms, including:
past-due payments directly owed to a health care provider
ongoing payment plans
money owed to a bank or collections agency that has been assigned or sold the medical debt
credit card debt from medical bills
money borrowed from family or friends to pay for medical bills.
This report discusses findings from our review of federal and state laws that regulate hospitals and debt collectors to protect patients from medical debt and its negative consequences. First, we briefly discuss the impact and causes of medical debt. Then, we present federal medical debt protections and discuss gaps in standards as well as enforcement. Then, we provide an overview of what states are doing to:
strengthen requirements for financial assistance and community benefits
regulate hospitals’ and debt collectors’ billing and collections activities
limit home liens, foreclosures, and wage garnishment
develop reporting systems to ensure all hospitals are adhering to standards and not disproportionately targeting people of color and low-income communities.
(See the appendix for an overview of medical debt protections in all 50 states and the District of Columbia.)
Impact of Medical Debt
More than half of people in medical and dental debt owe less than $2,500, but because most Americans cannot cover even minor emergency expenses, this debt disrupts their lives in serious ways. Fear of incurring medical debt also deters many Americans from seeking medical care. About 60 percent of adults who have incurred medical debt say they have had to cut back on basic necessities like food or clothing, and more than half the adults from low-income households (less than $40,000) report that they have used up their savings to pay for their medical debt.
A significant amount of medical debt is either sold or assigned to third-party debt-collecting agencies, who often engage in aggressive efforts to collect on the debt, creating stress for patients. Both hospitals and debt collectors have won judgments against patients, allowing them to take money directly from a patient’s paycheck or place liens on a patient’s home. In some cases, patients have also lost their homes. Medical debt can also have a negative impact on a patient’s credit score.
Key Terms Related to Medical Debt
Financial assistance policy: A hospital’s policy to provide free or discounted care to certain eligible patients. Eligibility for financial assistance can depend on income, insurance status, and/or residency status. A hospital may be required by law to have a financial assistance policy, or it may choose to implement one voluntarily. Financial assistance is frequently referred to as “charity care.”
Bad debt: Patient bills that a hospital has tried to collect on and failed. Typically, hospitals are not supposed to pursue collections for bills that qualify for financial assistance or charity care, so bad debt refers to debt owed by patients ineligible for financial assistance.
Community benefit requirements: Nonprofit hospitals are required by federal law and some state laws to provide community benefits, such as financial assistance and other investments targeting community need, in exchange for a tax exemption.
Debt collectors or collections agencies: Entities whose business model primarily relies on collecting unpaid debt. They can either collect on behalf of a hospital (while the hospital still technically holds the debt) or buy the debt from a hospital.
Sale of medical debt: Hospitals sometimes sell the debt patients owe them to third-party debt buyers, who can be aggressive in seeking repayment of the debt.
Creditor: A party that is owed the medical debt and often wants to collect on the medical debt. This can be a hospital, a debt collector acting on behalf of a hospital, or a third-party debt buyer.
Debtor: A patient who owes medical debt over unpaid medical bills.
Wage garnishment: The ability of a creditor to get a court order that would allow them to deduct a portion of a debtor-patient’s paycheck before it reaches the patient. Federal law limits how much can be withheld from a debtor’s paycheck, and some states exceed this federal protection.
Placing a lien: A legal claim that a creditor can place on a patient’s home, prohibiting the patient from selling, transferring, or refinancing their home without first paying off the creditor. Most states require creditors to get a court order before placing a lien on a home.
Foreclosure or forced sale: A creditor can repossess and sell a patient’s home to pay off their medical debt. Often, creditors are required to obtain a court order to do so.
Perhaps what is most troubling is that the burden of medical debt is not borne equally: Black and Hispanic/Latino adults and women are much more likely to incur medical debt. Black adults also tend to be sued more often as a result. Uninsured patients, those from low-income households, adults with disabilities, and young families with children are all at a heightened risk of being saddled with medical debt.
Causes of Medical Debt
Most people — 72 percent, according to one estimate — attribute their medical debt to bills from acute care, such as a single hospital stay or treatment for an accident. Nearly 30 percent of adults who owe medical debt owe it entirely for hospital bills.
Although uninsured patients are more likely to owe medical debt than insured patients, having insurance does not fully shield patients from medical debt and all its consequences. More than 40 percent of insured adults report incurring medical debt, likely because they either had a gap in their coverage or were enrolled in insurance with inadequate coverage. High deductibles and cost sharing can leave many exposed to unexpected medical expenses.
The problem of medical debt is further exacerbated by hospitals charging increasingly high prices for medical care and failing to provide adequate financial assistance to uninsured and underinsured patients with low income.
Key Findings
Federal Medical Debt Protections Have Many Gaps
At the federal level, the tax code, enforced by the Internal Revenue Service (IRS), requires nonprofit hospitals to broadly address medical debt. However, these requirements do not extend to for-profit hospitals (which make up about a quarter of U.S. hospitals) and have other limitations.
Further, the IRS does not have a strong track record of enforcing these requirements. In the past 10 years, the IRS has not revoked any hospital’s nonprofit status for noncompliance with these standards.
The Consumer Financial Protection Bureau and the Federal Trade Commission have additional oversight authority over credit reporting and debt collectors. The Fair Credit Reporting Act regulates credit reporting agencies and those that provide information to them (debt collectors and hospitals). Consumers have the right to dispute any incomplete or inaccurate information and remove any outdated, negative information. In some cases, patients can directly sue hospitals or debt collectors for inaccurately reporting medical debt to credit reporting agencies. In addition, the Federal Debt Collection Practices Act limits how aggressive debt collectors can be by restricting the ways and times in which they can contact debtors, requiring certain disclosures and notifications, and prohibiting unfair or deceptive practices. Patients can directly sue debt collectors in violation of the law. This law, however, does not limit or prohibit the use of certain legal remedies, like wage garnishment or foreclosure, to collect on a debt.
Many states have taken steps to fill the gaps in federal standards. Within a state, several agencies may play a role in enforcing medical debt protections. Generally speaking:
state departments of health are the primary regulators of hospitals and set standards for them
state departments of taxation are responsible for ensuring nonprofit hospitals are earning their exemption from state taxes
state attorneys general protect consumers from unfair and deceptive business practices by hospitals and debt collectors.
Fewer Than Half of States Exceed Federal Requirements for Financial Assistance, Protections Vary Widely
Federal law requires nonprofit hospitals to establish and publicize a written financial assistance policy, but these standards leave out for-profit hospitals and lack any minimum eligibility requirements. As the primary regulators of hospitals, states have the ability to fill these gaps and require hospitals to provide financial assistance to low-income residents. Twenty states require hospitals to provide financial assistance and set certain minimum standards that exceed the federal standard.
All but three of these 20 states extend their financial assistance requirements to for-profit hospitals. Of these 20 states, four states — Connecticut, Georgia, Nevada, and New York — apply their financial assistance requirements only to certain types of hospitals.
Policies also vary among the 31 states that do not have statutory or regulatory financial assistance requirements for hospitals. For example, the Minnesota attorney general has an agreement in place with nearly every hospital in the state to adhere to certain patient protections, though it falls short of requiring hospitals to provide financial assistance. Massachusetts operates a state-run financial assistance program partly funded through hospital assessments. Other states use far less prescriptive mechanisms to try to ensure that patients have access to financial assistance, such as placing the onus of treating low-income patients on individual counties or requiring hospitals to have a plan for treating low-income and/or uninsured patients without setting any specific requirements.
Enforcement of state financial assistance standards.
The only way to enforce the federal financial assistance requirement is to threaten a hospital’s nonprofit status, and the IRS has been reluctant to use this authority. Among the 20 states that have their own state financial assistance standards, 10 require compliance as a condition of licensure or as a legal mandate. These mandates are often coupled with administrative penalties, but some states have established additional consequences. For example, Maine allows patients to sue noncompliant hospitals.
Six states make compliance with their financial assistance standards a condition of receiving funding from the state. Two other states use their certificate-of-need process (which requires hospitals to seek the state’s approval before establishing new facilities or expanding an existing facility’s services) to impose their financial assistance mandates.
Setting eligibility requirements for financial assistance.
The federal financial assistance standard sets no minimum eligibility requirements for hospitals to follow. However, the 20 states with financial assistance standards define which residents are eligible for aid.
One way for states to ensure that financial assistance is available to those most in need is to prevent hospitals from discriminating against undocumented immigrants. Four states explicitly prohibit such discrimination in statute and regulation. Most states, however, are less explicit. Thirteen states define eligibility broadly, basing it most frequently on income, insurance status, and state residency. However, it is unclear how hospitals are interpreting this requirement when it comes to patients’ immigration status. In contrast, three states explicitly exclude undocumented immigrants from eligibility.
States also vary widely in terms of which income brackets are eligible for financial assistance and how much financial assistance they may receive.
At least three of the 20 states with financial assistance standards allow certain patients with heavy out-of-pocket medical expenses from catastrophic illness or prior medical debt to access financial assistance. Many states also require hospitals to consider a patient’s insurance status when making financial assistance determinations. At least six states make financial assistance available for uninsured patients only, while at least eight others also make financial assistance available to underinsured patients.
Standardizing the application process.
Cumbersome applications can discourage many patients from applying for financial assistance. Five states have developed a uniform application form, while three others have set minimum standards for financial assistance applications. Eleven states require hospitals to give patients the right to appeal a denial of financial assistance.
States Split in Requiring Nonprofit Hospitals to Invest in Community Benefits
Federal and state policymakers also can require nonprofit hospitals to invest in community benefits in return for tax exemptions. Federal law requires nonprofit hospitals to produce a community health needs assessment every three years and have an implementation strategy. Almost all states exempt nonprofit hospitals from a host of state taxes, including income, property, and/or sales taxes. However, only 27 impose community benefit requirements on nonprofit hospitals.
Community benefits frequently include financial assistance but also investments that address issues like lack of access to food and housing. In the long run, these investments can reduce medical debt burden by improving population health and the financial stability of a community. Most states that require nonprofit hospitals to provide community benefits allow nonprofit hospitals to choose how they invest their community benefit dollars. This hands-off approach has given rise to concerns about the lack of transparency in community benefit spending as well as questions about whether hospitals are investing this money in ways that are most helpful to the community, such as in providing financial assistance.
Applicability of community benefit standards.
Nineteen states impose community benefit requirements on all nonprofit hospitals in the state, but three states further limit these requirements to hospitals of a certain size. At least six states have extended these requirements to for-profit hospitals as well. Of these six, the District of Columbia, South Carolina, and Virginia have incorporated community benefit requirements into their certificate-of-need laws instead of their tax laws. As a result, any hospital seeking to expand in these states becomes subject to their community benefit requirement.
Interaction between financial assistance and community benefits.
The federal standard allows nonprofit hospitals to report financial assistance as part of their community benefit spending. Most states with community benefit requirements also allow hospitals to do this. However, only seven states require hospitals to provide financial assistance to satisfy their community benefit obligations.
Setting quantitative standards for community benefit spending.
Only seven states set minimum spending thresholds that hospitals must meet or exceed to satisfy state community benefit standards. For example, Illinois and Utah require nonprofit hospitals’ community benefit contributions to equal what their property tax liability would have been. Unique among states, Pennsylvania gives taxing districts the right to sue nonprofit hospitals for not holding up their end of the bargain, which has proven to be a strong enforcement mechanism.
Fewer Than Half the States Exceed Federal Standards for Billing and Collections
Hospital billing and collections practices can significantly increase the burden of medical debt on patients. However, the current federal standard does not regulate these practices beyond imposing waiting periods and prior notification requirements for certain extraordinary collections actions (ECAs), such as garnishing wages or selling the debt to a third party.
Requiring hospitals to provide payment plans.
Federal standards do not require hospitals to make payment plans available. However, a few states do require hospitals to offer payment plans, particularly for low-income and/or uninsured patients. For example, Colorado requires hospitals to provide a payment plan and limit monthly payments to 4 percent of a patient’s monthly gross income and to discharge the debt once the patient has made 36 payments.
Limiting interest on medical debt.
Federal law does not limit the amount of interest that can be charged on medical debt. However, eight states have laws prohibiting or limiting interest for medical debt. Some states like Arizona have set a ceiling for interest on all medical debt. Others like Connecticut further prohibit charging interest to patients who are at or below 250 percent of the federal poverty level and are ineligible for public insurance programs.
Though many states do not have specific laws prohibiting or limiting interest that hospitals or debt collectors can charge on medical debt, all states do have usury laws, which limit the amount of interest than can be charged on any oral or written agreement. Usury limits are set state-by-state and can range anywhere from 5 percent to more than 20 percent, but most limits fall well below the average interest rate for a credit card (around 24%). At least one state, Minnesota, has sued a health system for charging interest rates on medical debt that exceeded the allowed limit in the state’s usury laws.
Interactions between hospitals, third-party debt collectors, and patients.
Unlike hospitals, debt collectors do not have a relationship with patients and can be more aggressive when collecting on the debt. Federal law neither limits when a hospital can send a bill to collections, nor does it require hospitals to oversee the debt collectors it uses. Most states (37) also do not regulate when a hospital can send a bill to collections, although some states have developed more protective approaches.
For example, Connecticut prohibits hospitals from sending the bills of certain low-income patients to collections, and Illinois requires hospitals to offer a reasonable payment plan first. Additionally, five states require hospitals to oversee their debt collectors.
Sale of medical debt to third-party debt buyers.
Hospitals sometimes sell old unpaid debt to third-party debt buyers for pennies on the dollar. Debt buyers can be aggressive in their efforts to collect, and sometimes even try to collect on debt that was never owed. Federal law considers the sale of medical debt an ECA and requires nonprofit hospitals to follow certain notice and waiting requirements before initiating the sale. Most states (44) do not exceed this federal standard.
Only three states prohibit the sale of medical debt. Two other states — California and Colorado — regulate debt buyers instead. For example, California prohibits debt buyers from charging interest or fees, and Colorado prohibits them from foreclosing on a patient’s home.
Reporting medical debt to credit reporting agencies.
Federal law considers reporting medical debt to a credit reporting agency to be an ECA and requires nonprofit hospitals to follow certain notice and waiting requirements beforehand. Most states (41) do not exceed this federal standard.
Of the 10 states that do go beyond the federal standard, a few like Minnesota fully prohibit hospitals from reporting medical debt. Most others require hospitals, debt collectors, and/or debt buyers to wait a certain amount of time before reporting the debt to credit agencies (Exhibit 8). Two states directly regulate credit agencies: Colorado prohibits them from reporting on any medical debt under $726,200, while Maine requires them to wait at least 180 days from the date of first delinquency before reporting that debt.
States Vary Widely on Patient Protections from Medical Debt Lawsuits
Federal law considers initiating legal action to collect on unpaid medical bills to be an extraordinary collections action and also limits how much of a debtor’s paycheck can be garnished to pay a debt.
In most states, hospitals and debt buyers can sue patients to collect on unpaid medical bills. Three states limit when hospitals and/or collections agencies can initiate legal action. Illinois prohibits lawsuits against uninsured patients who demonstrate an inability to pay. Minnesota prohibits hospitals from giving “blanket approval” to collections agencies to pursue legal action, and Idaho prohibits the initiation of lawsuits until 90 days after the insurer adjudicates the claim, all appeals are exhausted, and the patient receives notice of the outstanding balance.
Liens and foreclosures.
Most states (32) do not limit hospitals, collections agencies, or debt buyers from placing a lien or foreclosing on a patient’s home to recover on unpaid medical bills. However, almost all states provide a homestead exemption, which protects some equity in a debtor’s home from being seized by creditors during bankruptcy. The amount of homestead exemption available to debtors varies from state to state, ranging from just $5,000 to the entire value of the home. Seven states have unlimited homestead exemptions, allowing debtors to fully shield their primary homes from creditors during bankruptcy. Additionally, Louisiana offers an unlimited homestead exemption for certain uninsured, low-income patients with at least $10,000 in medical bills.
Ten states prohibit or set limits on liens or foreclosures for medical debt. For example, New York and Maryland fully prohibit both liens and foreclosures because of medical debt, while California and New Mexico only prohibit them for certain low-income populations.
Wage garnishment.
Under federal law, the amount of wages garnished weekly may not exceed the lesser of: 25 percent of the employee’s disposable earnings, or the amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage. Twenty-one states exceed the federal ceiling for wage garnishment. Only a few states go further to prohibit wage garnishment for all or some patients. For example, New York fully prohibits wage garnishment to recover on medical debt for all patients, yet California only extends this protection for certain low-income populations. While New Hampshire does not prohibit wage garnishment, it requires the creditor to keep going back to court every pay period to garnish wages, which significantly limits creditors’ ability to garnish wages in practice.
Many States Have Hospital Reporting Requirements, But Few Are Robust
Federal law requires all nonprofit hospitals to submit an annual tax form including total dollar amounts spent on financial assistance and written off as bad debt. However, these reporting requirements do not extend to for-profit hospitals and lack granularity. States, as the primary regulators of hospitals, would likely benefit from more robust data collection processes to better understand the impact of medical debt and guide their oversight and enforcement efforts.
Currently, 32 states collect some of the following:
financial data, including the total dollar amounts spent on financial assistance and/or bad debt
financial assistance program data, including the numbers of applications received, approved, denied, and appealed
demographic data on the populations most affected by medical debt
information on the number of lawsuits and types of judgments sought by hospitals against patients.
Fifteen states explicitly require hospitals to report total dollar amounts spent on financial assistance and/or bad debt, while 11 states also require hospitals to report certain data related to their financial assistance programs. Most of these 11 states limit the data they collect to the numbers of applications received, approved, denied, and appealed. However, a handful of them go further and ask hospitals to report on the amount of financial assistance provided per patient, number of financial assistance applicants approved and denied by zip code, number of payment plans created and completed, and number of accounts sent to collections.
Five states require hospitals to further break down their financial assistance data by race, ethnicity, gender, and/or preferred or primary language. For example, Maryland requires hospitals to break down the following data by race, ethnicity, and gender: the bills hospitals write off as bad debt and the number of patients against whom the hospital or the debt collector has filed a lawsuit.
Only Oregon asks hospitals to report on the number of patient accounts they refer for collections and extraordinary collections actions.
Discussion and Policy Implications
In 2022, the federal government announced administrative measures targeting the medical debt problem, which included launching a study of hospital billing practices and prohibiting federal government lenders from considering medical debt when making decisions on loan and mortgage applications. Although these measures will help some, only federal legislation and enhanced oversight will likely address current gaps in federal standards.
States can also fill the gaps in federal patient protections by improving access to financial assistance, ensuring that nonprofit hospitals are earning their tax exemption, and protecting patients against aggressive billing and collections practices. States also can leverage underutilized usury laws to protect their residents from medical debt.
Finding the most effective ways to enforce these standards at the state level could also protect patients. Absent oversight and enforcement, patients from underserved communities continue to face harm from medical debt, even when states require hospitals to provide financial assistance and prohibit them from engaging in aggressive collections practices. Bolstering reporting requirements alone would not likely ensure compliance, but states could protect patients by strengthening their penalties, providing patients with the right to sue noncompliant hospitals, and devoting funding to increase oversight by state agency officials.
To develop a comprehensive medical debt protection framework, states could also bring together state agencies like their departments of health, insurance, and taxation, as well as their state attorney general’s office. Creating an interagency office dedicated to medical debt protection would allow for greater efficiency and help the state build expertise to take on the well-resourced debt collection and hospital industries.
Still, these measures only address the symptoms of the bigger problem: the unaffordability of health care in the United States. Federal and state policymakers who want to have a meaningful impact on the medical debt problem could consider the protections discussed in this report as part of a broader plan to reduce health care costs and improve coverage.
In much of the country, a single hospital system now accounts for most hospital admissions.
Some illnesses and injuries — say, a broken ankle — can send you to numerous health care providers. You might start at urgent care but end up in the emergency room. Referred to an orthopedist, you might eventually land in an outpatient surgery center.
Four different stops on your road to recovery. But as supersized health care systems gobble up smaller hospitals and clinics, it’s increasingly likely that all those facilities will be owned by the same corporation.
Hospital trade groups say mergers can save failing hospitals, especially rural ones. But research shows that a lack of competition often leads to fewer services at higher costs. In recent years, federal regulators have been taking a harder look at health care consolidation.
Yet some states, notably those in the South, are paving the way for more mergers.
Mississippi passed a law this year that exempts hospital acquisitions from state antitrust laws, while North Carolina considered legislation to do the same for the University of North Carolina’s health system. Louisiana officials approved a $150 million hospital acquisition late last year that has ignited a legal battle with the Federal Trade Commission over whether they allowed a monopoly.
States including South Carolina, Tennessee, Texas and Virginia have certificate of public advantage (COPA) laws that let state agencies determine whether hospitals can merge, circumventing federal antitrust laws. And large hospital systems wield significant political power in many state capitals.
‘A tool in the tool belt’
Nearly half of Mississippi’s rural hospitals are at risk of closing, according to a report from the Center for Healthcare Quality & Payment Reform, a nonprofit policy research center.
Mississippi leaders hope easing restrictions on hospital mergers could be a solution. A new law exempts all hospital acquisitions and mergers from state antitrust laws and classifies community hospitals as government entities, making them immune from antitrust enforcement.
We saw primary care offices get shut down. We’ve seen our specialists leave for out of state. Several of the outlying hospitals saw services cut even though they were told it wouldn’t happen.
– Kerri Wilson, a registered nurse in North Carolina
Mississippi, one of the poorest states in the nation, is also one of the least healthy, with high rates of chronic conditions like heart disease and diabetes. It is one of 10 states that haven’t expanded Medicaid under the Affordable Care Act, and has one of the nation’s highest percentages of people without health insurance.
“Like many states in a similar socioeconomic status, Mississippi has difficulties with patients that are either not insured or underinsured,” said Ryan Kelly, executive director of the nonprofit Mississippi Rural Health Association. Food insecurity and lack of reliable transportation mean rural residents tend to be sicker and more expensive to treat.
That’s part of the reason why so many Mississippi hospitals operate in the red. The largest hospital in the Mississippi Delta region, Greenwood Leflore, is at immediate risk of closure even after hospital leaders shuttered unit after unit — including labor and delivery, and intensive care — in an effort to remain solvent.
A deal for the University of Mississippi Medical Center to purchase Greenwood Leflore fell through last year. Now, with the new law in effect, the hospital’s owners — the city and county — are soliciting new bidders and offering them the option to buy the hospital outright.
Kelly said he expects to see more Mississippi hospitals consolidate over the coming decade. Some have already had conversations around merger possibilities after the new law went into effect, though talks are in early days.
“It’s a tool in the tool belt,” he said of the new law. “I think it could be a saving grace for some of our hospitals that are perennially struggling but still serve with good purpose. They could be part of a larger system that could help offset their costs so they’re able to be a little leaner but still provide services in their community.”
Leaders in some states think consolidation could solve their health care woes, but studies indicate it has a negative impact.
“There’s a large body of research showing that health care consolidation leads to increases in prices without clear evidence it improves quality,” said Zachary Levinson, a project director at KFF, a nonprofit health care policy research organization, who analyzes the business practices of hospitals and other providers and their impact on costs.
When researchers studied how affiliation with a larger health system affected the number of services a rural hospital offered, they found most of the losses in service occurred in hospitals that joined larger systems, according to a 2023 study from the Rural Policy Research Institute at the University of Iowa.
Even when an acquisition by a larger health system helps a struggling hospital keep its doors open, “there can be potential tradeoffs,” Levinson said.
“There’s some concern that, for example, when a larger health system buys up a smaller independent hospital in a different region, that hospital will become less attentive to the specific needs of the community it serves,” and may cut services the community wants because they’re not deemed profitable enough, he said.
Most research suggests hospital consolidation does lead to higher prices, according to a sweeping 2020 report from MedPAC, an independent congressional agency that advises Congress on issues affecting Medicare. The report found that patients with private insurance pay higher prices for care and for insurance in markets that are dominated by one health care system. And when hospitals acquire physician practices, taxpayer and patient costs can double for some services provided in a physician’s office, the report found.
Kelly said he’s not as concerned with consolidation raising costs for Mississippi’s rural residents because so many qualify for subsidized care, but he does think mergers could eliminate some jobs in the health care sector.
“It’s hard to say for sure,” he said. “It is a risk, no question. But I still think it’s a net positive.”
A ‘hospital cartel’
When HCA Healthcare purchased a North Carolina hospital system in 2019, registered nurse Kerri Wilson wasn’t prepared for how much would change — and how quickly — at her hospital in Asheville.
“Once the sale was final in 2019, that’s when it was like the ball dropped and we started seeing staffing cuts,” said Wilson, an Asheville native who has worked in the cardiology stepdown unit at Mission Hospital since 2016.
“We saw our nurse-patient ratios change,” Wilson said. “We saw primary care offices get shut down. We’ve seen our specialists leave for out of state. Several of the outlying hospitals saw services cut even though they were told it wouldn’t happen.”
In the four years since HCA Healthcare bought Mission Health, North Carolinians have hit the nation’s largest health system with multiple antitrust lawsuits, including one that asserts HCA operates an unlawful health care monopoly through Mission Health, and another filed by city and county governments that says HCA’s corporate practices have decimated local health care options and raised costs.
HCA Healthcare did not immediately respond to a request for comment. However, when the second lawsuit was filed, HCA/Mission Health spokesperson Nancy Lindell called it “meritless.”
“Mission Health has been caring for Western North Carolina for more than 130 years and our dedication to providing excellent health care to our community will not waiver [sic] as we vigorously defend against this meritless litigation,” Lindell said in a statement to the Mountain Xpress newspaper. “We are disappointed in this action and we continue to be proud of the heroic work our team does daily.”
Mission’s nurses voted in 2020 to join National Nurses Organizing Committee, an affiliate of National Nurses United, the nation’s largest nursing union, to advocate for higher pay and safer working conditions.
Meanwhile, North Carolina leaders such as Republican State Treasurer Dale Folwell and Democratic Attorney General Josh Stein have spoken out against HCA’s practices. Folwell likened the merger to a “hospital cartel” and both officials filed amicus briefs supporting the plaintiffs in the antitrust lawsuits.
“We have a situation with the cartel-ization of health care in North Carolina where people have to drive miles just to get basic services, and this is unacceptable,” Folwell told Stateline. He said many North Carolinians, particularly those with low incomes, fear seeking medical help because of sky-high medical bills that he said are a result of massive health care systems with little state oversight.
Folwell has publicly criticized the power that the North Carolina Health Care Association, the state’s hospital trade group, wields in the legislature. He calls the group the “leader of the [hospital] cartel.”
Industry groups spent more than $141 million nationwide lobbying state officials on health issues in 2021. And out of that $141 million, the hospital and nursing home industry spent the most, accounting for nearly 1 out of every 4 dollars spent on lobbying state lawmakers over health issues.
“This is not a Republican or Democrat issue,” said Folwell, who has lent his support to a bipartisan bill that would limit the power of large hospitals to charge interest rates and rein in medical debt collection tactics. “It’s a moral issue.”
North Carolina Democratic state Sen. Julie Mayfield, who was on the Asheville City Council when HCA acquired Mission Health, sponsored a bill earlier this year that would have curbed hospital consolidations.
In a social media post introducing the bill, Mayfield said she hoped it would “prevent other communities from suffering what we have suffered in the wake of the Mission sale — loss of nursing and other staff, loss of physicians, closure of facilities, and the resulting lower quality of care many people have experienced in Mission hospitals over the last four years.”
Even the Federal Trade Commission jumped in, urging legislators to “reconsider” a bill that would have greenlighted UNC Health’s expansion, saying it could “lead to patient harm in the form of higher health care costs, lower quality, reduced innovation and reduced access to care.” That bill ultimately failed in the state House, as sentiment among some North Carolina leaders had already soured on hospital mergers.
In most U.S. markets, a single hospital system now accounts for more than half of hospital inpatient admissions. Federal regulators have been scrutinizing health care mergers more carefully in recent years, said KFF’s Levinson. The FTC has both sued and been sued by health care systems in Louisiana this year, and recently released a draft version of new guidelines on anti-competitive practices.
“People have viewed those guidelines as indicating the FTC and [the U.S. Department of Justice] will be more interested in aggressively challenging anti-competitive practices than in the past,” Levinson said.
Both the Trump and Biden administrations issued executive orders directing federal agencies to focus on promoting competition in health care markets. President Joe Biden’s order noted that “hospital consolidation has left many areas, particularly rural communities, with inadequate or more expensive healthcare options.”
In Mississippi, the hospital mergers law received widespread support from most of the state’s GOP leaders. But the state’s far-right Freedom Caucus came out against it, with Republican state Rep. Dana Criswell, the chair of the caucus, calling it “an attempt at a complete government takeover” of Mississippi’s hospitals.
Criswell said allowing the University of Mississippi Medical Center to buy smaller hospitals “will create a huge government protected monopoly, driving out competition and ultimately putting private hospitals out of business.”
‘Trying something different’
Wilson, the Asheville nurse, said she used to have three or four patients per shift before the merger; now she typically has five. That gives her an average of 10 minutes per patient per hour. It’s not enough time, she said, to give patients their medication, answer questions and perform other tasks that she said nurses often take on because other departments are short-staffed.
Sometimes, she said, those tasks include helping patients go to the bathroom because there aren’t enough nursing assistants or taking out the trash because of a shortage of cleaning staff. Meanwhile, the waiting rooms are overflowing.
Wilson joined the new Mission Hospital nurses union, which was able to negotiate raises for its members. The union continues to protest working conditions, including staff-patient ratios.
But Kelly, of the Mississippi Rural Health Association, said that in his state, mergers are an opportunity for positive change.
“It’s not like health care in Mississippi is at the top of the list for good things,” he said. “I think this is an example of trying something different and seeing if it works.”
Favorable selection of healthier beneficiaries led to overpayments in counties with high Medicare Advantage penetration, but benchmark changes could mitigate the impact.
Dive Brief:
Favorable selection of beneficiaries in Medicare Advantage is throwing off benchmarks used to set payments to those plans, resulting in billions of overpayments to the privatized insurance program for seniors, according to a study published this week in Health Affairs.
Healthier people are more likely to enroll in MA compared to traditional Medicare, leading to overpayment in counties with high levels of MA participation and underpayment in counties with less MA market penetration, the study found.
Overall, MA plans were overpaid by an average of $9.3 billion per year between 2017 and 2020. As seniors increasingly turn to MA plans, setting payment benchmarks based on traditional Medicare spending has become “less tenable” and requires reform, researchers argued.
Dive Insight:
Overpayments to MA plans are a growing concern for regulators and researchers as more seniors choose the increasingly popular coverage option. More than half of the eligible Medicare population is now enrolled in MA, a stark increase from 19% of the eligible population enrolled in 2007.
One analysis from the USC Schaeffer Center for Health Policy and Economics found overpayments could reach more than $75 billion this year due to the favorable selection of healthier beneficiaries, aggressive coding and quality bonuses.
MA plans are administered by private insurers and paid a set amount each month regardless of beneficiaries’ use of healthcare services. Those payment rates are set by benchmarks in each county every year alongside quality payments and risk scores based on beneficiaries’ health needs.
But those benchmarks, which are tied to risk-adjusted spending in traditional Medicare, may be contributing to overpayments to MA plans, as healthier people are more likely to choose MA and sicker seniors switch to traditional Medicare plans.
The distribution of MA beneficiaries has also shifted toward counties that were overpaid, according to the study.
In benchmark year 2020, 31.4% of MA beneficiaries lived in underpaid counties, while 68.6% lived in counties that were overpaid, the study found. There were more than 2,700 underpaid counties compared with just over 330 overpaid counties, highlighting the concentration of beneficiaries in counties with high MA market penetration.
In underpaid counties, underpayments totaled a loss of $407 per beneficiary, while overpayments reached an extra $762 per beneficiary in overpaid areas.
Overall, the Health Affairs study estimated that overpayments to MA plans reached $37.3 billion between 2017 and 2020.
The CMS could take action to improve its risk adjustment methodology, which doesn’t take into account favorable selection dynamics for MA, according to the study.
“The simplest strategy would be to allow risk adjustment to vary according to MA penetration, thereby flattening the relationship between traditional Medicare risk and spending across levels of MA penetration,” the authors wrote.
Federal regulators have moved to audit MA plans and are attempting to claw back billions in overpayments.
Insurers have pushed back on the rule. Humana, one of the largest providers of MA plans in the country, sued the HHS last week, arguing the regulation is unfair and should be vacated.
HENRY KOTULA 