Medical debt report 11 1 16pm final

MEDICAL DEBT

Indentured Servitude: Wage and Bank Account Garnishment for Medical Debt at CHI Franciscan St. Joseph Hospital Executive Summary St. Joseph Hospital in Tacoma, Washington says that it is committed to “serving the poor” and “doing no harm.” Yet, its ruthless medical debt collection practices directly conflict with its stated values. As recently as 2016, the collection agencies that contract with St. Joseph have sued patients in court, reported nonpayment to credit bureaus, and garnished wages seized money from patients’ bank accounts.

In order to understand better the extent of these practices and their impact on residents, a team of canvassers with Washington Community Action Network (Washington CAN!) surveyed 297 residents in the neighborhoods surrounding St. Joseph Hospital and completed 20 in-depth interviews with garnishees. Researchers also completed a comprehensive review of civil suits in Pierce County Superior Court filed by collection agencies that contract with the hospital.

This research shows that garnishment is the first time many patients realize there is a debt. According to surveys at the door, 54% of respondents sent to collections were not told about charity care while they were in the hospital, and 53% said they did not receive a bill in the mail before they were sent to collections. Insured patients who think they are covered are often surprised to see their wages garnished for services provided by third-party contractors.

Collection agencies seize money from patients without regard to their financial conditions. Court records reveal that patients earning wages as low as $12.50 per hour are still seeing 25% of their paychecks garnished, the legally allowable maximum. Many people who would be otherwise stable fall below the poverty line after garnishment. Seeing no other

options, some patients file for bankruptcy, limiting their ability to rent an apartment, buy a house or car, or find a new job.

Garnishment affects entire families. If patients with medical debt are not working and have no money in their bank accounts, collection agencies will seize wages from spouses.

A family that is already barely able to afford basic expenses cannot absorb a 25% reduction in income. To avoid losing wages, some people change their jobs regularly or contract with temp agencies so that the court does not have time to process a garnishment through any one employer. Other patients are fired for garnishments. Even after patients are unemployed, collection agencies will seize savings left in patients’ bank accounts.

These practices cause chronic stress and health problems associated with poverty. They also increase health disparities: people working low-wage jobs and people of color are overrepresented among the people sued by St. Joseph debt collectors.

Throughout the country, hospitals have increasingly rejected extraordinary collections practices, like garnishment and credit reporting, demonstrating that these practices are not necessary to sustain a hospital financially. St. Joseph is among the regressive 20% that still contract with debt collectors. To maintain its commitment to the well-being of the community it serves, St. Joseph Hospital should: (1) stop garnishing wages and seizing money from bank accounts; (2) stop reporting to credit bureaus; (3) end all contracts with collection agencies; and (4) conduct billing in-house.

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MEDICAL DEBT

Introduction Residents in Tacoma are finding that Catholic Health Initiatives (CHI) Franciscan’s mission to care for the community is in direct conflict with its aggressive, dehumanizing collections practices. St. Joseph Medical Center in Pierce County, Washington is located in the heart of Hilltop, a historically Black and low-income neighborhood. It is not far from populations in crisis including half a dozen homeless shelters and a county jail within a five mile radius. As a result of socioeconomic factors and poor healthcare access, people in Pierce County on average die 6 years earlier than people in King County.​1 As the County deepens its commitment to addressing health disparities, people in Tacoma depend on St. Joseph Hospital to provide affordable, culturally competent care where it is needed most.

Unfortunately, public health is not the hospital’s most important bottom line. St. Joseph Hospital is part of the Catholic Health Initiatives (CHI) Franciscan Health System, one of only two major healthcare systems in Pierce County. Franciscan and its competitor, MultiCare, together make up 87% of the market for inpatient healthcare services.​2 This near duopoly gives CHI Franciscan the freedom to experiment with profit-making strategies, including cutting staff, increasing prices, and aggressively pursuing patient debt. Through these practices, the CHI Franciscan hospitals in Pierce County “more than double the statewide median [profit] of comparable hospitals and systems.”3 In 2015, after Pierce County residents advocated to improve the hospital’s charity care practices, St. Joseph reduced the length of its Financial Assistance application from 6 to 1.5 pages. It also implemented a 60% discount for people who are completely uninsured, compared to standard prices billed to insurance companies. 4 These are significant, incremental changes. Low-income patients now face fewer bureaucratic barriers to financial assistance and uninsured patients are less likely to experience price gouging. However, while these improvements might be taken as evidence of a hospital system living up to its commitments to “serve the poor” and “do no harm,” 5 they have the consequence of masking the truth about the hospital’s practices.

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Under its current billing policies, CHI Franciscan places “certain [account] balances with collection agencies” to contact patients by letter, email, or phone call, sue patients in court, report to credit bureaus, and seek repayment through wage or bank account garnishment.6 The hospital continues these practices to date, pushing patients in low- and middle-income brackets from financial stability to crisis.

Conversations with patients in debt along with legal and other research reveal the extent to which the collection agencies contracting with St. Joseph Hospital use wage garnishment as a tool to recuperate medical debts, the socioeconomic demographics of people facing wage garnishment in Pierce County, and the impact of wage garnishment on patients and their families. The research is based on a review of district and superior court records, surveys conducted door-to-door in the neighborhood surrounding the hospital, and in-depth interviews with people who have seen their wages garnished.

During conversations at the door, respondents were asked if they had ever been sent to collections by either of the two major hospital systems in Pierce County. More than one resident responded: “St. Joseph doesn’t send people to collections, they’re a Catholic hospital.” This misperception demonstrates a disconnect between St Joseph stated values and its behavior when not in the public spotlight.

It is not surprising that people in the community are confused by the fact and fiction of St. Joseph practices. On its website, CHI Franciscan explains: “We help protect vulnerable and underserved populations through our health care services, open to anyone regardless of their ability to pay.” 7 Yet, the collection agencies that contract with St. Joseph hospital not only disregard people’s ability to pay, but take money by force from the paychecks and bank accounts of patients earning barely above the minimum wage. The concluding section of this report outlines a number of changes in billing practices that St. Joseph can implement, following in the footsteps of hospitals throughout the country, to reduce harm to the health and well-being of its neighbors.

Ginny P.

MEDICAL DEBT

When my kids were growing up, my husband stayed home with them while I worked. Four people were depending on my salary to survive: my husband, my two kids at home, and my oldest son in prison.

After my youngest child was born, I went to St. Joseph to have a hysterectomy. I was in the hospital for three days. During that time, they never mentioned charity care. I was uninsured at the time, so that one hospital stay became a bill for $20,000. One year after the procedure, I was sent to collections.

At that time, I was working at a grocery warehouse, driving a forklift. I made pretty good money there, $20 per hour, about $600 per week, the best job I ever had. But once they started garnishing my wages, they took out 25%, about $300 per biweekly paycheck.

I’ve seen friends who lost their job because their wages were being garnished. I’m really lucky that I was protected by my union from being fired for these garnishments. But my union couldn’t protect me from the consequences of $300 less to balance the budget.

Because I was always so tight for money, that $300 per month put me over the edge. I had to start prioritizing. I had a newborn baby, so I couldn’t give up his diapers and formula. But I also had utility bills and rent to pay. Eventually, I gave up my car so that I wouldn’t have to juggle car payments on top of everything else. That made it difficult to get to work. In the end, I decided to file for bankruptcy. Even though there were lots of fees, it was still worth it to stop the collection agency from taking my income.

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Background In 2014, 64 million people in the U.S. were living with medical debt,​8 greater than the number of people living with cancer, diabetes, and HIV / AIDS combined.​9 When 1 in 5 Americans are unable to pay their medical bills, there is a systemic problem.

Recent research by the Economic Policy Institute found at least one-third of families in the U.S. do not have enough income to cover the costs of routine expenses, like housing, food, child care, transportation, and health insurance premiums.​10 Out-of-pocket costs for medical emergencies are out of the realm of financial possibility.

Wage and bank account garnishment are a heavy-handed response to unpaid debt. The Internal Revenue Service (IRS) considers garnishment to be an “extraordinary collection action” discouraged for nonprofit hospitals collecting medical debt.

However, it is a common practice in the collections industry.​11 According to the ADP Research Institute, approximately 7% of workers had their wages garnished in 2013​. 12

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Garnishment and its crippling effects are not equally experienced by all social groups. In a recent study, researchers at Rutgers found that 95% of all cases of wage garnishment were filed against people residing in low or moderate-income neighborhoods and more than half (56%) were filed against people in predominantly Black or Latino neighborhoods.​13 Many factors contribute to the disproportionate use of garnishment against people of color, including racial disparities in income, wealth, and access to credit, and racial biases in lending to consumers and suing debtors.14 In 1968, Congress passed the Consumer Credit Protection Act to protect consumers from “unfair, abusive, or deceptive acts” in debt collections,​15 including the damage caused by garnished wages. In supporting the Congressional Act, President Lyndon B. Johnson observed: “Hundreds of workers among the poor lose their jobs or most of their wages each year as a result of garnishment proceedings.”16 ​The Act protected 75% of an employee’s paycheck or the equivalent of 30 hours a week at the federal minimum wage.17

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Methodology This reform brought some measure of relief to workersturned-indentured-servants who were losing the majority of their income to debt collectors. However, many states found that 75% of a debtor’s paycheck was insufficient to keep working families out of poverty. Five states set the proportion of exempt wages at 90% and four states - North Carolina, Pennsylvania, South Carolina, and Texas - banned wage garnishment entirely for most kinds of debt.​18 Washington was not among the bold reformers. Washington state law is only slightly stronger than federal law, additionally protecting the financial equivalent of 35 hours per week at the federal minimum wage.19 When debt collectors cannot access a debtor’s money through their wages, the collector can seize funds in the debtor’s bank account. Federal law sets no limits on the amount of money that a debt collector can seize.​20 Washington law protects only $500 in a bank account. Although state law technically prohibits the seizure of funds placed in the bank account through direct deposit from an employer, the debtor must go to court to prove evidence that their wages were taken from their bank account. In practice, bank account seizures often include wages that would otherwise be exempt from garnishment.

None of the legal restrictions on garnishment at the state or federal levels guarantee workers the minimum cash flow needed to stay out of poverty. Neither law protects debtors from falling below a living wage.​21 The laws also fail to protect the minimum balance needed in a bank account, an estimated $1200 to cover basic, routine expenses like rent, utilities, transportation, and food.

Data for this report came from three sources: Pierce County District Court and State Supreme Court records; neighborhood canvassing in Tacoma; and in-depth personal interviews with Tacoma residents.

Between April and September of 2016, Washington Community Action Network (Washington CAN!) canvassed the neighborhood surrounding the CHI Franciscan St. Joseph Medical Center in Tacoma. Canvassers knocked on 1,255 doors, made 590 contacts, and completed 297 surveys. Survey data included demographic information such as gender, race, and age, as well as responses to questions about respondents’ experience with hospitals in the county, exposure to medical debt collections, and the impact of medical debt collections on their lives.

Canvassers identified 94 people who were sent to collections because of medical debt. These individuals were interviewed at the door, re-contacted by phone, and, when possible, visited in person for a third conversation. Another 20 interviews were completed through conversations with people standing in front of homeless shelters and at local social service events.

During the same time period, researchers also searched electronic court records to identify collection agencies that contract with the CHI Franciscan hospital system. Researchers used the Judicial Information System (JIS-Link) for District Court records to confirm the relationship between Pierce County hospitals and their collection agencies​.22 Although the hospital system contracts with many other collection agencies, researchers chose to focus on three agencies that have local offices and sue patients in the Pierce County Superior Court – Puget Sound Collections Inc., Pacific Northwest Collections Inc., and Merchants Credit Corporation. Of the three collection agencies, Puget Sound Collections (PSC) has the most cases filed in the County Superior Court.

Once these collection agencies were identified, researchers used Pierce County LINX to search Superior Court records, where many judgements are filed on garnishment in collections cases. Researchers pulled records on 753 cases, the entire universe of judgements on garnishment filed by these agencies in 2015, and examined the writ of garnishment for each of these cases. They also reviewed the entire case file for 207 cases to construct a picture of the debtor, the court’s actions, and the resulting consequences. The cases for deeper investigation were selected from the entire universe of collection agencies’ garnishment suits in both 2010 and 2015.

Researchers predicted the gender of garnishees in court files based on the individual’s first name, and the garnishee’s ethnicity (‘Hispanic’ or ‘not Hispanic’) based on the individual’s surname.​23 Garnishees’ employer is listed in the writ of garnishment documents.

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Results and Analysis People of color and low-wage workers are most impacted by wage garnishment in Pierce County.

Canvassers primarily talked with residents in low-to-moderate-income neighborhoods in Tacoma. Respondents included young, healthy people who have never been to a hospital, fully insured people who have never had medical debt, and people who have medical debt but make regular payments. Nonetheless, 31% of all respondents, almost 1 in 3 low- and moderate-income residents of Tacoma, have been sent to collections for medical debt.

The number of respondents who said they seek care at CHI Franciscan’s St Joseph Hospital was the same as the number of respondents who said they seek care at MultiCare’s Tacoma General. The hospitals are also about as likely to send patients’ account balances to collection agencies: 38% of residents said they had been sent to collections by St. Joeseph, compared to 36% by Tacoma General, and 9% by other hospitals. Practices at one hospital influence the other as they compete to represent themselves to their patients and donors.

The patchwork insurance coverage of the ACA and the income cap for patients to qualify for charity care leave people most vulnerable to medical debt when their income falls above the poverty line and below the standard for middle-class security.

Figure 1, compiled based on an analysis of court records, shows the 10 most common employers of people whose wages were garnished in 2015 as a result of a civil suit in Pierce County Superior Court by a collection agency that contracts with CHI Franciscan . Most of the companies have a large number of low or minimum-wage positions with high turnover. For example, 18 garnishees work at Fred Meyer, where the starting pay for a cashier is only $11.17/hour. Boeing, MultiCare, and Franciscan, three of the largest companies in the region, also appear in the list. Garnishment affects a cross-section of the low-to-middle-income population.

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MultiCare Boeing Franciscan Fred Meyer WalMart DFAS

Costco Safeway State of WA USPS

Figure 1. ​The most common employers of people whose wages were garnished in 2015 as a result of a civil suit in Pierce County Superior Court by a collection agency that contracts with CHI Franciscan.

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Nonetheless, court record analyses show that women are less likely to see their wages or bank account garnished for medical debt. Of the cases examined, there were twice as many male garnishees as female garnishees. It could be that women, often with scarce disposable income and children to support, fear that the consequences of unexpected garnishment are too high and do what they can to stop garnishment even if it results in economic vulnerability: quit and find work paid in cash, seek help from a relative, or file for bankruptcy. This hypothesis is supported by some of the anecdotal evidence from legal cases described in the following section.

Among the people canvassed at the door, more Black and Latino respondents than white respondents were sent to collections.26 Although it is difficult to identify the rate of garnishment for all races, surname analysis of court records suggests that, while Latinos make up only 10% of Pierce County,​27 they make up more than 15% of people facing garnishment.

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Many studies have shown that women are more likely than men to have medical debt.24,25 On average, women, especially women of color, are more likely than men to be single parents, have no savings or assets, and receive less pay for the same work. As a result, women have less expendable income, after bills and basic necessities, to pay medical bills before they get sent to collections. Surveys collected at the door in this study found that women are also more likely than men to have been sent to collections for medical debt: Thirty-seven percent of women in this study had been in collections compared to twenty-seven percent of men.

Black and Latino residents are more likely to live on the edge of poverty with no resources for medical emergencies. They are also less likely to have health insurance than white residents because of low enrollment rates in ACA insurance in communities of color 28 and denial of insurance coverage to undocumented immigrants.​29 Racial disparities in health, especially in Pierce County,​30 also mean that Black and Latino residents are more likely to need hospitalization and major medical procedures than white residents, and therefore, more likely to acquire medical bills.

Maria J. L. I am from Guadalajara, Mexico, a mother of 8 children and a grandmother of 15 grandchildren. I spent most years of my adult life as a single mother with a full household. For many years, I didn’t have documents. To survive, I took two factory jobs and was paid under the table at less than minimum wage. This had a bad impact on my body, I’ve had a lot of chronic health problems.

MEDICAL DEBT

In 2007, I went to St. Joseph clinic for a blood analysis for my diabetes. I am an undocumented, low-income woman, and I only speak Spanish. For whatever reason, discrimination, lack of interpreters, or lack of commitment to telling people about charity care, I was never told that there was a financial assistance program. I was undocumented and uninsured at the time, so I was sent to collections after a year. The bill started off small, but by now, it’s grown to $9,000.

I was working for a temp agency that sent me to unload trailers for $10.50 per hour. I was feeling overwhelmed by the work and physically exhausted, but when the collection agency started cutting my paycheck, that was the last straw, and I quit. That was a hard time in my life.

I have Medicare now, which has helped a lot. But it hasn’t resolved the problem completely, because I still have co-pays that I can never afford. I depend on Social Security Disability Insurance and the little support I can find from friends.

Last year, in 2015, I fell and couldn’t get up. An ambulance took me to St. Joseph. At the hospital, they did a few exams, said my internal organs were probably bruised, but didn’t do any major procedures. I still ended up with a $7,000 bill, the remaining balance after Medicare.

The hospital sent me to a collection agency again. The collectors started calling about twice a week. They also called my friend Isabel, asking where I am. I don’t know how they got her number. It makes me very depressed to have debts that I can’t pay, and it raises my blood pressure from the stress of it.

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CHI Franciscan’s use of wage garnishment affects the lives of low- and moderate- income patients.

Garnishment is the first time many patients realize there is a debt.

According to surveys collected at the door in this study, 54% of respondents sent to collections were not told about financial assistance or charity care while they were in the hospital. This was also documented in 2014 in a similar study of patients at St. Joseph Hospital 31 The proportion of people who are sent to collections without information about charity care has not improved. A hospital financial assistance policy that requires patients to prove their destitution places an unfair burden on the patient. Franciscan made an effort to address this problem; their billing policy now states, “the Franciscan Health System will perform a reasonable review of each inpatient account prior to turning an account over to a third-party collection agent.” 32

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Court records suggest that some patients who might have qualified for financial assistance are still being sent to collections and sued in court. However, not all or even most of the patients facing garnishment would have qualified for charity care.

Many of the patients sued in Pierce County Superior Court were above 300% of the Federal Poverty Level (above $35,310 for a single adult), but below an income that would give an individual or family the kind of financial stability and liquid cash to add an additional unexpected bill. A study by the Federal Reserve recently found that less than 50% of all Americans would be prepared to afford an emergency expense of $400 without borrowing money and nearly 20% would be completely unable to cover the cost at all.​33 Medical debt collections are destabilizing for a much larger proportion of the population than people eligible for charity care.

Among survey respondents, 53% said they did not receive a bill in the mail before they were sent to collections. It is possible that people sent to medical debt collections could have been able to pay part of the bill if they had seen it before it went to collections. Debt collectors are legally required to inform people that they are being sued and send a court date where they can contest their judgement,3​ 4 but in practice, people often do not realize they have been sued until their paycheck shrinks.

Insured patients have wages garnished for co-pays and services provided by third party contractors.

The high cost of insurance premiums motivate many consumers today to take on catastrophic, high-deductible, or minimal coverage plans.​35 When forced to go to the hospital people with minimal insurance are left with thousands in bills. Thirdparty contractors also take many patients by surprise. As one woman said at the door: “My insurance said I was fine, everything would be covered at St. Joseph.

But then I got a bill in the mail for the anesthesiologist who put me under during surgery.”

An account reconstructed based on details listed in court documents demonstrates how third-party contractor bills lead to medical debt collections. For S., the cost of third-party contractors meant $2,821 in wage garnishment in addition to his regular insurance premiums:

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S.​36 lives with his wife in Bonney Lake. In September 2015, Franciscan sent S. to collections for endoscopy and outreach services even though the cost of inpatient services were covered. His co-pays after insurance totaled $1,454 and came to $1796 after interest. S. commutes to work with King County Metro in Seattle where he makes good wages but not enough to afford the cost of a house in Seattle. The collection agency began garnishing $643 from his wages each paycheck for three months beginning in February 2016. After interest and court fees, $2,821 were cut from his annual salary.

Debt collectors profit financially when people are late or negligent in paying their debts. The medical debt cases examined from Pierce County Superior Court show interest accrued at 12%. Additional fees are added every time a paycheck is garnished for court, attorney, and processing fees. Even though T.’s debt was paid within 7 months with only two garnishment judgements against him he was still hit with 21% additional costs in interest and fees: T.​ 37 is an Asian man who lives with his wife. T. went to St. Joseph Hospital where he received in-patient care and saw a digestive health specialist. After this visit he owed a principal balance of $3,094. With interest this came to $3,659.

T. works at Fred Meyer in management with a moderate-income salary, so a smaller number of garnishments pay off his debt compared to the hospital’s more typical garnishees. In September 2015 Puget Sound Collections began withholding $939 per paycheck for a two month period. Another writ of garnishment took $164 from his paycheck per month starting in February. By March, the debt was paid down, but not before losing $333 to interest and $467 to court and attorney fees and a hit to his credit score.

Even workers in poverty making wages as low as $12.50 per hour still see 25% of their paycheck garnished​.

Laws regulating garnishment only protect the poorest of the poor. Many people, like B., are already making unlivable wages and working part-time before garnishment: B.38 is an unmarried white woman. She was assigned a principal balance of $2,589 which increased with interest to $3,846. When she was first sued, she was working at Certain Victory Food Services, a food catering company for military personnel. Garnishments ranging from $136 to $265 were taken from each of her paychecks at the maximum allowable attachment of 25%. In other words, B. was working an inconsistent number of hours each week and bringing in somewhere between $13,056 and $25,440 per year. Nine months after the first garnishment, B. filed for bankruptcy.

According to calculations from MIT, the cost of living for the basics - food, child care, health insurance premiums, housing, and transportation - in Pierce County is $22,404 for a single adult and $64,390 for a family of four.​39 Before garnishment, assuming that every week B was given as many hours as she was given on her best week and that she has no children, she would be making only $3,000 more than the most basic cost of living for a single adult. The collection agency was prepared to take more than that amount from her annual salary, dropping her into poverty and forcing her to sacrifice some of her basic needs.

Garnishment creates employment instability as workers change jobs to avoid garnishment.

Bankruptcy has many long-lasting consequences, freezing people out of car loans, mortgages, and the credit cards people often use for emergencies.

People who can neither afford the consequences of losing wages in an already tight budget nor the impact of bankruptcy often resort to changing jobs in an attempt to avoid garnishment. After M. went to the doctor, the collection agency tried to pursue wages from him and his wife, forcing them both into more than a year of employment instability: M.​ 41 and his wife H. were sued for debt in March of 2015. They initially owed $2,093 but with interest the total balance is now $3,460.

When the writ of garnishment was first issued M. was working at Safeway but he quit before the court could answer the garnishment. His wife worked at Haggen’s. When she was issued a writ of garnishment, she too quit her job and got a new position at Target.

However, by March of 2016, another writ of garnishment was processed on her paycheck, taking $561 from her paychecks over a 60 day period. Only $227 of the garnishment went to pay down the debt because $334 was garnished for court, attorney, and recovery fees. M. got a new job at Superior Steel and Ironworkers, Inc., and the collection agency resumed their efforts to garnish his wages.

Over four pay periods, $175 of his paycheck was taken by the collection agency to pay off $183 in court fees and $518 on his debt. A year and a half after the filing date, after both M. and H. have changed jobs, they have both seen their wages garnished and still have a balance of $2,715 on their debt.

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Collection Agencies Apply High Interests, Garnishment Fees, and Report to Credit Bureaus.

In order to end an untenable situation, B. filed for bankruptcy, what many people do when they have wages garnished. Nationwide, bankruptcies are rising rapidly. Wage garnishment is a huge contributing factor: States with the lowest per capita bankruptcy filings are the same states with the strictest restrictions on collectors’ ability to garnish wages.​40 One resident living just above the poverty line whose wages had been garnished remarked, “It would almost be better if I didn’t have a job, I would at least know how much money to expect, and I might even have more income.”

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Another woman that canvassers met at the door reported that she had taken a contract with a temp agency that moves her to a different construction company every six months so that the courts do not have time to process her garnishment.

Employees can be terminated after more than 3 garnishment orders within 1 year.

Wage garnishment is a hassle for employers to process and places liability with the company to pay the balance if any errors are made.​42 This gives employers an incentive to refuse to hire or to fire any employees who have outstanding debts, poor credit, or wage garnishments. By federal law an employee can be terminated for after just one garnishment order. Washington law is slightly more lenient, guaranteeing workers protection for 3 garnishment orders before an employee can be fired.​43 However, because a single writ of garnishment sets in order four instances of garnishment over a 60 day period, most people have four garnishments in quick succession, creating vulnerability to termination. For A., that meant losing a fairly stable income: A.​44​is a single Latina woman living in a low-income neighborhood in Lakewood. She owed a principal balance of $13,882. After interest that grew to $16,950. When she was first sued in March 2015, A. was working at WalMart, making an estimated annual salary of $41,184. The collection agency began garnishing $429 per paycheck for a period of two months. When the collection agency attempted to place another lien on her earnings in September, Wal-Mart responded to the court indicating that A. had been fired.

Although A. had lost her job, the collection agency continued to pursue her money. In December, the collection agency garnished $3,245 from her bank account. Similar garnishments took place on two more occasions between December 2015 and April of 2016. The case is still not closed and another writ of garnishment is pending on her bank account. A. still owes $8,715.

The collection agency’s seizure of A.’s bank account even after she lost her job is an extreme example of ruthless collection practices that would be financially destabilizing for anyone.

Garnishment affects entire families​.

The unexpected and forced seizure of wages affect people making decisions about the well-being of their children, partners, and loved ones. Collections can directly impact debtors’ married partners even when they were not the one to acquire the debt. For Ar., this meant his wife’s wages were seized:

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Ar.​ 45 and his wife, An., had a principal balance of $2,100. After interest, their balance came to $3,231. Ar. does not work but An. works at Jo Ann Stores, a fabric retail store. The judgement attached the maximum 25% garnishment permissible by law. The amount of garnishment each paycheck varied. For example, on February 27, 2015, $306 of her wages were garnished, whereas only $282 of her paycheck was taken the next month, on March 27, 2015.

This suggests that An. is working a job that offers an inconsistent number of hours each week The highest garnishment she saw, presumably a week with her highest earnings, was $332, meaning her biweekly paycheck was only $1,328. If every week looked like this high earning week, her salary would be $31,872 per year. Between June 2015 and March 2016, a total of $4,103 was taken from her wages, cutting her salary down to $27,769. As the sole breadwinner in a family of two, An. depends on her part-time job, minimum wage job to pay the bills; garnishment against An. pushed An. and Ar. below the poverty line.

Marco R. I’ve spent most of the last 20 years here in Tacoma, working and raising my children. I have been through a lot of stressful experiences in my life, but I keep going.

MEDICAL DEBT

I developed a chronic heart problem a few years ago. I went to St. Joseph for heart surgery. When you’re there, asleep, in pain, you’re not thinking about how much it’s going to cost.

Only when I got home, months later, I saw a bill in the mail for $1,500. I couldn’t make payments then, all of my money was going to support my family and their basic needs, so I let it go.

But I started getting constant threatening calls. Sometimes the calls would say, we’re going to sue you in court. I’ve been to detention before, so that was very scary, because I didn’t want to go through any of that again.

They did end up suing me in court, though, and started to collect my wages. I felt so bad then, it just didn’t make sense to keep trying to stay above water with these debts hanging over my head. It was all I could think about all the time, and I was getting worse financially. I decided to leave my apartment behind.

I’ve been homeless for about a year now. It’s rough, it’s not how I want to be living, but it’s what I’m doing to try to save up enough money to get it all over with.

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Conclusions Disentangling Health Care and Collections Agencies In Iowa, Heartland Regional Medical Center was investigated by ProPublica for its aggressive collections practices and rampant wage garnishment, not unlike St. Joseph Medical Center in Tacoma.​ 46​After investigations hit national news and critique by Senator Charles Grassley (R-Iowa), the hospital changed its charity care policies in 2013. The hospital forgave the debts of 3,342 people, resulting in a total of $17 million in debt relief.​47 The hospital remained profitable in spite of this decision. In response, Senator Grassley remarked: “The hospital deserves credit for doing the right thing after its practices were scrutinized, but it should not take congressional and press attention to ensure that tax-exempt, charitable organizations are focused on their mission of helping those in need.”

MEDICAL DEBT

St. Joseph Hospital’s decision to use The decision not to send collection agencies puts people to collection them in a regressive agencies is not exceptional. minority: 80% of The IRS surveyed 1,800 hospitals in the county nonprofit hospitals across the have do not contract country in 2012​.48 They found with debt collectors. that only 1 in 5 hospitals in the country still use “extraordinary” debt collection measures, such as sending debtors to collectors, suing people in court, reporting to credit bureaus, and garnishing wages and bank accounts.​49 The other 80% of hospitals find ways to remain financially sustainable without depending on collections.

An analysis of St. Joseph Hospital’s financial records indicate that, within their current revenue and expenditures, the hospital could eliminate contracts with collections agencies without a significant impact on their overall budget. In 2015, the hospital gained $2.4 billion in patient revenue, $640 million from other operating revenue, and spent only $585 million on operating expenses​.50 “Community benefit” expenditures, including bad debt and public health education for staff and community members, came to $1.8 billion, including charity care deductions at $21 million, less than 1% of the total annual expenses and deductions. The hospital’s profits, $24 million for the year, were greater than the total expenditures on charity care, and higher than any hospital in the state other than MultiCare.51

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Similarly, CHI Franciscan reports indicate that the majority of revenue for patient services still come from private insurance companies and Medicare/Medicaid.​52 Only 5% of the hospital’s total revenue for patient services came from self-pay accounts. Even without public data about the total amount of account balances in collections, it is at least certain that collections on outstanding patient debts amount to less than 5% of the hospital’s revenue.

As a nonprofit hospital, St. Joseph receives a tax exemption on the premise that the hospital serves the public, especially the poor.​53 To maintain its commitment to the well-being of the community it serves, the CHI Franciscan St. Joseph Hospital should implement the following practices: 1. Stop garnishing wages and seizing money from bank accounts.

Evidence from the surveys, interviews, and court records in this study demonstrate that wage and bank account garnishment is an abusive practice that contributes to financial and employment instability, unemployment, bankruptcy, homelessness, and chronic stress.

2. Stop reporting to credit bureaus.

When people are sued in court and reported to credit bureaus, it damages credit scores. This impacts patients’ ability to rent an apartment, buy a house or a car, or find a job, closing people off from the resources they need for financial stability.

3. End all contracts with collection agencies.

This report examined three collection agencies that contract with St. Joseph Hospital. All three agencies used similar practices, suing people in court and garnishing wages. Hence, the problem would not be fixed if the hospital cut its contracts with only a single collection agency. The practices observed in this study are also well within standard practice in the collections industry, practices that are fundamentally at odds with the ethics of community care and nonprofit service.

4. Conduct billing in-house.

CHI Franciscan’s most recently released Form 990 states, “Collection agencies [that contract with CHI Franciscan] are trained on the Catholic Health Initiatives’ mission, core values, and standard of conduct to make sure all patients are treated with dignity and respect.”54 The abusive and ruthless wage and bank account garnishments executed by collection agencies do not align with CHI Franciscan’s stated values. If billing was conducted in-house, the hospital could exercise the oversight necessary to ensure that billing is happening in accordance with the promises it has made to its patients and donors.

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Notes 1

“Caring for Pierce County: Are Our Local Healthcare Providers Adequately Serving Our Community?”

Washington CAN! 2​ 014. <http://washingtoncan.org/wordpress/wp-content/uploads/2014/11/wcan-report-2.pdf> 2 Washington Health Care Facilities Authority Revnue Bonds New Issue Series 2012A. (MultiCare Health System), p A-13.

3 “Merciless Charity: Franciscan Health System leaves patients in crippling debt.” ​W​​​ashington Community Action Network​. 2014. <http://www.seiu1199nw.org/files/2014/09/WhitePaper​FINAL.pdf> 4 “About Our Billing.” C ​ HI Franciscan Health​. Accessed 4 September 2016. <https://www.chifranciscan.org/ Billing-and-Finances/About-Our-Billing/> 5 “Information Concerning Catholic Health Initiatives and the CHI Reporting Group as of and for the Fiscal Year ended June 30, 2015.” Catholic Health Initiatives. <http://catholichealthinitiatives.org/documents/Financial_Information/CHI%20Reporting%20Gro up%20Annual%20Report%20June%2030,%202015.pdf> 6 Franciscan Health System. EIN 91-0564491. 2013. <https://pp​990.s3.amazonaws.com/2015_08_EO/91​ 0564491_990_201406.pdf?X​Amz​Algorit hm=AWS4​HMAC​SHA256&X​Amz​Credential=AKIAI7C6X5GT 42DHYZIA%2F20160904%2Fu s​east​1%2Fs3%2Faws4_request&X​Amz​Date=20160904T155305Z&X​Amz​ Expires=1800&X​ Amz​SignedHeaders=host&X​Amz​Signature=4c606c151cb6fc171c75f71e579983a94be09b 0d3 2ce7edcf3611510efdedfcd> ​ HI Franciscan Health​. <https://www.chifranciscan.org/about-us/Overview/Annual7 “Annual Reports.” C Reports/> 8 McElwee, Sean. “Enough to Make You Sick: The Burden of Medical Debt.” Demos: ​​ An Equal Say and an Equal Chance for All. ​15 August 2016. <http://www.demos.org/publication/enough​make​you​sick​burden​medical​debt> 9 There are approximately 14.5 million people living with cancer, 29 million with diabetes, and 1.2 million with HIV / AIDS. “Cancer Statistics.” N ​ ational Cancer Institute​. 14 March 2016. <https://www.cancer.gov/ about-cancer/understanding/statistics>, “Diabetes Latest.” C ​ enter for Disease Control and Prevention​. Accessed 6 September 2016. <http://www.cdc.gov/features/diabetesfactsheet/> “HIV in the United States: At a Glance.” C ​ enter for Disease Control and Prevention​. June 2016. <https://www.cancer.gov/about-cancer/understanding/statistics> 10 Lin, James. “A Basic Standard of Living Costs $48,778, and Nearly a Third of Families Fall Short.” Economic Policy Institute​. 29 October 2008. <http://www.epi.org/publication/bp224/> 11 Wisner, Cynthia. “Extraordinary Collection Actions and Charity Care in an ACA World.” <https://www. healthlawyers.org/Events/Programs/Materials/Documents/Tax13/h_bucci_king_spurlock_wisner_paper.pdf> 12 “Garnishment: The Untold Story.” ​ADP Research Institute​. 2014. <https://www.adp.com/tools-and-resources/adp-research-institute/insights/~/media/RI/pdf/Garnishment-whitepaper.ashx> 13 Ian, Liberty. “How the modern practice of debt collection is a violation of the 13th Amendment’s prohibition on involuntary servitude.” R ​ utgers Race and the Law Review​. 15 (2014): 281-​309. ​ aculty Scholarship. P ​ aper 693. (2005) 14 Skeel Jr., David. “Racial Dimensions of Credit and Bankruptcy.” F <http://scholarship.law.edu/faculty_scholarship/693> 15 Pridgen, Dee. “Sea Changes in Consumer FInancial Protection: Stronger Agency and Stronger Laws.”

Wyoming Law Review​. 13.2 (2013): 405-437.

16 Johnson, 1967, quoted in: Cocanower, David. “Federal Restrictions of Wage Garnishment: Title III of the Consumer Protection Act.” I​ ndiana Law Journal​. 44.2 (1969): 267-292.

17 Arnold, Chris. “With Debt Collection, Your Bank Account Could Be At Risk.” ​​NPR.Com​. 16 September 2014. <http://www.npr.org/2014/09/16/348709389/with​debt​collection​your​bank​account​could​be​at​ risk> ​ ational Consumer Law Cen18 ​No Fresh Start: How States Let Debt Collectors Push Families into Poverty. N ter. October 2013. <https://www.nclc.org/images/pdf/pr-reports/report-no-fresh-start.pdf> 19 Garnishments and Levies: Calculation of exempt earnings. Washington Revised Code 25.60.10d.

20 No Fresh Start​, 2013.

21 Ibid.

22 Chapter 2.68 RCW and Court Rule JISC 15.

23 Bailey, Kenneth. ​Methods of Social Research​. New York, NY: The Free Press, 1994.

24 Hamel, Liz, Mira Norton, Karen Pollitz, Larry Levitt, Gary Claxton, and Mollyann Brodie. “The Burden of Medical Debt: Results from the Kaiser Family Foundation / New York Times Medical Bills Survey.” ​Kaiser Family Foundation. ​5 January 2016. <http://kff.org/report-section/the-burden-of-medical-debt-section-1-whohas-medical-bill-problems-and-what-are-the-contributing-factors/> 25 Rustgi, Sheila, Michelle Doty, and Sara Collins. “Women at Risk: Why Many Women are Forgoing Needed Health Care.” ​The Commonwealth Fund​. May 2009. <http://www.commonwealthfund.org/~/media/Files/ Publications/Issue%20Brief/2009/May/Women%20at%20Risk/PDF_1262_Rustgi_women_at_risk_issue_ brief_Final.pdf> 26 A few Native and Asian / Pacific Islander residents were surveyed, but not enough to draw conclusions about the rate of medical debt collections in these racial groups. ​ mployment Security Department: Washington State​. January 2016.

27 Vleming, Jim .”Pierce County Profile.” E <https://fortress.wa.gov/esd/employmentdata/reports-publications/regional-reports/county-profiles/piercecounty-profile> 14

28

Delgado, Gary. “Breaking Barriers: Improving Health Insurance Enrollment and Access to Health Care.” Alliance for a Just Society​. 2015. <http://allianceforajustsociety.org/wp-content/uploads/2015/04/ BreakingBarriers_Natl_sm.pdf> 29 “What immigrants and refugees need to know about the Affordable Care Act (ACA).” S​ AMHSA​. <http://www.samhsa.gov/sites/default/files/immigrants-refugees-affordable-care-act-with-notes.pdf> 30 “Disparities in Care.” ​Washington Health Alliance​. 2014. <http://wahealthalliance.org/wp-content/ uploads/2014/07/disparities-in-care-report-2014.pdf> 31 “Merciless Charity: Franciscan Health System Leaves Patients in Crippling Debt.” ​Washington Community Action Network​. 2014.

32 Franciscan Health System. EIN 91​0564491. 2​013. <https://pp​990.s3.amazonaws.com/2015_08_ EO/91​0564491_990_201406.pdf?X​Amz​Algorit hm=AWS4​HMAC​SHA256&X​Amz​Credenti al=AKIAI7C6X5GT42DHYZIA%2F20160904%2Fu s​east​1%2Fs3%2Faws4_request&X​Amz​ Date=20160904T155305Z&X​Amz​Expires=1800&X​ Amz​SignedHeaders=host&X​Amz​Signature=4c60 6c151cb6fc171c75f71e579983a94be09b0d3 2ce7edcf3611510efdedfcd> 33 Gabler, Neal. “The Secret Shame of Middle-Class Americans.” ​The Atlantic. M ​ ay 2016. <http:// www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/> 34 White, Martha. “More Lenders are ‘Garnishing Wages’ to Get Paid Back.” ​T​​​ime​. 23 September 2014. <http://time.com/3422329/wage​garnishment​lenders​going​after​paychecks/> 35 Diddams, Margaret. “Closing the Health Care Gap in South Snohomish County.” ​Washington CAN!​ 2015. <http://washingtoncan.org/wordpress/wp-content/uploads/2011/01/Verdant-Impact-Report.pdf> 36 Case Number 15-2-12316-1. Pierce County Superior Court.

37 Case Number 15-2-07673-1. Pierce County Superior Court.

38 Case Number 10-2-05756-6. Pierce County Superior Court.

39 Glasmeier, Amy. “Living Wage Calculator: Living Wage Calculation for Pierce County, Washington.”

Massachusetts Institute of Technology​. 2016. <http://livingwage.mit.edu/counties/53053> 40 Brunn, George. “Wage Garnishment in California: A Study and Recommendations.” ​​ California Law Review. 5​ 3.5 (1965): 1214 ​- 1253.

41 Case Number 15-2-06861-5. Pierce County Superior Court.

MEDICAL 42 Brunn 1965 43 Ender, Hari. “Washington Wage Garnishment Law.” Nolo.com​ ​​ . Accessed 31 August 2016.

DEBT <http://www.nolo.com/legal​encyclopedia/washington​wage​garnishment​law.html> 44 Case Number 15-2-06779-1. Pierce County Superior Court.

45 Case Number 15-2-05155-1. Pierce County Superior Court.

46 Arnold, Chris. “When Nonprofit Hospitals Sue their Poorest Patients.” ​NPR.com ​19 Decem ber 2014. <http://www.npr.org/2014/12/19/371202059/when​a​hospital​bill​becomes​a​decade​long​ pay​c ut> 47 Arnold, Chris and Paul Kiel. “Nonprofit Hospital Forgives Debts and Stops Suing So Many Poor Patients.” ​​Nebraska’s PBS & NPR Stations. ​2 June 2016. <http://netnebraska.org/node/1027112> 48 Nikpay, Sayeh and John Ayanian. “Hospital Charity Care - Effects of New Community-Benefit Requirements.” 373 (2015): 1687-1690.

49 Ibid.

50 Washington Community Action Network analysis of Hospital Annual Financial reports to the Washington State Department of Health through fourth quarter 2015. Raw data downloaded 3 September 2016. <http://www.doh.wa.gov/DataandStatisticalReports/HealthcareinWashington/HospitalandPatient Data/HospitalFinancialData/YearEndReports/2015HospitalYearEndReports> 51 “Caring for Pierce County: Are Our Local Healthcare Providers Adequately Serving Our Community?” ​​Washington Community Action Network. ​2014. <http://washingtoncan.org/wordpress/wp​content/ uploads/2014/11/wcan​report​2.pdf> 52 “Information Concerning Catholic Health Initiatives and the CHI Reporting Group as of and for the Fiscal Year ended June 30, 2015.” Catholic Health Initiatives. <http://catholichealthinitiatives.org/ documents/Financial_Information/CHI%20Reporting%20Gro up%20Annual%20Report%20June%20 30,%202015.pdf> 53 Nikpay, Sayeh and John Ayanian. “Hospital Charity Care ​Effects of New Community ​Benefit Requirements.” 373 (2015): 1687 - 1​ 690.

54 Franciscan Health System. EIN 91​0564491. Form 990. 2013. <https://pp​990.s3.amazonaws. com/2015_08_EO/91​0564491_990_201406.pdf?X​Amz​Algorit hm=AWS4​HMAC​SHA256&X​Amz​Cr edential=AKIAI7C6X5GT42DHYZIA%2F20160904%2Fu s​east​1%2Fs3%2Faws4_request&X​Amz​ Date=20160904T155305Z&X​Amz​Expires=1800&X​ Amz​SignedHeaders=host&X​Amz​Signature=4c60 6c151cb6fc171c75f71e579983a94be09b0d3 2ce7edcf3611510efdedfcd>

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