Duluth, Minn.-based Essentia Health collects only about 20% of the $125 million its patients owe for self-paid services, deductibles and cost-sharing.
To boost those collections, the 11-hospital, not-for-profit system takes advantage of a Minnesota law allowing it to seize state tax refunds from people who have unpaid bills. Under the law, five of its rural hospitals can use the “revenue recapture” program since they lease facilities from state or local governments.
In 2018, the tax refunds it intercepted totaled more than $500,000, a small percentage of Essentia’s nearly $4 billion in total patient revenue.
“We get excited about anything we recover,” said Melanie Wilson, Essentia’s vice president of revenue services. “We invest a lot of money to serve those communities. This is just a small way to balance our commitment with their commitment back to us.”
Under little-known laws, Minnesota and a number of other states allow hospitals and other healthcare providers, such as ambulance companies, to take patients’ tax refunds over multiple years to cover unpaid bills. These states include Alabama, Kansas, Oregon, South Carolina and Wisconsin. A bill to establish a similar system in Georgia passed the state House but died in the Senate last year due to concerns about the impact on low-income patients.
Hospitals must file claims with the state revenue department, which then takes available refund amounts in taxpayers’ accounts and sends the money to the hospital.
The state laws generally limit this recovery process to providers that are owned by or affiliated with city, county or state government entities. In some states, laws written many years ago to let public agencies like the courts collect unpaid penalties and fees from debtors’ tax refunds were later broadened to include public healthcare providers.
But some private, not-for-profit hospital systems with a tenuous connection to government are using this mechanism to recover unpaid medical debt. In Minnesota, they include Allina Health, CentraCare Health and Essentia.
There, providers have collected $91.2 million over the past five years from 272,000 tax refund seizures, according to the Minnesota Department of Revenue. That averages about $335 per seizure, though amounts ranging from around $50 to several thousand dollars may be taken.