Five former UK HealthCare patients sued the health system alleging it and the state government use unconstitutional practices to collect outstanding bills.
The federal lawsuit claimed the Kentucky Department of Revenue, which collects Lexington, Ky.-based UK HealthCare's debts, does not adequately certify the charges nor notify patients about appealing outstanding bills, denying them their right to due process. Similarly, the health system's bills and employees allegedly do not inform patients that they have the right to appeal.
The five patients are seeking class-action status for their lawsuit against state and university employees.
UK HealthCare is allegedly the only healthcare provider in Kentucky that collects its debts by referring them to the Department of Revenue, and often does so without notifying the patient, preventing them from applying for financial assistance, plaintiffs said. The department automatically adds a 25% fee plus interest to the debt, which the patients said can saddle them with lifetime medical debts.
The plaintiffs want a federal judge to prohibit the Department of Revenue from collecting UK HealthCare debts until it provides adequate notice to appeal.
"I just want people to know that if you go to UK, and you think what they charged you is unfair, there's no way to fight it," Danny Metts, a former UK HealthCare patient and one of the plaintiffs in the lawsuit, said in prepared remarks. "It's like if you went to court and there's a prosecutor there, but you're not allowed to make a defense."
The Department of Revenue said in a statement that it does not comment on pending litigation, but noted that its collection of UK HealthCare debt has been suspended due to COVID-19, at the direction of Kentucky Gov. Andy Beshear.
Still, the department continues to send threatening letters, the plaintiffs said.
UK HealthCare said in a statement that it contacts patients multiple times before referring debts to the Department of Revenue, and suggests payment plans or mediation.
"We should all want medical debts—obligations generated because complex and often life-saving care was provided—to be paid. That's how we spread the cost of care and ensure affordable access to more people who need such care the most," the organization said.
Recent investigations, including one by Modern Healthcare, have brought hospitals' debt collection practices to light, detailing how some providers sue their patients. Hospital executives argue that their bad-debt levels are growing as patients have to shoulder more costs and they need to recoup all they can to remain viable. Critics contend that aggressive debt collection practices contradict their missions as altruistic organizations.
At minimum, patients should have an opportunity to challenge charges, which may include errors, said Betsy Davis Stone, an attorney at Kentucky Equal Justice Center, which is representing the plaintiffs along with the National Center for Law and Economic Justice.
"Without a process for challenging those mistakes, UK Healthcare patients are left paying whatever UK Healthcare and the Department of Revenue decide to charge," she said in prepared remarks, adding that the pandemic has upped the stakes as more families are financially unstable. "The Constitution gives these patients the right to stand up and challenge debts before the government takes their paychecks, their savings, their homes, and their livelihoods."
UK Healthcare reported operating income of $251.3 million on $1.76 billion of operating revenue in 2019, up from operating income of $220.7 million on $1.64 billion of operating revenue in 2018, according to Modern Healthcare's financial database.
Its provision of bad debt increased to $87.8 million in 2019 from $69.3 million the year prior, while the amount of unreconciled bills it had written off as a loss increased significantly from $53.7 million to $113.1 million.
UK HealthCare said in court filings that ending the Department of Revenue's collection efforts would cost the University of Kentucky "tens of millions of dollars," which implies that potential class members of the lawsuit exceed 10,000 individuals, the plaintiffs said in the complaint.
The UK HealthCare invoices allegedly do not even contain the words "appeal" or "hearing," contradicting UK HealthCare's Financial Assistance Program mandate to "attempt to make patients aware of the FAP as early as possible in the treatment process."
There have only been around a dozen so-called "13B" appeals of outstanding bills since 2017, plaintiffs alleged. When patients try to appeal, state officials say it is too late to have a hearing, according to the lawsuit.
"Here, too, any appeals process that might exist in the abstract has been affirmatively—and very successfully—concealed," the complaint reads.
None of the UK HealthCare bills that plaintiff Lucy Alexander received for her 2012 hernia surgery included language regarding a right to appeal, she alleged.
Alexander ultimately found that UK HealthCare allegedly miscoded the claim it sent to her insurer for preauthorization, so the procedure wasn't covered, unlike what she was told. That left her on the hook for more than $25,000—the full list price on the chargemaster—in addition to a $6,335 fee from the Department of Revenue, and the window for her to appeal had expired.
Her wages have been garnished and the state has claimed her tax refunds since 2015. According to a recent notice, she has paid $20,191.45 as of Jan. 8, 2020, but still owes $16,576.69. More than $5,000 in interest has been added, in addition to the 25% fee.
Metts, another plaintiff, was told by a UK HealthCare employee that his treatment was preauthorized with Medicaid and Medicare and that the full amount would be covered. The bills he received would reflect what UK HealthCare billed his insurance and should be ignored, he was assured.
But the employee had allegedly made a mistake, Metts was later notified, and he wasn't properly enrolled in Medicaid, which contradicted the bills he received. It was too late to apply for financial assistance and Metts—who was living only on Social Security payments—owed more than $5,700, including an $1,131 fee with interest from the Department of Revenue.
After a state employee allegedly threatened to levy his bank account, he agreed to a $25 a month payment plan. After eight years of monthly payments, he would still owe nearly $6,000. He was never told he could appeal, Metts claimed.
"Based on his interactions with the DOR and the litany of notices he receives, he is constantly worried that he will not be able to satisfy the debts in his lifetime, leaving his family with additional financial burdens," the complaint reads.