Lexington Medical Center sued over medical debt collection

Lexington Medical Center has gone too far in its use of a controversial debt collection tactic, according to allegations in a lawsuit filed this month in federal bankruptcy court.

The Jan. 10 complaint accused the hospital of going after patients with unpaid medical bills whose debts had been dismissed or put on hold after filing for bankruptcy.

The lawsuit, initially reported by the Post and Courier of Charleston, alleges that Lexington Medical Center knew the debts it was collecting were off-limits, but that it pressed forward on collecting them nonetheless.

The lawsuit says that although medical debt is often a common cause of bankruptcy, “LMC routinely and systematically ignores bankruptcy discharges and bankruptcy stays,” the filing said.

The lawsuit was filed on behalf of three South Carolina residents, who represent “all others similarly situated.” Their attorney, consumer protection lawyer David A. Maxfield, seeks class-action status.

Jeremiah F. Jones filed for Chapter 7 bankruptcy in December 2018, placing a “stay” on the money he owed, including that owed to the hospital. Yet a month later, Lexington Medical Center seized $336 of his tax refund, violating the court-sanctioned pause on all debt collection activities, the lawsuit said.

The lawsuit alleges that another plaintiff in the case, Teri Denice Mayers, had her debts discharged by the court after she filed for bankruptcy in February 2014. Part of what she owed was $1,600 to Lexington Medical Center for radiology and urgent care treatment she received in 2013, according to the filing.

In the spring of 2019, Lexington Medical Center took $345 from Mayers’ tax refund, even though her debts were essentially erased by the court five years earlier, the lawsuit said. It took Mayers five months to get her money back, in which time she was unable to make car payments, according to the lawsuit.

The State reached out to Lexington Medical Center on Friday morning for comment.

Lexington Medical Center, along with many other public hospitals and health care systems, as well as some public agencies, uses a mechanism that’s built into South Carolina law to collect unpaid debts. It’s called the Setoff Debt Collection Program, and Lexington Medical Center has used it since around 1995, hospital spokesperson Jennifer Wilson told The State last year.

Because Lexington Medical Center is a non-profit hospital run by Lexington County and the county’s health services district, it is allowed to reclaim state income tax refunds for unpaid medical bills by working with the South Carolina Department of Revenue.

Since 2016, Lexington Medical Center has reclaimed at least $66,228,800 in medical debt using this maneuver, according to data from the South Carolina Association of Counties. Around 10% of the hospital’s patients are uninsured, according to Wilson.

The Lexington County hospital was outpaced in its collections only by Greenville Health System, which became Prisma Health after a merger in November 2017 with local system Palmetto Health.

The association of counties, like the Municipal Association of South Carolina, can tack on a $25 fee per transaction — added to the debt — for helping hospitals get paid.

The hospital is required to send a 30-day notice in the mail to the patient, alerting them to the debt and of the hospital’s intention to send the debt to the DOR for collection. However, it is not required that the patient confirm receipt of the notice before that debt is sent off to collections. The DOR can then swipe a portion or the entirety of a patient’s income tax refund to cover the medical debt. This can continue for years, until the debt is repaid.

Kimberly Ann Williams, the third plaintiff in the lawsuit, owed the hospital $90,000, according to the filing. When she filed for bankruptcy in May 2017, the court discharged that debt, as it had for Jones. Lexington Medical Center received a notice about the discharge, according to the lawsuit. Yet in April 2018, Williams began receiving collections notices “that threatened to invoke” the Setoff Debt Collection Program, the lawsuit said.

The hospital also attempted to broker a payback plan with Williams, and “successfully persuaded” her to make three payments, in total more than $100, the lawsuit said.

Before it sends debts to outside collections agencies, including the DOR, Lexington Medical Center can broker payment plans with patients who owe the hospital money. The hospital will accept payments as low as $50 a month, according to Wilson, the spokesperson.

Patients have a year to contest the collection, according to the law. If money is found to have been incorrectly garnished, the Department or Revenue or Lexington Medical Center can also issue a refund.

This story was originally published January 31, 2020 at 11:54 AM.