Angelia Fowler was surprised to learn that the debt-collection agency she says is ruining her life is owned by the hospital company that saved it.
Fowler had been sick for months in November 2015 when her son finally took her to the emergency room with what turned out to be pneumonia. She spent much of the next month in a coma in intensive care at St. Mary’s Medical Center in West Palm Beach, Florida.
The bill arrived in January. After discounts, the hospital wanted her to pay $80,770. Other bills from specialists boosted the sum she owed above six figures, enough to buy a condo in West Palm Beach. It was a sum she couldn’t pay.
Millions of patients like Fowler are on the receiving end of the health-care industry’s collections machine. The amount of past-due medical debt in the U.S. is about $75 billion, spread among 43 million people, according to estimates from economists at MIT, Northwestern University and the University of Chicago. About half of all collections lines on credit reports are related to medical debt, a 2014 report (PDF) from the Consumer Financial Protection Bureau showed.
Fowler, who is uninsured and doesn’t qualify for Medicaid in Florida, lives off unemployment and help from her son, a chef. The bill from St. Mary’s went to a collections agency called Central Financial Control, which reported it to credit bureaus. Though Fowler attained a Master of Business Administration degree online this fall, she said three employers have declined to hire her because of the medical debt, a practice that’s legal in Florida and 38 other states.
“When you’re handed this type of debt because of health reasons, it is like a set of debt handcuffs,” said Fowler, who is now 60. “It throws your life off trajectory.”
Though Fowler didn’t realize it, St. Mary’s Medical Center and Central Financial Control are both owned by Tenet Healthcare Corp., the for-profit hospital operator. As Tenet and other hospital companies struggle to make money providing medical care, they are turning to the profitable and growing business of collecting debt.
Most hospitals have finance departments or outside companies that try to ensure they get paid by insurers and patients. But Tenet has gone a step further than most, turning its operation into a separate business line called Conifer and contracting its services to other medical providers.
Conifer serves the 77 hospitals Tenet operates. It also works for more than 700 others, including hospitals run by the nonprofit Catholic Health Initiatives, which owns a minority stake in the business. The collections agency that contacted Fowler, Central Financial Control, is the operating name of a Conifer subsidiary called Syndicated Office Systems LLC.
Conifer is one of the few bright spots at Tenet. The Dallas-based company is selling off hospitals to manage its $15 billion debt load. Even as Tenet has unloaded hospitals, it keeps them on as clients of Conifer, according to the company’s earnings presentation (PDF) last month. Acting Chief Executive Officer Ronald Rittenmeyer, during Tenet’s earnings call Nov. 7, said he plans to cut jobs at Conifer, which employed 15,570 people at the end of 2016.
While Conifer accounts for just 5 percent of Tenet’s revenue, it has an outsize influence on the company’s bottom line. Measured by earnings before interest, taxes, depreciation and amortization, Conifer’s margins have been roughly twice as large as those in Tenet’s hospital business. The parent company doesn’t directly report how much Conifer contributes to its net income.
Tenet and Conifer declined to make executives available for an interview. In an emailed statement, Ryan Lieber, a spokesman for St. Mary’s, said that Conifer “helps our patients understand and navigate the financial aspects” of their care, including applying for charity care and other financial help. The business has helped more than 25,000 St. Mary’s patients in the past two years, he said.
Fowler’s account “was never classified as a charity care case,” Lieber said. After Bloomberg asked about her situation, the hospital said it will reach out to her “to close out her account and resolve credit reporting issues.”
Other medical providers are in the collections business. HCA, the nation’s largest for-profit hospital chain, has a subsidiary called Parallon that boasts on its website about collecting $41 billion annually. MedNax Inc., a company that provides staffing to hospitals for such services as anesthesiology and neonatal intensive care, purchased a billing and collections company in 2015.
Medical providers got more sophisticated about billing and collections during the 1990s. That’s when insurers, under pressure to contain costs, became more restrictive about what medical services they would pay for. More recently, insurance policies have put more costs on patients. The average deductible for employer-sponsored coverage more than doubled in the past decade, to $1,505 for an individual. That means hospitals are increasingly chasing payments from individuals as well as insurers.
The business of making sure doctors and hospitals get paid—known in industry jargon as revenue-cycle management—is by one estimate a $24 billion market. Along with billing and collections, it includes verifying patients’ insurance, checking whether they’re eligible for government assistance and making sure the services that doctors provide are properly documented and billed.
Collecting payment has become more important as hospitals’ traditional revenue streams come under pressure. Looming cuts to Medicare reimbursements may make as many as 60 percent of U.S. hospitals unprofitable, compared with about 25 percent currently, according to a 2016 Congressional Budget Office analysis.
“The stakes are higher, the dollars are bigger and therefore, they simply can’t afford to not be good at this,” said Jim Lazarus, managing director at Advisory Board Co., a hospital consulting company.
Tenet’s practices have drawn backlash from patients and regulators for years. In June 2015, the Consumer Financial Protection Bureau ordered (PDF) Conifer to pay $5 million in relief to consumers. The regulator said it failed to send consumers proper documentation and didn’t adequately respond when debts were disputed.
The bureau has recorded 889 consumer complaints about Tenet since 2013, including 358 so far in 2017. Many don’t mention the hospital company directly but refer instead to Central Financial Control or Syndicated Office Systems. Among complaints about medical debt, only two collections agencies were cited more frequently than Tenet. None of Tenet’s for-profit hospital competitors have a similar record of complaints, although some of those companies outsource the work.
When Fowler was unable to meet her obligation, she appealed online to an organization called RIP Medical Debt, a nonprofit that buys debt on the secondary market and forgives it. It was founded by two former collections industry executives. The nonprofit identifies people who can’t pay their medical debts and then tries to raise money to buy the delinquent accounts for pennies on the dollar, forgiving the debt. The charity said it hasn’t yet taken up her account.
Fowler said the hospital never discussed charity care with her and that her attempts to set up a payment plan after she was discharged went nowhere.
“They said nothing to me. I just got this giant bill in the mail,” she said. “I’m very grateful that you saved my life. But does our health care have to decimate us financially? It’s destroying me.”