Tip Moody trusted the University of Kentucky. He worked there, and since 2001 he had visited UK’s Albert B Chandler hospital every three months for HIV treatment.
Even when the university sent him a bill for $5,604 for treatment in 2008 despite his income-eligibility for financial assistance, Moody thought things would work out.
But that trust dissipated by 2009, after the university sent his debt to the Kentucky Department of Revenue for collection. The state demanded payment for a bill he had been contesting for years, started withholding his tax returns and in 2010 placed a lien on the house his mother lived in.
“State sponsored bullying is what it amounts to,” Moody said. “I was being extorted to pay a bill that I had disputed for years that the University of Kentucky never allowed me to (formally) dispute and that the Department of Revenue never gave me an opening to dispute.”
As Moody learned, UK HealthCare has powerful debt collection tools at its disposal thanks to its partnership with the Department of Revenue, which can garnish wages, levy bank accounts or intercept tax returns to get at money allegedly owed to the university — all without a court order.
In recent weeks, extensive detail about those debt collection practices has been filed in the United States District Court for the Eastern District of Kentucky, in a class action lawsuit filed by Moody and four other named plaintiffs in 2020. The defendants, who are officials from UK and the state revenue department, and the plaintiffs all filed motions for summary judgment in late February, each asking Judge Gregory F. Van Tatenhove to rule in its favor without a trial. In support of the motions, witness testimony and many documents produced in discovery are considered part of the public record for the first time.
In the suit, the plaintiffs allege the UK healthcare system and the Commonwealth of Kentucky collect unpaid medical debts without giving patients a meaningful chance to appeal, seek a hearing or otherwise exercise due process rights guaranteed under the U.S. Constitution. Evidence submitted by the plaintiffs indicates that once the UK hospital has decided that a patient owes it money, there’s little chance the patient will ever see an appeal hearing, let alone succeed in challenging their obligations to the hospital. The plaintiffs, among other things, are seeking an injunction preventing UK HealthCare and the revenue department from collecting until patients have been granted a clear right to a hearing to challenge their debts.
Lawyers for the university and the state argue that the current process more than meets the standard for due process well before debts are sent to the revenue department for collection.
“Our role at the University is to take care of the sickest patients in our state and help them heal and return home. We feel like it’s our responsibility to make sure we generate the resources necessary to support that mission,” UK spokesperson Jay Blanton said. “Our filings in this case point to the extensive steps we have taken to ensure that patients are communicated with consistency and fairly regarding payment for treatment and procedures.”
The Department of Revenue has not responded to a request for comment.
UK HealthCare lawyers told Moody during court proceedings that his debt to the hospital has been cleared. The university also claims that four of the five named plaintiffs are making claims that are past the statute of limitations. What’s more, a little-noticed provision in Kentucky lawmakers’ proposed tax plan, currently moving through the legislature, bars the state from collecting medical debt. So the central question of the lawsuit may ultimately be deemed moot for future patients.
But the collection practices have been lucrative for both the university and the state for years. By the time the Kentucky Center for Investigative Reporting first wrote about UK HealthCare’s debt collection practices in 2020, the Department of Revenue had collected $76 million in medical debt since 2009, including $14 million in fees and interest added to state coffers.
So lucrative, in fact, that when the state determined in 2012 that it had been violating patients’ constitutional rights by collecting medical debt for UK HealthCare without meeting basic standards of due process, they decided to keep collecting older debts, despite the acknowledged due process violations. According to evidence uncovered during the discovery process, the decision to continue collecting was made due to the amount of money at stake.
Karina Tefft, an attorney from the National Center for Law and Economic Justice who is representing the plaintiffs, said UK HealthCare and the Department of Revenue have abused the trust people like Moody put in the institutions.
“It’s about making money,” Tefft said. “No part of this is about serving patients and their needs. It’s a flagrant disregard for people’s constitutional rights. It’s extremely predatory, especially preying on low income families that don’t have a lot of options, resources or other information.”
‘State sponsored bullying’
Moody was diagnosed with HIV in 2001, and he started appointments at the University of Kentucky hospital shortly after, undergoing expensive lab tests at least every three months.
Moody worked as an administrative staff associate at the university, first at the college of agriculture then the college of dentistry, but wasn’t covered by the university’s employee insurance program. For years, his treatments had been paid for mostly by UK HealthCare’s financial assistance program and federal funding meant to help uninsured people pay for HIV treatment.
Moody says he typically met with a financial counselor at the end of every visit.
He qualified for assistance for years without a hitch until 2008, when the hospital altered procedures and he wasn’t aware he needed to reapply every six months, he said.
His financial assistance ended without his knowledge and the hospital suddenly started sending him bills for thousands of dollars.
Moody brought the issue up with management and the financial counselors at the hospital’s infectious disease clinic. They sent him a financial assistance renewal application in September 2008 and Moody was able to prove his income placed him well within the program’s limits that whole year, including at the time of appointments he was billed for.
But the bills kept coming. Moody learned from then-state Sen. Tom Buford, whom Moody had contacted about the debt, that financial aid can’t be retroactively applied to debts that are older than three months, so he would have to pay that money back. (Buford died last year.)
Moody, like other plaintiffs in this lawsuit, claims that at no point in this process did the university let him know he was entitled to a hearing to formally challenge this debt.
Although the university regularly denies patients access to the financial assistance program, usually because patients fail to sufficiently prove their income, lawyers for the plaintiffs claim “no patient has ever requested, and UK HealthCare has never heard, a hearing to dispute the denial of a patient’s financial assistance application.”
The application for financial assistance used to include language informing patients that they are entitled to a formal hearing to appeal the decision should the hospital deny their request for financial aid, although Moody doesn’t remember seeing that language.
But the new application form used since August 2021 and offered by the plaintiffs as evidence includes no such notice. The hospital also doesn’t tell patients they can appeal a denial once the hospital has made a decision on their financial aid eligibility.
Patients who did manage to formally contest a bill from the hospital between the years 2012 and 2016 would come before hearing officer Marcy Deaton.
Deaton served as both hearing officer and UK HealthCare’s legal representative in hearings that, the plaintiffs argue, violated Kentucky’s administrative hearing laws because they were not held in front of a neutral party and didn’t allow patients to present evidence, as required.
A patient referred to in the plaintiffs’ Statement of Material Facts as “Mr. K” was in a hearing with Deaton when it became apparent that the hospital had the wrong address for him and as a result he never received an application for financial aid.
Deaton still denied Mr. K’s debt relief, arguing that it wasn’t her job to determine whether the patient would have qualified for assistance, and said the patient should have been more diligent about following up on his application, according to the plaintiffs’ Statement. This is one of three examples in the lawsuit filings of notices being mailed to the wrong address.
In deposition testimony, Deaton couldn’t recall if she’d ever granted an appeal of a decision regarding financial assistance.
Ultimately, hearing responsibility was shifted from Deaton’s office to the office of Attorney General, but no hearings were held during the long 2016 to 2019 transition period, according to court documents.
Moody considers himself pretty savvy when it comes to navigating byzantine administrations like those found in hospitals. If he wasn’t able to get help with his bill, he can’t imagine other, more vulnerable people would have much luck.
“I worked at UK. I knew where my doctor’s offices were, I knew where the administrator’s office was,” Moody said. “I didn’t have any trouble trying to navigate the system, but I was stonewalled at every turn.”
After a decision regarding financial assistance is made, UK HealthCare starts billing patients.
UK’s description of its debt collection process offered to the court says that if bills remain unpaid after a series of invoices, the hospital transfers the debt over to Central Kentucky Management Services (CKMS), the third-party debt collection agency affiliated with UK HealthCare.
CKMS first sends patients a letter informing them their debt is past due. The letter tells patients they can contact the organization about the debt, but doesn’t mention a formal appeals process.
CKMS then sends another series of letters with more information. If those letters fail to elicit payment, CKMS then sends the debt to the state Department of Revenue for enforced collection.
The revenue department has authority to collect debts for all state agencies, and the defendants claim the University of Kentucky qualifies as a state agency. The lawmaker who wrote the statute UK HealthCare points to for justification said that wasn’t lawmakers’ intention.
For years, the letters sent by CKMS didn’t mention the right to an appeal or hearing at all. This prompted the revenue department to stop collecting UK medical bills in April of 2012 because – as internal emails produced in discovery expressly say – the state believed the hospital’s debt collection practices didn’t comply with due process requirements.
The U.S. Constitution’s 14th amendment guarantees the right to due process, meaning essentially that the government can’t take a person’s life, liberty or property without a chance to be heard before a neutral arbiter. The state paused collection efforts in 2012 until CKMS could modify the letters sent to patients, adding language about the right to protest the bill and to request an audience with a UK HealthCare hearing officer.
According to the Department of Revenue, this met the requirements for due process, but there was still a problem: The revenue department was already collecting money from a lot of people, including Moody, who had not been afforded the minimum standards for due process.
In one email produced in discovery, state lawyers expressed their need to determine what to do with those cases already “in the pipeline” at Revenue, and proposed a follow-up meeting.