WRMC Litigation

4/25/2012

Contact: Tammy G. Love

VP of Business Development

Phone: (336) 651-8116

By CHARLES S. WILLIAMS
Wilkes Journal-Patriot Staff

Wilkes Regional Medical Center has gone from being one of the state's most litigious hospitals to being "probably one of the least litigious there is," said Gene Faile, the hospital's chief executive officer, this week.

According to The Charlotte Observer, as a part of a series of articles on hospitals filing lawsuits against patients for nonpayment of bills, Wilkes Regional filed more than 12,000 suits for delinquent bills during the five year period ending in 2010. The report said Wilkes Regional "appears to be the state's most litigious individual hospital." But that, according to Faile, has changed drastically. The change began when the WRMC Hospital Operating Board (which leases the nonprofit hospital from the Town of North Wilkesboro) signed a management services contract with Carolinas Healthcare Systems, based in Charlotte, in February 2007.

In fiscal year 2005 (Oct. 1, 2004-Sept. 30, 2005), Faile said, the hospital filed 2,726 suits for nonpayment of bills. That number climbed to 2,975 in 2006, 2,555 in 2007, and 3,060 in 2008. "But a year after CHS took over management of the hospital, the policy was changed," said Faile, who was appointed as CEO here in November 2008. "It took that long for CHS to review all of the policies here and see what needed to be revised. Before that, the threshold for filing a lawsuit was only $300 in debt, which was very low."

Marlin Markham, Wilkes Regional's chief financial officer, added, "Under the new policy, the hospital will file suit only for a patient's outstanding self pay portion of a bil,, and only if the patient is making no attempt to pay the bill. The threshold for suits is now $750.

Very selective about suits

"Under the new policy, we are very selective about suits, and we try our best to work with people so that they can pay their bills," said Faile. He added, "If someone comes in with an emergency condition who we know does not have the ability to pay, we, first of all, treat them. Then we look at the case to see if they are eligible for charity care. Those rules are based on federal poverty guidelines. We will also see if they are eligible for Medicaid. We do everything we can to help them and get financial assistance. People come in like that all the time. If they have nothing, qualify for charity care, and have no way to pay, we write it off."

Faile and Markham said that the hospital provided $11 million in charity care over the past two fiscal years. "Those bills are written off the books completely," added Faile. "We do not pursue it from anyone. We can't get it from the government, and we can't get it from the patient, so we absorb it. That's the way CHS does business. We do all we can to collect the bills that we are due, but we don't just sue patients without careful, thoughtful consideration."

Number of suits dropped

According to hospital officials, the number of suits filed in 2009 by WRMC dropped to 349, with 685 in 2010, and 548 in 2011. "That is a miniscule number when you consider that we handled 100,000 registrations each year," said Faile. A "registration" is recorded each time a patient visits the hospital for treatment in the emergency department, lab work, any outpatient procedure, or any other visit. Markham said that most of the suits filed are for individual "registrations."

Of the 548 suits filed in the past year, Faile said, the hospital received judgments in less than 400 cases, meaning that the hospital could continue legal proceedings to secure the amount owed. In each lawsuit, an average of five different dates of service were included in the balance for either one patient or several members of the same family. "In some of those cases where there were no judgments, the individuals simply could not be found," said the CEO. "When we did receive a judgment, we still try to work with the individual. There are many instances in which the person agrees to pay a certain amount - perhaps $50 a month - until the debt is paid. If there is no money but the individual owns property, we have the right to take a lien against that property. It may take a number of years to get that money, but we can recover it eventually." The 548 lawsuits filed in 2011 represented 524 debtors. Markham said that 5 percent of suits filed are for repeat debtors. In 2009, the 349 suits resulted in judgments of $900,000. To date, the collections on those suits total $183,500. In 2010, the 685 suits resulted in judgments for $1.3 million, with to date collections of $146,355. For the past year, there were judgments of $1.4 million in the 548 suits, and the hospital has collected $65,045.

The hospital has a total of 3,075 past due accounts. Of that number, 2,009 patients have payment plans with the hospital's "extended business office" (a collection agency). Another 739 have payment plans with the McElwee Law Firm of North Wilkesboro (which files the suits) that were set prior to any legal action, while 327 have payment plans with the McElwee firm set after lawsuits were filed. The extended office sets up an average of 89 new payment plans for delinquent accounts each month, compared to 52 for the McElwee firm. The McElwee firm receives a portion of the settlement as pay. Markham said that firms filing suits "generally receive 25 percent of the settlement. It depends upon the age of the account. The older the file, the harder it usually is to collect. I've dealt with firms in the past that have taken 35-40 percent for older cases." Markham explained, "We, of course, send bills to everyone. After 150 days, if there has been no attempt to pay the bill or set up a payment arrangement, we write it off here as a bad debt but continue to attempt to collect it by turning it over to our law firm. These are usually the bills in which the responsible person is unresponsive. They simply won't talk to us." Faile added that the hospital offers a straight 40 percent discount for all services to individuals with no insurance or health coverage. Furthermore, discounts up to 20 percent are offered to all customers who pay their balance in full upon receipt of the first bill.

John Logsdon, an attorney with the McElwee firm, acknowledged, "There are fewer suits being filed. Of course, our firm doesn't step in until after the hospital has tried to work with the patients. "At one point, the hospital was sending us every past due account. Since CHS has stepped in, the number has dropped."

Previous lawsuits

Commenting on the large number of lawsuits filed by the hospital prior to the CHS agreement, Faile said only, "I think the hospital was struggling financially. Perhaps they were trying to get needed resources." In 2009, the hospital reported a net income of $788,347. The hospital had suffered a loss in five of the previous six years. In 2007, the loss was $997,367, and the hospital suffered a loss of $1,749,285 in 2008. The hospital realized a profit of $66,634 in 2010, and a loss of $242,088 in 2011. Through the first half of the current fiscal year, the hospital is reporting a profit of $747,258. Under terms of the 10 year management services contract with CHS, Wilkes Regional is paying CHS an annual management fee equal to .75 percent of the hospital's net operating revenues, and at the board's discretion, an incentive compensation award of up to .25 percent of the hospital's total net operating revenues for the year, not to exceed $850,000 per year for the first five years of the contract. For the second five years, the board will pay CHS a base fee of 1 percent of total net operating revenues, plus, at the board's discretion, up to .5 percent of the total net operating revenue, not to exceed $1.5 million.

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