Getting Stuck: Uninsured Patients Slammed with Lawsuits by Not-for-Profit Hospital

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Car horns blared and the 5 o'clock traffic stacked up behind him as Ignacio Alaniz rolled back under his car to try to start the engine again. As he lay there, touching the wire to divert the starter on the ancient white Buick Century, he heard a click as the car jolted alive and popped into gear. Seconds before it happened, flat on his back on the cool pavement that January night in 2012, belly pressed against the metal works, Alaniz realized he was about to be run over by his own car.

More than 3,000 pounds of metal smashed across his chest. He heard the snap of his ribs, the sharp crack of bone as the front wheel and then the back slammed into his torso. The car sped blindly forward, popped over a curb and sailed into a ditch. People watched as Alaniz, bloody and twisted, pulled himself up off the pavement. He tried to walk, moving with lurching steps, but his insides were screaming.

"Don't move," he heard a woman say as she pulled out her cell phone to call 911. Once she knew the ambulance was on its way, she let Alaniz use her phone to call his girlfriend, Theresa Malone.

Seeing a number she didn't recognize, Malone would normally have ignored the call, but she answered.

A neighbor drove her to Old Galveston Road, just minutes from Malone and Alaniz's home in south Houston. Alaniz was already in the ambulance. His chest and right arm were puffing up as the injured parts filled with fluid. Beneath the blood and the swelling, she could see the solemn black eyes, the droopy, graying mustache he wore, the face of the man she'd been with for more than a decade. She asked if she could ride in the ambulance.

They weren't taking him in the ambulance, an emergency medical technician told her. The thudding whir of a helicopter filled the air. EMTs loaded Alaniz aboard. They were taking him to Memorial Hermann, in the Texas Medical Center, the EMT said. The helicopter ride meant a difference of crucial minutes as Alaniz's abdomen filled with fluids and his body went deeper into distress.

By the time the helicopter landed, he was already $12,196.37 in debt.

Alaniz didn't have insurance — he'd just gotten a new job after months of being out of work, he was healthy and it would have taken too big a chunk out of his weekly paycheck — and Malone wondered for a second why they weren't taking him to Ben Taub, the public hospital that's part of the Harris Health System (formerly the Harris County Hospital District).

By the time Malone got there, Alaniz was already in surgery. The doctors weren't sure he was going to make it, she was told. Doctors cut a footlong crescent-shaped incision in his side to get at his collapsed lungs and nine broken ribs. They grafted a square of skin onto his right elbow, covering the space where it had been ripped open to the bone. They set his broken arm and treated the burns from the tire tread across his stomach.

The next few days passed in a blur. While Alaniz was in the intensive care unit, in too much pain to be conscious, Malone started worrying about the bill. She knew this hospital wasn't cheap.

They weren't wealthy people, she told Memorial Hermann Financial Counselor Linda Ramon. Malone worked as an office coordinator and Alaniz had just gotten a job refurbishing turbines. She was paying for gas and parking with money collected by her co-workers.

Ramon reassured her that Memorial Hermann was a nonprofit hospital with a charity arm that would help them. If Malone could put down $100 in good-faith money, they would be able to work something out.

The bill was now at $59,000, Ramon told her, looking through Alaniz's file. A soft electric ding sounded from the computer.

"What was that sound?" Malone asked.

"Oh, the bill just went up $10,000," Ramon said.

Malone got the first official bill while Alaniz was still in the ICU. She tried to talk to Ramon about it, but Ramon didn't return her calls. Once, Malone flagged the woman down in the hallway, asking if they could set up a time to talk about how the payment plan would work, what part the hospital would take care of and what Alaniz and Malone needed to start planning to pay. Ramon told her she'd be in touch.

That was the last time Malone saw her.

The total bill was issued in September 2012 and came in at $444,518.11. Malone and Alaniz didn't know what to do with it, so Malone put it in the small brown accordion file she'd placed the other notices in and kept trying to reach Ramon.

On January 5, 2013, Alaniz was served papers informing him that Memorial Hermann Health System, the largest nonprofit hospital in Houston with a flagship facility in the heart of the city's world-famous medical center, was suing him for $456,675.23 — the sum of his bill plus interest and $2,500 in legal fees.

As a nonprofit, Memorial Hermann is expected to help those in the community without the means to pay for medical care, which exempts the hospital from paying most federal, state and local taxes. But while the hospital deals with uninsured patients more than any other nonprofit in Houston — partly because of its size and partly because of its Level 1 trauma center that requires it to accept all patients — the hospital sues some of its uninsured patients, often those least able to pay.

A Houston Press review of civil court documents filed with the Harris County District Clerk shows this has been going on since 1999, with Memorial Hermann filing against more than 90 patients for unpaid medical bills. Many of the cases filed have been dismissed for want of prosecution, meaning that the hospital decided not to prosecute the cases. Often, the cases not dismissed were seen through to default judgments when the parties being sued by Memorial Hermann didn't answer the suits. In lieu of a trial, judges ruled with the hospital and ordered unrepresented defendants to pay at least a portion of their debts. In some cases, patients were able to renegotiate and pay a fraction of what they were originally charged. In others, they were ordered to work out a plan to pay off thousands of dollars in bills.

Memorial Hermann spokesman James Campbell declined to comment on the Alaniz case, saying he could not discuss it because it is pending litigation. He said that Memorial Hermann sees more uninsured patients in the community than any other hospital, including the Harris County Health System. Memorial Hermann donated just under $400 million in uncompensated care last year, Campbell said.

He said the hospital doesn't differentiate between uninsured and insured patients in regard to patient bills. "When it comes to uninsured patients, we don't look at it that way as a system. We look at it as debt collection, just like any other hospital," Campbell said.

"There is nothing contradictory about being a not-for-profit organization and collecting a debt," Campbell stated in an e-mail.

Memorial Hermann is a nonprofit, but the hospital system's annual revenue in fiscal year 2010, according to the most recent annual report filed with the U.S. Department of Health and Human Services, was more than $2.9 billion. Expenses came in at under $2.7 billion, leaving more than $228 million in revenue on the table, according to the report. Even after subtracting the $582 million Memorial Hermann donated in care — the bulk of it made up of unreimbursed medical expenses from Medicaid patients — the nonprofit still recorded a profit of more than $200 million and an endowment of more than $3.8 million. Memorial Hermann President and CEO Daniel Wolterman was paid a salary of close to $2.2 million that year.

Despite the hospital's healthy financial books, Alaniz's story isn't an unusual one. Lawyer Tariq Gladney has represented clients who qualified for assistance from Lone Star Legal Aid and didn't have the means to pay hospital bills. In the six or seven cases in which he has represented Memorial Hermann patients since joining the nonprofit legal service in 2008, he said, it was a matter of staring down the hospitals, explaining that his clients would never have the money to pay.

A client's home and up to $60,000 of property for a family of three are protected by law from collections. It's rare to see a client in Lone Star who is able to own a home or has more than $60,000 in assets, Gladney says. But he says that Memorial Hermann lawyers have sat across from him like cowboys in an Old West shootout, unwilling to back down and acknowledge that they wouldn't be collecting the debts. Memorial Hermann dropped the cases in every instance, but Gladney is still mystified as to why the hospital's lawyers pursued these suits in the first place.

"I have yet to see another hospital do this," Gladney said. "It doesn't make much financial sense. Most of my clients are judgment-proof."

It is possible to argue the hospital lawyers down if you can't get your case dismissed. One patient, Theodore Achtarides, responded to the 2009 suit brought against him by filing a sworn affidavit flatly denying all of Memorial Hermann's allegations. He contends that he never gave the hospital permission to treat him when he was in sound mind, since he was taken there while in medical distress. The hospital sued Achtarides for more than $300,000, including more than $77,000 in legal fees. Ike Exezidis, the lawyer representing Achtarides, stated in court documents that adding the legal fees wasn't fair; Achtarides insisted that he was never served with papers notifying him of the suit or contacted by Memorial Hermann's lawyers. His bill was also higher than it would have been if he had had insurance, Exezidis pointed out in the affidavit. Achtarides also picked up a staph infection while in the hospital, he added.

"I am not being charged the reasonable and necessary billing for the alleged services provided," Achtarides stated. "Plaintiff is seeking payment for an amount which is not in accordance with all other contracts they enter into to provide medical care, such as with other health insurance companies and social security."

After Achtarides filed his many objections to the suit, the two sides worked out an agreement. He was to pay about $20,000 in medical expenses and $5,000 in legal fees, a fraction of the bills cited in the original suit.

However, Vivian Ho, the James A. Baker III Institute Chair of Health Economics at Rice University, backs up the Memorial Hermann ­position, insisting that hospitals shouldn't automatically wear the black hat in such cases. About 28 percent of Houston's population is uninsured. Ben Taub, the only public Level 1 trauma center in the city, is one of the busiest trauma centers in the nation, partly because it's the place uninsured people go for medical care. Memorial Hermann-Texas Medical Center, the flagship facility in the 12-hospital system, also calls itself one of the most active trauma centers in the nation, taking emergency patients from all over Houston whether they have insurance or not, as required by law. This comes at a time when nonprofit hospitals across the country have recorded a jump in unpaid medical bills, which rose to more than $41.1 billion in 2011, according to a report issued by the American Hospital Association. Because of this, Memorial Hermann also deals with a large portion of the uninsured population, Ho said.

Memorial Hermann is a business, Ho said, and while it has a charity, costs are rising for hospitals just as they are for patients. "If they're going to take on so many patients that have limited resources, it's going to make sense that they're going to be more aggressive to collect payments from the ones they think can pay," she said. "It would be a mistake to assume this is just Memorial Hermann being greedy."

Still, Robert Painter, a Houston lawyer who specializes in representing patients against hospitals, says he was appalled early this year to realize Memorial Hermann was suing patients. He looked around and couldn't find anything similar happening at the other nonprofit hospitals in the Houston area.

"Memorial holds itself out as a nonprofit system, trying to help the public and the uninsured with funds from George Hermann," Painter said. "The behemoth then, on a very regular basis, will sue its uninsured patients. A nonprofit system that is supposed to have the best interests of its patients in mind is suing the most vulnerable patients, the ones they should be helping."

Painter dug up the records of the most recent suits filed and sent the people listed in the suits certified letters in which he offered to represent them against the hospital, on a contingency fee basis so he would get paid only if they won. He told Alaniz and Malone that the hospital was changing its name to the Memorial Hermann Health System and that Alaniz would be served new papers reflecting the name change in coming weeks. When the papers showed up, just as he'd said, Alaniz and Malone decided to take Painter up on his offer.

If they'd known this was what staying at Memorial Hermann would mean, Malone said, she and Alaniz would have gone to another hospital. But they never really had a choice. There are only three Level 1 trauma centers in Houston and four in the larger area, counting the University of Texas Medical Branch in Galveston. When responding to a call, EMTs have the authority to take the patient to the hospital that is best equipped to handle the injuries at hand, without any consideration of cost.

There's a "golden hour" with these kinds of injuries. Being taken to the wrong hospital, or taking too long to get to the right doctors, could mean death after incurring a massive trauma, such as the one Alaniz experienced.

The law required the hospital to keep Alaniz until he stabilized — a fuzzy term that usually means until the patient is able to leave. Most likely there was never an option to transfer him to another hospital once he got into the Memorial Hermann system.

Even if he had been able to make the transfer, it would have been difficult to find another facility willing to take him without insurance. If he had tried to move to a county hospital, either Ben Taub or Lyndon B. Johnson, there was a question of whether those packed public hospitals would have had space for him. There was nowhere else for him to go.

People like Alaniz face a difficult situation when they need emergency care, because it can often cost almost double what it would cost an insured person by the time the patient is left holding the final bill, Painter said.

Hospitals are like car lots when it comes to pricing services. There is a sticker price on individual services, but if the patient has Medicare or Medicaid, government officials tell the hospital what price they'll actually pay. If the patient has insurance, the insurance companies negotiate the original price down to something more reasonable.

Alaniz didn't have anyone who would try to negotiate the price down. His bills were adding up, and there was nothing he could do about it. As nurses administered the drugs, gave him a pillow to prop him up so he could breathe and wheeled him off for X-rays, they would scan each item.

Alaniz was being billed $24.50 to $49 for the silk sutures holding the long crescent of a surgical scar on the left side of his back closed in a cross-stitch. He was to pay $486 per day for oxygen and $1.25 per 5-milligram tablet of Oxycodone, one of the many painkillers that got him through those first days when all he seemed to do was try to ride the waves of pain before he fell unconscious again from the drugs. He was billed $174 each time they X-rayed his chest. The X-rays alone cost $18,055.57.

Malone asked if the nurses might use some of the stuff left over from the last time they'd come through his room on their rounds. They continued on, pulling out new medical supplies, one more item on the bill with each beep of the ­scanner.

The individual charges were alarming, but the sheer weight of the debt didn't sink in until Alaniz realized he'd have to face it in court.

Court is where a lot of these cases end up. ­Patricia Keel's husband landed in Memorial Hermann in 2005 after a massive heart attack. Johnny Keel was in the middle of an emergency triple bypass when Patricia Keel learned that her husband's employer hadn't been paying his ­insurance.

In 2006, Keel wrote a letter to the judge in her case, begging the court to help the Keels work out some kind of deal with the hospital. They were four payments behind and in danger of losing their home. Johnny Keel had gone back to work, but most of his paycheck went toward health insurance.

"We have not previously replied to the attorney because we didn't have any money to give them and didn't think we could come to the table without money to offer," she wrote. "We have since realized that simply not dealing with financial situations doesn't help, whether you have money or not."

They'd lurched into debt after Johnny Keel's heart attack and were filing for bankruptcy, Keel told the judge in her letter, begging him for leniency.

Memorial Hermann lawyers had the letter thrown out and the judge handed down a declaratory judgment. The case was dismissed for want of prosecution two years later, but the Keels' marriage had busted up by then. Johnny Keel must have worked out some deal with the hospital because he returned to the hospital recently with more heart problems, Patricia Keel said. Between the heart attack, the surgeries and the massive debt, the burly, confident man she'd known disappeared. "He was a broken man after that," she said.

People expect nonprofits to function as pure charities, but that's not how the systems are built now. University of Houston professor Patricia Gray, a former state legislator who serves as director of research at the school's Health and Law Policy Institute, says hospitals in the United States moving to sue uninsured patients isn't as unusual as you'd think. Nonprofits have been landing in hot water for years over the quality of their charity work and the way they handle uninsured patients, Gray said.

"I don't think they want to appear that they're just giving it away to anyone who walks in the door," Gray said. "Hospitals do have to get paid. In this country, I think, patients think that health care is a right, but this is one of the few countries where it isn't."

While hospitals like Memorial Hermann wear the hat of being a nonprofit, rising costs and the need for funds have shaped them into entities that function more like for-profit companies. Once that shift takes place in a large organization, it's difficult to maintain the charity approach in the system, according to the book To Profit or Not to Profit, a study on the financial changes in nonprofits.

UTMB, which is located in the district Gray represented as a legislator, has been sharply criticized for years with complaints that it doesn't do enough to maintain its nonprofit status and tax exemption in the community. MD Anderson came under fire for attempting to turn away a Lake Jackson woman diagnosed with acute leukemia because her limited-benefit insurance wouldn't cover enough of the bill and hospital officials wanted her to pay more than $100,000 up front, Gray said. MD Anderson was also the focus of a recent story in Time magazine in which the author called out the nonprofit hospital for pulling in a profit of $531 million, a 26 percent margin on $2.05 billion, and for paying its president and CEO, Ronald DePinho, a salary of more than $1.8 million.

Texas requires that at least 4 percent of patient revenue actually be spent on charity care, but right now that includes full-price bills for the uninsured and the charges that Medicaid won't reimburse, along with various community services, meaning the hospital is providing charity care, so the money doesn't go as far as you'd think, Painter said. Who qualifies for the charity care can also be a murky question.

Patients at or below 200 percent of the Federal Poverty Guidelines will receive charity care, Memorial Hermann's Campbell said. Those who are 201 percent to 400 percent above the federal poverty level are charged on a sliding scale. According to the current guidelines, that means anyone who earns less than about $23,000 a year qualifies for free care. You have to make about $46,000 or less to be charged on a sliding scale. This sounds like a clear-cut policy, but Alaniz and Malone never got a direct answer about whether they qualified for charity.

President Obama's essentially stalled Affordable Care Act aims at fixing some of these ­problems. The act has language that will shift hospitals away from charging a fee for each service and toward focusing more on the quality of care. If a patient is successfully treated and doesn't have to return to the hospital, the hospital will be rewarded for that.

Nonprofits will also be required to be more transparent about how patients can qualify for charity programs, what bills will be covered and what the patients will have to cover — a way of trying to force hospitals to drop the veil hiding what people are expected to pay for their medical care.

Alaniz got out of the hospital in February 2012, after almost a month in the ICU. He was working on his own physical therapy using a pulley he'd rigged up in the garage, because he and Malone couldn't afford the physical therapy appointments suggested by the doctors, $70 a visit.

Since the accident, Alaniz has stayed focused on getting his strength back. The white Buick sits in back of the house. Alaniz shakes his head when he looks at it — he hates the sight of the car — but he repaired it and is keeping it. The car is worth something only as scrap metal, but if his truck ever gives out, the car might be his only option. Saddled with debt from the hospital that saved his life, he might not be able to get another vehicle loan.

He still walks carefully, and the tattoos across his back and chest hang crooked now, reshaped across his body according to how the car crushed him. His bones ache when the weather changes, and he goes out in the garage in the evenings to hang off the rope and pulley he set up, mimicking the one in the physical therapist's ­office.

He finally got a new job and went back to work a couple months ago. When he got his first paycheck, he wondered how long he'd be taking home the full check before the hospital started garnishing his wages (which actually the hospital can't do).

When Alaniz was served with the papers informing him he was being sued, he racked his mind for a way to come up with the money. He might have to go sit this out in jail, he told Malone. He wasn't sure how long it would take to pay his bills, but it was the only thing he could think of to try to clear the debt. Of course, hospitals don't accept time in jail as payment. Now Alaniz and Malone are hoping the countersuit against the hospital, slated to be heard in civil court in October, will do what they were unable to and find a legal way to deal with the debt.

He and Malone have been together for 13 years. They were first introduced on a blind date in 1980 and dated for a year before they split up. He moved on to other relationships and Malone became a widow when her second husband died. They met again at a party in 2000.

He moved into the little house she had bought and paid off with her second husband. Alaniz started talking about marriage, but Malone told him he needed to pay his child support and clean up his finances before they got legally joined. They'd started talking about marriage again just before the accident, but the same people who saved his life have now crippled him with debt. Now Alaniz is the one hesitating. If he doesn't win when his case goes to trial in October, he could be paying off this debt for the rest of his life. He doesn't want to drag Malone down with him.


Hospitals began as the last place anyone wanted to be.

The first charity hospitals, those established in Europe in the Middle Ages and hundreds of years later in America, were places for the poor, the dying, the mentally ill, the disabled and the homeless. If you had any means at all, you stayed home and the doctors came to you.

At the beginning of the 20th century, churches and benefactors began establishing more nonprofit hospitals in the United States. Famed oil man George Hermann, made rich off his wells in the Humble Oil Field, had been in poor health for years and had an abiding fascination with hospitals. He visited hospitals and spas all over the country and around the world, including the infamous Kellogg sanitarium in Battle Creek, Michigan.

Hermann died at Johns Hopkins in Baltimore, but he'd always felt Houston needed a first-class hospital, so he left the bulk of his $2.6 million estate and a chunk of land to the city to establish a nonprofit hospital. It opened in 1925 with 100 beds.

Meanwhile, medicine galloped out of the Dark Ages with developments in anesthesia and antibiotics and a myriad of other advances. Before these changes, the biggest cost people had faced when they were sick was from missed days at work. Suddenly doctors had more options to treat patients, and medical care became the biggest expense.

The number of people buying health insurance and demanding hospital care skyrocketed. At the same time, the Great Depression ushered in President Franklin D. Roosevelt's New Deal and the expectation of a society with safety nets for the poor. Health care, once a luxury of the rich, was beginning to be seen as something everyone should have access to.

While Houston's medical center was growing, the laws and approaches to hospitalization were changing as well. Through the Hill-Burton Act of 1946, legislators encouraged hospitals to modernize their facilities by offering grants to nonprofits that agreed to take care of the poor for free or at reduced prices.

Medical funding shifted again with the advent of Medicare and Medicaid in the mid-1960s. At the same time, hospitals started coming under pressure to admit people to emergency rooms even if they couldn't pay for care. Texas was one of the first states to enact a law to that effect, but it wasn't until 1986 that Congress passed the federal Emergency Medical Treatment and Labor Act, which required hospitals participating in Medicare and Medicaid programs to provide "stabilizing care" to all ER patients. The law was put in place to ensure that someone badly injured or sick wouldn't be denied care.

Over the years, Hermann became a part of the Texas Medical Center. In 1997, Hermann merged with Memorial to become Memorial Hermann. Within two years, the hospital began appearing as the plaintiff in lawsuits against patients.

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