Can the State Collect Medical Debt for UK Healthcare?

Can one medical provider in Kentucky use the state Department of Revenue to collect money it claims its patients owe by:

• levying bank accounts and paychecks,

• placing liens on real property and

• seizing a patient’s state tax return?

That was the question before the Kentucky Supreme Court last Thursday in UK Healthcare v. Moore.

Private attorney Doug Richards brought a claim challenging the Kentucky Department of Revenue’s practice of collecting medical debts on behalf of UK Healthcare (UK Hospital). The DOR collects these debts using its supercharged collection powers—garnishing wages, seizing funds in bank accounts, intercepting state tax refunds—without ever filing a lawsuit.

Multiple legal agencies filed amicus briefs in the case articulating the various ways the Department of Revenue’s collection activity violates the law, harms Kentuckians, and gives UK Healthcare an unfair advantage by allowing it to collect its debts more effectively than other medical providers.

The Kentucky Justice Association wrote a brief detailing the location of UK Hospital in the landscape of Kentucky’s government along with UK’s claim of sovereign immunity. Kentucky Equal Justice Center wrote on the unfair advantage this practice gave UK Hospital, the unfairness of allowing debt collection without judicial oversight, and the distorting effects this practice has on the marketplace of medical providers. Finally, Kentucky’s four legal aid organizations (Legal Aid Society, Legal Aid of the Bluegrass, AppalReD Legal Aid, and Kentucky Legal Aid) filed a brief on the impact this practice has on their extraordinarily vulnerable clients.

Here is a link to a Dropbox folder of all the briefs before the Kentucky Supreme Court, including the three amicus briefs filed to challenge the practice of the Department of Revenue collecting medical debts for UK Healthcare. (KJA’s brief was written by Kevin Burke, one of the most skilled appellate writers I know, in case you were looking for a model of clear and authoritative writing.)

I will also just mention that KEJC’s brief contains the absolute best line I’ll ever write in a legal brief, no question:

This case highlights just one of the many ways that medical billing, medical debt, and collection of medical debt is messed up in this state. According to the National Consumer Law Center, 27% of Kentuckians have medical debt that has been referred to collection agencies. In nonwhite areas of Kentucky, the percentage escalates dramatically: 49% of people have medical debt in collections.

All the companies collecting medical debt in Kentucky should play by the same rules and there should be a judge making sure of it. That’s not happening now and it’s crucially important for UK Healthcare’s patients that the Kentucky Supreme Court end this abusive, unfair practice.