Lawsuits and garnishments for unpaid medical debts are back in the news, following a pair of published reports detailing the practice and spotlighting a hospital in Ohio and healthcare facilities in Colorado. Together, the investigations underscore how aggressive collection tactics are reshaping the financial and healthcare realities of many patients, while also raising tough questions for providers, revenue cycle managers, and collectors.
Ohio: Mary Rutan Hospital’s courtroom surge
In Bellefontaine, Ohio, Mary Rutan Hospital has sharply increased its use of lawsuits to collect unpaid medical bills, according to a published report. Once filing fewer than 400 cases per year, the nonprofit hospital has sued nearly 2,700 patients since early 2024. Debts ranged from just over $200 to more than $150,000. Many patients lacked legal representation, leading to default judgments that allow the hospital to garnish up to 25% of wages, plus 8% annual interest.
Hospital leaders defend the approach as a “last resort,” citing pandemic backlogs, undercompensated care, and the need to remain financially sustainable. Critics, however, argue the surge in lawsuits has damaged community trust. Local attorneys note Mary Rutan is unusual in refusing to settle debts for less than the full amount owed — a stance that leaves some patients declaring bankruptcy or entering lengthy, high-interest repayment plans.
Colorado: Garnishment tied to Medicaid billing errors
A separate report from KFF Health News detailed garnishment trends in Colorado, where courts approved more than 14,000 garnishment orders annually tied to medical debt. Many of the cases involved patients who should have been covered by Medicaid, according to the report, but billing errors or miscommunication sent them into collections. Patients were pursued for debts as small as $30, with court fees and interest inflating balances by 25% or more. In one case, a $400 bill ballooned into several thousand dollars.
Colorado allows garnishment of up to 20% of disposable income for medical debt, though state law also provides for discounted repayment plans. Even so, consumer advocates warn that the practice disproportionately affects low-wage workers and can push households into deeper financial distress. Hospitals and collection agencies argue garnishment is rare and a last resort, but the data suggest it remains a significant and growing tool for recovery.
Why it matters
