US Community Health Centers' Debt Collection Practices Spark Industry and Regulatory Debate

Community health centers (CHCs), federally qualified health centers designed to provide primary health care to underserved low-income populations, have been reported to engage in debt collection practices including lawsuits and wage garnishments against patients, raising concerns about mission conflicts. An analysis of court records reveals multiple CHCs in states like Kansas, Virginia, and Michigan have sued patients for unpaid medical bills since 2020, often targeting uninsured patients who qualify for discounted care due to low income. PrairieStar Health Center in Kansas filed over 1,000 lawsuits since 2020, with patients expressing surprise and distress over legal actions that included additional interest, court fees, and legal costs. CHC leaders cite financial instability, rising operational costs, and unstable funding as reasons to pursue collections as a last resort after providing payment plans and discount options. Federal law requires CHCs to make "every reasonable effort" to collect payments, but does not specifically mandate litigation or wages garnishments, indicating these practices are discretionary. Some CHCs outsource collections to third-party agencies, which may take significant portions of recovered funds and use aggressive tactics such as arrest warrants for non-appearances. Recent Virginia legislation limits wage garnishments for patients who qualify for financial assistance, signaling regulatory shifts that could impact CHC debt recovery approaches. Contrasting approaches exist among CHCs; some opt against external collections to maintain patient dignity and avoid deterring care, while others actively pursue legal remedies to mitigate financial losses. Experts suggest aggressive collections can undermine the safety-net role of CHCs, potentially deterring future care and disproportionately impacting vulnerable populations. Industry groups advocate for state-level reforms to cap medical debt interest rates, limit lawsuits, and ban wage garnishment, aligning CHC practices closer to nonprofit hospital debt collection standards. This evolving landscape highlights tensions between CHCs' financial sustainability and their foundational mission to provide accessible care to economically disadvantaged individuals.