Docs who got loans owe millions

High default rates led to cancellation of loan program.

Doctors who left taxpayers to pick up the tab for their medical school under a long-defunct federal program owe a combined $115 million, and three practicing area doctors have court judgments against them for nonpayment of these loans, an I-Team investigation found.

In this federal loan program, 55 Ohio doctors owe a total of $4.3 million with judgments dating back to 1994, according to the U.S. Attorney’s Office.

One Cleveland-area psychiatrist, who tops the Ohio list, owes $393,452. She is still licensed to practice medicine and is currently living in Los Angeles, according to the Ohio Medical Board.

The loans were obtained through the Health Education Assistance Loan (HEAL) program, which was launched in 1978 to help low- and moderate-income graduate students pay for medical school. It was discontinued in 1998 after years of criticism and ballooning defaults, in part because the program relied on interest rates that fluctuated sometimes into the double digits.

Dozens of Ohio doctors have not complied with their court-ordered payments, the I-Team found, meaning they are considered in default by the government and were added to an exclusion list of people who can’t bill federal programs such as Medicaid or Medicare.

The exclusion list includes Martin Hobowsky, who owns a small doctor’s practice in South Charleston; Anthony Hall, a Springfield dentist; and Donald Hunter, a Fairborn chiropractor. The latest available records, from 2013, showed that Hobowsky owed $186,343, Hall $165,096, and Hunter $65,882.

Hall and Hunter say they have made payments on their debt since landing on the list.

Federal regulators have criticized the HEAL program for not aggressively pursuing borrowers with have income. A 2010 report from the U.S. Department of Health and Human Services inspector general found nearly half of the doctors in default earned income at that time, yet most made no loan payments.

“This should be a cautionary tale,” said Leslie Paige, vice president for policy at Citizens Against Government Waste.

“The federal government is very good at starting new things. What they are very bad at is measuring outcomes, chasing the money after it’s gone, exercising oversight over any of it or clawing the money back once it’s gone.”

‘We’re not making any money’

Doctors defaulted on their federally backed student loans for a myriad of reasons. A couple of the doctors on the default list are dead. Others had their licenses rescinded or denied because of criminal charges.

Others simply fell behind on their payments.

Hobowsky, who earned his medical degree in 1986 from Oklahoma State University, said he can’t practice medicine the way he wants and repay his student loan debt.

“The reason I got into default was I wanted to do medicine the old timey way, where doctors would practice by themselves, hanging up a shingle outside the office,” he said. “That’s not encouraged these days.”

Hobowsky said increased federal regulation has pressured doctors to join hospitals and go into groups to make money — not work out of their homes and make house calls.

Hobowsky’s home, where he works, is valued at $138,800, according to public records.

Hobowsky said he stopped taking health insurance 10 years ago. In 2010, the Ohio Medical Board suspended his license for 18 months after an investigation found he was not in compliance with federal law pertaining to controlled substances. He is currently semi-retired, and the government has garnisheed his retirement to help recover the loan amount.

With the amount he owes and his income, however, Hobowsky, 71, said the loan won’t ever get repaid in full. At the current rate, he said, the loan won’t be paid off until “after I die, and many lifetimes afterward.”

“We’re not making any money, so to pay back this humongous loan is a very, very slow process and almost nearly impossible for some people,” Hobowsky said.

A majority of the defaulters had some income, yet made little or no payments on their HEAL loans, according to the HHS inspector general’s office’s report in 2010. Of the 486 defaulters who had some income that year, 312 made no loan payments. Of the 174 who made a payment, nearly half paid less than $2,000 each, according to the report.

The median earnings for defaulters who had income that year was $34,387. But 98 defaulters earned at least $50,000 and made no payments, according to the IG. And four of those who made no payments earned more than $200,000. Combined, the 98 loan recipients owed $15 million.

HHS officials agreed to better track the income of those who have defaulted on the loans and help investigators seek repayment. But administration of the program was passed this year from the health agency to the U.S. Department of Education.

The I-Team acquired a list of doctors in the exclusion database by examining HHS’s archived webpages from 2013. DOE refuses to make public an ongoing list of doctors who defaulted on HEAL loans and instead will publish the list once a year starting in summer 2015.

‘I will pay this off’

A majority of HEAL loan defaulters are chiropractors, an industry whose reps lobbied for inclusion in the program, according to a 2010 report from the non-profit Sunlight Foundation, which argues for more accountability in government.

Donald Hunter, a chiropractor who has an office on East Dayton Yellow Springs Road in Fairborn, has been on the exclusion list since 2009. Hunter would not comment for this story except to say that he is making payments on his loan and doesn’t believe he should be listed as in default.

A receptionist in his office tells callers the office does not bill insurance directly. Instead, patients pay for their services and then work with their own insurance company to see about reimbursement.

When a reporter called Anthony Hall’s office in Springfield, the receptionist said he no longer accepts Medicaid and is only open Tuesday and Wednesday.

Hall was barred from accepting Medicaid in 2012, though the ban didn’t take effect until the following year. Records show he received $80,069 in Medicaid payments between 2010 and 2013. According to Hall, Medicaid pays about 20 to 25 percent of what doctors bill.

Hall entered into a repayment plan with the U.S. attorney’s office in 2005, after a judgment was entered against him for not paying on his loan. He again fell behind on his payments and was put on the exclusion list after a back injury reduced the number of hours he could work, he said.

“I wasn’t practicing nearly as much in terms of the number of patients I can see,” he said, estimating his business dropped off by up to 70 percent.

In 2011, Hall was arrested and charged with attempting to possess cocaine. He avoided prosecution by admitting to the court that he has a drug and alcohol problem and accepted intervention in lieu of conviction. His state dental license was not impacted.

Hall, who graduated in 1992 from a private medical college in Nashville, Tenn., said he has repaid about $110,000 of his loan debt and currently owes about $60,000. He said he is working with HHS to get reinstated into the Medicaid program.

“I will pay this off within my ability to work and my ability to work has been compromised,” he said.

Pile of debt

The HEAL program helped more than 157,000 borrowers get $4 billion in loans. But medical college experts say the loan’s crushing variable interest rates — which rose to double digits at times throughout the 20-year program — sometimes made the federal program a bad deal for students.

The program was directed at poor and middle class students because other federal loans available at the time didn’t cover the full cost of attending medical school. However, some graduates were left drowning in debt. The University of Cincinnati’s medical school stopped offering the loan program before it was entirely discontinued by the federal government in 1998.

“They were very expensive and they got really, really expensive,” said Dan Burr, financial aid director at UC’s medical school. “When I got into financial aid, we were doing very little HEAL loans.”

A student today who plans to finance a four-year trip to UC medical school would have to take out roughly $175,000 worth of assistance — which is about the average loan assistance handed out for American medical school grads who borrow.

Burr said today’s student loan programs provide more protections for students, offering loans set at a fixed interest rate directly through the federal government. But for low- and middle-income students, the pile of debt puts medical school out of reach for many.

“The medical education world has to acknowledge that a lot of people in medical school are the upper earners of America,” Burr said. “You go deeply into debt to become a physician and in, most cases, you have a high salary that makes that debt sustainable. As long as you have that model, you’re not going to change.”

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