Nonprofit hospitals in particular are feeling the strain of new regulations on top of increasing patient balances and stricter collection requirements. Deductibles are up nearly 40% from the average for an individually purchased plan before the health care reform, yet the Affordable Care Act requires nonprofit hospitals to follow “reasonable billing and collection requirements,” and to cease “extraordinary” debt collection. But what is considered “reasonable” or “extraordinary”?
In this article we hope to clear up the questions about what you can and cannot do, and to provide you with the resources to do the research you need to ensure you are compliant.
What are the new collection requirements under the Affordable Care Act?
Since the implementation of the Affordable Care Act in 2010, charitable hospitals have been waiting to hear what the final requirements being placed on them will be. On December 30, 2013 the IRS announced that although no final decision has been made, hospitals should rely on the proposed regulations for now.
The proposed regulations lay out four general requirements that charitable hospital organizations must comply with on a facility-by-facility basis.
- Each organization must establish written financial assistance and emergency medical care policies;
- Organizations must limit the cost for emergency and other medically necessary care to individuals who are eligible for assistance under the abovementioned financial assistance policy;
- Charitable hospitals must make reasonable efforts to determine whether a patient is eligible for financial assistance under the aforementioned policy before engaging in extraordinary collection actions against the individual, and;
- Each nonprofit hospital organization must conduct a community health needs assessment (CHNA), and develop a strategy to implement it once every three years.
What qualifies as a “reasonable effort?”
The third requirement under the proposed regulations calls for hospitals to make “reasonable efforts” to determine whether a patient is eligible for financial assistance before engaging in “extraordinary” collection practices.
So what is “reasonable”? The proposed regulations state that in general, to have made reasonable efforts, a hospital facility must provide a patient with a 120-day notification period, beginning with the date of the first billing statement, during which time the patient can decide whether they will apply for financial assistance. After the initial 120 day period, the hospital can undertake extraordinary collection actions; however, they must still accept a patient’s financial assistance application for an additional 120 days.
What is an “extraordinary” collection practice?
Hospitals can no longer engage in what are considered “extraordinary” collection actions until such time as they can reasonably determine whether a patient qualifies for financial assistance. As a result, the regulations now prohibit engagement in the following collection activities within 120 days of the patient receiving a bill:
- Reporting a patient’s delinquent debt to a credit bureau;
- Selling a patient’s debt to a third party;
- Placing a lien on a patient’s property;
- Foreclosing on a patient’s real property;
- Attaching on or seizing a patient’s bank account or any other personal property;
- Commencing a civil action against a patient;
- Causing a patient’s arrest;
- Causing a patient to be subject to a writ of body attachment; and,
- Garnishing a patient’s wages.
It is important to note that nonprofit hospitals can still engage a third-party to collect a patient debt.
Medical Debt Resolution Best Practices
The new regulations lay out what nonprofit hospitals cannot do, but what are some best practices they can engage in to resolve medical debt?
The Healthcare Financial Management Association (HFMA) and the Association of Credit and Collection Professionals (ACA International) have joined together to develop guidelines for managing patient accounts from the moment a statement is sent to a patient to when the account is closed.
The full report can be found here.
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Written by Ali Bechtel, Public Relations Coordinator
This information is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Although we attempt to provide up-to-date information, laws and regulations often change. We make no claims, promises, or guarantees about the accuracy or completeness of this document. For legal advice, please consult an attorney.