Healthcare News & Insights

New regs affect hospitals’ debt collection

The rules on collecting payments from patients will get tougher on hospitals, thanks to new requirements from the feds.

160931670 (1)At the end of last year, the New York Times wrote, the IRS and the Treasury Department issued debt collection guidelines for nonprofit hospitals that want to maintain their tax-exempt status.

In the past, nonprofit hospitals acted just as quickly as for-profit institutions when it came to collection activities against delinquent patients, regardless of their ability to pay. Now, stricter rules limit nonprofit facilities’ actions before they can send patients to debt collectors or file lawsuits against them seeking payment.

Instead of sending delinquent patients to collections right away, nonprofit hospitals must first determine if the patients meet certain criteria. If an evaluation uncovers that patients have financial need, the hospitals must offer these patients discounts, free care or other financial help.

Nonprofit hospitals must give patient at least 120 days before taking such “extraordinary collection actions” as contacting credit bureaus, filing court cases or passing the patient’s account along to a collections agency.

Make clear policies

The rules also give nonprofit hospitals stricter guidelines about setting prices for services. According to the feds, any patient who’s eligible for financial assistance can’t be charged more than “the amounts generally billed” to people who have private or government insurance.

The new guidance also offers come clarification about provisions of the Affordable Care Act relating to the financial needs of patients. Now, at least once every three years, nonprofit hospitals are required to review and address the specific health needs of the communities they serve.

If nonprofit hospitals don’t meet these requirements, they could be subject to a hefty $50,000 tax penalty.

In addition, each nonprofit facility must have a clear written policy about financial assistance for needy patients. The policy must lay out the specific criteria for eligibility, as well as how patients can apply. And the burden’s on hospitals to make this policy’s existence known to patients.

Big picture thinking

Although these rules only apply to nonprofit facilities at the moment, legal experts in health care believe that they’ll become the standard for all hospitals in time. Reason: The Consumer Financial Protection Bureau (CFPB), which governs debt collection activities, supports these standards.

So regardless of your hospital’s tax-exempt status, it’s a good idea to keep your eye on these guidelines. With organizations like the CFPB working to advocate for consumers’ rights when it comes to collecting all kinds of debt, similar rules could very well apply to your facility and its debt collection policies in the near future.

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