Nonprofit hospitals have the right—indeed the obligation—to pursue outstanding debts. But aggressive debt collection tactics can rightly spark public backlash.
The U.S. Treasury Department this holiday week quietly released its final regulations governing patient protections from overly aggressive debt collections tactics by "tax-exempt" hospitals.
These new regulations shouldn't surprise anyone. The feds have been talking about them for years now as a component of the Patient Protection and Affordable Care Act. A cursory review shows there is nothing in the new guidelines that wasn't anticipated. For expediency's sake, read the details here.
The release of the new regs comes just days after Pro Publica published a series of devastating reports detailing the aggressive and possibly illegal debt collection practices at several nonprofit hospitals, specifically in Missouri and Alabama. The Pro Publica stories were widely read after they were picked up by mainstream media, including NPR.
Unfortunately, the actions of a few nonprofit hospitals tarnish the entire sector. In the media, you are guilty until proven innocent, and even then suspicions linger. Frankly, it would not be unfair to suggest that these aggressive practices are limited only to the hospitals identified by Pro Publica.
Are these aggressive debt collection tactics a symptom of a larger challenge facing many nonprofit hospitals? I believe so, and I am not alone.
Jill Horwitz, a professor at the UCLA School of Law, and a public health policy expert, says these new guidelines, along with ongoing Congressional investigations into care provided by nonprofit hospitals, and the redesign of the federal 990 returns "all point in the direction of requiring hospitals to provide free care for indigent patients in exchange for their tax exemption."
"I worry about that focus because non-profit hospitals do a lot of things to improve the health of everybody, not just indigent patients," Horwitz says. "There have to be trade-offs. If you require hospitals to spend more money providing free care, they are going to have to make cuts elsewhere or find ways to increase revenues. Neither of those responses are really desirable."
"Making cuts elsewhere means providing less-profitable services that a lot of people, especially poor people need and making money requires focusing on profitable services and cross-subsidizing to meet the free care provision requirement. That means doing more diagnostic imaging, more invasive cardiac treatments, and more orthopedics, which are already areas that the federal government worries that we provide too many services."
Horwitz's big picture arguments are valid and nuanced, and I hope to speak with her again in the coming year to expand on her observations.
For our immediate purposes, however, rest assured that cross-subsidizing is not what local media is going to focus on if you've got a bill collector demanding credit card swipes from bleeding patients in the emergency department.
The issue of debt collection and bill padding—particularly at nonprofit hospitals—pops up every so often. Back in 2010 nonprofits were rapped for their failure to inform patients about their eligibility for charity care. In 2013, public outrage followed a report detailing the strong-armed tactics Accretive Health Inc., a debt collection agency in Chicago whose work on behalf of its hospital clients brought down the wrath of the Minnesota Attorney General.
Clearly, healthcare billing and debt collection are issues that resonate strongly with the American public. They tap into our anxieties about our abilities to pay for healthcare, even if we are insured. This anxiety is well-founded.
A Kaiser Family Foundation study published early this year found that one in three Americans has difficulty paying for medical debts. KFF data further shows that 70% of people with medical debt are insured, and that people with employer-sponsored coverage represent 54% of medical debt cases. These are the people who are playing by the rules and they're still in financial straits!
Healthcare is expensive and complex. Health insurance benefits copays and networks can be undecipherable for people not schooled in cryptology. Those entering the healthcare labyrinth are usually sick, or in pain, or tending to a loved one, and stressed out. It's almost impossible to get an estimate for what you'll eventually pay, and healthcare is still years behind retail when it comes to pricing transparency.
If you're in senior leadership, you should be able to answer these questions: What is your hospital's debt collection strategy? Are you telling your patients about their charity care options? Do you know how far your hospital will go to collect a debt? Are you demanding payment in full or threatening to dun wages, or are you attempting to work with your former patients to find a less-draconian repayment scheme?
If you contract with a debt collection service, do you know how they're attempting to collect your debts? Have you specifically told your debt collectors how far they can go in your name to pursue repayment? Have you spoken with former patients who've been through your debt collection process? Is your strategy to plead ignorance if any unsavory debt collection tactics, either in-house or through a collection service, are made public?
Always keep in mind the potential for public backlash when your nonprofit hospital fashions a debt collection strategy. Nonprofit hospitals have the right—indeed the obligation—to pursue outstanding debts. When you're fashioning those guidelines, however, don't just consider what the Internal Revenue Service might think. Envision how your debt collection practices would look if they were reported on the Five O'clock News.
John Commins is the news editor for HealthLeaders.