Changes on the Horizon for Healthcare Debt Collectors

Mike Ginsberg

In the third quarter of 2012, an alarming trend has taken hold in the ARM industry: at all levels of government, the desire to restrict and control the collection of healthcare debt is rampant.

Warning signs began years ago when attorneys general from the states of Minnesota and Illinois launched investigations of nonprofit hospitals with regard to their collection practices. Hearings were held at both the state and federal level to examine the collection practices of nonprofit hospitals and their collection agencies and the media’s focus on consumers who were the purported victims of aggressive healthcare collection practices was relentless.

Once the U.S. Supreme Court deemed the Affordable Care Act constitutional in June of 2012, the IRS moved quickly to carry out its mandate and the trend to control the billing and collection practices of nonprofit hospitals officially took hold.  What is this all about and what is in store for collection agencies and other Revenue Cycle Management firms servicing healthcare providers?

Rozanne Andersen, Chief Compliance and Marketing Officer for Ontario Systems and a dear friend of our firm, takes a deep dive into this important topic in our Q3 Outsourced Business Services Sector Review which is now available for download.

Some of her important findings include:

1. Things are different than when HIPAA first took effect. Back then, members of the healthcare and the collection industries reacted in one of two ways.   One camp believed the sky was falling, took HIPAA and its corresponding regulations very, very seriously and immediately took steps to comply. The second camp’s reaction was much more subdued, thought the HIPAA regulations would and could never be enforced and believed since consumers were not given a private right of action under HIPAA, the need to comply was minimal at best.

If you are trying to assess which camp you may fall into with regard to the proposed IRC Section 501(r) regulations, be aware of several major differences between HIPAA and IRC Section 501(r) in terms of enforcement.  The proposed regulations will be enforced by the Internal Revenue Service rather than HHS. The IRS does have money to enforce the nonprofit tax code.  

2. Two new terms have surfaced. The first term is extraordinary collection activities and the second is reasonable efforts. The proposed rules seek to limit the use of extraordinary collection activities during the 120 day period beginning with the date of the first bill.

3.  Legal/judicial process is further defined in the proposed rule to include:

• Placing liens on property;
• Foreclosing on an individual’s property;
• Attaching or seizing an individual’s bank acct or other personal property;
• Commencing a civil action;
• Causing an individual’s arrest;
• Causing and individual to be subject to writ of body attachment; and
• Garnishing wages

4.  Rep. Barney Frank (D-Mass.) introduced a revised version of H.R. 4101, the Fair Debt Collection Practices Clarification Act of 2012, in the U.S. House of Representatives. The bill was later reintroduced as H.R. 5794 with the same title.  This bill remains on hold. Word from the Hill indicates Rep. Frank will not attach his proposed amendment to the FDCPA to another bill nor move it on an expedited basis.  Congressman Lee Terry (R-NE) has already confirmed his support of the legislation and has indicated a willingness to reintroduce the bill during the next Congress.

5.  Senator Al Franken’s (D-Minn.) End Debt Collector Abuse Act, which includes tough new rules for medical debt collection agencies and healthcare providers, has had little movement in recent months. This bill seeks to amend the FDCPA by imposing additional requirements on both first and third party collectors of medical debt and increasing the protections afforded consumers under the FDCPA who owe medical debt.

Members of the ARM and healthcare industries should pay close attention to the proposed IRS regulations and the proposed legislation introduced by both Congressman Frank and Senator Franken. The passage of any one will have a dramatic impact on the process by which medical debt is collected, the rights of patients, the use of legal remedies, the credit reporting process and the ability of hospitals to maintain their tax exempt status.