Nevada Healthcare Collections Law Could Backfire

The president of the Nevada Hospital Association told insideARM.com that the state’s new law regulating medical debt collections will force hospitals to sue debtors sooner. The law, which became effective last month, reduced by two years the time a hospital has to pursue and win a judgment for payment.

Previously, Nevada hospitals and their collection agents had up to six years to pursue a legal judgment for unpaid medical bills. If after six years, no legal judgment was made, the debt balance became null and void. Now, a debt balance will be voided after four years if the hospital doesn’t get a legal judgment, said Bill Welch, NHA’s president.

Welch said Nevada lawmakers believe the law will create a better environment for consumers. On the contrary, he said hospitals will just be more aggressive about collecting what they are owed.

“Hospitals are not going to forgo their rights on those accounts just because the deadline for collecting payment moved from four years to six,” Welch said. “They will just pursue their legal rights in four years.”

Just as before, Nevada hospitals will work with their customers to establish a payment plan before pursuing legal action. But if a debtor defaults, the clock starts at whatever time remains in the four year period.

Welch said it’s possible at that point that a hospital will become very aggressive about collecting payment.  “It will force a hospital to do something sooner because it won’t have the time or resources to track the clock,” he said.

As bad debt goes, Nevada hospitals do a better job of collecting payment. In 2006, Nevada hospitals’ bad debt was about $404 million or 4 percent of in-patient billed charges, said NHA financial analyst Dwight Hansen. The average nationwide for for-profit hospitals is about 11 percent, according Fitch Ratings Co.

Still, Welch argues it’s unfair that Nevada hospitals have two less years to collect payment from its customers than other creditors.

“It’s intriguing that our legislature would single out the hospital community from every other type of debt services out there and say we will have to collect our debt under a different standard and in a shorter time frame,” he said. “All other debt in Nevada, current law provides for six years.”