Feds propose new rules to stop aggressive bill collectors

Proposal would require compliance with rules to obtain tax exemptions

Amid growing concern that not-for-profit hospitals are engaging in aggressive medical-debt collection practices, the Treasury Department on Friday proposed regulations to better shield patients.

"In recent months, we have heard concerns about aggressive hospital debt collection activities, including allowing debt collectors to pursue collections in [EDs]," says Acting Assistant Secretary for Tax Policy Emily McMahon, adding, "These practices jeopardize patient care, and our proposed rules will help ensure the don't happen in charitable hospitals."

The draft rules—created under a provision of the Affordable Care Act—would tie hospitals' tax exemptions to their compliance with the rules. Specifically, the rules would:

  • Require that hospitals establish a publicly available financial assistance policy and provide a summary of that policy in "plain language" when patients are discharged and with the first three bills;
  • Prohibit hospitals from engaging in certain collection actions (such as reporting debt to a credit agency) without first making reasonable efforts to determine a patient's eligibility for financial aid and allowing patients up to 240 days following the first bill to apply for aid;
  • Prohibit hospitals from charging patients who are eligible for financial aid more for medically necessary care than they would charge insured patients; and
  • Require that hospitals have a written policy guaranteeing emergency medical care without discriminating against patients who require financial aid. 
  •  A closer look at Treasury's proposed rules

Jessica Curtis—who heads the Hospital Accountability Project at Community Catalyst—applauded the proposal. "We were excited to see how much and how comprehensive they were," she said, adding, "Our take home message really is that we need to put more of the onus on hospitals to be better about being fair with patients."

However, the American Hospital Association (AHA)—which recently updated its billing and collection guidelines—says the rules are onerous and hold hospitals responsible for the actions of third-party debt collectors.

Moreover, AHA general counsel Melinda Hatton says the penalties for making a mistake in a hospital's explanation of its financial aid policy could be significant and cost a facility its tax exemption. "The way the [Internal Revenue Service] is looking at this, if you're a hospital system and any one of the hospitals in your system loses its tax exemption as a result of noncompliance, your whole system could lose its exemption," she says (Gold, Kaiser Health News/NPR, 6/27; Zibel, Wall Street Journal, 6/22; Alexander/Garloch, McClatchy Newspapers/Boston Herald, 6/23; Treasury release, 6/22).

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