Treasury Department Proposes Specific Regulations Limiting Hospital Debt Collection

Patients who may qualify for financial assistance will have up to 240 days to pay their hospital bill before the debt can be reported to a credit agency or wages can be garnished, the U.S. Treasury Department proposed Friday.

The Treasury issued a press release announcing a series of proposed regulations to fulfill a provision of the Patient Protection and Affordable Care Act to “ensure access to financial assistance of patients of charitable hospitals and protect patients from abusive collections practices.” As of press time, the proposed regulations have yet to be released or published in the Federal Register.

According to the press release, not-for-profit hospitals, “as a condition of receiving tax-exemption, must establish billing and collections protections for patients eligible for financial assistance and provide patients with the information needed to apply such assistance.” While many of the proposed regulations conform to guidelines found on IRS Schedule H (Form 990), which all charitable hospitals must file, it makes explicit the vague IRS instructions which state that a hospital must make “reasonable” efforts  to determine if a patient qualifies for charity care (financial assistance). According to the press release:

Limitation on Collection Actions. A tax-exempt hospital is prohibited from engaging in certain collection methods (for example, reporting a debt to a credit agency or garnishing wages) until it makes reasonable efforts to determine whether an individual is eligible for the financial assistance it offers. Under these proposed rules, charitable hospitals must:

•  Provide patients with a plain language summary of the financial assistance policy before discharge and with the first three bills;
• Give patients at least 120 days following the first bill to submit an application for financial assistance before commencing certain collection actions;
• Give the patient an additional 120 days (for 240 days total) to submit a complete application;
• If a patient is determined eligible for financial assistance during these 240 days, refund any excess payments made before applying for aid and seek to reverse any collections actions already commenced.

Because the Treasury dropped notice of these proposed regulations on Friday, news of them had yet to trickle out to healthcare professionals. On Sunday hospital finance professionals gathered in Las Vegas for the opening day of the Hospital Financial Management Association’s annual leadership conference. No one interviewed by insidePatientFinance.com expressed knowledge of the new regulations. In a session held Sunday on the topic of hospital collections, no one outside the presenter seemed to be aware of the proposed regulations, much less their impact on patient finance departments.