Tougher bankruptcy rules expected to become law in coming weeks after passing the U.S. Senate last week aren't likely to help hospitals and health systems, though patients probably will take a hit.
With hospitals already under fire for overaggressive collection tactics, the likelihood that fewer consumers will be allowed to bypass their debts through bankruptcy under the law would not mean hospitals would step up their collection efforts, industry participants say. "I kind of doubt that the hospitals are likely to toughen up their policies on collection," said James Doyle, senior vice president and chief financial officer of Elmhurst (Ill.) Memorial Healthcare. Hospitals are putting more focus on charity-care policies, Doyle said.
There may be a little bit of improvement in hospitals' bad-debt figures but not much, said Scott Johnston, technical director at the Healthcare Financial Management Association. "I think it will have a minimal impact," Johnston said.
The bankruptcy bill toughens the requirement for consumers filing for bankruptcy protection under Chapter 7, which essentially writes off debts. Chapter 13 bankruptcy, the major alternative, requires the debtor to pay creditors back over time.
Henry Sommer, a Philadelphia lawyer and an author on bankruptcy law, said the bill could potentially hurt hospitals, along with other creditors, and definitely will make life harder for consumers. Whether or not patients are able to file for Chapter 7 bankruptcy, they typically don't have the money to pay creditors, he said. And to the extent that hospitals rely on credit cards to collect payment, they are likely to get back less. Fewer consumers will be able to get credit cards under the bill because they will not be able to clean up their credit ratings, he said.
Two bill amendments proposed by Sen. Edward Kennedy (D-Mass.) would have allowed debtors with serious medical problems to file under Chapter 7 and would have protected up to $150,000 in home equity from creditors, according to the American Bankruptcy Institute. Those amendments failed to become part of the bill. President Bush has said he supports the bill.