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Blog: Healthcare providers take heat over debt collection lawsuits against patients

With surprise medical bills and high out-of-pocket costs getting increasing political attention, some hospitals and physician groups are drawing criticism for aggressive collection actions against patients.

A St. Louis Post-Dispatch investigation last week found more than 1,000 debt collection lawsuits between Dec. 2, 2014, and March 10, 2016, in the St. Louis area stemming from emergency department treatment provided by the Schumacher Clinical Partners medical group at hospitals owned by the not-for-profit SSM Health, a Catholic system. The suits were filed by Capio Partners, a large national medical debt collector that bought unpaid ED bills from Schumacher in 2014.

The article cited the case of an uninsured woman who was treated in 2011 at an SSM hospital's ED and who said she was told she wouldn't be billed. Then she found herself being sued last year over a $1,183 bill. When she tried to get her hospital record to figure out the cost of her visit, the hospital told her it couldn't process the request without an exact date.

Under the Affordable Care Act and a 2014 Internal Revenue Service rule, not-for-profit hospitals are required to provide financial assistance to qualifying low-income patients and avoid using extraordinary collection practices against these patients. Hospitals that don't comply risk losing their tax-exempt status.

The twist in the SSM case is that it was the for-profit emergency medicine group to which SSM had contracted out its ED care that sold the bills to a debt collector. The medical group itself is not subject to the federal charity care rules. That's a common situation across the country, said Erin Fuse Brown, an assistant law professor at Georgia State University.

While contracting physician groups don't have to comply with the federal rules, not-for-profit hospitals should make sure their contractors follow the hospital's billing policies, she said. In its final guidance to hospitals in December 2014 on billing and collections, the IRS clarified that it will require hospitals to make a good-faith effort to ensure that their vendors comply with the rules.

“Hospitals should be concerned about this happening because this could put the hospitals' tax-exempt status at risk,” Brown said. “If I were SSM, I would say we'll terminate the contract with you unless you stop suing patients.”

SSM Health's chief financial officer initially told the St. Louis Post-Dispatch that the burden is on patients to tell the medical group when they have received charitable help from the hospital so the medical group can match it. SSM later said it would develop a way to inform the medical group directly about patients who received financial assistance. SSM Health did not respond to a Modern Healthcare request for comment by deadline Monday.

“Putting it on patients to communicate with the contractor wouldn't solve the problem,” Brown said.

The American College of Emergency Physicians said it has no policy on whether emergency physician groups should harmonize their billing and collections policies with hospitals they contract with.

Earlier this month, the Arizona Republic reported that a collection agency working for the Phoenix-based Arizona Center for Hand Surgery had sued more than a dozen patients over the past two years for unpaid amounts arising from surprise out-of-network medical bills related to emergency care. Some of the cases involved care at HonorHealth, Banner Health, and St. Joseph's Hospital, all not-for-profit systems.

In the cases cited by the newspaper, the patients had gone to a hospital that was in their health plan's network, but the surgeon who treated them in these emergency situations was not in-network. The hand surgeons' group sued over amounts ranging from $11,583 to $51,596.

HonorHealth's John C. Lincoln Medical Center told the Arizona Republic that it had encouraged the Arizona Center for Hand Surgery to accept more insurance contracts and to “fully evaluate their collection processes to best serve patients.” Banner Health said it couldn't risk losing specialists who are in short supply by requiring them to sign contracts with health plans.

In another investigation about a year ago, ProPublica and NPR reported on not-for-profit hospitals that sued low-income patients for unpaid bills and seized their wages. One hospital, Heartland Regional Medical Center in St. Joseph, Mo., had garnished the wages of nearly 6,000 people from 2009 to 2013. Through its collection agency, it took anywhere from 10% to 25% of the pay of both the patient and the patient's spouse or partner, and tacked on a 9% interest charge.

Many of the Heartland patients who faced these collection suits and wage garnishment actions had incomes low enough to qualify for the hospital's charitable aid policy but did not know about the hospital's policy.

A study published in the New England Journal of Medicine last year found that only 44% of not-for-profit hospitals in 2012 regularly informed patients of their potential eligibility for charity care before beginning the debt collection process.

Some of the low-income Missouri patients who faced these collection actions would have been spared the experience if their state had expanded Medicaid to low-income adults. “With expansion, I think you would see an overall lessening of people in the bad-debt category,” Charlie Shields, CEO of Truman Medical Centers in Kansas City, Mo., told Modern Healthcare in an interview last year.

Shields said his safety net facility uses a robust financial counseling process to help patients find a source of coverage and let them know at the front end what their financial obligation will be before incurring medical debt. He added that cases where Truman has sued patients for unpaid bills “are almost nonexistent.”

But he predicted debt collection actions by other healthcare providers will continue. “I don't see the pressure lessening for people trying to protect their margins,” Shields said.


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