Creating Extraordinary Vendor Partnerships in the Face of Healthcare Reform – By Elizabeth Richards, Esq.

Patient Billing & Collections under the Healthcare Reform Timeline

If you talk to any hospital revenue cycle executive, they will tell you the extreme importance of having a strong relationship with an ethical and compliant collection vendor. After all, it is the money collected that keeps the hospital in business. However, medical collections have always been a little bit different than other debt collections. Most people do not plan to go to the hospital, they find themselves there unexpectedly. After the illness or injury that landed them there, they enter an extremely confusing world of EOBs, deductibles, co-pays, per diems, capitated rates, and many other terms they do not understand. It has always been important for hospitals to choose vendors who understand these dynamics. However, in the face of non-profit healthcare collection reform under 501(r), it is even more important for hospitals to make sure their collection vendors are set up to comply with the new regulations.

As was previously discussed, the newly created IRS section 501(r) for charitable hospitals creates new requirements for collecting money from patients. One of the main requirements is that a hospital conduct a notification and an application period for their charity care policy, before engaging in what are termed “extraordinary collection” activities. Unfortunately for hospitals, the penalty for not meeting these onerous requirements is loss of their 501(c)(3) status. Additionally, the hospital is 100% liable for the actions of its vendor. This is a big change for hospitals who have really never before been 100% liable for the way their vendors collect money for them. Of course they were always somewhat liable, but there is not direct liability for violations of other federal collection requirements, like the FDCPA and the TCPA. Now more than ever, it is important that the collection vendor a hospital chooses becomes a partner in protecting and advancing the charitable mission of the hospital.

What is so different now? Well for one thing, the “extraordinary” collection actions defined in 501(r) are undertaken every day in every other industry that collects money. Things like credit reporting, garnishments and legal judgments are used on a regular basis when someone owes money. Hospitals must choose a partner who understands that these things are no longer normal course of business for healthcare collections. Your partner must be on board with making sure the notification and application periods are met before engaging in these actions. This is especially important for any early-out partners you choose. They may become the ones responsible for monitoring and adhering to these deadlines. The hospital will have to rely on their collection partner to disseminate information to their patients and make sure applications are returned for processing. The hospital will be asking a vendor, who is in the business of collecting money, to inform their patients that they may not have to pay their bill.

As you can see, not any collection vendor will do. Hospitals need to seek out partnerships with companies who have their best interests, and the interests of their patients, in mind. Responsibilities will need to be correctly outlined for both parties in their contracts. The collection partner will need to show the hospital that they are ready to manage the flow and use scripting to address issues that arise related to 501(r). The collection partner will become the hospital’s first line of defense in addressing issues under 501(r). There is no reason a hospital cannot continue to have a robust and successful collection practice, with the right relationship in place and the right people on their team.

By: Elizabeth Richards, Attorney, Clinton A. Harkins, P.C.

Attorney Richards was a presenter at this year’s ACA 75th Anniversary Convention & Expo in Chicago, IL.

This information is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Although we attempt to provide up-to-date information, laws and regulations often change. We make no claims, promises, or guarantees about the accuracy or completeness of this document. For legal advice, please consult an attorney.

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