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Treasury and IRS Clamp Down On Nonprofit Hospital Debt Collections

Even after the Affordable Care Act, hospital bills are still a big enough problem that they can only be solved with a New York bankruptcy filing. Somewhat surprisingly, hospitals, even nonprofit ones that are supposed to have charitable purposes, have turned to hiring debt collectors to compel payment from patients who are behind on their bills. A few years ago, The New York Times reported that hospitals started making this move because they were giving out increasing amounts of uncompensated health care to their communities. As with all debt collections, some of their practices were abusive, like allowing collectors to pursue patients even in emergency rooms.

These practices, though, have caused a backlash by the federal government, and on December 31st, the Treasury Department and the Internal Revenue Service issued new regulations that will restrict how hospitals can collect on their bills. Hospitals that don’t follow these rules may see their nonprofit status revoked, which is definitely something they will avoid.

Here are a few ways the regulations will discourage bad collection practices by nonprofit hospitals:

  • Requiring reasonable collection standards. Hospitals cannot sell hospital debts, report them to credit bureaus, or garnish wages to pay them until they determine that the patient is eligible for assistance from the hospital’s financial assistance policy, which the rules require hospitals to enact.
  • Limiting charges to what insured patients pay for similar procedures. Hospitals are notorious for their secretive pricing practices, such as using “chargemaster” databases that raise costs for basic medical supplies to absurd levels. This part of the rule hopefully addresses that.
  • Assessing and reporting community health needs. Once every three years, hospitals will be required to disclose in their tax filings what their communities’ health needs are and what they will do to meet them. This requirement is to ensure that nonprofit hospitals are adhering to their missions, which is notable because a more recent New York Times article reported on a study finding that such hospitals spend only 7.5 percent on average on charity and community benefit.

The regulations allow hospitals to retain their nonprofit status even in the case of egregious violations if they correct the failures and notify the public of the breach.

The full text of the rule can be found here (pdf, but a long download). The Treasury Department’s blog post summarizing the rules can be found here.

Because about half of the hospitals in the U.S. are nonprofits, these rules should have a profound impact on their operations—and even their pricing. However, those with existing medical debts, or medical debts from for-profit hospitals, might want to speak to a New York bankruptcy lawyer to determine their options.

For answers to more questions about medical bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

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