In announcing its Final Rule Defining Larger Participants of the Consumer Debt Collection Market yesterday, the CFPB affirmed that medical debts will not be included in the definition of receipts. Specifically, the rule “excludes from the definition of annual receipts those receipts that result from collecting debts that were originally owed to a medical provider.” According to official sources at the CFPB, “annual receipts” is determined by the economic census and is roughly equivalent to annual revenue. Various media outlets and some industry associations had previously confused the term “annual receipts” [revenue] with “gross collections.”
The central issue cited by the Bureau for the exclusion is the difficulty in determining whether each individual debt meets the definition of “credit” under Dodd-Frank. The law defines credit as “the right granted by a person to a consumer to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment for such purchase.”
The Bureau expressed concern that it would not be practical for consumer debt collectors to know in each case whether credit was extended, so it has made the decision to exclude the entire category. Exceptions might be in specific cases, for instance, where a payment for medical services was made by credit card. In instances like this, the debt is actually owed to the credit card company, and not the medical provider.
But healthcare debt collectors and revenue cycle management companies that are breathing a big sigh of relief might not want to get too comfortable…
Stephanie Eidelman is the president and publisher of insideARM.com and insidePatientFinance.com. insidePF is the only dedicated source of actionable information for healthcare business executives and patient financial services professionals—the people who are responsible for effectively managing A/R and increasing their organizations’ cash flow — to increase patient revenues and minimize bad debt.