Treasury Proposes Strict Limits on Nonprofit Hospital Debt Collection

The U.S. Department of the Treasury Friday released proposed regulations that it says will help ensure access to financial assistance for patients of charitable hospitals and protect patients from abusive debt collection practices.

Hospitals wishing to maintain their tax-exempt status will have to adhere to new billing and debt collection protections for needy patients.

The new rules call for certain debt collection actions — like reporting the debt to credit agencies and garnishing wages — to be frozen for up to 240 days after the first bill is sent out.

Nonprofits hospitals must wait 120 days following the first bill to submit an application for financial assistance before commencing certain collection actions. After that, hospitals must wait an additional 120 days (for a total of 240 days) for the patients to complete their application for financial assistance. If a patient is determined eligible for financial assistance during these 240 days, hospitals must refund any excess payments made before applying for aid and seek to reverse any collections actions already commenced.

“In recent months, we have heard concerns about aggressive hospital debt collection activities, including allowing debt collectors to pursue collections in emergency rooms,” said Acting Assistant Secretary for Tax Policy Emily McMahon.” These practices jeopardize patient care, and our proposed rules will help ensure they don’t happen in charitable hospitals. These rules also require charitable hospitals to establish and publicize financial assistance policies, and give hospitals the flexibility to establish programs that meet the needs of their communities.”

The proposed rules were mandated by a provision of the Affordable Care Act (health care reform) passed in 2010.

For more coverage of these new rules, please visit our sister site, insidePatientFinance.com, which launched today, Monday June 25. Note: your insideARM.com registration will work on insidePatientFinance.com, but you will need to log in on your first visit.

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