Treasury, IRS Release Details of Hospital Debt Collection Regulations
The Treasury Department last week released the details of its proposed regulations limiting patient debt collections by not-for-profit hospitals to as much as 240 days. Those interested in commenting on the proposed regulations have until September 24.
The proposed regulations clarify IRS regulations regarding how a hospital manages its financial assistance policy (FAP) and emergency medical care policy, and how it collects debts from patients who may qualify for financial assistance or charity care.
The ARM industry reacted last week to the preliminary details.
“The new Treasury rules will be an added revenue cycle burden for all nonprofit hospitals to comply with,” said Tom Gavinski, vice president of I.C. System. “These hospitals will incur additional costs in attempting to determine financial assistance for patients and incur additional costs waiting for the patient to complete their financial assistance application. Holding self pay patient accounts as accounts receivable for eight months without any collection activity will reduce the overall collectability of those accounts, reducing the net value of that receivable.”
Gavinski also noted that hospitals are already being squeezed with reduced reimbursement and tighter margins. “These proposed rules will create additional financial constraints on not for profit hospitals that will challenge them financially,” he said.
For more detail on the new regulations and what they will mean for healthcare providers and the medical ARM community, please visit insidePatientFinance.com.
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The entities creating this new rule are out of touch with hospital receivables. My company has been working self pay receivables on a 120 day cycle for nearly five years. The collection agencies that follow our program collect less than 2% across the board. In this program the work is done up front. All the statements and phone calls are done as an “extension” of the hospital’s business office. The rate for this service is less that a hospital can let the account sit for. During the 120 day cycle the patient will receive a statement every 28 days and a phone call every 7 to 10 days. At the end the the cycle the patient would have no less than 15 sttempts to collect regardless of the balance. Anyone in medical receivables know that age is the most determinable factor in collecting. This move to 249 days will cut the collectiblity of these debts in half and once again cost health care an enormous amount of cash which in turn raise the costs of services.
It really just illustrates how uniformed “bureaucrats’ are when they impose such regulations. The negative effect is not so much in potential loss to recovery, as it is to the now special handling of these accounts. The recoverability on non-compliant (on patient’s part -incomplete / no paperwork or non-qualification)) charity / financial assistance is almost non-existent to begin with; so waiting 240 days to commence collection efforts will not make much of a difference in recovery. What it does create is the unnecessary burden on the provider to have handle these accounts a certain way and very possibly and dramatically increase “days in A/R”, as I would surmise that the average balance in this category is significantly higher. Bureaucrats have no conception of A/R inventory management and efficient account flow. Why must it be an additional responsibility of the provider? Why can we not expect some level of responsibility of the patient? Many if not all that are slow or do not complete the necessary paperwork to obtain these benefits, simply because they do not care about their bill. It’s the same (to some degree) in converting non-resource patients to Medicaid, and other Government funded “paying” programs. The regulation should reversed and the responsibility be put on the patient to make reasonable efforts.