State Healthcare Reform and the Collection Industry

Several states have recently enacted healthcare legislation that directly affects hospital creditors and the ARM industry.

Bills passed in four states – California, Illinois, Nevada, and North Dakota – address hospitals’ late payment and interest fees, charity care and discount payment policies, property liens, and governance under the federal Fair Debt Collection Practices Act (FDCPA). In almost all cases, legislation that applies to hospital creditors also regulates collection agencies, debt buyers, and collection law firms if existing state or federal law does not already apply.

Of the four bills passed, Nevada AB 247 is perhaps the most far-reaching. It establishes a strict statute of limitations for collections, prohibits hospitals from assigning fees for contingency collections onto a debtor’s account, and prohibits the transfer of a real property lien to a debt buyer following the sale of a healthcare portfolio. This will appreciably reduce inflows of cash to hospitals in the recovery of bad debt. According to the Las Vegas Sun, the amendments in AB 247 were driven, at least in part, by some Assembly members’ notions that hospitals should be held accountable for “some of the alleged abuses after the debt is sold [sic] to a collection agency.”

Under federal law, creditors are generally exempt from FDCPA, but states have the authority to require businesses that operate within their jurisdiction to comply with the federal law or – as is the case in many states – enact their own FDCPA legislation. Nevada’s AB 247 and other recent legislation envelop healthcare creditors under federal FDCPA regulations.

These regulatory changes offer challenges, but also a service opportunity for ARM companies. Hospital creditors unfamiliar with the particulars of the federal law may seek consulting services or outsource a greater segment of their delinquent receivables to ARM industry companies, as ARM firms have more wide-ranging FDCPA expertise.

Excerpted from Michael Klozotsky’s recently published Executive Brief, “Curses or Cures: State Regulations, Hospital Creditors, and the ARM Industry,” available now to members of insideARM.com (requires free registration).

As an analyst at Kaulkin Media, Michael conducts custom research projects and writes publications focusing on the healthcare sector of the accounts receivable management industry. Contact Michael at mklozotsky@kaulkin.com or 240-499-3836.