A 14-month failed experiment by a Minnesota hospital chain to increase up-front cash revenue collected from patients by inserting collection agency staff into its admissions process has drawn the ire of that state’s attorney general, who contends such practices were illegal.

Minnesota Attorney General Lori Swanson released a six-volume “compliance review” of Minneapolis-based Fairview Health Services, a not-for-profit chain of seven hospitals and more than 40 clinics, and its contractual relationship with Accretive Health, a publicly traded firm offering revenue cycle management services for hospitals, that allegedly integrated bill collectors into hospital admissions staff.

Early stage revenue cycle management resembles what in the ARM industry would be classified as “first-party collections.” Traditionally, first party services have been conducted in the name of a creditor or by the creditor itself. In this instance, Fairview employees, or those hospital employees trained by Fairview, were not, in fact, collecting debt, but were performing traditional first-party services.

The attorney general previously has taken a hard stance against what her office perceives are violations by the collection industry. Last month she announced that she was taking action against debt-buyer Midland Funding LLC of allegedly “defrauding Minnesota courts and citizens by filing false and deceptive ‘robo-signed’ affidavits” in its collection practices.

In November 2010 Fairview entered into a contract that Accretive claimed would allegedly increase collections from patients and reduce treatment costs by almost $500 million over five years.

To accomplish this, Accretive took over management of the hospital’s money collecting duties at the point where patients enter the hospital. The attorney general’s report hyperbolically called this “The emergency room meets Glengarry Glen Ross,” a reference to the David Mamet play/movie set in a real estate sales boiler room. The attorney general claims that Accretive instilled a similar hard sales culture and even quoted from the speech made by Alec Baldwin’s character in the movie (WARNING: link contains profanity).

Admissions staff at Fairview received scripts and supporting software tools from Accretive designed to pressure patients to pay for medical services before receiving them, the attorney general claims. “The scripts can lead a patient or her family to believe the patient will not receive treatment until payment is made,” according to the attorney general’s report.

When Accretive staff were informed that such tactics violated the Emergency Medical Treatment and Active Labor Act (EMTALA) which requires that medical screening and emergency stabilizing treatment must beprovided before payment is discussed, the concern was dismissed summarily by Accretive representatives.

The contract with Accretive was not the first time Fairview had run afoul of the attorney general. In 2005 the attorney general’s office had “found numerous problems with and deficiencies in Fairview’s collection activities, billing practices for uninsured patients, and the administration of charity care,” according to the attorney general report. To remediate those deficiencies Fairview entered into a general agreement establishing new standards regarding its collection practices, standards that were violated by Accretive, according to Fairview, and as a result it terminated the agreement with the collections company in January of this year.

The attorney general’s report listed several collections standards it alleges were violated by Accretive and Fairview, including:

  • “That a hospital is prohibited from forwarding a patient account to a third-party collector until the applicable insurance policy has provided coverage and paid for its share of the treatment;
  • “That if the patient indicates an inability to pay, the hospital must offer a reasonable payment plan;
  • “That the patient must be given a reasonable opportunity to submit an application for charity care;
  • “That the hospital itself must decide whether to refer an account to a third-party debt collector.”

In the same month that Fairview terminated its agreement with Accretive, the attorney general sued Accretive for medical privacy violations after an employee of the collection agency lost a laptop containing sensitive information on 23,500 Minnesotans who had received healthcare services from Fairview and other medical institutions.

According to the attorney general, Accretive “employs unlicensed third-party collectors who misrepresent themselves as ‘financial counselors’ to patients of Fairview Health Services. The unlicensed collectors, located in Kalamazoo, Michigan, are improperly given access to private medical information of Fairview patients, which they use to gain the trust of patients. The collectors use deceptive and unlawful collection tactics, which violate state and federal debt collection laws.”

Furthermore, Accretive was not even a licensed collection agency in Minnesota until 11 days before Fairview terminated its contact, the attorney general claims, nor are its collection agents licensed in the state as required by law.

“Accretive is at the center of one of the most highly regulated industries in America,” concludes the attorney general report. “Its activities directly impact the health and financial well-being of patients, many of whom are sick and infirm. Despite this, it has shown a persistent lack of attention to matters of regulatory compliance.”

Prior to the attorney general report, Accretive Health stock had been trading at higher than $19 per share; at midday Wednesday, the stock was down more than 25 percent to under $14 in heavy trading. The company will release its Q1 earnings results on May 9.


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