On or after July 5 the IRS will issue a decision on its proposed 240-day grace period where not-for-profit hospitals must not commence or, once started, suspend “extraordinary collection actions” directed at patients with delinquent medical bills.

Over on Forbes.com, I explain the background behind the proposed rule as well as the reaction by healthcare providers and consumer groups who, understandably, are on opposite sides of the debate.

Back in December the IRS held a hearing on the proposed rules. Some of that discussion is summarized in the Forbes.com article, and we’ve collected that testimony in a download (you can find the link below). But there was one speaker in particular whose testimony defined the issues the proposed regulations will cause with patient financial services, demonstrated the flawed logic behind the regulations, and presented some possible solutions.

Andreanna Ksidakis, vice president in the Office of the General Counsel at Sutter Health in Sacramento, California, spoke before the IRS panel as a representative of the American Hospital Association. What follows is an edited transcript of her testimony. It’s lengthy, but PFS professionals should find it illuminating:

The proposed regulations create an eight-month process with a very prescriptive and extremely detailed set of procedures when combined with other provisions that effectively applies to every patient. From a practical perspective, the 120-day notification and the 120-day application procedures will require a new set of hospital policies with parallel tracking and no commensurate benefit. The difficulty of the proposed regulations is magnified by the definition of financial assistance policy eligible individual. Any individual who could be eligible for assistance is considered eligible for purposes of the proposed regulation, even if that patient does not apply for assistance, meaning the hospital would not be aware of the eligibility. The effect is to make every patient subject to the reasonable efforts process without benefiting the patient and this would be unnecessarily time consuming and costly.

 

I did lead the advisory group and it was very difficult to understand the difference between the 120 days and the second 120 days and how they would work in conjunction when you’re going out to a collection agency. Effectively a collection agency is not going to want to take it if they know a predominance of them bounce back.

 

Hospitals want to make an effort in making eligibility determinations as early as possible. The proposed regulation’s exclusive reliance on financial assistance policy application essentially interferes with that. Many patients identify at registration that they have insurance coverage or otherwise are able to pay for their care. For those without coverage, the hospital’s assistance program may begin by determining eligibility for public programs and for others completion of financial assistance application is the next step.

 

Unnecessary paperwork or delay in determining eligibility for assistance is not good for the patients or the hospitals. For example, the proposed regulations would apply to the situation of a patient who refuses to engage in meaningful discussion regarding payment options. This might include both patients who have insurance and patients who are uninsured but have the ability to pay. In these instances, an early review of demographics and other factors may indicate whether or not the patient has ability to pay and waiting over 240 days to undertake significant collection action seems unjustified, especially since the longer the bill remains outstanding the harder it will be to collect.

 

To save hospitals the time and cost of overhauling current systems, we recommend that instead of the reasonable efforts requirement and the presumptive eligibility safe harbor that the final regulations specify that a hospital facility will have made reasonable efforts to determine financial assistance eligibility if it relies on the financial assistance application or other trustworthy methods. The methods to determine an individual’s eligibility for financial assistance would also be disclosed and described annually on its Form 990.

 

The bill sent to the patient would reflect any financial assistance provided. If the patient responded in a timely manner as defined in the financial assistance policy and provided information indicating eligibility for a greater discount, the discount could later be extended to the patient. This approach has the advantage of maintaining option for a patient to make the financial assistance application while enabling hospitals to continue to use other means and methods to determine qualification and offer a range of assistance sooner to those who are eligible under financial assistance…

 

As hospitals, our incentive is not to send something to collection that we think is uncollectable and with those patients who have a need to use the financial assistance policy, we’d rather find out sooner rather than later and use those systems and the databases to figure that out. On the converse, by using those same systems, we may see that somebody indeed has the ability to pay, that they’re from a very rich zip code and they’re uninsured and they may just know what the law is or just being irreverent, may be ignoring any notices. Meanwhile, under the regulations, we keep sending them notices of financial assistance eligibility and we have to do it past that 120- day period. Once we get into that second 120-day period, they would even effectively have the means to put in an application and stop their collections even though eventually they would be deemed not eligible for our policies. So what we’re doing is we’re stretching that 240-day in situations that we know the patient has the ability to pay and in fact should pay…

 

At Sutter Health we have 24 hospitals so we’re going to administer that process and in order to stay within the guidelines and to ensure we’re always there, we’re going to have to go for those most conservative methods. So we’re going to have to establish a policy. We’re going to have to change our policy to make sure that those things don’t fall through the cracks so we will extend — if this regulation stays in place, we will probably have to change our policies that are now in compliance with California law to make sure that new have — that we can comply with the application process. And it’s an administrative burden that I think is unnecessary and I think with the collection agencies it’s an administrative burden to continue to send the – - when they find out that it’s not collectible when they’re looking at these alternate methods, they’re going to send them back if they need to and I think they should have the ability to send them back anytime. We want to make sure that people that qualify can, it’s just with this method you will see people tend to just — some people that have the ability to pay just aren’t going to pay. They’re just going to wait and wait and wait and wait and we won’t really be able to do anything significant until the 240th day.

 

Download the edited transcript of the IRS hearing here (registration required):  (You must be logged in to download this file. Don't have an account? Register for free and you'll be returned to this page.)


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