What Happened to the IRS 240-Day Ban on Hospital Bill Collections?

Are non-profit hospitals and their collection partners able to report patients with unpaid medical bills to credit reporting agencies or not?

Ten months ago the IRS released proposed regulations defining “extraordinary collection activities,” which are prohibited for any patient who may qualify for financial assistance. Until a nonprofit hospital can determine with certainty whether a patient qualifies, it must give that patient up to 240 days to fill out application for financial assistance. During that period neither the hospital nor its collection partners can report the delinquent bill to a credit reporting agencies, the proposed regulations state.

Healthcare provider organizations have argued that reporting a delinquent bill does not or should not qualify as an “extraordinary collection activity” and prohibiting it will hamstring them from collecting what they are owed. The IRS sought comments from the public on the regulations, and received more than 200.

If the regulations have been finalized, the IRS is keeping mum. There is a strong indication it will still be months before they are released. In a recent set of proposed rules regarding Community Health Needs Assessments released by the IRS earlier this month there was a brief statement regarding the status of the extraordinary collection activity rules: “The Treasury Department and the IRS intend to finalize the 2012 proposed regulations in conjunction with the finalization of these proposed regulations.” The proposed CHNA regulations cannot be finalized until after the comment period ends on July 5.

According to the regulation proposed last year, not-for-profit hospitals will not be able to engage in “extraordinary collection activities” until it has done the following:

• Provide patients with a plain language summary of the financial assistance policy before discharge and with the first three bills;
• Give patients at least 120 days following the first bill to submit an application for financial assistance before commencing certain collection actions;
• Give the patient an additional 120 days (for 240 days total) to submit a complete application;
• If a patient is determined eligible for financial assistance during these 240 days, refund any excess payments made before applying for aid and seek to reverse any collections actions already commenced.

Not-for-profit hospitals must report their respective collection activities for accounts receivable on Form 990 Schedule H. For Fiscal 2012, the most recent tax season, Schedule H contained no new information regarding exactly what extraordinary collection activities are, but did contain information about what they are not. Not-for-profit hospital are required to list whether it pursued collection activities such as reporting to a credit agency or filing lawsuits, liens, or body attachments. In the instructions for that section is a note, “No inference should be made regarding whether the actions listed … are ‘extraordinary collection actions.’”

Previously:

Associations Find Proposed IRS Regs for Healthcare Collections Burdensome

Treasury Department Proposes Specific Regulations Limiting Hospital Debt Collection