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.

A copy of the proposed regulations and accompanying explanations, some 24 pages, can be downloaded here.

The proposed regulations describe:

  • What information that a hospital facility must include in its financial assistance policy and the methods a hospital facility must use to widely publicize its FAP.
  • What a hospital facility must include in its emergency medical care policy.
  • How a hospital facility determines the maximum amounts (that is, the amounts generally billed – AGB — to individuals who have insurance coverage) it can charge FAP-eligible individuals for emergency and other medically necessary care. In the case of an individual who is FAP-eligible but has not applied for financial assistance at the time charges are made, the proposed regulations provide that a hospital facility will not fail to satisfy section 501(r)(5) if it charges the individual more than AGB, provided the hospital facility is complying with all the requirements regarding notifying individuals about the FAP and responding to applications submitted, including correcting the amount charged and seeking to reverse any extraordinary collection actions previously initiated if an individual is later found to be FAP-eligible.
  • What actions are considered ‘‘extraordinary collection actions’’ and the ‘‘reasonable efforts’’ a hospital facility must make to determine FAP-eligibility before engaging in such actions.

The proposed regulations also include definitions of ‘‘hospital organization,’’ ‘‘hospital facility,’’ and other key terms.

The 240-Day Debt Collection Window

The section of the proposed regulations generating the most interest are those related to debt collection. Under the current IRS regulations nonprofit hospitals are required to make a “reasonable effort” to determine if a patient qualifies for financial assistance. The proposed regulations define what “reasonable” means. A hospital must provide any patient who might qualify for charity care with a 120-day “notification period” that commences with the first bill during which the hospital must communicate its financial assistance policy. This must be followed with another 120-day “application period” during which the patient is allowed to submit a financial assistance application. Only after these two periods have expired can a hospital engage in “extraordinary collection actions.”

Under the proposed refinement of the regulations, reporting a patient’s delinquent debt to a credit bureau would now be considered an “extraordinary collection action,” as it currently is in some states.

In addition, the new regulations would also include a prohibition of selling a patient’s debt to a third party as an extraordinary collection action. While a not-for-profit hospital can contract with a third-party to collect a debt, the proposed regulations forbid it from selling that debt until it has determined definitively that the debtor does not qualify for financial assistance.

The list of extraordinary collection actions also includes, but is not limited to:

  • Placing a lien on an individual’s property;
  • Foreclosing on an individual’s real property;
  • Attaching or seizing an individual’s bank account or any other personal property; Commencing a civil action against an individual;
  • Causing an individual’s arrest;
  • Causing an individual to be subject to a writ of body attachment; and?
  • Garnishing an individual’s wages.

As mentioned previously, the deadline for commenting on these proposed regulations is Sept. 24, 2012. Comments can be mailed to CC:PA:LPD:PR (REG–130266–11), room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Comments can also be presented in person during regular business hours (Monday through Friday, 8 am to 4 pm) to CC:PA:LPD:PR (REG–130266– 11), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC. Those wishing to submit their comments electronically can do so via the Federal eRulemaking Portal at (IRS REG– 130266–11).


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