The Obama administration has adopted sweeping new rules to discourage nonprofit hospitals from using aggressive tactics to collect payments from low-income patients.
Under the rules, nonprofit hospitals must now offer discounts, free care or other financial assistance to certain needy patients. Additionally, hospitals must try to determine whether a patient is eligible for assistance before they refer a case to a debt collector, send negative information to a credit agency, place a lien on a patient’s home, file a lawsuit or seek a court order to seize a patient’s earnings.
The rules, issued at the end of 2014 by the Treasury Department and the Internal Revenue Service, lay out detailed requirements for nonprofit hospitals that have or want tax-exempt status, about 60 percent of hospitals nationwide.
The rules, published in the Federal Register on Dec. 31, address a peculiar feature of hospital finances: For decades, uninsured patients have been required to pay much more than Medicaid, Medicare and private insurers pay for the same services. Uninsured patients were often the only ones who paid full “list prices” at hospitals.
Under the rules, patients eligible for financial assistance cannot be charged more than “the amounts generally billed” to people who have insurance through a government program or a private carrier.
The rules clarify broadly worded provisions of the Affordable Care Act. Under the rules, each nonprofit hospital must assess the health needs of its community at least once every three years and take steps to address those needs. Hospitals that do not meet this requirement may be subject to a tax penalty of $50,000.
In addition, each nonprofit hospital must establish and publicize a written policy stating who is eligible for financial assistance and how people can apply.
Hospitals often go to court to collect unpaid bills. Their collection practices have been documented in hundreds of court decisions around the country. In many cases, the basic facts are not disputed: A patient received care. The hospitals often win by default because the patients do not show up in court.
The rules generally require nonprofit hospitals to give consumers at least 120 days before taking “extraordinary collection actions,” which include reporting debts to credit bureaus and using debt collection agencies.
Illinois statutes already impose restrictions on the ability of any hospital to collect debts without offering a payment plan and financial assistance.