IRS rules for curbing collections abuse among nonprofit hospitals are not specific enough and should also include for-profit providers, according to a new report in the AMA Journal of Ethics that blasts healthcare providers over some of their billing practices.
Currently, hospitals have the discretion to decide eligibility for financial assistance, which is the trigger for the rules' protections, according to author Erin C. Fuse Brown, a professor of health law at the Georgia State University College of Law in Atlanta.
Hospitals routinely charge uninsured patients full prices, while government and commercial payers receive discounts of 50 percent or more, she said in the report.
[Also: 6 steps to price transparency, according to St. Luke's Health System]
Harsh debt collection practices include assigning the debt to collection agencies, suing patients, seeking foreclosure or liens on patients' homes, garnishing wages, charging high interest rates, requiring upfront payment before providing more care, and seeking arrest for failure to appear in court for a debt collection hearing, she said.
The IRS rules were part of the Affordable Care Act, but were not finalized until December 2014. The rules gave additional requirements for tax-exempt hospitals to keep their federal tax exemption status.
However, the rule's vagueness includes provisions that bar hospitals from using "extraordinary collection actions" and mandating they make "reasonable efforts" to determine whether the patient is eligible for financial assistance.
The author proposes taking hospital discretion out of billing and collection practices by having defined income and affordability thresholds that pertain not only to the uninsured but to those who have high-deductible plans.
[Also: As patient payments rise, healthcare organizations focus on collections]
The proliferation of narrow-network health plans makes it more likely that patients will find themselves unwittingly going out of network, resulting in high out-of-pocket bills, Brown said.
Current hospital financial assistance policies vary significantly, she said. A study of 140 hospitals showed eligibility cutoffs ranging from an income of 100 percent of the federal poverty level to 600 percent.
A better approach would be to decouple fair pricing and collection rules from hospital tax status and make compliance with the IRS rules a condition of participation in Medicare, the author states.
All Medicare-participating hospitals should be required to limit the amounts charged to self-pay patients with incomes less than a defined threshold of 350 or 400 percent of the federal poverty level, as well as any patients whose out-of-pocket medical bills exceed 10 percent of their annual household income, Brown said.
Like Healthcare Finance on Facebook
Under this proposal, hospitals would also: offer eligible patients an option for an extended payment plan with no or limited interest; be prohibited from attaching a lien to or forcing the sale of a person's primary residence to collect a debt; be prohibited from seeking wage garnishment while a person is making a good-faith effort to pay the debt; and assign a debt to a collection agency and report nonpayment to a credit reporting agency only if the patient has stopped making payments for a defined time.
IRS rules, which have been in effect for about nine months, mandate hospitals to keep up and widely publicize financial assistance policies, including eligibility criteria; to limit the amounts charged to patients who are eligible for financial assistance to "amounts generally billed" to insured patients for emergency or medically necessary care; and to ban charging patients who qualify for financial help the full chargemaster rates.
Twitter: @SusanMorseHFN