QUARTERLY NEWSLETTER - SUMMER EDITION 2012 - #4
INSIDE SCOOP
PROVIDER BEWARE
Debt Collection Quandary
Payors Avoiding Co-Pays & Deductibles Through Abuse of Fair Debt Collection Practices Act and What You Need to Know By Richard Lovich, Esq. As if hospitals didn’t have enough trouble collecting from contracted payors, a new tactic has now arisen on behalf of patients seeking to escape responsibility for co-pays and deductibles. In order to avoid this from happening, it is important to understand how it is being done. Known in California as the Rosenthal Fair Debt Collection Practices Act, (California Civil Code 1788, et seq.,) and federally as The Fair Debt Collection Practices Act, 15 USC 1600, et., seq.) (the “Act”), the Act started from a laudable goal. Seeking to tame aggressive debt collectors and prohibiting midnight dunning calls would be something just about everyone would support. However, as with most legislation, in practice the Act can allow patients to place a hospital in a position where, because of potential penalties, it may become economically unfeasible to collect on a co-pay or deductible. The potential penalties for violation of the Act are $1,000.00 per violation, plus reasonable attorney’s fees. Actual damages do not have to be proven in order to recover the penalty amount. Let’s look at a set of facts illustrating the issue: Patient is billed for a $1,500 co-pay/ deductible related to treatment provided at a fictional hospital, “Main Street Medical Center”. Main Street is owned by a fictional corporate parent “California Hospitals, Inc.” The bill is sent on a letterhead reading “California Hospital, Inc., Main Street Medical Center”. Sounds common, right? Here is the problem: Under the Act, a “creditor” is defined as a person or entity to whom a debt is owed. Designation as a creditor does not necessarily subject that entity to the provisions (penalties) under the Act. However, if a creditor is a “debt collector”, as defined under the Act, then the creditor can be held liable if the provisions of the Act are violated. A debt collector can be defined as a creditor who uses any name other than his own, which would indicate that a third person is collecting or attempting to collect such debts. See the problem? Does the inclusion of the corporate name on the bill turn the hospital from a creditor into a debt collector?
Legally, it probably does not. However, if the amount being sought is $1500, and the patient obtains a lawyer who asserts the Act under these circumstances, the hospital is faced with an economic decision. If the hospital is found to be a debt collector, its technical violation of the Act (such as having automated form letters sent to the patient directly after the attorney has written to the hospital indicating he/she is representing the patient and all communications are to go to him/her), could result in the patient recovering $1000 for each letter sent by the hospital plus attorney’s fees.
“Does the inclusion of the corporate name on a bill turn the hospital from a creditor into a debt collector?”
If actually adjudicated the penalty could be lower or not levied at all and the hospital might be found not have violated the Act. However, there is the possibility a judge could levy these penalties, thus creating the need to make a business decision on these type of cases. Also beware: consumer advocate attorneys hoping for a big pay day, try to identify opportunities for filing class action suits. If the hospital’s normal billing procedure is as described in the example, potentially thousands of patients could be combined through the use of the class action device. If so, an individual claim of a few hundred dollars could be turned into a very large and expensive suit. The solution? Whenever pursuing co-pay, deductibles or any patient liability, hospitals should clearly define itself as a creditor and avoid falling into the definition of a debt collector.
Is The Fox Guarding The Henhouse? The UnitedHealth Group/EHR Dilemma By Joy Stephenson, Esq. & Charles Acquisto, Esq. When UnitedHealth Group Inc., acquired Executive Health Resources Inc. for $1.5 billion in August of 2010, few in the health care industry raised an eyebrow. No concerns were raised in the media of UnitedHealth Group’s adding the Newton Square, Pennsylvania-based company known as EHR to its Ingenix database management and consulting unit. Eighteen months later, a caution flag was raised by Banner Health officials in an April 30, 2012, article by KaiserHealth. Banner, one of the nation’s largest non-profit hospital systems with 23 facilities in seven states, had hired Executive Health Resources as a vendor to fight Medicare and UnitedHealthcare on claim denials and underpayments prior to UnitedGroup’s acquisition of EHR. The Banner executives in the Phoenixbased corporate offices had issues with the potential conflicts of interest. “It does seem as though there is reason for concern because they [UnitedHealth Group] can use our own information against us,” Banner CFO Dennis Dahlen told KaiserHealth. The worries are legitimate. The Minnetonka, Minnesota-based UnitedHealth Group is the largest health insurer in sales in the United States with 30 million members. EHR, founded in 1997, provides hospitals with teams of outside physician advisers to
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