Charitable Hospital Lawsuits

Review collection practices critically, suggests lawyer

Do you know how your organization goes about collecting debts from past patients? Do you know exactly how? Would you mind if those practices were detailed on the evening news over a picture of your front entrance and logo?

The recent lawsuits filed against charitable hospitals has brought attention to the issue of collections practices in health care and made them a major risk, says Scott Becker, JD, a partner in McGuireWoods LLP’s Chicago office and one of the co-chairs of the firm’s health care practice. Some allegations in the lawsuits are not what you would like associated with your organization, but he warns that the very same thing could be happening down the hall unless you have taken steps to prevent abuse.

A sample audit may be the best way to find out how poor patients are treated in your institution, he suggests. The audit should look at how those patients are treated from their intake — including whether you gather any information at that time about their financial status — and what efforts are made to collect payment.

Becker says he suspects many risk managers would be surprised by what happens when their finance department hands a bill over to a collections agency. Reports of harassment, threats, arrests, and forced bankruptcy are not uncommon, Becker says.

Meet with collections

Becker suggests that risk managers should meet with the collections department or agency and go over exactly how the process works. "It’s a big mistake to say you don’t know or don’t care what happens after you send that bill to collections," he says. "Even if it’s an outside agency, everything they do they’re doing in your name and in the public’s eye you are completely responsible. You need to know exactly how they handle collecting on that account, how far they go and what tactics they use, and you need to be comfortable with it."

The risk manager must exercise some control over the collections process, he says. For instance, you may want to develop a system in which the collections agency must come to you before pursuing legal action against debtors. If collections brings you 20 cases in which the next step is legal action, you might see that 18 are in poverty and decide to just write off the debts instead, he says. "Whatever the system is, you need to understand it and agree to it up front," he says. "What is the nastiest thing they do in collecting these bills and are you OK with it? Can you live with seeing it on the front page of the local paper?"

Pricing structures also at issue

The same idea applies to the different charges for insured and uninsured patients. The risk manager should be familiar with the different pricing structures. "Ask yourself if the only people you’re charging full retail are the people who are least able to pay, the people who don’t even realize that the usual and customary charge you’re billing them is 10 times what everybody else is paying," he says. "Ask yourself if you’re OK with that being detailed to the public."

Becker says the lawsuits also highlight the fact that many hospitals have not taken proper steps to identify indigent patients from the outset, instead treating all patients the same when it comes to collections. If that is your hospital’s process, it’s time to change, he says.

"If someone is really poor and you’re supposed to be a charity hospital, you need to have a system in your intake so that you know that and factor that in to how you go about bill collections," he says. "A lot of these problems could be solved by proper intake so that if you have someone who is truly in poverty, you start out by discounting their usual and customary charges."