'Aggressive' collections are in the eye of the beholder

As many readers know, Mokena, IL-based Provena Covenant Medical Center has become the poster child for what could happen if state or federal authorities start taking a hard line on how a hospital handles its money. Since 2003, Provena execs have been fighting to get back their property tax exemption, which was unceremoniously yanked by county authorities who thought, among other things, that its collection practices were too aggressive. 

Apparently, one of the practices that most offended the county officials was Provena's use of what is known, with grim sarcasm, as "body attachments"--the use of warrants to throw debtors in jail who don't show up to hearings regarding their medical debt.  (Provena execs have since forsworn this approach, according to published reports...and good for them if so.)

States get into the act

Since Provena got into trouble with Illinois, state legislatures have increasingly climbed into the healthcare collections arena, passing legislation that sets some limits on what healthcare collectors can do. For example, InsideARM notes that late last year four states--California, Illinois, Nevada and North Dakota--passed bills or had bills become effective that limited hospitals late payment and interest fees.

Some of the new laws forbid hospitals that offer extended payment plans from charging interest if parties stick to a payment schedule, while others limit interest, fees or collection agency referrals for a set number of days after an initial billing. California also forbids hospitals from garnishing wages or placing a lien on a debtor's primary residence if the patient was cared for under the hospital's charity or discount policies.

Appearances count

Now, here's a pop quiz: Which of the practices being regulated above are truly out of line? And which are just a reasonable way of keeping your facility or practice solvent? More importantly, which ones will your state penalize? Unfortunately, that's where everyone's crystal ball gets foggy. After all, "aggressive" is in the eye of the beholder.

The truth is, there's always going to be a spectrum of healthcare collections practices in play out there, some of which might end up looking ugly to regulators, and others that seem perfectly reasonable. The question is, which is which? In the past, that might have been only a modest worry, but today it could go from a small problem to a threat to your tax exemption quickly.  Yes, Provena is currently a unique case, but don't doubt that such challenges will become more common as legislators get their teeth into healthcare collections issues.

So, for the foreseeable future, it's going to be critical that collections efforts are managed immaculately--including some form of review that might detect hard-luck cases--that debts aren't placed in collections too quickly, that you don't impose punitive interest or fees and that you take care to understand the whole patient's situation. Hey, get creative--maybe that mom who isn't returning your calls just needs a playroom where she can leave her kids so you can talk business.

And there's always the good old fashioned gut check. I don't know about you, but I doubt anyone who ever asked a judge for the right to throw a struggling debtor in jail doubted that they were playing extreme hardball.

With any luck, if you don't get the dreaded "aggressive" label from legislators, local authorities or the IRS, you'll be in the clear. In the meantime, remember that appearance count--now more than ever. - Anne