CFPB's pending rule changes could impact hospital debt collection

Money man.

For decades, hospital collection practices from patients and their families have mostly ducked under the regulatory radar. But pending new rules from the Consumer Financial Protection Bureau (CFPB) may wind up changing all of that.

The CFPB wants to clarify when a debtor owes a debt, noting in a recent report (.pdf) that "creditors generate much of the underlying information in the debt collection system, but they may not convey their full files to a third-party debt collector or debt buyer because transferring so much information between systems can be technically complicated and expensive” and that the reliability of the data tends to degrade as it is transferred down the line to successive debt collectors.

As a result, consumers may be dunned for money they do not actually owe. 

The proposed changes by the CFPB could impact hospitals and how they handle billings and collections, particularly regarding the use of third parties to collect payments, according to Becker's Hospital CFO.

The article noted that it would be a “big shakeup in compliance” primarily designed to address complaints regarding the practices of collecting medical debt. Among those complaints: improper communications from debt collectors, repeated calls regarding debt not actually owed and failure to communicate clearly about what is owed.

Hospitals and healthcare systems have already had many dubious collection practices called into question. Mosaic Life Care in Missouri had created a for-profit subsidiary specifically designed to sue patients who fell behind on payments. It abandoned that practice and provided some $17 million in financial relief after reporting on the topic by ProPublica. Carolinas Medical Center-Mercy sued some 12,000 patients over sums owed, sometimes for nominal amounts, despite the fact that in many instances they could have qualified for the hospital's charity care program.

If the rules are finalized close to their current form, hospitals and healthcare systems should expect it to become more challenging to delegate collections to third parties, be expected to clarify their dispute processes with patients, and possible abandon any negative submissions to credit reporting agencies. Becker's said the rules would likely be put into effect in early 2017.