New federal patient finance rules are impressive--so long as they're enforced

These have been less than heady days for the U.S. Department of the Treasury. Two agencies under its supervision, the Secret Service and the Internal Revenue Service, have been under fire. The former has been criticized for agents going missing at inopportune times at the White House, while the latter couldn't find emails about how it investigates political fundraising groups for their tax exemptions.

That may explain why the Treasury waited until Dec. 29, one of the slowest news days of the year, to drop new rules about how not-for-profit hospitals conduct business around patient finances. It is a potentially explosive change, and no doubt the Treasury had reasons for not wanting to draw a lot of attention to the rules.

Bad timing, but about time nevertheless.

The rules are ambitious in their scope. Non-profit hospitals can no longer seek upfront payments for care and must make a "reasonable effort" to provide patients with financial assistance. They also can't bill uninsured patients more than what their counterparts with insurance coverage pay. Their financial assistance policies will also have to be widely disseminated and clearly communicated to patients as well. Hospitals will also have to assess the ongoing needs of their communities--including their financial condition--and discuss those assessments in their 990 tax forms.

Any news junkie knows by now that a large portion of this country is struggling to pay their medical bills. Such bills are the leading cause of bankruptcy in the U.S. by a wide margin. And given the fact that a majority of hospitals in this country are not-for-profit, it's not a great leap to conclude that such institutions contribute their fair share to this trend.

Coming clearly to mind here are Carolinas Healthcare, Mosaic Life Care and Fairview Health Services. All three systems were accused of either suing patients or strong-arming them to pay up before they received services.

Despite the appalling practices of such institutions, there hasn't been a lot of sympathy for these patients. A large swath of Americans automatically assume that if you cannot pay a bill you're a deadbeat or malingerer. You can set your watch to how the U.S. work ethic trumps empathy and makes it the only industrialized nation in the world where a sudden illness or accident can lead to the poorhouse.

That disconnect has provided enough leeway for hospitals to relentlessly bill their patients at their highest rates, and then sue them when they were buried under debts that not only did they have no hope of repaying but were multiples more than what Medicare or private insurers had to pay for the same service.

It also gave non-profit hospital boards leeway to pay their top executives millions of dollars a year even though they were supposed to be leading a community-based mission.

That's why Montefiore Medical Center in Bronx, New York ponies up the funds to pay a personal driver for CEO Steven Safyer, M.D., instead of using that money to better serve its catchment area, which includes the poorest Congressional district in the entire nation. Safyer earns between $4 million and $5 million in a typical year. Can't he afford his own driver?

That may be why Kate Walsh, the CEO of Boston Medical Center, bristled when I asked her about her $1.7 million in annual compensation after she discussed laying off staff to save money at a journalism event a couple of years ago. There are thousands of similar examples at hospitals throughout the U.S.

Now that the regulations are out, it will be interesting to see how hospitals actually respond. Will their communications with patients become clearer, more persistent and more relevant? Will fewer patients get sued?

But even more important is whether the Treasury and the IRS actually make good on their threats to yank the tax exemptions of hospitals that don't follow these new rules. Lawmakers in Illinois rewrote the laws governing hospital charity care practices after Provena Health lost some of its property tax exemptions. I can guarantee you two things about that: You cannot read the revised codes, much less ever hope to understand them, which renders them unenforceable. And there will never be another hospital in the Land of Lincoln that ever loses a property tax exemption. Ever.

The Treasury may have dropped these new regs in a way to be inconspicuous as possible, but it will have to bare its teeth for all to see in order to actually make them work. - Ron (@FierceHealth)

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