You can almost set your clock by it: at least once a year, a major piece of investigative journalism documents the struggles of uninsured and underinsured people who carry heavy medical debt and are facing collection actions from hospitals and other providers. (See “From the ER to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages,” ProPublica and NPR, 2014; Steven Brill’s 2013 article “Bitter Pill: Why Medical Bills Are Killing Us,” Time, 2013 (subscription required); “Prognosis: Profit” series, Charlotte Observer, 2012.) Without fail, these stories cut to the quick of why access to affordable, high-quality health care is a moral issue. They also highlight the tensions that exist between profits and patient care, especially the long-lasting problems that arise for patients when hospital billing and collection practices don’t acknowledge patients’ financial realities.
Just before the new year, the Treasury Department and IRS issued long-awaited final rules that directly address hospital financial assistance, billing and collections. The regulations finalize the details for a broader ACA mandate that governs how tax-exempt hospitals provide community benefit. Historically, hospital community benefit programs—including financial assistance or free care—have been a mixed bag in terms of content, governance, and level of investment; and states have taken an uneven approach to regulating hospital behavior. While the new regulations leave most of the details to hospitals to decide, they set a new federal floor that greatly increases transparency on financial assistance and collections, provides some protection against medical debt and overcharging, and offers communities greater insight and potential influence on the way hospitals understand and address broader health issues.
What Do the Rules Change?
Transparency. Transparency is at the heart of these new rules. Financial assistance, billing and collection policies will now be available for public review, with hospitals required to disclose detailed information about eligibility, how to apply for help, and how they use third-party data to screen patients for presumptive eligibility. Translation standards for printed and online financial aid materials improved, with hospitals required to translate policies into the primary language of populations to 5 percent or 1,000, whichever is less, of people “likely to be affected or encountered by the hospital facility.” Hospitals must publicly post their community benefit planning documents for public comment. These simple requirements have been hard to come by at the state level. Now, they’re the law of the land.
Curbing no-holds-barred billing and collections. Unfortunately, the new rules don’t include an outright ban on some of the most aggressive collection actions in use today, nor do they require hospitals to observe a minimum threshold for eligibility for financial assistance—two things advocates were hoping to see. But, they do provide patients with more procedural protections against collection activity than they’ve had in the past. In addition to notifying patients and the public that financial assistance is available, hospitals have to assist patients with the application process (hospitals can perform this function themselves or outsource it to a non-profit organization or government agency). Patients have a minimum of 120 days from the first post-discharge bill without having to worry about “extraordinary collection actions,” and hospitals that begin these collection activities must suspend them if they receive an application for financial help up to 240 days after the post-discharge bill. Critically, if a patient is deemed eligible for financial help under the hospital’s policy, they can no longer be charged sticker price—“gross charges’—for care. Instead, they can only be charged the “amount generally billed” to an insured patient receiving the same services. (They’ve got to disclose their methods for determining this amount in their financial assistance policy.) This introduces some parity into a billing system that often perversely penalizes those who can least afford to pay hospitals’ high mark-ups.
Community input and better health planning. The ACA requires tax-exempt hospitals to use a health planning tool, the community health needs assessment (CHNA), to better understand community health needs. It also requires hospitals to develop an “implementation strategy” for meeting those needs. One implication is the potential to streamline community benefit investments toward priority issues within a community, avoiding an ad hoc approach that dilutes precious resources. The process encourages collaboration among hospitals, public health and community advocates, providing opportunities to take a deeper dive on systemic issues (like financial barriers, environmental problems, housing, nutrition) that impact health but defy easy solutions. The final rules mostly mirror earlier proposed rules here, though hospitals now have to include evaluation data for previous efforts in their CHNAs. Hospitals must solicit community input and consider the input they receive, though they are not required to make drafts of the CHNA or implementation strategy available for public comment. (NOTE: Most hospitals, relying on the proposed rules, have already completed one CHNA, which should be available on their websites and/or on request. Hospitals do need to consider written comments they receive in the next round of their community benefit planning.)
The buck stops here. Despite pushback from some quarters, the IRS held firm that tax-exempt hospitals can’t absolve themselves of responsibility by outsourcing their billing and collection responsibilities to third parties or selling patient debt. Furthermore, hospital boards bear ultimate responsibility for compliance with these new standards. This should raise the internal profile of community benefit, financial assistance and billing—a critical move, since so many details are left to hospitals to decide.
What Does This Mean for Our Work?
There is no question that the final rules are a step in the right direction. They provide an important tool—in some places, like many states that have not closed the coverage gap, the only tool—for addressing health and improving access to care for low- and moderate-income people and others facing high-cost care. And, they offer hospitals clarity and consistency on the federal level (states can go further than the federal rules and some have). As our health care system moves toward integrated care and capitated payment, the CHNA requirements provide a great opportunity for communities and hospitals to work together to achieve better outcomes. On the financial front, hospitals can still choose to be miserly, but the new public reporting may dampen enthusiasm for the “old ways” of collecting.
Effectiveness will ultimately depend on hospitals making a good faith effort to comply with the spirit of the law, not just the letter. And that means advocates and community organizations must remain engaged with local hospitals, monitoring their compliance and taking advantage of opportunities to shape policy to meet local needs.
Patient-friendly billing practices don’t just help patients. Hospitals can benefit, too, from adopting better methods to collect.