January 26, 2004
HOSPITAL DEBT COLLECTION LAW
By: John Kasprak, Senior Attorney
You asked for information on the state's new hospital debt collection legislation, including any effects on hospitals. You are also interested in other activity taking place on hospital debt collection practices.
Legislation adopted in 2003 (PA 03-266) addresses debt collection practices of Connecticut hospitals, hospital bed funds, and services to and payments for uninsured patients. It prohibits referral to a collection agent or initiating sanction against a patient for fee collection unless certain conditions are met. The act requires collection agents to make hospital bed fund summaries available; hospitals in turn must require their collection agents to include a summary of their bed fund policy in all bills and collection notices. Under the act, hospitals and others involved in debt collection must discontinue such activities when they become aware that the debtor is eligible for bed funds or other financial assistance. The law limits prejudgment and post-judgment interest on debt arising from hospital services to 5% per year.
Both the attorney general and a union have filed lawsuits against certain hospitals over their policies and practices of providing care to the poor, particularly the use of hospital bed funds.
The American Hospital Association recently released guidelines addressing hospital billing and collection practices. Other states that have been particularly active on this issue are Illinois and California.
CONNECTICUT LEGISLATION ON HOSPITAL DEBT COLLECTION PRACTICES
Public Act 03-266, effective October 1, 2003, makes a number of changes to the laws governing hospital bed funds; hospital debt collection practices; and hospital services to, and payment for, uninsured patients. Specifically, the act:
1. requires hospitals to file more detailed information on their free care and reduced care with the Office of Health Care Access (OHCA);
2. amends the definition of “hospital bed fund;”
3. requires the already mandated public notices and written summaries about hospitals' bed funds be in English and Spanish;
4. requires the written summaries to describe other hospital policies concerning free or reduced-cost care for indigent people and to notify patients that they can reapply if rejected;
5. requires collection agents to make bed fund summaries available and hospitals to require their collection agents to include a summary of the bed fund policy in all bills and collection notices;
6. redefines “uninsured person” for purposes of hospital billing for services and collection and requires collection agents to give patients written notice of their insurance status;
7. prohibits referral to a collection agent or initiating an action against a patient for fee collection unless certain conditions are met;
8. requires hospitals to file annual debt collection reports with OHCA;
9. requires hospitals and others involved in debt collection to discontinue such activities when they become aware that the debtor is eligible for bed funds or other financial assistance;
10. limits prejudgment and post-judgment interest on debt arising from hospital services to 5% per year;
11. increases the homestead exemption from $75,000 to $125,000 in the case of a money judgment for hospital services;
12. requires, in the case of hospital services, that an order for installment payments and a default on those payments occur before a judgment creditor can apply to collect the judgment; and
13. specifies that compliance with the installment payment stays any property execution or foreclosure.
(A copy of the full public act summary is attached.)
RECENT ACTIVITY RELATED TO THE HOSPITAL DEBT COLLECTION LAW
Liens on Property
In November 2003, Yale-New Haven Hospital announced that it had released 95% of the 2,500 liens it had placed on area properties to secure debt. Apparently, the hospital raised the thresholds for the value of the property affected, as well as for the amount of the debt that would trigger any future liens (see “Yale-New Haven Removes Liens on Most Properties,” New Haven Register, November 19, 2003). The liens were for most of the towns in the New Haven area, as well as Bridgeport. A total of 125 liens were still listed on land records as of the time of this article.
Also, as of mid November 2003, Yale-New Haven Hospital had closed 868 of 11,000 accounts in collection, which were worth about $200,000.
Earlier this month, the Service Employees International Union 1199 New England filed a lawsuit against two affiliated hospitals (Yale-New Haven and Bridgeport hospitals), arguing that they have illegally denied free medical care to the poor. The union's lawsuit is similar to one filed in February 2003 by Attorney General Blumenthal that alleged that Yale-New Haven misused its free bed funds and put obstacles in the way of patients accessing them.
After the hospital debt collection law took effect in October 2003, Yale-New-Haven issued new guidelines on who qualified for them. If a patient is at 250% of poverty ($22,450 single person; $46,000 for a family of four) and has been rejected for state assistance, the hospital will automatically write off the bill, using its bed funds, which are worth about $24 million. But Yale-New Haven will not use the funds for patients with insurance who have problems because of deductibles, co-pays, or uncovered medical procedures. The hospital argues that Medicare does not allow deductibles or co-pays to be waived, while the same applies for contractual agreements with HMOs. Blumenthal disagrees with this interpretation, stating, “There is simply no logical or reasonable interpretation of the new law that would support the hospital saying…patients with insurance are ineligible to receive free-bed funds…” (“State, Yale-New Haven Differ on new Law; Dispute Escalates Over Hospital's Free-Bed Funds,” New Haven Register, November 30, 2003). This lawsuit has not yet been settled.
In the 1199 lawsuit, the union is asking a New Haven Superior Court judge to appoint an independent board to oversee all free bed funds administered by Yale-New Haven and Bridgeport hospitals and to control the hospitals' payment collection procedures. The union's lawsuit was filed on behalf of eight people and class action status is being sought.
AMERICAN HOSPITAL ASSOCIATION GUIDELINES
In late 2003, the American Hospital Association (AHA) released a set of guidelines and a legal “white paper” on hospital billing and collection practices. (These materials can be found on the AHA's website at http://hospitalconnect.com.) These were issued in the face of criticism of some hospitals' practices toward low-income uninsured patients, including failure to inform people about charity care eligibility, home foreclosures, wage garnishment, and even jailing. In a separate letter to the Secretary Thompson of the U.S. Department of Health and Human Services, the AHA asked for clarification of certain Medicare regulations affecting hospital billing and collection practices.
According t the new AHA guidelines, hospitals should:
1. make public and available their charges for services;
2. review current charges to ensure that they are “reasonably related to both the cost of the service and to meeting all of the community's health care needs”;
3. provide financial counseling to patients about their hospital bills;
4. have understandable written policies to help patients determine if they qualify for public or hospital-based assistance programs;
5. ensure that all written policies for assisting low-income patients are applied consistently and share them with community health and human services agencies and other organizations that assist people in need; and
6. educate hospital staff about these policies.
The AHA guidelines on debt collection practices are not particularly detailed and call on hospitals to define the practices used by their outside collection agencies and develop written policies about when and how patient debt is advanced for collection.