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Five Things Every Hospital Board Member Should Know About the Collection of Patient Debt

This article was originally published in Minnesota Hospital Association‘s newsletter, Health Care Leader.

Hospital boards have a thousand moving pieces to watch. Boards are not supposed to understand the day-to-day operations of the hospital collection process. Rather, hospital boards are charged with ensuring that policies, processes and people are in place so that the hospital is in compliance with the rules, laws and agreements governing the collection of patient debt.

It would be surprising if the hospitals of any other state are as highly regulated with respect to the collection of patient debt as are Minnesota hospitals. The collection of patient debt by Minnesota hospitals is regulated by state statute, a (relatively) new provision of the Internal Revenue Code, extensive federal regulations and an agreement nearly every Minnesota hospital has signed with the Minnesota attorney general’s office.

So, given the myriad of issues required to be top-of-mind for hospital board members, what questions should rise to the top for a hospital board member with respect to the collection of patient debt? Here are five suggestions.

  1. How does our financial aid work?
    Financial aid is what stands between the patient and the collection agency. A patient who truly cannot afford to pay should not be subjected to a far-reaching collection process. A tax exempt hospital is required to take reasonable steps to ensure that patients have been made aware of the availability of financial aid before beginning the collection process. The board should have a basic understanding about the hospital’s financial aid system, including how financial aid is offered, the levels of financial aid offered and how the hospital’s financial aid offerings compare to those of similar hospitals.
  2. Who collects our patient debt?
    Most hospitals have an internal collection function, as well as an external collection agency and collection law firm under contract to collect patient debt. For hospitals that signed the attorney general agreement, an officer of the hospital (the CEO or his or her designee) reauthorizes agreements with outside collection agencies annually. The board of a hospital should know where the hospital’s debt is collected, by whom and that the hospital conducts an annual review of those entities’ performance.
  3. What are the trend lines on our patient complaints?
    Annually, the board of a Minnesota hospital (at least those that signed the attorney general agreement) should be presented with the results of a review of the hospital’s debt collection practices and the practices of its outside agency and law firms. The board should be informed of trends in patient complaints and know that someone within the hospital is monitoring a monthly complaint log from the collection agencies. The board should ask what is being done to prevent a trending type of complaint from becoming a problem for the hospital.
  4. What are the trend lines on our patient lawsuits and garnishments?
    The board of a Minnesota hospital should know how many (ball park) patient lawsuits and garnishments were authorized by the hospital in the past year, and how those numbers compare to prior years. The board should have an overall comfort level that the process used by the hospital to determine that a patient should be subject to litigation and garnishment is fair, carefully overseen, and provides every opportunity for a patient to make arrangements to pay the bill before being sued.
  5. Who leads our compliance with the various laws regulating collection of patient debt?
    The board of a hospital should know who leads the hospital’s compliance efforts with respect to collection of patient debt. This person should make the annual report to the board on compliance with the attorney general agreement because he or she is in the best position to prevent the hospital from becoming the next news story about unfair collection of patient debt. The board should ask him or her a few questions about the above-listed topics.

    A board ultimately wants to be certain that it has upheld its fiduciary obligations with respect to regulatory land mines like collection of patient debt. Receiving a report annually allows the board to carry out this responsibility. A board can go beyond the baseline and actually enhance a hospital’s organizational strength in this area by engaging with the staff responsible for patient debt collection compliance. These five questions represent a place to start.

Nilan Johnson Lewis’ health care team advises hospitals and health care systems on regulatory compliance, governance, complex transactions, privacy and security issues, contracting and credentialing, and more. For more information, contact Heidi Christianson at 612.305.7698.

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