This entry was originally posted on The Shriver Brief.

When patients seek emergency medical treatment, they expect to speak to doctors and nurses—not debt collectors. But hundreds of documents released last week by the Minnesota attorney general reveal that at least one medical debt collector, Accretive Health, has been working on the front lines in hospitals, often demanding that patients pay before receiving medical treatment.

According to The New York Times, the documents show that the embedded debt collectors may appear to be hospital employees and may even discourage patients from seeking emergency care. They follow scripts, just like debt collectors on the telephone, only they speak to patients in person at a time when they have immediate medical needs.

In addition to its scrutinized work at Fairview Health Services in Minnesota, Accretive Health holds contracts for “revenue cycle operations” with Henry Ford Health System in Michigan, Intermountain Healthcare in Utah, and Catholic Health East, which runs hospitals in eleven states. All of these hospital systems are non-profit corporations, meaning that the Internal Revenue Service (IRS) allows them to operate tax-free in exchange for providing certain benefits to the communities they serve. The tax savings realized by non-profit hospitals aren’t peanuts—$ 4.3 billion in 2002 alone. Non-profit hospitals make up less than 2 percent of non-profit organizations, but they receive 41 percent of federal non-profit tax benefits.

Many non-profit hospitals meet their “community benefit” obligations by providing charity care, also known as “financial assistance,” which helps fill a gap in health coverage for many uninsured and underinsured Americans. But measuring and monitoring hospitals’ community benefit efforts has been a challenge. In fact, in 2005, the IRS noted the prevalence of abuse of the amorphous “community benefit” standard, saying it had difficulty distinguishing between non-profit and for-profit hospitals in their operations.

As Corey Davis of the National Health Law Program and Jessica Curtis and Anna Dunbar-Hester of Community Catalyst explain in their recent article in Clearinghouse Review, Congress responded to this abuse by including in the Patient Protection and Affordable Care Act amendments to sections of the tax code that govern non-profit hospitals. These changes protect low-income and self-pay patients through new billing and collection standards that non-profit hospitals must follow to maintain their tax-exempt status. Unlike some parts of the new health care law, these changes went into effect immediately. According to Section 9007(a) of the Patient Protection and Affordable Care Act, non-profit hospitals now must:

  • • refrain from engaging in “extraordinary collection actions” unless and until they have made “reasonable efforts” to determine if a patient is eligible for financial assistance,
  • • limit charges for emergency or other medically necessary care for patients qualifying for financial assistance to the lowest amount charged to insured patients,
  • • refrain from applying “gross charges” to patients who qualify for financial assistance,
  • • have a written policy to provide emergency medical care regardless of a patient’s ability to pay, and
  • • have a written financial assistance policy describing eligibility criteria, whether free or discounted care is available to low-income patients, how the hospital calculates charges, how it will publicize financial assistance, and how patients can apply for financial assistance.
To monitor and enforce compliance with the new law, the IRS recently revised the Schedule H form that non-profit hospitals must file with their Form 990 tax returns. Schedule H, the vehicle for reporting community benefit activities, now includes questions reflecting the new requirements from the Patient Protection and Affordable Care Act.

But the IRS isn’t the only one paying attention to this issue. After the Minnesota attorney general’s report, a California Congressman asked for an investigation of Accretive Health to probe whether its practices violated other federal laws. Last week a North Carolina newspaper ran a weeklong series highlighting questions around hospital profits, and on Friday afternoon, NPR’s “All Things Considered” featured a story on non-profit hospitals’ “stinginess” with charity care.

Whether the new health care law will prevent scenes such as those described in The New York Times article from recurring in non-profit hospitals remains to be seen. Davis, Curtis and Dunbar-Hester note in their Clearinghouse Review article that the Treasury Department is developing regulations that should define exactly what constitutes an “extraordinary collection action” and will elaborate on other sections of the health care law that could curb such behavior. By anyone’s definition, embedding debt collectors among medical staff seems, at a minimum, “uncharitable.”

— Amanda Moore Staff Attorney-Legal Editor Sargent Shriver National Center on Poverty Law