Ensuring collections processes are in line with 501(r) may pose a challenge for many non-profit healthcare organizations, since many providers outsource unpaid accounts and have to rely on a third party for compliance. As noted in the Final Rule, organizations may be liable for vendor noncompliance unless “a hospital facility acts reasonably and in good faith to supervise and enforce the section 501(r)(6) obligations of its contractual agreements with debt collectors or purchasers and corrects any contractual violations it discovers.” To help leaders understand the specific rules that affect collections vendors and modify processes and contracts accordingly, we‘ve outlined the following key considerations for compliant practices.
Postponing Extraordinary Collection Actions
Under 501(r), organizations and their collections vendors must comply with rules regulating when extraordinary collection actions (ECAs), including taking legal action or garnishing wages, may take place. As Academy survey results show, 21% of organizations have changed their process for auditing vendors to ensure these rules are followed.
For example, one Wisconsin-based organization’s contract analyst randomly audits accounts in bad debt every month to ensure vendors are not initiating ECAs until the required timeframe. They also audit early-out accounts, checking whether the vendor is initiating the appropriate number of bills and phone calls to patients in the required timeframe. While this organization expects its early-out vendor to make extra communication attempts for certain accounts based on propensity-to pay scores, each patient must receive a minimum of three statements.
Providing a 30-Day Notification Letter Prior to ECAs
As the responsibility for sending patients the required 30-day notification letter before initiating ECAs may fall on bad debt vendors, providers may need to work with them to ensure they include the specific ECAs vendors intend to take against a given patient, the date when such actions will commence, language describing the availability of financial assistance, and a copy of the plain language summary of the FAP with each letter.
Organizations may also give bad debt vendors responsibility for attempting to orally notify patients about the availability of the FAP and how to apply for assistance 30 days before initiating ECAs. To track vendors’ compliance with these rules, organizations might consider including provisions within their contracts requiring vendors to provide documentation of their communication attempts with patients. For example, the aforementioned organization in Wisconsin requires its bad debt vendors to send the organization copies of the 30-day notification letters given to patients. Staff then check the dates of the letters in relation to when ECAs were initiated. If the dates of certain ECAs, such as a report to credit agencies, are not easily identifiable through audits, the organization contacts the vendors to verify when accounts were sent in addition to asking for copies of the letters.
Suspending Ongoing ECAs
Organizations may find it challenging to develop processes for informing bad debt vendors to suspend any ongoing ECAs against patients who submit their financial assistance applications between 121 to 240 days after the first post-discharge billing statement. Even if the application is only partially filled out, vendors may not resume ECAs until the application is complete and the organization determines that the patient does not qualify.
To effectively communicate, organizations might consider developing a staff role dedicated to monitoring submissions for financial assistance applications. Two staff members who act as liaisons between the Wisconsin-based organization and its bad debt vendors send emails to notify vendor staff when applications are received. Depending on an organization’s capabilities, notifying vendors through the EHR may provide more efficiency. The same organization also leverages its EHR to send daily update files to vendors and place indicators on the files to show when an application has been received or remove indicators if ECAs may resume.
By having a firm understanding of these rules and applying them to their contracts and strategies with vendors, nonprofit organizations may be better able to develop processes for actively monitoring vendors’ adherence to 501(r) rules.