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Problems with medical debt collection

Noncompliance with these requirements may violate the Fair Debt Collection Practices Act or the Fair Credit Reporting Act, as well as constitute a defense to collection.

I. What provider must prove

A hospital or physician normally does not have an agreement by the patient to pay a specific price for services, except in a few cases involving “elective” procedures such as plastic surgery. Absent such an agreement, the provider must prove (1) what services were provided, (2) that its charges are the usual and customary charges for that particular establishment, and (3) that the charges are comparable to the charges of other, similar establishments in the area. Victory Memorial Hospital v. Rice, 143 Ill.App.3d 621, 493 N.E.2d 117, 119 – 120 (2d Dist. 1986); Temesvary v. Houdek, 301 Ill.App.3d 560, 703 N.E.2d 613 (2d Dist. 1998); Protestant Hospital Builders Club, Inc. v. Goedde, 98 Ill.App.3d 1028, 424 N.E.2d 1302 (5th Dist. 1981).

II. Unreasonable charges

Examination of medical and hospital bills often discloses items that are facially unreasonable ($50 for an aspirin), duplicative (charging for the same item more than once), entered in error (comparison of the bill with the underlying medical records and pharmacy record discloses that the item billed was not in fact provided), or nonbillable (charging for items that should be included in the cost of hospital rooms, surgeons charging the full cost for more than one procedure during the same operative session), separate charges for standard hospital room supplies (toothbrushes, tissues), and charges for multiple tests that should be incorporated in one test. Some studies indicate that over 80 percent of hospital bills contain errors of this nature. Barb Berggoetz, Decoding your medical bills: take control of your health care costs, Saturday Evening Post, Sept. 1, 2010, at 28(2); Adam Voiland, How to Decipher a Hospital Bill, U.S. News & World Report, July 15, 2007.

One issue concerns emergency room services billed at the two highest-reimbursed severity levels, 99285 and 99284. These CPT codes are intended for lengthy or complex encounters. But between 2009 and 2016, use of these codes grew by 38% and 16% respectively, supplanting billing at lower-severity codes. Any bill for one of these codes should be examined.

III. IIIinois Fair Patient Billing Act

Illinois enacted a Fair Patient Billing Act, 210 ILCS 88/1 et seq., effective January 1, 2007. It requires that hospitals (not physicians) to notify patients of the right to apply for financial assistance and to negotiate a “reasonable payment plan. “ 210 ILCS 88/30. It is unlawful to file a collection action against a patient without providing such opportunity. 210 ILCS 88/30(b)-(c).

IV. Affordable Care Act regulations

Federal regulations implementing the Affordable Care Act, 26 C.F.R. §1.501(r)-6 (“Obamacare”), prohibit hospitals from engaging in “extraordinary collection actions” against an individual to obtain payment for care before the hospital “has made reasonable efforts to determine whether the individual is eligible for assistance for the care under its financial assistance policy (FAP).” An “extraordinary collection action” is defined in 26 C.F.R. §1.501(r)-6(b) to include selling the debt, credit reporting, requiring payment before providing further care, legal process other than a claim in the patient’s bankruptcy, placing a lien on property other than a tort recovery, and garnishment of wages. Debt sales are exempt if the purchaser is subject to a binding agreement to refrain from engaging in extraordinary collection actions. Reasonable efforts to determine whether the individual is eligible for assistance include notice and 120 days’ opportunity to apply for assistance before any extraordinary collection actions are instituted.

V. Other defenses and issues unique to medical debts include:

A. Discounts. The Hospital Uninsured Patient Discount Act, 210 ILCS 89/1, effective December 22, 2008, mandates certain discounts for uninsured patients who meet specified income criteria. 210 ILCS 89/10.

B. Restrictions on “balance billing” in the state and federal Medicaid and Medicare statutes and in contracts with insurers, health maintenance organizations (HMOs), and preferred provider organizations (PPOs) (These restrictions limit (often to zero) the amount for which the patient is liable if a claim is or should have been submitted. E.g., 42 U.S.C. §1395cc; 42 C.F.R. §§489.21, 447.15.);

C. Negligence in submitting bills to insurance, etc. An institution that undertook to apply for Medicaid or similar benefits but failed to do so is barred on an estoppel theory from recovery against the patient (Mount Sinai Hospital v. Kornegay, 75 Misc.2d 302, 347 N.Y.S.2d 807 (N.Y.Civ. Ct. 1973). The same logic should apply to failure to timely or properly submit charges for payment to an insurer or other party that would have paid them;

D. Lack of medical necessity. An implicit term of the contract between a medical provider and a patient is that only such services as are reasonably determined to be medically necessary will be provided. “Explanation of benefits” documents provided by insurers and other benefits providers should be examined. If they deny reimbursement on the ground that services provided were not medically necessary, and that determination is correct, the medical provider should not be able to recover payment from the patient, at least if the provider was responsible for the decision to require the services. Sisters of Third Order of St. Francis v. Summerson, 217 Ill.App.3d 377, 577 N.E.2d 177 (3d Dist. 1991) (matter is affirmative defense; however, hospital may not be at liberty to disregard instructions of patient’s own physician, even if instructions called for procedures that were not medically necessary). A third-party complaint against the benefits provider is often appropriate in this situation. Similar arguments apply in the case of experimental procedures, at least if their experimental nature was not disclosed.

E. Statute of limitations. We have seen attempts to collect old medical bills. In our opinion, the usual financial responsibility document you sign when first visiting a hospital or doctor's office is not a written contract entitling the provider to the ten-year statute of limitations. The five-year statute therefore applies. The only exception is likely to be contracts for elective surgery, such as cosmetic procedures, where a fixed price is agreed upon in advance. Attempts to collect old bills may violate the Fair Debt Collection Practices Act..

F. Surprise bills from out-of-network providers. A patient checks their insurance coverage or benefits plan and goes to a hospital that is in-network. They then get billed by a doctor or other provider who is out-of-network. The hospital is in-network, but has granted privileges to or contracted with providers who are not. The hospital does not warn in advance that it is doing so. We believe that this is a deceptive practice and impermissible. For services provided after January 1, 2022, this practice is restricted by statute.

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