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What do institutional ethics require of hospital bill collection processes?
Individual ethics also a factor in bill collection
President Obama may have signed the $787 billion stimulus package with the expectation that it will create jobs and jumpstart the economy, but businesses — including those in the business of health care — are still feeling financial pain. As individuals either lose health care insurance or are unable to meet deductibles and afford what in many cases are higher co-pays, the health care system as a whole is pinched.
Do hospitals have a responsibility to patients that differs from other creditors, particularly related to bill collection policies and processes — and particularly in an economic downturn when current or former patients may have the will to pay but not the means?
"It's an issue that constantly comes up in any institution, and at UCI we're particularly affected, because we do more than our fair share of the county's indigent care," says Felicia Cohn, PhD, director of medical ethics at the University of California, School of Medicine, Irvine. "So, it's a constant struggle to maintain the bottom line to be able to provide the care that people need and deserve."
Cohn frames the issue of balancing an institution's desire to serve the greatest number of people and still get paid as a "constant balance of justice," because "every institution is having financial problems."
How a hospital responds to patients' financial difficulties could affect the institution's standing in the community if that community learns the hospital is responsible for overly aggressive collections practices.
"It's a relevant topic, because the way in which a hospital relates to its patients — both potential and actual patients — that is, both members of the community who have a certain image or perception of the institution, as well as members of the community who have been patients in the hospital, and may be again, partially assess that organization on the way in which it not only provides services within the hospital, that is, to patients, but also how they are treated following discharge," says Paul B. Hofmann, DrPh, president of Hofmann Healthcare Group in Moraga, CA, and an editorial advisory board member for Medical Ethics Advisor.
Hofmann says it follows the aphorism, "You never get a second chance to make a good first impression."
"You know, you want your first impression to be as positive as possible, and you want your final impression to be as strong and positive, as well," he says.
Are hospitals experiencing non-payment?
Daniel Gialloreto, director of collections at Shafer Law Firm in Atlanta, notes that his firm's collections agreements spell out, in addition to what fees the firm will earn, such things as how many calls a guarantor of an account can expect to receive during a given month.
"We also have a signed HIPAA agreement, which deals with primarily the privacy of the former patient's information," Gialloreto says in an e-mail response.
From his vantage point, he says there has been a "dramatic increase in unpaid medical bills, to the point that [one] institution has a hiring freeze and a purchasing freeze on new medical equipment."
At Vanderbilt University Medical Center in Nashville, TN, director of patient accounting, Gary Perrizo, says, "We have not seen a big surge in our patient liability — for pure private pay — skyrocket. In other parts of the country, you would, or have. It could be because of our locality and who some of our main employers are."
One of those large employers is the state of Tennessee, and the hospital serves a large group of state employees. Another large employer is the university system itself.
"We've had layoffs here in the region, but I don't think we've had it hit as bad as other places," Perrizo says.
Perrizo also says that Vanderbilt has not seen an increase in the length of time in which bills are paid. However, he says, "I will say this: I see an awful lot of charity write-offs, based on our financial assistance policies."
Should hospitals be more lenient in a downturn?
In this economic downturn, when there are reports of 11 million people looking for jobs — with thousands of job layoffs announced in January alone — it follows that more people will have lost their employer-sponsored health care benefits, thus making it more difficult to pay when health care services are needed.
One question that could be posed is: Should hospitals be more lenient in an economic downturn?
"I think a distinction can and should be made between existing policies and procedures on the one hand, and their application on the other," Hofmann says. "That is to say that every hospital will have detailed policies and procedures pertaining to the collection of revenue from insurance carriers and patients.
"What is critical during this severe economic downturn is that those policies and procedures be flexible and applied judiciously, recognizing that the patients and their families — when it comes to deductibles, co-insurance, and self-pay responsibilities — have to be accommodated in a way that recognizes the fact that a larger proportion of that population [may] have less resources," he says.
Typically, the CFO or hospital finance committee would initiate a change in policy, most agree.
"Certainly, there are a set of metrics that are used by every hospital that monitor the billing cycle, and the number of outstanding days in accounts receivable is something that is very closely assessed, not only by the finance department, but obviously by the senior administration, the finance committee of the board, and the board itself," Hofmann says. "But the initiative in determining when and how existing policies and procedures might be modified or adjusted would begin within finance."
And while hospitals always should apply financial policies judiciously, according to Hofmann, "during exceptionally difficult times, a hospital has to demonstrate exquisite sensitivity to the way in which existing policies and procedures are applied, and that serves both the community and the institution."
In a series published by the Baltimore Sun in December 2008 on hospital practices in bill collection, one story focused on those individuals who wind up in what appears to be court, and the article maintains that these former patients believe they are, indeed, in a court of law.
Nancy Fiedler, senior vice president of communications for the Maryland Hospital Association, says her organization conducted studies that found that "a lot of these individuals who ended up in court are not the ones you might expect — the huge bill — because, as you might expect, those are the ones that the individuals come to the hospital and say, 'We've got to figure something out.'
"So, we're really talking about, for the most part — you know, $500, $1,000 — by the standards of health care cost, fairly modest costs," Fiedler says. "But there has been an increase of these kinds of outstanding bills, and, you know, this was before the economy even went south, and part of that is — at least the feeling from the hospital standpoint — is that the co-pays . . . even with employer-sponsored [policies], have increased."
Fiedler says another problem is that individuals who are out of work may buy a health insurance package that they believe to be comprehensive when, in fact, those policies may only be for catastrophic care.
"So, you go to the emergency room and you have to have an MRI, or a CAT scan or something like that, and you end up with a couple of thousand-dollar bill, which you are [unlikely] to be able to pay, in the case of individuals," she says.
What many hospitals do to help
Vanderbilt, for example, has three different types of financial assistance policies:
1) Pure charity, which is based on federal poverty guidelines, according to Perrizo. For this, Vanderbilt goes above 200% of the federal poverty level, and is today "right at" 250%, he says.
2) A catastrophic assistance policy. For this, "We will forego balances that you owe us, if your portions of the bill were greater than your annual [household] income."
3) A policy mandated by the state of Tennessee: For this program, Perrizo explains that the law provides for those who have been declared private pay with no insurance — meaning the patient is not eligible for Medicaid or other assistance programs, either federally sponsored or state-sponsored and is seeking "medically necessary services, they are entitled to a discount." That discount is based on Vanderbilt's averaged managed care contracted discounts, which is currently at 40%, Perrizo says.
For the most part, according to Fiedler and Perrizo, hospitals typically do not contract with the same collection agencies that may be employed for, say, a credit card balance. Furthermore, Perrizo says that Vanderbilt dictates what its collection agencies may or may not do with a patient.
"We call those shots," he says.
As for the types of actions the institution does not allow, Perrizo says, "We do not foreclose on anyone's real property; we do not take anyone's home; we do not take anyone's car; we do not go after personal or real assets of the guarantor of the account.
"What we do go after is future earnings," he says, noting that the hospital attempts to set up a "payment arrangement plan that is interest-free, so we try to work with them."
Piedmont Healthcare, which operates the private Piedmont Hospital in Atlanta, says in an e-mail response that the hospital has made no policy changes "due to the current economic landscape." However, the institution has begun utilizing Search America "to identify self-pay patients who qualify for charity care upon admission."
"This takes the burden off the patients and their families, who in the past had to provide paperwork in order to qualify for charity care," according to Diana Lewis, public relations director, in the e-mail. "We also use the program to qualify patients who ask for financial assistance, even though they have insurance."
Fiedler says she "will not say that hospital bills are particularly easy to understand. However, speaking for Maryland hospitals, she says most institutions "spend a very considerable amount of expense and time helping individuals who do qualify for health benefits: Medicaid, sometimes it's a state program that exists for breast cancer, or things like that, but getting people into programs where they would have health insurance coverage."
Such financial billing advisors essentially act as insurance "translators" for patients, who may have difficulty understanding what types of coverage their own insurance provides, or the types of financial assistance that may be available to them.
Is the right thing impossible?
When considering a question of how to achieve a desired end that satisfies everyone with regard to hospital payment, the University of California, Irvine's Cohn says, "I don't think it's possible."
"You are constantly going to have health care institutions struggling to meet their expenses, so that they can continue providing care to at least some people — if not everyone — while at the same time, people who really need care won't be able to get it, because there just won't be the resources available.
"You know, they say if you make a compromise that makes everyone unhappy, you've done something right. And I think that probably applies here. Every institution has some obligation to provide care for those in need, but they also have an obligation to stay in business, so that they can continue providing care for everyone else," Cohn says.