Hospitals may need to focus more resources on patient financial assistance to meet new regulatory requirements.

June 1—A recently concluded Senate Judiciary Committee investigation into the debt-collection practices of a Missouri hospital could portend additional scrutiny on hospitals.

Sen. Charles Grassley (R-Iowa), chairman of the committee, launched an investigation into the debt-collection practices of not-for-profit Mosaic Life Care, St. Joseph, Mo., after critical media reports of lawsuits the organization filed to reclaim outstanding patient debt. Grassley was concerned that the not-for-profit hospital was too aggressive in collecting debt and provided insufficient information about its available financial assistance, among other issues.

Following the recent completion of the investigation, Grassley noted that further scrutiny is likely.

"It is unclear how many other charitable institutions may be engaging in similar practices," Grassley wrote in a letter to other committee members about the findings of the investigation. "However, vigorous oversight is vital to finding and fixing other examples of such abuse."

A Grassley spokeswoman, responding to a question about plans for future scrutiny of hospital charity care policies, noted that Grassley will “continue to keep an eye on how tax-exempt hospitals fulfill their obligations, as he has for a long time.”

The congressional investigation came amid a deadline for hospitals to meet the new charity care policy requirements of the Affordable Care Act (ACA). The ACA’s 501(r) requirements for charitable 501(c)(3) hospitals include creating written financial assistance policies and emergency medical care policies, limiting the amounts charged for emergency or other medically necessary care to patients eligible for assistance under a hospital's financial assistance policy, and undertaking reasonable efforts to determine whether individuals are eligible for assistance under a hospital's financial assistance policy before engaging in extraordinary collection actions (ECAs).

The regulation implementing those requirements required completion by the start of a hospital’s 2016 fiscal year. Non-compliant hospitals can face the loss of their tax-exempt status.

One patient billing advisor viewed Grassley’s warning as likely applying to 501(r) requirements.

"For any hospital that hasn’t done a comprehensive review of its financial assistance policy, this suggests that they do that; he and others are going to be paying attention going forward," Mark Rukavina, principal at Community Health Advisors, said in an interview.

Mosaic’s Steps

In addition to a onetime debt forgiveness initiative, Mosaic undertook a range of policy changes that drew praise from Grassley in a Senate floor speech following his investigation.

"It probably shocks Mosaic that I would compliment them, considering where I started in this investigation," Grassley said in his speech. "But I speak from the heart that when they make these changes, they ought to be complimented now."

The nearly 18-month investigation resulted in the debt forgiveness initiative and a range of changes in the hospital’s debt-collection practices. Among the policy changes that drew support from Grassley was expanded notification to patients about the availability of financial assistance. For instance, the hospital will ensure patients are provided 180 days of direct notification of financial assistance prior to being sent to collections.

"Some of the collection actions that were pursued by Mosaic previously may have been caused by a lack of awareness among patients that these options are available," said Rukavina, who advised the hospital on ways to bolster its patient notification apparatus.

Grassley also praised Mosaic for hiring additional staff to assist with applications for Medicaid and dedicating certain patient financial service representatives to ensure timely processing of financial assistance applications.

The hospital’s praised response was not based on any industry model, according to a Mosaic spokeswoman, but developed on its own.

"Mosaic Life Care began the journey toward becoming more patient-centric many years ago within our clinical space including expanding care management through our model as an accountable care organization," Tracey Clark, a Mosaic spokeswoman, wrote in an email response to questions. "Becoming more proactive in the holistic care of those we serve and increasingly addressing financial concerns on the front end of care rather than after care, is congruent with not only the organization's mission and vision, but with the Mosaic Life Care model as well."

Meeting the Policy Deadline

Industry observers warned about indications that many hospitals are struggling to meet the 501(r) financial assistance requirements. For instance, Rukavina said the financial assistance policies of other hospitals he has reviewed are not as readily accessible as Mosaic’s, which included dedicated pages on its website, downloadable applications, and consumer videos.

"The main problem is in how well hospitals are implementing their policies and how active they are in educating patients at the time they seek care, rather than sending them a bill and waiting until they can’t pay and then potentially sending it to a collection agency," John Ayanian, MD, director of the Institute for Healthcare Policy and Innovation at the University of Michigan, said in an interview.

Although the ACA required hospitals to meet its charity assistance policies for several years before the 501(r) rules were formally issued, many hospitals had fallen short, according to an October 2015 study that Ayanian co-authored in the New England Journal of Medicine.

Of the more than 1,800 not-for-profit hospitals examined, 94 percent reported having written charity care and emergency care policies to guide them in deciding which patients could get free or reduced-price care, according to the review of the hospitals’ 2012 IRS filings.

However, only 42 percent of the hospitals reported notifying patients about their potential eligibility for charity care before attempting to collect unpaid medical bills. The ACA required such notifications to give patients a chance to apply to get some or all of their costs written off.

"What’s important is how well they are making patients and their families aware of their policy," Ayanian said. “Do they have financial counselors who screen people based on their income to determine whether they should be encouraged to apply, or do they just put a sign up in the waiting room and put the burden on patients to determine whether they are eligible?”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C. office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Thursday, June 02, 2016