By adopting a consistent approach to their patient billing and payment collection processes, providers can improve the payment experience for patients and resolve outstanding medical accounts in a way that is fair and equitable to both parties.

The appropriate resolution of the patient portion of medical bills continues to present challenges to patients and providers alike. Variation among providers in terms of processes, procedures, and time frames leaves patients uncertain about what to expect after they receive a bill.

Realizing that documenting industrywide consistent post-service account resolution practices would help resolve these challenges, HFMA partnered with ACA International (the Association of Credit and Collection Professionals) and convened a task force to establish best practices for the fair resolution of patients' medical bills. Task force members include a diverse group of providers, consumer advocates, collections agencies, and credit bureaus, as shown in the sidebar.

The primary audiences for the best practices include healthcare providers, business affiliates, and credit bureaus. (In this context, business affiliates are organizations that contract with healthcare providers to work directly with patients, on behalf of providers, to resolve outstanding medical accounts. Examples include, but are not limited to, accounts receivable management companies, collection agencies, and debt buyers.) For these audiences, the best practices identify a standardized process for resolving the patient portion of medical bills and provide a framework for educating patients about the account resolution process. 

Secondary audiences include patients (through the providers who work with them directly) and the policy community.  

Medical Account Resolution Process Overview

After a service is rendered, some account resolution activities apply to all patient accounts with outstanding balances; others come into play only after the account is determined to be at risk for becoming bad debt. These two phases of the post-service account resolution process are depicted in this workflow.

Key Recommendations

To engage patients in a constructive way and help ensure that the medical account resolution process is fair to all parties, providers and business affiliates working on their behalf should follow best practices for account resolution, as shown in the flow chart above and described in depth in the full report, Best Practices for Resolution of Medical Accounts. Key recommendations from that report include the following.

Lay the groundwork. Although these best practices focus on post-service resolution of accounts, the task force recognizes that much depends on events that transpire at—or before—the time of service. Successful account resolution begins with educating patients about the estimated patient responsibility, payment options, and the availability of financial assistance programs and about what to expect throughout the account resolution process. Toward that end, the task force recommends that providers follow HFMA's Patient Financial Communications Best Practices. In essence, providers should take responsibility for educating patients about their payment options and responsibilities and be proactive about communicating financial assistance policies and procedures.

Make bills patient-friendly. All financial communication should be clear, concise, correct, and patient friendly. Following the guidelines developed for HFMA's Patient-Friendly Billing® Project will help ensure that patients can quickly determine what to do when they receive a bill, and that bills contain the right amount of detail and correctly reflect the financial aspects of a care episode.

Establish policies and ensure that they are followed. All activities in pursuit of account resolution should be governed by the provider organization’s financial assistance, account resolution, and collections policies. These policies should be approved by the provider's board of directors and followed by all parties, including business affiliates representing the provider. Providers should have a clear written policy regarding the provision of financial assistance, which describes how to apply, what supporting documentation should be submitted, eligibility criteria, and any measures providers may take to resolve accounts. This policy should reflect the economic circumstances of the community and be readily available to all patients.

Be consistent. Key aspects of account resolution should be standardized throughout the organization. For example, payments should be applied to accounts in a consistent manner. When patients have multiple open accounts, unless specific payment application instructions are provided by the patient, the payment should be applied to the balance on the statement that accompanies the payment. If there are funds in excess of the balance and no direction is provided by the patient, providers should systematically apply payments to older accounts first to assure a fair and constant methodology of payment application. (Other examples of processes that can benefit from consistency are described in the footnotes to the flow chart in the full report.)

Coordinate account resolution activities with business affiliates. At any given point in the account resolution process, only one party should be pursuing resolution of a particular account. To avoid duplication of patient contact, accounts should be reconciled with external business affiliates. A provider may choose to use external business affiliates to pursue account resolution as part of an "early-out" strategy or if the account becomes delinquent; in both cases, account reconciliation must occur often enough to provide a high level of confidence that the patient is not being contacted about an outstanding account by multiple entities at the same time.

Exercise sound business judgment when choosing account resolution methods. Providers should use sound business judgment and knowledge of the community in choosing methods to use for account resolution. Such methods may include phone calls, letters, screening (e.g., for bankruptcy, eligibility for financial assistance programs, or third party payer coverage eligibility), data scoring for the purpose of financial assistance or payment plan development, and third party loans from reputable providers. The best practices encourage providers to draw on their knowledge of their patient populations and the surrounding community when deciding which of these options to deploy and when.

Start the account resolution clock when the first statement is sent to the patient. The best practices specify that the initial billing to the patient for a patient balance (either true self pay or balance after insurance) should be the starting date for the process to resolve the account. All time-bound activity should be driven by this date. This practice will eliminate confusion that may result when patients are on the receiving end of account resolution efforts by different entities using different time frames.

In addition, the best practices specify that providers and business affiliates should wait 120 days after the date of the first bill (with limited exceptions) before reporting a past-due account to credit bureaus or taking other extraordinary collection actions. It is the provider's responsibility to ensure that business affiliates are informed of the first statement date. Business affiliates also should have access to all information needed to assist the patient in resolving the account.

Report back to credit bureaus when an account is resolved. Providers may choose not to report past due accounts to credit bureaus. However, if reporting has occurred, the reporting entity (either the provider or the business affiliate) has a responsibility to report back to the bureau if the account is resolved. A negative listing for medical debt should be removed or reported as resolved on a consumer's credit report within 45 days of account resolution. In this way, the consumer is not penalized beyond resolution of the account.

Track all consumer complaints. All consumer complaints should be tracked and shared between the provider and business affiliates to improve customer service, hasten account resolution, and avoid reoccurring grievances. As referenced earlier, account servicing parties must abide by the provider’s board-approved financial assistance program, account resolution, and collection policies. Regularly occurring audits should be performed to assure compliance with policies for both early-out providers and accounts that are in collections. Business affiliates' internal policies should comply with established ethical standards, as outlined in ACA International's ACA Code of Ethics and Code of Operations. If a provider opts to sell outstanding accounts, the provider should also require that the debt buyer adhere to ACA International's Health Care Collection, Servicing and Debt Purchasing Practices Statement of Principles and Guidelines and be licensed as a debt buyer, where required by state law. These practices not only help ensure high standards of ethical behavior but should also serve to reduce consumer complaints.

Toward a Fair Resolution Process

Widespread industry adoption of these best practices, which reflect the task force's consensus on the current state of best practices, is expected to lead to improvement in the overall collection process, patient experience, and providers' financial performance. Working together toward these shared goals will ensure that the medical account resolution process is fair and equitable for all.

Additional Resources

ACA International, Code of Ethics and Code of Operations of ACA International, 2010. 

ACA International, Health Care Collection, Servicing and Debt Purchasing Practices Statement of Principles and Guidelines

HFMA, Best Practices for Patient Financial Communications, 2013.

HFMA, Consumerism in Health Care: An Initiative of the HFMA Patient Friendly Billing Project, 2006. 

HFMA, Hospitals Share Insights to Improve Financial Policies for the Uninsured and Underinsured Patient: A Report from the Patient Friendly Billing Project, 2005. 

HFMA, Comment Letter on IRSs Proposed Rule: Additional Requirements for Charitable Hospitals, Section 501(c)(3), Sept. 24, 2012.

Internal Revenue Service. "New Requirements for 501(c)(3) Hospitals Under the Affordable Care Act."

R. Speizman, V.A. Moore, and A.O. Mitchell, "Proposed Regs Address New Hospital Tax-Exemption Requirements," hfm, March 2013. 

HFMA Medical Debt Collection Task Force

Publication Date: Wednesday, January 15, 2014