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Should Hospitals Worry About the CFPB’s Proposed Debt Collection Rule?

While there is a lot for the credit and collection industry to be excited about as it pertains to the proposed debt collection rule that was released by the Consumer Financial Protection Bureau, there are still some concerns about how the provisions of the proposed rule will affect companies not just in the credit and collection industry, but in other industries as well, especially healthcare. Those concerns were spotlighted in some of the comments that were filed in response to the proposed rule. The comment period closed in mid-September with more than 12,000 responses. The CFPB is now analyzing those responses as it prepares to issue a final rule, which could be expected at some point in 2020.

The primary concern for companies in the healthcare space is a requirement that collectors include an itemized list of charges and debts when sending collection letters to individuals. The itemized list must include interest, fees, payments, and credits since the itemization date. When placing accounts with collection agencies, many healthcare companies do not supply the itemization information, instead choosing to provide the total balance that is due.

The cost for companies to comply with this requirement is estimated to be $4 billion, according to a comment on the proposed rule filed by ACA International, with an additional untold increase in the amount of charity care or uncompensated care that hospitals would be required to administer. Creditors would bear the brunt of those additional costs, according to ACA’s comment.

A similar itemization requirement was recently enacted in New York, and the unintended consequence was that collection agencies filed more lawsuits against individuals with unpaid debts because collectors “did not want to invest the money” to update their systems. In essence, it was easier to pursue a legal strategy rather than try to contact an individual and work with him or her to pay off the unpaid debt.

For healthcare providers, the requirement of providing an itemized statement when placing accounts with third-party collection agencies may force them to make changes to their policies and procedures so that they remain in compliance with the Health Insurance Portability and Accountability Act (HIPAA).

“Because the Bureau lacks the authority to order HIPPA-covered entities to provide detailed medical billing information to collectors, and because the Bureau lacks the power to exempt HIPPA-covered entities from HIPPA rules, ACA is concerned that some medical providers, faced with potential liability for violating HIPAA, will refuse to provide the information required to comply with proposed § 1006.34(c); thus forcing collectors to decide between complying with § 1006.34(c) or filing collection lawsuits against consumers where debt collectors can rely upon notice pleading,” ACA wrote in its comment.

The CFPB’s proposed overhaul of the FDCPA is a once-in-a-generation update to the most fundamental law governing the collection of debt. How it affects the healthcare industry is an impact that will be felt for years to come

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