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The Importance of the Date of Delinquency

“If a tree falls in the forest and nobody is around to hear it, does it make a sound?” is one of those deep, thought-provoking philosophical questions meant to test the limits of reason and metaphysics. For the healthcare industry, a similar question might be, “When does a debt become delinquent?”

Technically, a debt is delinquent the moment after an individual receives a bill for something and does not immediately pay it. But most hospitals will wait to classify an unpaid bill as delinquent until after it receives payment from the patient’s health insurance carrier and an Explanation of Benefits and statement are sent to the individual.

Determining when a debt becomes delinquent is especially important if the provider or the collection agency it uses to recover unpaid debts is going to report that debt to a credit reporting agency. Reporting the date of first delinquency is a requirement when sending information to a credit bureau. It determines the period of time that the debt appears on an individual’s credit report. One collection agency recently was fined $500,000 for, among other things, failing to accurately report the date of first delinquency on the debts it was reporting to the credit reporting agencies.

Healthcare providers need to have a written policy that details how it determines the date of delinquency — whether it is the date that services were rendered or if it chooses to wait until after the insurance carrier pays its portion of the coverage and a statement is sent to the individual, informing him or her of the balance remaining. While choosing the date of service might seem easy and beneficial to the consumer, it can also make it appear as though the debt has been delinquent longer than the consumer believes, which may lead to complaints, lawsuits, and investigations from regulatory agencies.

Having a collection policy — and sticking to it — will help make sure that patients are made aware of their rights and that collection efforts are consistently applied to all accounts. It will also show regulators the thought process and reasons behind decisions that are made with respect to how debts are collected and reported.

Credit reporting can be a very useful and effective tool to help healthcare providers collect on unpaid balances and help individuals improve their financial situations. But in order for it to be done the right way, providers need to develop a policy detailing how it determines when a debt becomes delinquent. Unfortunately, the answer to that question cannot be one left to the philosophers to decide.

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PPMS is a management system for recovery agencies based upon developing, implementing and adhering to a set of strict industry-specific professional practices and policies.

PPMS certification, much like a SAS-70 audit, requires independent CPA attestation that an agency has in place written policies, procedures, and work processes that ensure regulatory compliance and adherence to industry best practices. The agency must also demonstrate that it has procedures in place to identify and remediate any variance from these. PPMS certified agencies are subject to annual surveillance and must re-certify every five years.

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