Outdated hospital billing practices present challenge to meeting new debt collection rules

Alia Paavola

Outdated billing practices, particularly in hospitals and physician offices, are causing some issues for debt collection firms as they revamp their consumer communication practices as required by law, Bloomberg Law reported Oct. 19. 

Under a new Consumer Financial Protection Bureau law that takes effect Nov. 30, debt collectors are required to provide people a clear description of the debt owed and to whom they owe it, as well as provide a debt validation notice. Debt collectors rely on their clients, like hospitals and medical providers, to provide this information.

According to the report, it likely will be harder for debt collectors who work with hospitals and physician offices to meet compliance with the centerpiece of the disclosure rule: the validation notice.

The Consumer Financial Protection Bureau provided a model validation notice to debt collectors that, if followed, shields collection agencies from lawsuits or other enforcement actions that allege improper disclosures or improper debt collection. However, this model validation notice doesn't take into account how physician offices and hospitals bill.

"There's just a lot of heartburn around medical, because unfortunately the form doesn't address the nuances" of how medical charges are done, Joann Needleman, the head of Clark Hill PLC's consumer financial services practice, told Bloomberg Law.

In particular, physician visits and hospital stays can be billed by procedures, meaning patients can get multiple bills for the same visit. There are also insurance delays that can complicate medical billing and make it hard to use the model validation notice provided by the Consumer Financial Protection Bureau. There also is not a place on the model form where a collector can include the person financially responsible for a minor or deceased person, according to the report.