IRS Issues New Rules to Curb Litigious Nonprofit Hospitals

IRS Issues New Rules to Curb Litigious Nonprofit Hospitals

New rules issued by the Internal Revenue Service to curb aggressive debt collection by nonprofit hospitals may be insufficient to protect poor patients who cannot pay their medical bills, ProPublica reports.

While nonprofit hospitals are required to offer care and services to lower-income patients at a reduced cost, there have been few rules on how they publicize their so-called charity care policies or how they treat patients who qualify for such assistance. In more than one case, ProPublica reports, low-income patients who could not pay their bills have been sued and had their wages garnished. The new rules handed down by the IRS — which were required as part of the 2010 Affordable Care Act and go into effect in 2016 — require nonprofit hospitals to post their financial assistance policies on their websites and offer a "plain language summary" on paper to patients. If patients do not apply for assistance and are unable to pay their bills, the hospital must send at least one more summary of its policy and mention it on subsequent billing statements. In addition, before a hospital can sue a patient over an unpaid bill, it must attempt to communicate verbally with the patient about its policies in addition to sending a notice that it is planning to sue and that the patient may qualify for financial assistance.

While patient advocates welcome the stricter rules, some are concerned about the IRS's ability to enforce the guidelines. "That's always been the problem with the charitable hospital rules," Corey Davis, an attorney with patient advocacy organization National Health Law Program, told ProPublica. "The IRS doesn't enforce them and nobody else can enforce them."

Complicating the issue, the new rules leave it up to each nonprofit hospital to determine its financial assistance policies and which patients qualify for charity care. "There's all sorts of discretion because [hospitals] just have to have a policy," said Chi Chi Wu of the National Consumer Law Center.

As a result, said Jessica Curtis, an attorney with Community Catalyst, there will be large variations among nonprofit hospitals in how they treat lower-income patients. "It will come down to," said Curtis, "'How seriously does the hospital take this issue?'"

Paul Kiel. "For Nonprofit Hospitals Who Sue Patients, New Rules." ProPublica 01/15/2015.