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HFMA Offers Best Practices for Fair Debt Resolution

Richard Gundling, FHFMA, CMA

It's a subject no one really wants to discuss, but communication is key when it comes to addressing a patient's financial responsibility for medical bills. To help with those uncomfortable conversations, the Healthcare Financial Management Association (HFMA) recently released "Best Practices for the Fair Resolution of Patients' Medical Bills."

Designed to be used by providers, their business affiliates and credit bureaus, the best practices were jointly published with the Association for Credit Collection Professionals. The 28-page report, published last fall, updates guidance originally released in 2014. The HFMA Medical Debt Collection Task Force - which includes diverse representation of providers, consumer advocates, collections agencies and credit bureaus - reconvened in 2020 to update and add best practices, particularly financial assistance response to COVID-19 and future health emergencies.

HFMA Senior Vice President for Content & Professional Practice Guidance Richard Gundling, FHFMA, CMA, said strains from the pandemic, changes in collection laws, increased transparency expectations and available tools made it the right time to update the guidance. "Let's make sure these are fresh, up to date and top of mind," he said of reviewing the accounts receivable process.

The release coincided with the upheaval surrounding the pandemic. "We saw a big spike in unemployment and loss of insurance. Hospitals were backing away from collection policies because communities were hurting," said Gundling. Yet, he added, that's the time to have solid processes in place. Gundling noted a job loss should serve as a trigger for provider entities to discuss options the patient might not know are available, including Medicaid eligibility, ACA Marketplace plans and financial assistance programs.

The updated guidance provides detailed information on each step in the accounts receivable process from recommendations for pre-service financial communications and best practices for resolution of medical debt post-discharge to working with account resolution business affiliates and accounts sent to a collection agency.

Gundling said the best opportunity to avoid difficult conversations down the line is to clearly outline financial responsibility and collection procedures up front in the pre-service time frame whenever possible. "It's all about communication. Everybody has such variable coverage and costs," he explained. "You should be able to get a good estimate of what your cost will be. Can you afford that? If the answer is 'no,' then ask why."

He continued, "It's not a matter of just giving them a laundry list of prices, you have to explain the costs." Gundling added, this pre-service conversation provides a natural opportunity to discuss other coverage options, interest free medical financing, and financial assistance programs from pharmaceutical companies, manufacturers and provider entities. Even with coverage in place, provider participation changes over time, so it might warrant a discussion about finding an in-network provider. Timing for elective procedures or the course of treatment are also topics to be considered. Do two drugs work equally well with one being less expensive or covered on the patient's plan? Those are options that can be explored on the front end.

Even when there isn't much opportunity to reduce pricing, Gundling said setting expectations is valuable. "It's better to know up front than to get home and have a bill you didn't anticipate," he pointed out. Of course, he added, emergency situations often don't allow for pre-service conversations. In those cases, discussing financial responsibility has to come later. "You want (the conversation) as soon as possible in the course of treatment, but if the patient is not ready, then follow up when they are. Again, its communicating."

To that end, Gundling said provider entities should review their bills to ensure they are as clear and concise as possible without a lot of medical jargon. That said, bills should provide necessary information on treatment costs, patient's financial responsibility and a contact number to call for clarification. "A patient is much more likely to pay a bill they understand and were expecting," Gundling pointed out.

The HFMA best practices report notes all account resolution efforts should follow the formally documented provider collection policies that have been approved by the board or other authorizing body. This is also true for all business affiliates under contract with providers. Additionally, affiliates need timely and accurate information to service accounts, making regular reconciliations between the provider's system and affiliate's system critical to ensure balances are accurate and in sync.

For accounts deemed a bad debt risk, those outstanding balances are often turned over to a collections agency after other steps have failed. "Work with collection agencies to make sure those agencies are also following best practices and the mission of the hospital," Gundling said.

Providers should have a formal policy established regarding the use of extraordinary collection actions (ECAs) as defined by the IRS. These ECAs could include a lien on property, wage garnishment or lawsuits. However, HFMA's best practice document notes using ECAs is optional and must be weighed in light of potential negative impacts. The report includes a checklist of internal controls to consider before moving to this step.

"There's always a balance with collections," said Gundling. Providers, he continued, need resources to run but also want to make sure patients receive the care they need. "Providers need to have people who are empathetic and compassionate explain financial policies to people up front. I think they get tripped up by not being clear and trying to avoid an uncomfortable conversation."

"Best Practices for Resolution of Medical Accounts" is freely accessible on the HFMA website. From the homepage, click on the Industry Initiatives tab and then select Healthcare Dollars and Sense for the report and additional resources.


HFMA Best Practices for Resolution of Medical Accounts


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Association of Credit and Collection Professionals, Healthcare Collections, Healthcare Financial Management Association, HFMA, Medical Debt, Richard Gundling, Rick Gundling
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