Over the past three years, I have had many conversations with not-for-profit hospital clients and potential clients who have asked Americollect to mail the 501r extraordinary collection action final notice on their behalf. Each and every time, I have steered them away from Americollect mailing this letter on their behalf due to liability concerns. Just last year, a court case gave me my “I’m so glad we didn’t do that!” moment for why a collection agency should not send this on your behalf.
Before we dive into the court case, here is a little background on two regulations:
501r: This regulation, governed by the IRS and part of the Affordable Care Act, requires not-for-profit hospitals to provide “financial assistance” to patients. The regulations spell out certain requirements to meet the IRS guidelines. More information on 501r can be viewed at: http://www.americollect.com/knowledge/501r. One of the guidelines is, if a hospital chooses to do extraordinary collection actions (ECA), which is defined as credit bureau reporting, legal, or judicial actions against a patient, then the hospital has to mail a written (final) notice to give the patient a deadline after which the intended ECAs may be initiated. That deadline must be no earlier than 30 days after the date that the final notice is provided.
In addition, the regulations require the final notice to generally indicate that financial assistance is available for eligible individuals. Also, the final notice must list the intended ECAs the hospital facility may use.
FDCPA: The Fair Debt Collection Practices Act (FDCPA) is a regulation that collection agencies must follow. The FDCPA prohibits collection agencies from using “false, deceptive, or misleading representation[s] or means in connection with the collection of any debt.”
So how did these two regulations intertwine together for a court case? In 2016, Nina Flecha filed a class action suit under the FDCPA alleging that a collection agency (that will go unnamed and is NOT Americollect) mailed a final notice with a false threat to sue. Mrs. Flecha’s case is that Seton Medical Center does not allow legal action as part of their ECAs. The unnamed collection agency should have simply updated their final notice, removing legal action from the list of ECAs, and they likely would not have this class action suit filed against them. I believe that in the future there will be more cases in regards to another part of the FDCPA.
Part of the FDCPA says that collection agency communications have to take into account the “least sophisticated consumer.” This standard sets the bar for which communications can occur with patients. Consumer attorneys often sue collection agencies for language that could be confused by the “least sophisticated consumer,” and by having your collection agency mail your final notice. In a future newsletter article, we will address the “least sophisticated consumer” and why understanding this language is important to collecting; whether you are the hospital or a collection agency.
Oh by the way, this still doesn’t address the 501r requirement that, “the final notice must generally indicate that financial assistance is available for eligible individuals.” The conspicuous written notice requirements include that a “direct phone number and website address where applications, policies, and plain language summary” must be included. This is another place where a “least sophisticated consumer” could become confused.
Please, for the sake of your organization, don’t have the collection agency send your final notice as you never want the hospital’s name involved in a court case that could be avoided!