Lawsuit May have Implications for Medical Collection Agencies

It’s not uncommon for medical debt collectors to inform patients that they are responsible for the full charges sent to the agency for collection.  However, if the trend of states adopting laws to provide discounts to the uninsured continues, more agencies may have to revise their statements or they could be setting themselves up for a lawsuit similar to the one facing Audit & Adjustment Co.

The Washington-based agency is being sued, for allegedly violating the state’s charity care law as well as consumer protection and Fair Debt Collection Practices Act (FDCPA) for telling a Northwest Hospital & Medical Center patient that she owed the full amount of charges billed (“Collection Agency Sued for Allegedly Violating Charity Care Law,” Jan. 2).

Matthew Geyman, attorney for patient Anselma Andresillo, told insideARM that his client is suing the agency rather than the hospital because she believes it engaged in unfair and deceptive consumer practices.

“My client told the agency she had limited income and couldn’t pay the bill,” Geyman said. “They told her it was too late to get charity care and that she owed the full amount.  That practice of the collection agency telling patients they owe the full amount of charges without regard to Washington charity care law is unfair practices.”

Geyman believes the issue of deceptive collection practices could surface in other states that have laws to ensure hospitals provide charity care or discounted care to low-income or uninsured patients.  Illinois for example, recently passed a law to make sure hospitals discounts are more consistently and uniformly applied.  (“New Illinois Law Could Benefit Medical Debt Recoveries for State Hospitals,” Dec. 19, 2008).

Irrespective of whether additional lawsuits are filed, the case will likely generate negative publicity for health care providers and the ARM industry, said Kaulkin Ginsberg Analyst Michael Klozotsky.  It also could attract the attention of legislators in other states looking to reform their health care systems by directing their legislation at health care collections practices, he said.

Industry experts say collection agencies can be proactive. The level of involvement medical debt collectors have in determining patients’ charity care or discount eligibility may depend on state laws governing agencies’ responsibilities, said David Cherner, ACA International‘s legal counsel and legislative director of state government affairs.  

Nonetheless, as states consider adopting charity care legislation to provide hospital discounts to the uninsured, medical debt collectors, hospitals and health care providers need to be more specific about how involved debt collectors become in determining and qualifying patients for charity care and hospital discounts.

"When working with a client, the debt collector needs to be aware of their responsibilities and collaborate with their client when addressing any charity care obligations," Cherner said.