Additional regulations
Both the federal government and most states are likely to take additional action to reduce hospital debt lawsuits. Some proposals sound simple enough but would have significant complications. For example, governments could prohibit all lawsuits that collect hospital debt.7 Such a regulation would mean that paying hospital debts would essentially become optional. Imagine the millionaire who does not want to pay a $25,000 hospital charge; or patients with other debts who would pay those off before the hospital debt. The regulation might have income or asset limits on debt collection lawsuits and the like, but it quickly becomes complicated. Furthermore, to protect themselves, hospitals would undoubtedly become much more aggressive about requiring up-front payments—which would force the debt or prepayment onto credit cards or similar debt obligations that are not subject to the no collection lawsuit rule.
Public reporting. The follow-up study in Virginia17 suggests that requiring public reporting of the number of cases filed by or on behalf of (directly or indirectly) each hospital may help. Hospitals would, of course, have incentives to make their figures look better, perhaps by selling the debt to an agency that would be able to file suit in its name rather than the hospital’s name. These might be little more than indirect collections. For reporting purposes, any form of transferring debt might be considered filing a lawsuit. The problem, noted earlier, about requiring prepayment or credit cards would also exist.
Get the board involved. A different approach would be to ensure that a hospital’s board of trustees is involved in setting and overseeing debt collection policies. For example, the law might require boards to annually consider and adopt specific debt collection practices—including indirect collection efforts. Boards should already be doing something similar to this, but regulation might be an inexpensive way to ensure it is done—and in a manner consistent with the organization’s values. Another suggestion is to require the board to approve any legal action against specific patients.7 By making sure this is not just another item on the consent agenda, the oversight would probably reduce automatic debt collection processes.
Expand IRS reporting requirements for nonprofits. Indeed, for nonprofit hospitals with 501(c)(3) obligations, the Form 990, Schedule H already provides some information about collection actions and uncompensated care, and this is enhanced by the ACA Section 501(r). These could be expanded and perhaps include “indirect” collections. The IRS could “flag” hospitals with high total litigation and similar collection actions, and ask the hospital to provide a detailed explanation for each action and how it was consistent with the obligation to serve the public (thereby justifying the exempt taxation status, an idea proposed by the US Government Accountability Office in 2020).24
Ensure the hospital’s actions reflect their mission and values
Hospitals are created to provide medical care for people and to improve the human condition. Those who lead them should, and generally do, share that purpose. The apparent collection policies that have garnered negative public attention suggest that some of these institutions have lost focus of their ultimate mission and values. The boards and executives of these health care institutions, as well as the medical professionals and attorneys who serve them, should be continuously guided by those values.
Important decisions—including collection and prepayment processes—reflect the values of the institution. Failure to ensure these procedures are in line with the organization’s mission is an embarrassment to all health care facilities, including the majority of hospitals that do not engage in these aggressive collection practices. Not addressing these issues will likely result in political and legal action—blunt and inefficient instruments—to limit what the public sees as wrongdoing. ●