On January 23, 2006, the Illinois Attorney General (the AG) proposed the Hospital Fair Billing and Collection Practices Act (the act) to set standards for billing and collection practices in Illinois hospitals. The bill was introduced with a companion piece of legislation, the Tax-Exempt Hospital Responsibility Act (see January 31, 2006 On the Subject). This legislative package has generated nationwide interest and ultimately may have broader implications for hospitals in other jurisdictions.
The act would impose uniform standards and procedures for the several components of the billing and collection process: generating hospital bills (section 10-5 to 10-15); handling billing disputes between patients and hospitals (section 10-20 to 10-30); sending bills to collection (section 15-5 to 15-25); and initiating legal action against patients for payment (section 20-5 to 20-15).
The act places specific requirements on a hospital’s governing board related to the development of policy and practice in regard to billing and collections. A hospital’s governing body must adopt policies consistent with the act to prohibit “abusive, harassing, oppressive, false, deceptive, or misleading language or collection conduct” by the hospital or any of its collection agents. Governing boards have responsibility to approve policies for the advancement of bills to collection and must approve legal action related to collection efforts.
Highlights of the Billing and Collection Process
Although the act presents a rather straightforward set of procedures, it is highly regimented.
With respect to billing, a hospital must:
- Provide bills upon inpatient discharge or the completion of outpatient service in clear, comprehensible language with an explanation of the nature and status of co-payments or deductibles
- Offer patients payment plans
- List a toll-free number, mailing address and the name, address and telephone number of the hospital’s designated representative for responding to patient inquiries on all patient bills and collection notices
- Develop a system to record and log all oral and written patient complaints concerning billing and collection
- Not bill patients for any amount in excess of the patient’s portion of the bill when there is an unresolved dispute with a third-party payor
With respect to billing inquiries and disputes, a hospital must follow a two-cycle review of all disputed bills.
The first cycle includes:
- Suspension of all billing efforts upon receipt of a written or oral notice from a patient that the patient disputes the bill (patients must include in their claim why they believe the bill is in error, such as remaining liability by a third-party payor, a pending charity care application or lack of documentation)
- Specific turn-around times to respond to patient telephone inquiries, written correspondence or requests for a personal meeting, including acknowledgement in writing by the hospital of a patient’s claim that the bill is in error within five business days
- Review of a bill and written response to the patient within 14 days after receipt of the notice of dispute from the patient. The response must include notice of any corrections made by the hospital, an explanation of why the bill (as corrected, if appropriate) is correct, and documentation establishing the accuracy of the bill (after any corrections) and appropriate billing of all third-party payors
Thereafter, the patient is obligated to pay the bill (as corrected, if applicable) or establish a payment plan with the hospital (providing reasonable verification, if requested, that the patient is unable to pay the entire debt in a single payment). Alternatively, the patient may dispute the hospital’s determination, which triggers a second review cycle.
The second cycle of review includes:
- The hospital’s good faith review of the remaining disputed portion of its prior response, and written response to the patient within 14 days, indicating whether any further modifications to the patient’s account will be made
- After the hospital’s response, a 30-day period for the patient to either pay the entire debt or make arrangements to pay under a payment plan
A hospital must not resume billing efforts until 30 days after the patient receives the initial written response to a billing inquiry. Similarly, hospitals must wait an additional 30 days if a patient continues to dispute a bill and asks for a second review.
With respect to collection practices, a hospital must:
- Enter into a written contract with any collection agency or attorney it retains to collect medical debts, and the contract must require the agent to act in accordance with the act
- Verify before sending a bill to collection that the hospital has fully complied with the dispute and determination process described above, and if the patient is potentially eligible for charity care, the patient must be given at least 60 days following the date of discharge or receipt of care to submit an application
- Not sell any debt owed to it by a patient except to a licensed collection agency
- Not refer any debt for collection if the patient has made and continues to make payments on the debt in accordance with the terms of a payment plan
- Not refer a bill to collection while a claim for third-party payment is pending (including the time period wherein a patient retains appeal rights under an insurance plan or state or federal law)
Collection agents must keep logs of all oral and written complaints, which the hospital must obtain at least six times per year. A hospital must require its agents to keep a record of all communications to or from patients. Any violation of these provisions must be cause for contract termination.
With respect to legal action, a hospital must:
- Enter into a written contract with an attorney (without sub-contracting attorney selection to a collection agency)
- Not take legal action for the collection of a medical debt unless the collection effort has been authorized by a designated corporate officer appointed by a hospital’s governing board and the designated officer must not authorize a legal filing until verifying the hospital has complied with the full provisions of the act pertaining to billing and billing disputes
- Not seek to enforce a judgment (e.g., wage garnishment and liens) obtained against a patient unless the hospital’s governing board provides prior written authorization.
Further, the act requires hospitals to provide written notice to patients that they may receive separate bills from hospital staff members and from out-of-network providers, i.e., staff members who attend to the patient but are not in the patient’s health insurance network. This notice must include the proviso that some services rendered may not be covered or will be covered only in a limited fashion by the patient’s health insurance.
The act mandates that if the hospital knows of available third-party benefit coverage, it must submit timely claims to such payors within the deadline established by them or forego reimbursement. A hospital must not bill a patient for a claim that was not submitted to a patient’s third-party payor but should have been. Moreover, a hospital will be found in violation of the act if it bills a patient because of a third-party denial that resulted from hospital error.
The AG’s office will develop a standard form of “Patient’s Billing Rights” that outlines the mandated regimen established to ensure patients clearly understand the billing and collection process, their right to dispute bills, the right to make complaints about billing practices to the AG and their payment obligations. The Patient’s Billing Rights must be posted on the hospital’s website and throughout the hospital.
Violations of any of the mandated procedures trigger the AG’s investigatory power, including the right to request records regarding patient communication and complaints. The AG may bring an action for injunctive relief for any violation of the act and may seek the removal and replacement of any director, officer, agent or employee of any hospital who has approved, authorized, or acquiesced, directly or indirectly, in a violation. The AG can seek civil monetary penalties for failure to provide information to a patient ($1,000 per violation) and for violation of any other provision ($10,000 per violation). In the event a court grants a final order of relief against a hospital for violation of the act, the AG must refer the hospital to the Illinois Department of Public Health for “possible adverse licensure action” under the Hospital Licensing Act.