Medical debt is unique among consumer debts because it’s rarely taken voluntarily. Indeed, sometimes the debtor isn’t even conscious when the debt is taken.
Nonetheless, this is one of the biggest challenges for hospitals and other health facilities in the US; at least 32% of Americans owe some form of medical bill or debt (NPR puts the figures at 42 million). More than 28% of these people have medical debts exceeding $10,000; up to 54% have defaulted.
Usually, health institutions deal with debt recovery internally. Most hospitals have dedicated collection agents who attempt to recover amounts due.
However, after trying for a while in vain, a health facility may choose to outsource the collection process to a professional Debt Collection Agency (DCA). In most cases, the DCA is an option of last resort when it becomes clear that the other billing and recovery approaches were unsuccessful.
If your facility is currently exploring this option, the following is what you need to know about medical debt collection.
What is Medical Debt Collection?
Medical debt collection is the process of recovering overdue medical bills and bad debt from present or past patients.
It’s important to understand, however, that not all unpaid medical bills are debts. If a patient doesn’t pay their medical bill on time, it becomes an unpaid bill, not a debt.
If the unpaid bill isn’t paid by a certain date, it becomes past-due. In most cases, a bill will be treated as past-due for 90-180 days after billing the patient, though there’s no defined amount of time for hospitals to observe. It’s only after the 90-180 day period elapses that the past-due bill becomes a debt.
How Does It Work?
Medical debt collection works like any other collection process. The hospital will hand over the personal information and debt details of the debtor to the DCA. Then the collection agency begins to pursue the debtor with the aim of collecting all of the owed amounts within the shortest time possible.
Typically, the DCA will use a combination of tactics, including calls, text (SMS) messaging, and emails to persuade the debtor to pay. Many DCAs also attempt to sway debtors by offering or negotiating convenient payment plans.
The recovery process usually prioritizes three things;
- Attempting to collect the amount owed in full
- Preserving the good name of the creditor (hospital)
- Preserving the patient’s relationship with the creditor
Initially, medical debt collection was not strictly regulated in the US. However, that changed in December 2014 when the Consumer Financial Protection Bureau (CFPB) placed medical establishments squarely in its crosshairs. Strict enforcement action against medical debt collections was initiated shortly afterward.
Today, medical debt collection in the US is guided by;
- The Fair Debt Collection Practices Act (FDCPA)
- The Telephone Protection Act (TPA)
- Corresponding state laws
It’s worth noting that the FDCPA act doesn’t apply to a health institution attempting to collect debt on its own. It only kicks in when the institution outsources the collection process to a third party.
New Collection Regulations During Covid19
At least seventeen US states as well as the District of Columbia have announced new regulations impacting the collection of medical debt.
Many of these states have completely banned the collection of medical debt while others have also banned garnishing stimulus check payments.
New York, for instance, suspended medical debt collection in April until further notice. The District of Columbia, meanwhile, has banned collection agencies from calling, writing to, or messaging consumers regarding medical debt until 60 days after the Covid19 emergency ends. It’s important that you keep these changes in mind.