Charity Care and Collection Agencies Washington Collectors Association May 13, TULALIP, WA Scott M. Kinkley, Staff Attorney, Northwest Justice Project Matt Geyman, Staff Attorney, Columbia Legal Services

Washington State Supreme Court Civil Legal Needs Study Update 2015

Where Oh Where Have the Eligible Charity Care Patients Gone? In WA there are still over 570,000 uninsured patients who are “medically indigent” and eligible for Charity Care (down from over 1 million after Obamacare/ACA) Based on data reported to DOH, it appears that only a small fraction of patients who should be eligible, on the order of 5%, receive Charity Care What is happening to the remaining 95% of Charity Care eligible patients? Accounts in collections?

Charity Care Law & Regulations Law & Regulations Revised Code of Washington (RCW) et seq. Washington Administrative Code (WAC) et seq. Regulators Washington State Department of Health (DOH) Washington Attorney General’s Office (Consumer Protection) Hospital Industry Guidelines Washington State Hospital Association (WSHA)

What Is Charity Care? What is it? “Hospitals” “Medically necessary” What about insurance? Third-party payers billed first, then Charity Care if eligible Charity Care covers both uninsured and underinsured Who is eligible? Free care if income is below 100% of poverty level Discounted care if 100% to 200% of poverty level Hospital’s own policy may provide Charity Care up to 300% or 400% Assets relevant above 100% of poverty level but not below

Notice & Initial Determination Initial determination Hospitals have affirmative duty to make sure patients know about Charity Care and must ensure patients can apply for Charity Care E-Signature, “reviewed and understood,” but is actual policy available for patient to review? Hospitals have affirmative duty to determine Charity Care eligibility before sending an account to collections

Affirmative DUTY to Screen Before Collection Attempts “An initial determination of sponsorship status shall precede collection efforts directed to the patient.” RCW (6) All “persons who may be eligible for charity care shall be notified by the hospital” and “all persons with family income below one hundred percent of the federal poverty standard shall be deemed charity care patients for the full amount of hospital charges.” RCW (5)

Step One: Is the debt “hospital” debt? Step Two: Is the patient eligible? Uninsured or underinsured? Qualifying income based on family size and poverty level? Income includes “total cash receipts before taxes … salaries, welfare payments, social security” and other benefits such as child support Hospitals must forgive entire bill for patients at 100% of poverty level or below and sliding scale discount at 200% or below Hospitals may be required to provide more Charity Care up to higher income levels based on own policies CHARITY CARE: 3 Simple Steps

13 Eligibility Income Under 100% of poverty level - eligible for full waiver 101% to 200% - eligible for discount (may be full waiver under hospital policy) 201% and above - may be eligible for discount (depending on hospital policy) Assets may be relevant above 100% but not below Patients must first exhaust third party sources, e.g., private insurance, Medicare, Medicaid

Income & Family Size / Eligibility Grid

Step Three: Apply To apply, patient/debtor must simply complete hospital’s application Documentation (pay stubs, tax returns, etc., or letter signed by patient) Collection proceedings are STAYED while application is pending CHARITY CARE: Step Three

Final Determination & Appeal Process After receiving documents, hospital has 14 days to determine Charity Care eligibility - WAC (7) If hospital denies Charity Care, must explain reason and inform patient of 30 day appeal rights - WAC (8) & (9) Stay of collection action continues during appeal - WAC (9)(a)&(b).

Is There a Time Limit to Apply?

NO: May Apply “at any time” Patient can apply AT ANY TIME, even after litigation has been filed, which will stay litigation while application is pending Hospital must allow patients to apply for Charity Care “at any time” even after bill is referred to collection Collection process is STAYED during Charity Care determination if patient applies after collection litigation begins Similar to bankruptcy stay

Department of Health’s Answers to FAQ’s

WSHA Bulletin

Notice of Charity Care Application and to Stay

What If Patient Is Found Eligible for Charity Care After Judgment?

Charity Care May Apply Even After Judgment & Garnishment Even after garnishment, if patient shows Charity Care eligibility, hospital must refund amounts in excess of amount owed “In the event that a responsible party pays a portion or all of the charges... and is subsequently found to have met the charity care criteria... payments in excess of the amount determined to be appropriate... shall be refunded” – WAC (11)

Department of Health’s Answers to FAQ’s

New 501(r) Regulations and Potential Pitfalls

501(r) Regulations Went into effect at beginning of this year Caveat – too soon to draw many conclusions Only apply to 501(c)(3) hospitals, but that covers many if not most WA hospitals All except for public hospitals and the few for-profit hospitals

Under 501(r) Regulations, Hospitals Must Make “Reasonable Efforts” to Determine Charity Care Eligibility Before “ECAs” § 501(r)(6): hospital cannot engage in extraordinary collection actions (“ECAs”) before making reasonable efforts to determine if patient is eligible for assistance under Financial Assistance Policy (“FAP”) ECAs include (1) collection action, (2) reporting adverse information to credit agency or credit bureau, and (3) selling debt to third party

Time Limits Under 501(r) Regs Hospital must wait 120 days from date of first post-discharge billing statement before any collection action or other ECA Litigation and/or other ECA can begin on day 121, but patient can still apply for financial assistance for 240 days 30 days before any ECA, hospital must send written notice to patient and another summary of FAP If patient applies before day 240, litigation and any other ECAs are STAYED

What Risks Do 501(r) Regs Pose for Debt Collection Agencies? Under the rules, hospitals can forward accounts for collections before 120 days from first post-discharge bill, but in that case, collector has duty to comply Normal collection activities are permitted during that time period but not ECAs (litigation, credit reporting) Under 501(r) regulations, hospitals are accountable for actions of debt collectors Violations by collector during that time period could jeopardize hospital’s 501(c)(3) status Violations by collector during that time period could also create direct liability under FDCPA and FCRA

A Few Takeaways re 501(r) Rules Rules are too new to base conclusions on anyone’s experience, but... Timing is crucial - Need to know date of first post- discharge billing statement Need to know when 120 days expires for ECAs Need to know 240 day time for right to apply for financial assistance (but WA Charity Care law says right can apply “at any time”) Also must confirm that hospital complies with 30 day prior notice requirement before any ECAs are taken by debt collector

Other Potential Issues Potential FDCPA/WA CAA/WA CPA liability? Affirmative misstatements re Charity Care? Liability for alleging that sum certain is “due” without disclosing Charity Care Rights and Charity Care has not been determined? Duty to disclose material information re Charity Care? Duty to verify hospital complied with Charity Care notice and eligibility determination obligations before efforts to collect? Direct liability for violation of 501(r) regulations? Industry standards?

Charity Care Notice in Collection Agency Communications? Good practice? Industry standard? Amend RCW (8) to include disclosure re Charity Care and patient’s ability to apply for Charity Care “at any time”?

Questions?