Monday, April 30, 2012

Will They Never Learn? Aggressive Debt Collection in Hospitals

In 2006, the Illinois Department of Revenue revoked property tax exemption from Provena-Covenant Hospital in Urbana, IL, a case that began in 2004 with a recommendation from the local county Board of Review that started with the attention garnered by articles (including one in the New York Times) about Provena's debt collection practices - using "body attachments" to have debtors thrown in jail. Now comes word from a report by Minnesota's Attorney General that Fairview Health Services in that state employed Accretive Health, a health-care oriented debt collection firm, and "embedded" debt collectors in Fairview's emergency rooms to pressure patients to pay for medical services ahead of time and collect past bills. An even better article is this article in Modern Healthcare but you'll need a subscription to view it. (I note that Fairview has since terminated its relationship with Accretive - nothing like getting caught red-handed to help ameliorate bad behavior; Provena also had a miraculous conversion to a "kinder and gentler" approach after losing its tax exemption).

Aside from the fact that it seems to me the Accretive tactics ought to violate I.R.C. Section 501(r)(6) (forbidding "extraordinary collection actions" by tax-exempt hospitals), the whole incident once again brings me back to the notion that it is time simply to end tax exemption for nonprofit hospitals who do not meet other tests of charitable status (e.g., teaching hospitals would continued to be exempt as educational institutions; hospitals or clinics whose primary patient base were the poor would be exempt as a classic poor-relief charity). Early in my career I took this view, then moderated somewhat based upon the work by Jill Horwitz at Michigan showing that nonprofit hospitals often provided services that for-profit hospitals did not. But over the past few years, I've come back to what I view as a central truth about nonprofit hospitals: they aren't charities in any sense of the word. They are huge businesses and they act like it. Did anyone in Fairview's management wake up one morning and say something like "My God, we can't do this; we're a CHARITY for cryin' out loud." Of course not; they quit the practice when they got caught (maybe they did not know what was going on, in which case they are guilty of simple incompetence rather than malevolence).

One of Accretive's biggest clients is Ascension Health, a Catholic health care network that is among the (if not THE) largest nonprofit health care provider in the United States (see story here about Ascension and Accretive). Is Ascension a charity or simply a big business? I know what I think: Ascension is as much a "charity" as Rush Limbaugh is a communist. Time for us as a society to recognize that many (most?) nonprofit hospitals are not charities in any practical sense of that word, and act accordingly. At the very least, we can then avoid being disappointed when they act like Repo Man.


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