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Collecting Unpaid Charges: What a Practice Can and Can’t Do

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The ophthalmology practice, like any business, invariably encounters a percentage of charges that go unpaid. When an insurance company or other payor is involved, the collection process for those unpaid obligations is viewed under the law in the context of one business pursuing another in satisfaction of a contractual obligation.

However, when the unpaid debt is the obligation of a patient, both federal and state laws impose extensive requirements on the business seeking payment. These laws are designed to protect the consumer from overreaching collection practices. In addition, state and local medical societies may have procedural and ethical requirements that must be observed when it comes to collection of payment for medical care and treatment.

The Federal Fair Debt Collections Practices Act applies to collection agencies as well as the creditor (i.e., one to whom a debt is owed) that poses as a collection agency in its efforts to collect on a debt. This law limits the behaviors of those engaged in the collections process. In addition, many states, such as Pennsylvania, have enacted legislation that extends to all creditors engaged in debt collection. In light of these consumer protection laws, every practice needs to be aware of both state and federal requirements.

Some rules of thumb for the ophthalmology practice seeking to collect payment from a patient are set forth below.

Debt-Collection Don’ts

  1. When communicating with the patient or the patient’s spouse, parent (if the patient is a minor), guardian, executor or administrator:
    • DO NOT attempt to contact the person at an inconvenient time (assumed to be between the hours of 9 p.m. and 8 a.m.).
    • DO NOT attempt to contact the person if the patient is represented by an attorney who can be readily contacted, unless the attorney fails to respond within a reasonable period of time. 
    • DO NOT contact the person at his or her place of employment if the creditor or collection agency knows or has reason to know that the employer prohibits its employees from receiving such a communication while at work.

  2. When you are trying to locate the patient for collection purposes by contacting others (e.g., friends, neighbors, distant relatives):
    • DO NOT state that the patient owes a debt.
    • DO NOT communicate with the third person more than once unless (1) they request it, or (2) you reasonably believe that the response you initially received was erroneous or incomplete and that the person now has correct or complete location information. 
    • DO NOT communicate by postcard. 
    • DO NOT indicate the identity of a debt-collection business or debt-collection purpose on a mailing to the third party. 
    • DO NOT communicate with a third party if the patient is represented by an attorney who can be readily located and contacted, unless the attorney fails to respond within a reasonable period of time.

  3. Collection efforts must STOP when:
    • The person advises the debt collector in writing that she or he refuses to pay.
    • The person wishes the debt collector to cease further communications.

  4. Communications still may occur, if made to inform the person that:
    • Legal action and recovery of attorneys’ fees or another specific remedy are being or may be pursued, if such an action lawfully may be taken.
    • Further collections efforts are being terminated.

  5. Harassing or abusive collection practices include:
    • Threats of violence or other criminal means to collect payment.
    • Use of obscene or profane language.
    • Publication of lists of persons who refuse to pay debts (this does not include a report to a consumer reporting agency).
    • Advertisement of the sale of the debt to coerce payment.
    • Causing the person’s telephone to ring repeatedly or repeatedly engaging the person in conversation to abuse or harass.
    • Placing calls without disclosing the caller’s identity.

  6. False or misleading collection practices include:
    • Use of false or deceptive means to attempt collection or obtain information regarding the debtor.
    • Threats to take any action that legally cannot be taken or is not intended to be taken.
    • Implication that the debtor has committed a crime or other wrongful conduct in order to disgrace the person.
    • Implication that the debt collector is vouched for, bonded by or affiliated with the United States or a state government (e.g., by presenting a badge, wearing a uniform or using misleading stationery).
    • False representation of the character, amount or legal status of the debt.
    • False representation of the nature of the service rendered or compensation paid to the debt collector.
    • Threaten to communicate to a third party any credit information known to be false, including failure to communicate that a debt is disputed.
    • False representation that one is an attorney or that a communication is from an attorney.
    • Allegation that nonpayment will result in arrest or imprisonment or the seizure, garnishment, attachment or sale of property or wages, unless such action is lawful and intended to be taken.
    • False representation that documents are legal process; or if they are, that they are not and that no action by the debtor is required.
    • Use of a business name other than the true name of the debt collector.
    • Implication that the debt collector operates or is employed by a consumer reporting agency.
    • Implication that the sale, referral or transfer of any interest in the debt will cause the consumer to lose a defense or claim.
    • Written communication that falsely represents the authorization or approval of a court, official or state or federal agency, or other false impression as to source, authorization or approval.
    • Implication that accounts have been turned over to an innocent purchaser for value.

  7. Unfair practices include:
    • Attempting to collect amounts not authorized by agreement or permitted by law.
    • Use of post-dated checks or threats arising from them.
    • Imposing on the debtor charges for collect calls or telegrams.
    • Threats of nonjudicial action against property (e.g., taking or impeding the individual’s right of possession to property that the creditor does not have the present right to possess).
    • Communication with the patient by postcard.
    • Use of information on an envelope that indicates debt collection.

Debt-Collection Dos

  1. Establish written protocols for billing and collections staff.
  2. When communicating with third persons to confirm the person’s correct location, the caller should identify himself or herself, state the purpose of the call (i.e., location of the person, NOT collection of a debt) and identify the caller’s employer if specifically requested to do so.
  3. Disclose in the initial communication with debtor (both written and oral) that the debt collector is attempting to collect a debt and that information obtained will be used for that purpose.
  4. In the initial communication, or within five days thereafter, provide the debtor with written notice of the following:
    • The amount of the debt;
    • The name of the creditor;
    • A statement that unless within 30 days after receipt of notice the debtor disputes the validity of the debt or any portion of it, the debt will be assumed to be valid; and
    • If the individual notifies the debt collector in writing within the 30 days that the debt is disputed, the debt collector will supply the debtor with a copy of the judgment on the debt. Collection efforts must then cease until the information is provided.

  5. If within 30 days, the person requests the name of the creditor, collection efforts must cease until the requested information is provided.

In summary, the ophthalmology practice is best served in the long run by establishing written policies and procedures for staff that clearly state the expectations and boundaries for collection of unpaid patient charges.

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About the author: Dana Holtz is an attorney with the law firm Wade, Goldstein, Landau and Abruzzo. Holtz’s law practice focuses on physician contracting matters, including employment negotiations, buy-ins and pay-outs, and mergers and acquisitions. Holtz also has considerable experience in employment law and fraud and abuse matters.

Legal Notice: This article has been prepared as a service to the American Academy of Ophthalmic Executives. This information is not, and should not be construed as, legal advice. Should further analysis or explanation of the subject matter be required, please contact the author or the attorney with whom you normally consult.