The Consumer Financial Protection Bureau is taking aim at medical debt collectors, including third-party revenue cycle management companies, that collect inaccurate or inflated charges from patients.
In an advisory opinion, the CFPB doubled down on federal law, stating that medical debt collectors may not collect charges that are inaccurate, legally invalid, already paid, misrepresented, exaggerated or otherwise fake.
"Medical billing is often riddled with errors, including inflated or duplicative charges, fees for services the patient never received, or charges already paid," CFPB Director Rohit Chopra said in a public statement. "The CFPB is taking action to ensure that Americans are not unfairly chased by debt collectors over unsubstantiated or invalid medical bills."
This guidance comes as the healthcare industry stares down a mounting medical debt problem.
According to March 2023 numbers from the Urban Institute, more than one in seven nonelderly adults live in families with past-due medical debt. The CFPB stated that about 100 million Americans owe over $220 billion in medical debt, a problem that's compounded by medical billing complexity and the third-party vendors many healthcare organizations employ to complete that billing.
These third-party medical billing companies, including revenue cycle management companies, are subject to federal regulations, CFPB asserted. Specifically, they have legal obligations under the Fair Debt Collection Practices Act.
This advisory opinion serves to clarify how third-party medical billing and debt collection companies could violate this law when they attempt to collect on debts that are inaccurate or otherwise invalid.
Foremost, the CFBP advisory stated that medical debt collectors and other revenue cycle management companies may not attempt to collect medical bills that have already been paid by another entity, including insurance companies, government programs such as Medicare or Medicaid or even healthcare consumers themselves. CFPB referred to this practice as double billing, as it can lead to the consumer or other related entities paying twice for a single service.
The CFPB stated that about 100 million Americans owe over $220 billion in medical debt.
Next, the advisory addressed the practice of exceeding legal limits, including limits or caps set out by laws and regulations such as the federal No Surprises Act. These limits are set in place to protect healthcare consumers from facing "unjustifiably high medical debts," CFPB said, creating a financial environment set to support patient care access.
Third, CFPB asserted that medical debt collectors and revenue cycle management companies may not attempt to collect on falsified or fake charges. Falsified or fake charges happen when a bill includes upcoded or exaggerated services, as well as charges for services not rendered.
The penultimate guidance touched on unsubstantiated medical bills. A substantiated medical bill shows an indication that payments have been documented and financial assistance eligibility has been verified. The CFPB said federal law protects healthcare consumers from being harassed for debts they don't owe or for which they qualify for financial assistance.
Finally, the CFPB stated that medical debt collectors and revenue cycle management companies may not misrepresent a healthcare consumer's right to challenge a medical bill. Specifically, CFPB said that debt collectors may not represent a patient's medical debt as fully settled when, in fact, the obligation may be uncertain. The agency said such practice may dissuade patients from disputing or negotiating debts.
Patient collections is a key part of the healthcare revenue cycle, but with increasing rates of medical debt -- and the consequences of high medical debt -- it's become imperative for healthcare entities to work with patients to settle these debts fairly.
According to a February 2024 Kodiak Solutions report, patients are less likely to pay a medical debt in full when the charge is $500 or higher. Overall, patient collection rates decrease as the claim dollar amount increases.
As the medical debt issue in America mounts, CFPB asserted that all entities involved in patient collections, including debt collectors and patients themselves, must be aware of the federal laws protecting consumers.
Sara Heath has covered news related to patient engagement and health equity since 2015.
