When Can a Hospital Send You to Collections?

Medical expenses often present a significant financial challenge for individuals and families, leading to concerns about how hospital bills are managed. Understanding the journey of a medical bill, from the initial service to potential collection efforts, can help patients navigate this complex landscape. Hospitals employ specific processes for billing and debt recovery, which can sometimes result in an account being sent to a collection agency. Knowing these procedures empowers patients to address their financial obligations proactively and understand their rights throughout the billing cycle. This knowledge can help mitigate the stress associated with medical debt and provide clarity on when and why a hospital might pursue collection actions.

Understanding Initial Billing Practices

After receiving medical services, the hospital initiates a billing process by submitting a claim to the patient’s health insurance provider. Patients often receive an Explanation of Benefits (EOB), detailing payment and patient responsibility. An EOB is not a bill, but a statement explaining how the insurance claim was processed.

Hospitals typically provide an itemized bill upon request, detailing all charges. Patients are responsible for medical costs like deductibles, co-payments, and co-insurance. A deductible is the amount a patient pays before insurance coverage begins. Co-payments are fixed amounts for services, and co-insurance is a percentage of the cost paid after the deductible is met.

After insurance processing, the hospital issues a bill to the patient. Hospitals communicate these balances through mailed statements. Patients may also receive calls from the hospital’s billing department to discuss outstanding balances or payment options.

Conditions Leading to Account Transfer to Collections

A hospital transfers an account to a collections agency when a patient’s bill remains unpaid. This often occurs after balances have been outstanding for 90 to 180 days. Hospitals usually send multiple statements and attempt to contact the patient before escalating the account. A consistent lack of payment will trigger this action.

Unresolved patient responsibility leads to an account entering collections. If deductibles, co-payments, or co-insurance amounts remain unpaid, the hospital will pursue these balances. This includes charges for services not covered by insurance.

A lack of response to hospital communications can also prompt an account transfer to collections. Patients who do not engage with the hospital to discuss payment plans, financial assistance, or dispute billing errors may be designated uncollectible. Hospitals typically make several attempts to resolve the debt before resorting to external collection agencies.

If a patient applies for financial assistance or charity care and is denied, the account may proceed to collections. Hospitals have financial aid policies. Similarly, if a patient fails to provide necessary insurance information, the account can be sent to collections. Without proper insurance details, the hospital cannot submit claims, leaving the full financial responsibility with the patient.

Key Patient Protections and Rights

Patients have several protections and rights concerning medical billing and collections. The No Surprises Act protects patients from unexpected medical bills from out-of-network providers in emergencies and for certain non-emergency services at in-network facilities. This federal law prevents “surprise billing,” where patients receive bills for the difference between what their insurer pays and the provider’s charge, known as balance billing. The act requires providers to give patients a good faith estimate of expected charges for scheduled services.

Non-profit hospitals are subject to requirements under the Affordable Care Act (ACA) regarding financial assistance policies or charity care. These hospitals must have written financial assistance policies and provide care without charge or at reduced rates to eligible low-income patients. They must also establish clear deadlines for patients to apply for financial assistance, often requiring a wait period of at least 120 days after the first post-discharge bill before sending an account to collections.

The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates the conduct of third-party debt collectors, including those collecting medical debt. This act prohibits collectors from engaging in abusive, deceptive, or unfair practices, such as harassing phone calls, false representations, or contacting patients at unusual times or places. It also grants patients the right to dispute a debt and to request verification of the debt from the collection agency.

Patients have the right to dispute a bill directly with the hospital or collection agency. This involves sending a written dispute, which requires the billing entity to investigate the claim. Recent changes regarding medical debt and credit reporting protect patients; paid medical debt is no longer included on consumer credit reports. Medical debts under $500 are not reported, and there is a one-year waiting period before unpaid medical debts over $500 can appear on a credit report.

What Happens When an Account Enters Collections

Once a hospital account is transferred to a collection agency, the patient will receive initial contact. This begins with a “validation notice,” informing the patient of the debt amount, the creditor’s name, and their right to dispute the debt within 30 days. The collection agency may also initiate phone calls or send additional letters to demand payment. These communications aim to secure payment for the outstanding balance.

Patients can communicate and negotiate with the collection agency. This may involve discussing payment plans or attempting to settle the debt for a reduced amount. Any agreements reached should be documented in writing to avoid future disputes. These discussions can help manage the debt and prevent further collection actions.

Unpaid medical debt can impact a patient’s credit score, though recent changes have lessened its effects. Paid medical debt is now removed from credit reports, and smaller debts are not reported. However, unpaid medical bills can still negatively affect creditworthiness. This can influence a patient’s ability to obtain loans, credit cards, or housing.

Collection agencies can pursue legal action to recover medical debt, though this is rare for smaller amounts. This might involve filing a lawsuit to obtain a judgment, leading to wage garnishment, bank account levies, or property liens. Legal action is a last resort for collection agencies, typically for larger debts or when other efforts fail. Patients who receive notice of a lawsuit should seek legal counsel.