What the CFPB and White House’s Proposed Changes to Medical Debt Reporting Mean for Hospitals and Health Systems

On June 11, 2024, Vice President Harris and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra announced a radical proposal to remove medical bills from credit reports. This initiative is part of a broader effort by the Biden administration to alleviate the financial burden of medical debt and improve the financial stability of millions of Americans. 

Hospital and health system leadership will need to adapt to the new rule, which will significantly impact traditional billing and collection practices. New strategies will be essential for collecting from patients responsibly.

Summary of the Announcement

The proposed rule seeks to eliminate medical debt from credit reports, impacting more than 15 million Americans. This change is expected to raise credit scores by an average of 20 points, potentially leading to the approval of 22,000 additional mortgages annually. Vice President Harris also urged state legislation, local governments, and healthcare providers to take further steps to reduce medical debt, including using public funds to purchase and eliminate medical debt, expanding access to charity care, and limiting aggressive debt collection practices. 

Key Changes in Proposed Rule

For hospitals and health systems, this announcement brings a major shift in how medical debt will be handled and reported. Key implications include: 

1. Financial Assistance and Charity Care Expansion: Hospitals will need to enhance their financial assistance programs to prevent the accumulation of patient medical debt. This may involve revising eligibility criteria and increasing patient screening efforts so more low-income families receive the care they need. 
2. Debt Collection Practices: Under the proposed regulations, hospitals will be required to limit coercive debt collection tactics and ensure compliance with new guidelines aimed at protecting patients from aggressive collectors. 
3. Increased Scrutiny and Compliance: The IRS will increase audits of tax-exempt hospitals to ensure they provide the necessary community benefits to maintain their non-profit status. Hospitals will need to be diligent in documenting and demonstrating their compliance with these requirements. 

Challenges and Ramifications for Healthcare Providers

An analysis of the proposed rule shared with HFMA predicts that the liquidation rate for medical accounts reported to collection agencies would drop by 10% if the regulations are implemented. This could vastly shake up healthcare billing and collections processes, with some patients possibly becoming less motivated to pay their bills upon learning about the rule.  

This presents a financial challenge for hospitals, especially those already operating on razor-thin margins. Hospitals may encounter greater reimbursement challenges, potentially leading to the need for upfront patient payments. Now is the time to consider patient-friendly, pre-bad debt solutions for balances at risk of going uncollected. 

A Continued Commitment to Compliance

Under this proposed rule and existing legislation, CarePayment is committed to staying ahead of new and changing legislation to ensure that our practices are always compliant. Our proactive approach to patient financial engagement includes continuous monitoring of legislative changes and regulatory updates to align our policies and procedures with the latest requirements. We offer flexible, always 0.00% APR payment plans that prioritize patient financial well-being, eliminating excessive medical debt for patients. Additionally, we work directly with our provider partners to help them understand and implement changes in compliance with new patient medical debt and collection regulations. 

CarePayment remains dedicated to helping hospitals and health systems navigate these changes smoothly while continuing to provide exceptional care to their patients. Our commitment to compliance ensures that we are always prepared to adapt to new regulations, like the recent CFPB and White House announcement, to support both providers and patients in achieving financial health and stability. 

If you want to learn more about how we can help you maintain compliance with new and proposed legislation, reach out to us.