Debt collection

June 26, 2008

Is it okay to set up an in-office collection process for past due patient balances using a form letter that looks similar to a collection agencies letter? I have seen other office send these out. The letter usually has a letterhead that indicates something like "The Collection Center," and goes on to advise the patients that they have X number of days to pay their balance or further collection measures will be taken.

Q. Is it okay to set up an in-office collection process for past due patient balances using a form letter that looks similar to a collection agencies letter? I have seen other office send these out. The letter usually has a letterhead that indicates something like “The Collection Center,” and goes on to advise the patients that they have X number of days to pay their balanceor further collection measures will be taken.

A. If a medical practice is going to send out letters that suggest someone other than the physician him/herself is attempting to collect the debt, the practice must be familiar with the Fair Debt Collection Act. That act was enacted by Congress to help ensure that debt collectors treat debtors fairly. It applies to all “debt collectors,” including anyone who collects debts on behalf of someone else, or someone who “in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” Therefore, a medical practice that uses “The Collection Center” as part of the letterhead when sending out notices to patients would likely be considereda “debt collector.”

So what does it mean if the Fair Debt Collection Act is applicable to the medical practice? The Fair Debt Collection Act addresses how a debt collector can communicate with the debtor. For example, a debt collector cannot

• Contact the debtor at any unusual time or place.

• Contact the debtor if that person is represented by an attorney with regards to the debt.

• Contact the debtor at the debtor’s place of employment if the debtor prohibits such communications.

If a debtor tells the debt collector to stop communicating with him or her, the debt collector must stop all communications except to notify the debtor that some specific action is being taken, e.g., the debt collector is proceeding with a lawsuit.

A debt collector cannot discuss the patient’s medical bill with anyone other than the patient. Therefore, the medical practice could not discuss the outstanding debt with relatives or friends without consent of the patient.

The Fair Debt Collection Act also contains provisions regarding harassment, abuse, false or misleading representations, and unfair practices. If a medical practice violates the Fair Debt Collection Act, the practice could be liable for actual damages plus no more than $1,000 per individual and attorney’s fees. Actual damages could be significant if the debt collection practice somehow harmed the person’s credit. In addition, attorney’s fees could make a $50 debt become a significant expense.

While it is permissible for a medical practice to use letterhead that has a fictitious name such as “The Collection Center,” the medical practice should take the time to become intimately aware of the limitations of the Fair Debt Collection Act. In addition to the Federal law, you should also be aware that many states have statutes or regulations regarding the collection of debts. Simply because you were incompliance with the Fair Debt Collection Act does not mean that you complied with all state law.

S. Allan Adelman, JD

S. Allan Adelman is a health law attorney with Adelman, Sheff & Smith in Annapolis, MD, and Washington, DC. He can be reached by e-mail at aadelman@hospitallaw.com.

The answers to these queries are general opinions and are not intended as substitutes for legal advice. You should not rely on these replies in making decisions involving questions of law, but should instead consult with competentlegal counsel.