There isn’t a hospital anywhere in the United States that can avoid examining its financial policies, especially as they pertain to self-pay patients. Additionally, tax-exempt hospitals have to publish and comply with a financial policy written to align with state and federal regulations.

It wasn’t too far back that IRS Section 501(r) was enacted as part of the Patient Protection and Affordable Care Act, Pub. Law 111-148, 124 Stat. 119 (2010), imposing a new set of requirements applicable to charitable tax-exempt hospitals. In short, 501(r) governs the financial assistance policies, billing, and collection practices of hospitals exempt from taxation under IRC § 501(c)(3), including government hospitals with dual tax-exempt status. These regulations not only require specific policies and procedures, but also require hospital organizations to identify, correct and in many cases publicly disclose their own implementation errors in order to avoid penalties.

Half upfront for non-emergent surgical care

Against this backdrop of extra regulatory vigilance around hospital financial policies, University of New Mexico Hospital (UNMH) has drawn criticism for a new surgical policy that requires 50% up-front payment from anyone booking a “non-emergent” surgery. The policy is particularly interesting in a state like New Mexico, a state that the hospital’s own Community Impact Report acknowledges is comprised of a higher than average number of residents living at or very near near the federal poverty line.

What’s considered non-emergent here? Any surgery that is not immediately life saving is considered “elective” in UNMH’s policy, including surgical procedures needed by cancer patients and those with advanced cardiovascular disease. So we’re not talking nose jobs here. The surgery may be needed or very indicated, but if it’s non-emergent, the University of New Mexico Hospital’s policy says that all patients, including uninsured, low-income patients, must pay 50% of the total estimated costs in advance. The hospital claims that this policy has so far not reduced the total number of “elective” surgeries for its indigent patients, but community advocates are worried that the hospital’s policies are bound to have a negative effect on the health of many vulnerable patients.

Board calls for report on billing process

Earlier this summer, at the Trustee open session, community advocates (again, in a state where nearly 30% of all children live in poverty) implored the UNMH Board of Trustees to rescind the 50% upfront payment policy change and allow uninsured patients to obtain needed surgical care. Later this month, hospital administrators are due to report to the board on the hospital’s billing process and recommendations to best serve the community under the circumstances. For some, this raises the fair question of why these processes and the hospital’s revenue cycle management were not fully evaluated before the new “Finance Guidelines for Surgical Cases” took effect this spring.

While hospitals can surely opt to enact patient financial policies that heavily affect vulnerable populations to get more money in the door, others have taken a different approach. How are they doing it? By using predictive analytics to make sure patients are identified and assessed for charity care, and then offering suitable payment arrangements up front for those patients who are more solvent.

The case of UNMH raises larger systemic public health questions as well: If indigent people have to follow a complex qualification process to get charity care, will they? Do daunting processes that discourage timely treatment have a place in a world where the technology exists to quickly identify and assess a patient’s financial position and offer flexible, nondiscriminatory, extended payment options?

Cause & effect in question

UNMH’s public statements point the finger at insurance companies’ refusal to pay for surgeries that had not been pre-approved, which was resulting in last-minute cancellations of surgeries. Here there is more of an operational question at play: Why not avoid scheduling surgeries until the pre-clearance and financial counseling has taken place? Would they book a surgery with more confidence if patients were offered more robust financial services up front?

UNMH does not offer any of the newer breed of patient financing options available. Its own disclosures report that “The UNM Care program provides supplemental coverage assistance for Bernalillo County residents that have copayments and deductibles as part of health exchange or other insurance products. In addition patients may qualify for supplemental coverage under UNM Care to help to cover gaps in Medicare or Medicaid coverage.”

When a hospital’s financial assistance policy serves a state in which 38% of residents qualify for Medicaid (Medicaid expansion in NM covers adults up to 138% of the Federal Poverty Level), and a much higher-than-average number beyond that lives just above the poverty line, it’s plausible that a surgical policy that requires every patient to front 50% of surgical costs may very well attract not just the attention of community and civil rights activists, but also the interest of the IRS. The IRS’ role is to examine hospitals to ensure that the financial policy and procedural guidance set forth by 501(r) is in place.

UNMH’s current predicament may be a learning opportunity. We will be interested to see the 2018 UNMH community health needs assessment (a new one is required every three years, with the last one published in 2015), and how the hospital sees positioning itself for financial viability against those needs looking forward. The medical community at large is watching to see how a large hospital manages its requirements to establish appropriate and well-considered written policies on financial assistance, and how it handles limitations on billing and collection actions directed toward low-income patients.

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