Medical debt collection in Minnesota have become somewhat of a heated issue.

In April 2012, Minnesota Attorney General Lori Swanson published a six-volume “compliance review” bringing a questionable practice by state hospital/clinic chain Fairview Health Services.  The report alleges that Fairview – a non-profit consisting of seven hospitals and over forty clinics statewide – misused a relationship with Illinois revenue Fairviewcycle management company Accretive Health to increase its potential to cash in on up-front payments from patients.

The two companies had a contractual agreement whereby Accretive handled medical collections for the hospital chain, eliminating Fairview’s need to train existing office staff on patient collections and employing a number of other procedures designed to increase hospital/clinic revenue.  Medical collections and revenue cycle management companies can save practices an enormous amount of money by taking collections tasks – including handling insurance claims, calling patients, sorting and managing unpaid bills, skiptracing accounts, and more – out of the hands of medical office staff.  These tasks are instead performed by a team of collections experts with revenue cycle management training who can dedicate their entire workday to just medical billing.

While outsourcing medical debt collection is one of the best ways for clinics and hospitals to maximize revenue during an economic downturn (when patients are less likely to pay their bills), Swanson’s report alleges that Fairview Health Services integrated these outsourced, third-party medical billers into the hospital staff, but allowed them to perform “first-party” collections tasks.  First-party collections are typically performed by the staff at the medical facility, and include early follow-up with patients and contacting them to arrange payment before handing the account off to a third-party debt collector.

The problem Swanson saw lies in the way Accretive staff members who had been integrated into the Fairview staff (plus Fairview staff trained by Accretive) changed the facilities’ collections practices.  For example, the new procedures incorporated a number of scripts into the patient sign-in procedure that implied that patients would not receive care until the hospital could be assured of payment.  The Emergency Medical Treatment and Active Labor Act (EMTALA) prohibits the discussion of payment before stabilizing the patient and providing an emergency medical screening, but Accretive has denied that their scripts violate this act.  (The report also alleges that Accretive’s third-party collectors actually misrepresented themselves as “financial counselors” to patients.)

It’s not the first time that Accretive and Fairview have been in trouble with the Attorney General’s office, as their billing practices for uninsured patients and charity care administration was found to be “deficient” in 2005.  Fairview ended its contract with Accretive in January of 2012, and Accretive’s stock has since seen fairly dramatic losses.

The lesson here is an obvious one – be careful who you go into business with, and don’t let a company offering extremely lucrative deals run wild within your own organization without checking up on their business practices.  But hospitals and medical practices certainly shouldn’t write off medical accounts receivable solutions over the Accretive fiasco.  Outsourcing revenue cycle management, when done right, can offer a company an excellent way to manage its books and collect on more unpaid bills than ever could be done in-office.