Hospital company sued after FCC tightens medical debt collection rules

The bar was raised for medical debt collectors last summer when the Federal Communications Commission issued a ruling that made it harder to dial patients on their cellphones without their express consent.

Now a California-based hospital chain has become one of the first providers to be sued since the FCC’s July interpretive ruling.

The class-action suit targets Prospect Medical Group’s Southern California Hospital at Culver City. It alleges that the hospital used an automated dialer to call patient Donna Ratliff on her cellphone in order to collect a debt and did not have her express consent to do so.

The FCC issued its interpretive ruling after the medical debt collection industry—hoping for more flexibility—asked for greater clarification on the decades-old Telephone Consumer Protection Act to address issues such as auto-dialing cellphones, consent to call and reaching wrong numbers.

Instead, the FCC made it clear that debt collectors need express consent before dialing a cellphone and gave little leeway for when they reach a number that’s been reassigned.

Prospect Medical declined to comment on the Ratliff case, stating that the company hasn’t yet been served with the complaint.

However, the company insisted in a statement that it follows the necessary practices to obtain consent to call patients on their cellphones. “All of our patients are asked to sign an irrevocable authorization permitting our hospitals to contact them via telephone—including, specifically, via cellphone—in their efforts to collect outstanding debt.”

The plaintiff’s exact argument is still unclear, said Justin Kay, a Chicago-based attorney at law firm Drinker Biddle, who described the suit as “threadbare,” perhaps to make it harder for Prospect to win a motion to dismiss. “Presumably, what (the plaintiff’s attorney) is going to argue is the scope of consent did not include this call based on the circumstances under which the number was provided,” he said.

Previous cases have generally given hospitals some latitude on calling patients for purposes of collecting a payment as part of an episode of care. But healthcare providers need to make sure that the debt is linked to the medical encounter during which the patient provided a cell number.

“The best practice for any hospital is to have written consent during the admissions process that is broadly worded to include all types of automated calls and texts,” said Bradley Andreozzi, a Chicago-based attorney at Drinker Biddle.

TCPA violations are already an active area for plaintiffs, with TCPA-related lawsuits increasing 560% between 2010 and 2014, according to ACA International, the Association of Credit and Collection Professionals.

“As the FCC gradually narrowed the scope of express consent, it became cause to litigate,” Andreozzi said. “We don’t see any sign that that’s going to change anytime soon.”

Penalties for TCPA infractions start at $500 per call and can reach as much as $1,500 for willful violations.

While the Prospect case deals with the issue of express consent, it doesn’t touch one of the thorniest and most controversial parts of the FCC’s recent ruling: what happens when a debt collector reaches someone in error. The FCC allows medical debt collectors to call a number just once without penalty, regardless of whether someone picks up.

“The problem is they left no room for the situation—and this is increasingly common—where the person doesn’t answer the phone,” said Lewis Wiener, a Washington-based attorney at law firm Sutherland, Asbill & Brennan. “You’ve put them in an impossible situation.”

As many as 100,000 cellphone numbers are reassigned everyday, Wiener added.

ACA International has sued the FCC challenging the July order.

“It’s impossible for companies to keep up with that level of risk factor,” Wiener said. “There’s really no way to confirm whether the person you’re calling is the right number. It’s a gotcha.”

The best ways for providers to protect themselves, Wiener said, is to have a rigorous process for getting consent, respect the wishes of people who opt out and, whenever possible, use e-mail. “You’re swimming in shark-infested waters,” he said. “Take as few laps as you can.”

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