Medical Debt Reform in Minnesota – What Health Care Providers Need to Know

On May 21, 2024, Governor Walz signed into law the Debt Fairness Act (“Act”), a bill that establishes significant reforms to consumer debt collection practices in Minnesota (SF 4097/HF 4077). Several of these reforms are aimed specifically at medical debt, which has been a long-time focus of Attorney General Keith Ellison.

Nonprofit hospitals in Minnesota are already subject to the Hospital Agreement with the Minnesota Attorney General’s Office, which includes several requirements relating to hospital billing and collection practices. In addition, legislation passed in 2023 that established similar statutory requirements for hospitals. The Debt Fairness Act, however, applies more broadly to all “health care providers” in the state, which include not only hospitals, but also provider group practices and health care professionals who are licensed or registered to provide health care services under state law.

In addition to the provisions described below, the Act eliminates the automatic transfer of medical debt to a patient’s spouse, prohibits the reporting of medical debt to credit bureaus, and protects patients from a wide range of unethical and predatory debt collection practices. While the public focus has been on the Act’s impact on health care consumers, health care providers need to be aware of the requirements that impact provider operations and policies. These requirements go into effect October 1, 2024.

Here's what providers need to know:

Prohibition on Denying Medically Necessary Care Due to Outstanding Medical Debt

The Act prohibits health care providers from denying a patient medically necessary health treatment or services due to outstanding medical debt. This includes any debt that is currently or previously held by the patient or any member of the patient’s family or household. This prohibition applies regardless of whether health treatment or services may be available to the patient from other health care providers.

Providers can, however, require a patient to enroll in a payment plan for outstanding medical debt as a condition of providing medically necessary health treatment or services. Any such payment plan must be reasonable and must account for any information disclosed by the patient regarding the patient’s ability to pay. In other words, the payment plan cannot require the patient to pay amounts they cannot afford under their specific circumstances. The provider must also notify the patient that if he/she is unable to make any of the required plan payments, the patient must notify the provider and pay an amount they can afford at that time.

Public Availability of Debt Collection Policy

Health care providers must make available to the public their policy for collecting medical debt from patients. The policy must be clearly posted on the health care provider’s website and provided to any individual who requests it. For individual health care professionals, the policy must be displayed on the website of the health clinic, group practice, or hospital at which the health care professional is employed or under contract.

The content of the policy must specify, at minimum, the health care provider’s procedures for (1)  communicating with patients about medical debt owed and collection of such debt, (2) referring medical debt to a collection agency or law firm, and (3) identifying debt as satisfied or uncollectible and ending collection activities. Although the Act does not otherwise mandate how providers must address these issues, providers must ensure that any such policy complies with the Act’s extensive new restrictions around unethical debt collection practices.

Billing Error Dispute Process

The Act also creates a new process for patients to dispute potential billing or coding errors. The process requires a health care provider or health plan, upon discovery or notification of a potential error, to review the bill and correct any errors identified. This review process may be initiated by a patient or another individual or entity notifying the provider that a medical bill may contain an error. Upon receipt of such notification, or upon internal discovery by the provider or health plan, providers and plans have 30 days to send a notice to the patient explaining (1) the potential error, (2) the provider’s or health plan’s obligation to review and correct any identified errors, and (3) the provider's responsibility to refrain from billing the patient for any service that is subject to review while the review is being completed.

Within 30 days of completing the review, the provider or health plan then must (1) notify the patient that the review is complete, (2) explain in detail how any identified billing errors were corrected, or if no errors were found, explain why the bill was not modified as requested, (3) provide references to applicable coding guidelines, health records, and other relevant information used in the review, and (4) refund the patient for any amounts the patient overpaid in connection with corrected errors.

Notably, the Act does not establish a timeline for the internal review process, nor does it specify how the internal review must be conducted. Accordingly, health care providers and health plans have some leeway in establishing internal review processes in compliance with these requirements.

Penalties and Enforcement

The Attorney General is authorized to investigate violations of the Act and enforce compliance with its provisions. A health care provider that violates the Act is strictly liable to the patient for (1) actual damage sustained by the patient as a result of the violation, (2) additional damages allowed by the court, not exceeding $1,000 per violation, and (3) in the case of any successful action, the costs of the action, together with reasonable attorneys’ fees, as determined by the court. A health care provider that willfully and maliciously violates the Act’s requirements is strictly liable to the patient for three times the sums above.

Key Takeaways

The Debt Fairness Act will have far-reaching impacts on medical debt collection practices in Minnesota. Health care providers should be prepared to comply with the Act’s requirements by reviewing their policies and practices regarding outstanding debt and patient financial assistance programs.

In particular, health care providers should revisit any policies that directly or indirectly deny or delay medical care due to a patient’s financial history with the provider. Instead, providers should focus on providing financial assistance resources to patients with overdue medical bills. These resources can include reasonable payment plans, but providers should exercise caution to ensure that such plans are flexible enough to account for a patient’s unique circumstances before and during the repayment period.

In addition, health care providers should ensure that their billing and collection policies and procedures address the items required under the Act and are made available to the public on or before October 1, 2024. Lastly, providers must update their billing dispute procedures to comply with the timelines and notifications described above.

Contact us to discuss how you or your organization can prepare to comply with these new laws.