Hospitals can use Equifax to gauge patients' propensity to pay, court rules

Hospitals can use financial reports from Equifax and other credit reporting agencies to help determine a patient's propensity to pay medical debt under Medicare rules, a federal district court ruled March 29. 

Medicare reimburses hospitals 70 percent of a hospital's qualifying bad debt. Prior to 2020, Medicare allowed hospitals to determine whether a particular person is unable to pay the debt using their own methods. Plaintiffs in the case, a group of hospitals in Norfolk, Va.-based Sentara Healthcare's network, used Equifax to help it make decisions about patient propensity to pay. 

The Sentara hospitals sought reimbursement from bad debt incurred from 2010 to 2013, but CMS ultimately rejected the request, arguing that Sentara violated Medicare rules by improperly outsourcing indigency determinations to Equifax rather than independently verifying the patients' assets and liabilities as required by Medicare. 

Sentara challenged the CMS decision in court, arguing its extensive bad debt policy does not rely solely on the Equifax report and therefore does not violate Medicare rules. Both organizations moved for summary judgment. 

The U.S. District Court for the District of Columbia on March 29 held that Sentara Hospitals didn’t run afoul of Medicare rules, saying Sentara "did more than simply rubber-stamp a low Equifax score." 

The district court granted Sentara summary judgment.

"Sentara, accordingly, is entitled to reimbursement for its bad debts during the cost years 2010 through 2013," the court ruled. 

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