Lawrence Medical Center is now employing the use of Municipal Intercept Services in an attempt to recover some of the money it lost on unpaid debts.
Dean Griffin, CEO of Lawrence Medical Center says the hospital has lost close to $5 million over the last three years to what he calls “bad debt” accumulated by people who technically can afford to pay their hospital bill but do not.
“It’s a large sum of money that would mean a lot to this hospital,” he said.
The Department of Revenue system previously only allowed certain state agencies to intercept tax refunds, but in 2014, the Alabama Legislature enacted an amendment allowing municipalities and counties to attempt to recover delinquent debts owed by individuals to local governments by collecting debt from the individual’s state tax refund, according to alintercept.org.
As part of the 2014 legislation, the Alabama Department of Revenue (ADOR) agreed to process these debts through only two clearinghouse entities: the Alabama League of Municipalities (ALM) for municipal entities and the Association of County Commissions of Alabama (ACCA) for county entities, according to the website. In 2015, ALM formed Municipal Intercept Services, LLC (MIS) as its clearinghouse entity.
According to the website, MIS allows for the input of debt data and then formats and transmits it to the ADOR as per their specifications. This allows ADOR to “intercept” an individual’s state tax refund by matching social security numbers. MIS then handles any successfully intercepted money and disburses those funds back to participating entities.
Fortunately for the hospital, MIS is provided at zero cost to eligible participating hospitals, but unfortunately for individuals who owe money, MIS collects a $25 processing fee from the debtor for any successful intercept. If the debtor is not eligible for an Alabama State tax refund, however, no money can be collected.
Griffin said individuals will receive a notice that money owed was removed from their state tax refund.
“More and more hospitals are doing this.” The hospitals that have tried it have had good success recovering a significant amount of money from bad debt.”
Those individuals who receive a notice have 30 days to file an appeal with the hospital in which they can contest the debt collection.
“If we made a mistake, we will certainly refund them the money,” Griffin said.
To put just how much money the hospital is losing to unpaid debt in to perspective, Griffin offered to provide some recent financial figures.
“We’re budgeted to have $1.6 million in bad debt for this year and we’re projected to have total net patient revenue of $14,058,000.”
Not only is the hospital losing money on unpaid debts, Griffin says it also lost $176,000 last year in Medicaid reimbursements to offset the cost of uncompensated charity care. All of this comes at a time when rural hospitals across the country are struggling from a lack of patients.
Griffin says he is hopeful that legislators will change this in the near future, but he is not holding his breath.