State regulators say they want to bar Maryland hospitals from adding interest on unpaid bills at twice the rate allowed for other types of debts under the state constitution.
Stephen Ports, principal deputy director of the Health Services Cost Review Commission, told the Senate Finance Committee that the agency's power to regulate hospitals could extend to how much the debt-collections firms they hire can charge in interest before a court judgment is entered against a patient who doesn't pay a bill.
But Sen. Delores G. Kelley, a Baltimore County Democrat, questioned whether the regulations would extend beyond hospitals to a "third party" such as a collection agency or a law firm. Sen. George W. Della said legislation would be needed, and Kelley and Sen. Catherine E. Pugh, who like Della is a Baltimore Democrat, suggested they prefer that approach.
The issue arose late Thursday as the Finance Committee reviewed Della's bill to require hospitals to charge interest rates that comply with regulations set by the Health Services Cost Review Commission, which regulates hospital rates. The provision is part of a larger bill that would set a minimum statewide standard for hospitals on providing free care to patients and prohibit hospitals from filing liens on patients' primary residences.
A similar bill sponsored by Del. Peter A. Hammen, chairman of the House Health and Government Operations Committee, would ban prejudgment interest altogether.
Sen. Thomas M. "Mac" Middleton, chairman of the Finance Committee, said he wants to see the bills amended so they are identical.
The legislation was prompted by a Baltimore Sun investigative series published in December. The newspaper documented, among other things, that in debt- collection cases filed by the law firm of Wolpoff and Abramson, hospitals routinely seek to add 12 percent interest on judgments dating back to 60 days after the patient was discharged.
Although that is legal under regulations adopted by the rate-setting agency, the practice is criticized as unnecessarily aggressive even by some other debt- collection lawyers. The Maryland Constitution sets interest rates at 6 percent for most debts, but hospital debts are exempt. The higher rate can add thousands of dollars to judgments imposed on people of limited means.
In response to the newspaper's report, state regulators in January proposed to replace the 12 percent interest rate with an adjustable rate of prime plus 3 percentage points. In December, that would have totaled 6.25 percent, but as recently as June 2006, it would have been 11.25 percent.
Regulators scrapped that plan in a Feb. 13 report to Gov. Martin O'Malley, who in December ordered an "immediate and thorough review" of hospital debt- collection practices.
The cost review commission's report called on the legislature to prohibit hospitals and debt-collection agencies from charging prejudgment interest. It also recommended that state regulators develop standards for collection policies and practices.
Robert B. Murray, executive director of the rate-setting commission, wrote that only a few hospitals have policies governing the practices of debt-collection agencies and law firms that they hire to pursue patients.
"In general, once the debt is handed to a third party, the policies are silent regarding the behavior of these parties," Murray wrote.