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SUBJECT: BAD DEBT ASSIGNMENT
Salinas Valley Health Medical Center
POLICIES AND PROCEDURES MANUAL
Patient Financial Services
EFFECTIVE DATE: 10/01/00
ACCOUNTABILITY:
Patient Financial Services Department
REVIEWED AND APPROVED BY:
Charlotte Wayman, Director of Patient Financial Services
and Patient Registration Departments
POLICY# : 8530.100100.5
DATE OF LAST REVISION: 01/01/22,
03/04/24, 05/08/24
PURPOSE
The purpose of this policy is to establish guidelines for assigning patient accounts to a bad debt status and,
when appropriate, to be placed with an outside collection agency. At all times, this Policy is to be
interpreted in a manner consistent with Section 501(r) of the Internal Revenue Code and the Financial
Assistance Program/Full Charity Care & Discount Partial Charity Care Policies (the “Charity Care Policy”).
In the event of a conflict between this Policy and Section 501(r) and/or the Charity Care Policy, Section
501(r) and the Charity Care Policy control. Any agreements entered into with outside collection agencies
shall expressly state that the collection agency shall abide by Section 501(r) of the Internal Revenue Code at
all times, including, but not limited to, immediately stopping any and all collection efforts if a patient
requests financial assistance within 240 days of the date of the first post discharge invoice sent to the
patient.
POLICY
It is the policy of Salinas Valley Health Medical Center to maintain accurate patient account records and
conduct routine reviews of past due accounts to determine when an account should be transferred to bad
debt. Bad debts are amounts that are considered non-collectible from account activity documentation and
payment history. Accounts are transferred to a bad debt status after all necessary and reasonable collection
steps have been taken to obtain payment. Notwithstanding anything to the contrary in this or any other
policies that may be applicable, neither Salinas Valley Health Medical Center nor any collection agencies
with which the hospital contracts shall engage in any “Extraordinary Collection Actions” (“ECAs”) in the
first 180 days after the first post discharge invoice is sent to a patient or at any other time after such 180
days period unless the hospital has used “reasonable efforts” within the meaning of Section 501(r) of the
Code to determine whether the patient is eligible for financial assistance under the hospital’s financial
assistance policy. For this purpose, ECAs include selling the patient’s debt to another party; reporting
adverse information about the patient to consumer credit reporting agencies or credit bureaus; deferring or
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denying, or requiring a payment before providing, medically necessary care because of a patient’s non-
payment of one or more bills for previously provided care covered under the hospital facility's FAP; and
actions that require a legal or judicial process, including but not limited to (a) placing a lien on the patient’s
property; (b) foreclosing on the patient’s real property; (c) attaching or seizing the patient’s bank account or
any other personal property; (d) commencing a civil action against the patient; (e) causing the patient’s
arrest; (f) causing the patient to be subject to a writ of body attachment; and (g) garnishing a patient’s
wages. In all cases where ECAs may be used, Salinas Valley Health Medical Center or the collection
agency with which it contracts shall provide the patient with a written notice that indicates financial
assistance may be available, specifies the ECA that will be taken if the bill is not paid or the individual does
not apply for financial assistance, and states the deadline to pay and at which ECAs may be taken, which
date must be at least 30 days from the date of the letter. 30 day written notice will be conducted by the
collection agency prior to any ECA action.
Allowable bad debts resulting from self-pay balances, non-collectible deductibles and co-insurance amounts
must meet at least one the following criteria:
• The debt must be related to covered services and derived from self-pay, deductible and co-insurance
amounts.
• The provider must be able to establish that reasonable collection efforts (including appropriate
documentation such as, but not limited to, UB04’s, follow-up statements, and other personal contact
information) from the date of the original patient statement.
• There are no available credit balances from related accounts.
• Sound business judgment and process established that there was no likelihood of recovery.
PROCEDURE
Prior to any other collection activity, at least seven consecutive monthly statements will be sent to a patient
on all self-pay balances asking the patient to pay in full or contact the Patient Financial Services department
at 831-755-0732 for financial assistance. These statements shall include a plain language summary
(Attachment #7) of the Charity Care Policy and shall inform the patient how to apply for financial
assistance if needed.
Once the designated Insurance Clerks have exhausted all avenues in collection efforts with the payer they
will transfer the following, but not limited to, types of account balances to a SPAY (self-pay) status.
• Insurance Denied
• Insurance paid with remaining patient balance .i.e., co-insurance/deductible
• No insurance
The designated Financial Counselor responsible for working SPAY (self-pay) accounts will utilize the
Meditech system to identify accounts eligible for assignment to bad debt status:
a) $25.01 - $5=24,999.99 system automatically refers to collection agency after seven consecutive
statements to the patient.
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b) >$24,999.99 - Designated Financial Counselor will ensure seven consecutive statements and all
collection efforts have been exhausted. Designated Financial Counselor must submit account to
the Director/Designee for approval prior to referring account to an outside collection agency.
Only after Salinas Valley Health Medical Center has made reasonable efforts (within the meaning of
Section 501(r) of the Internal Revenue Code) to determine whether a patient qualifies for financial
assistance under the Charity Care Policy, an account may be transferred to bad debt and be subject to the
referral procedures set forth below.
For a self-pay account to be transferred to bad debt, the appropriate number of notifications at least seven
consecutive statements will be made to the patient. Any phone call attempts or contact with the
patient/guarantor will be documented in the Meditech system. The following schedule should be used by
the Financial Counselors to identify accounts with patient responsibility for bad debt status. The designated
Financial Counselor should follow these guidelines to facilitate accounts being properly assigned to a
collection agency. The following schedule is based on when the account reflects a Final Billed SPAY
balance.
Day 1
Day 30
Day 31
Day 61
Day 76
a. System
generated
statement.
b. Mail Room
will insert
plain language
summary
document.
a. System set
reminder to
the financial
counselor to
call the
patient/
guarantor at
all available
numbers
when
applicable.
a. System
generated
statement.
b. Mail
Room will
insert plain
language
summary
document.
a. System
generated
statement.
b. Mail Room
will insert
plain
language
summary
document.
a. System
generated letter
no response
letter
(Attachment #1).
b. Mail Room
will insert plain
language
summary
document.
generated
statement.
b. Mail Room
will insert plain
language
summary
document.
c. System set
reminder to the
financial
counselor to
call the patient/
guarantor at all
available
numbers when
applicable.
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Day 106
Day 121
Day 136
Day 151
Day 165
Day 180
Day 195
a. System
generated
letter
unsuccess
ful
attempt
(Attachme
nt #2).
b. Mail
Room
will insert
plain
language
summary
document.
a. System
generated
statement.
b. Mail
Room will
insert plain
language
summary
document.
a. System
generated
letter
multiple
attempts
(Attachmen
t #3).
b. System
set
reminder to
the
financial
counselor
to call the
patient/
guarantor
at all
available
numbers
when
applicable.
c. Mail
Room will
insert plain
language
summary
document.
a. System
generated
statement.
b. Mail
Room will
insert plain
language
summary
document.
a. System
generated letter
multiple
attempts
(Attachment
#3).
b. Mail Room
will insert plain
language
summary
document.
a. System
generated letter
final notice
letter
(Attachment
#4).
b. Clerk Typist
II will insert
the Charity
care
application and
the plain
Language
Summary
document.
a. System will
automatically
refer account
to the outside
collection
agency for
balances
$25.01 to
$24,999.99
b. Balances
$25,000 and
greater are to
be referred
manually to the
director/design
ee prior to
referring to an
outside
collection
agency.
• For accounts with a self-pay balance $25.01 - $24,999.99 the system will automatically refer the account
to an outside collection agency once the above progression has been met. Pertinent activity related to the
entire collection and bad debt process is documented within the Meditech system and is available to be
utilized as part of the routine reviews. Accounts with balances $25,000.00 or greater are to be referred to
the director of PFS or designee. $75,000.00-$249,999.99 are to be referred to the CFO by the PFS
director/designee for signature. Balances $250.000.00 and greater are to be referred to the CEO by the
PFS director/designee. All balances of $25,000.00 or greater require signatures according to the
approval for collections form (Attachment 5). Refer to the chart on page two for help in adhering to the
guidelines and timeframes for bad debt transfers.
• For contract accounts (Payment Arrangements), the Financial Counselor should review the patient
account for current payment status. The patient accounts should be reviewed monthly to ensure
patients are in compliant with monthly payment agreement.
• The hospital extended payment plan may be declared no longer operative after the patient’s failure
to make all consecutive payments due during a 90-day period. Before declaring the hospital
extended payment plan no longer operative, the hospital, collection agency, debt buyer, or assignee
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shall make a reasonable attempt to contact the patient by telephone and, to give notice in writing,
that the extended payment plan may become inoperative, and of the opportunity to renegotiate the
extended payment plan.
• For Medi-Cal pending accounts, the Financial Counselor should verify Medi-Cal eligibility and print out
a POS.
• If total eligibility was identified, the Financial Counselor will forward account to the designated
Insurance Clerk responsible for billing Medi-cal.
• If POS indicates SOC (Share of Cost), the Financial Counselor must attempt to contact the
patient/guarantor and/or send a SOC owing letter for payment on the share of cost amount
(Attachment #6).
• If there is no eligibility, money is moved to SPAY and collection efforts continue according to
the collection stream on page 2.
• For Victims of Crime pending accounts the Financial Counselors will notate on the account when the
confirmation of application letter is received from The Monterey County office of The District Attorney
and will forward the account to the Insurance Clerk to update the Insurance Mnemonic to victims of
crime.
Attachments: No Response Letter ----------------------------------------Attachment 1
Unsuccessful Attempt Letter-------------------------------Attachment 2
Multiple Attempt Letter ------------------------------------Attachment 3
Final Notice Letter ------------------------------------------Attachment 4
Approval For Collections Signature Form ---------------Attachment 5
Medi-Cal Share of Cost Patient Responsibility Letter--Attachment 6
Plain Language Summary Document -------------------- Attachment 7
Formulated: 06/21/00
Revised Date: 09/21/00,10/04/00,02/05/02,04/11/02,03/24/04,09/07/04,02/01/05,06/01/07, 03/11,
06/25/13, 03/17/21, 01/01/22, 03/04/24, 05/08/24
Distribution: Patient Financial Services
Originating Department: Patient Financial Services
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ATTACHMENT 1
ATTACHMENT 1: No Response Letter
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ATTACHMENT 1 (Cont.)
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ATTACHMENT 2
ATTACHMENT 2: Unsuccessful Attempt Letter
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ATTACHMENT 2 (Cont.)
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ATTACHMENT 3
ATTACHMENT 3: Multiple Attempt Letter
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ATTACHMENT 3 (Cont.)
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ATTACHMENT 4
ATTACHMENT 4: Final Notice Letter
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ATTACHMENT 4 (Cont.)
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ATTACHMENT 5
ATTACHMENT 5: Approval for Collections
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ATTACHMENT 6
ATTACHMENT 6: Medi-Cal Share of Cost Patient Responsibility Letter
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ATTACHMENT 6 (Cont.)
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ATTACHMENT 7
ATTACHMENT 7: Plain Language Summary