The passing away of a patient comes with many challenges for physicians, including a range emotional and professional issues. Beyond those concerns, some physicians and their practices must also consider how to collect on any outstanding bill that might go unpaid after patient’s death.
“When a patient passes away, obviously there is, unfortunately, a lot of paperwork and stress for families, and it’s a very difficult situation,” says Shikha Jain, MD, an oncologist and associate professor of medicine at the University of Illinois in Chicago. “Talking about finances in that moment can be difficult and uncomfortable, and one thing I’d recommend is that the physicians themselves not get involved.”
Instead, Jain says, someone in the billing department in the practice or the hospital should take a lead on dealing with any outstanding debts.
“That doctor-patient relationship is a very precious relationship, so you don’t want to mix that financial aspect of providing care with the doctor-patient relationship,” Jain says. “That’s one thing that’s really important.”
The best approach in such situations is for practices to have a standing policy in place that dictates how to handle bills once a patient has passed away.
In most cases, the executor of the patient’s will must inform all creditors, including doctors, that the decedent has died, but sometimes there’s a delay.
Hoping the Doctor’s Office Writes It Off
“Even though the person in charge of the estate is supposed to contact the doctor’s office and let them know when a patient has passed, that doesn’t always happen,” says Hope Wen, head of billing at practice management platform Soundry Health. “It can be very challenging to track down that information, and sometimes they’re just crossing their fingers hoping that the doctor’s office will just write off the balance, which they often do.”
Some offices use a service that compares accounts receivable lists to Social Security death files and state records to identify deaths more quickly. Some physicians might also use a debt collection agency or an attorney who has experience collecting decedent debts and dealing with executors and probate courts.
Once the practice becomes aware that a patient has passed away, it can no longer send communications to the name and address on file, although it can continue to go through the billing process with the insurer for any bills incurred up to the date of the death.
At that point, the estate becomes responsible for the debt, and all communication must go to the executor of the estate (in some states, this might be called a personal representative). The office can reach out to any contacts on file to see if they are able to identify the executor.
“You want to do that in a compassionate way,” says Jack Brown III, JD, MBA, president of Gulf Coast Collection Bureau. “You’ll tell them you’re sorry for their loss, but you’re wondering who is responsible for the estate. Once you’ve identified that person and gotten their letter of administration from the probate court or a power of attorney, then you can speak with that person as if they were the patient.”
The names of executors are also public record and are available through the probate court (sometimes called the surrogate court) in the county where the decedent lived.
“Even if there’s no will or no executive named, the court will appoint an administrator for the estate, which is usually a family member,” says Robert Bernstein, an estate lawyer in Parsippany, New Jersey. “Their information will be on file in the court.”
Insurance Coverage
Typically, insurance will pay for treatment (after deductibles and copays) up until the date of the patient’s death. But, of course, it can take months for some insurance companies to make their final payments, allowing physicians to know exactly how much they’re owed by that estate. In such cases, it’s important for physicians to know the rules in the decedent’s state for how long they have to file a claim.
Most states require claims occur within 6 to 9 months of the person’s death. However, in some states, claimants can continue to file for much longer if the estate has not yet paid out all of its assets.
“Sometimes there is real estate to sell or a business to wind down, and it can take years for the estate to distribute all of the assets,” Bernstein says. “If it’s a year later and they still haven’t distributed the assets, the physician can still file the claim and should be paid.”
In some cases, especially if the decedent received compassionate, quality care, their family will want to make good on any outstanding debts to the healthcare providers who took care of their loved ones in their final days. In other cases, especially when a family member has had a long illness, their assets have been depleted over time or were transferred to other family members, so that there is little left in the estate itself when the patient passes away.
Regardless of other circumstances, the estate alone is responsible for such payments, and family members, including spouses and children, typically have no liability. (Though rarely enforced, some states do have filial responsibility laws that could hold children responsible for their parents’ debts, including unpaid medical bills. In addition, states with community property laws might require a surviving spouse to cover their partner’s debt, even after death.)
The probate process varies from state to state, but in general, the probate system and the executor will gather all existing assets and then notify all creditors about how to submit a claim. Typically, the claim will need to include information about how much is owed and documentation, such as bills and an explanation of benefits to back up the claim. It should be borne in mind that even those who’ve passed away have privacy protections under the Health Insurance Portability and Accountability Act, so practices must be careful as to how much information they’re sharing through their claim.
Once the estate has received all the claims, the executor will follow a priority of claims, starting with secured creditors. Typically, medical bills, especially those incurred in the last 90 days of the decedent’s life, have priority in the probate process, Brown says.
How to Minimize Losses
In that case, the practice would write off the unpaid debt as a business loss. If there are not enough assets in the estate to pay all claims, the executor will follow a state schedule that apportions those assets that are available.
There are some steps that practices can take to protect themselves from incurring such losses. For example, before beginning treatment, practices might consider asking patients to name a guarantor, who will essentially promise to cover any outstanding debts that the patient incurs.
To be binding, the office will need a signature from both the patient and the guarantor. Some offices may also keep a patient credit card number on file with written authorization that they can use it to pay bills that are past due, although this payment method would no longer be valid after a patient passes away.
While it’s important for all physicians to document and verify the financial information for their patients, oncologists often must consider an additional layer of fiduciary responsibility when it comes to their patients. Wen suggests that oncology offices check in with insurance companies to determine whether a patient has exhausted their benefits.
“That can happen with cancer patients, depending on how long they’ve been receiving treatment and what type of treatment they’ve been getting,” Wen says. “Some of the clinical trials, insurance will pay for them, but they’re really expensive and can get toward that max. So knowing where they are with their insurance coverage is big.”
When time is of the essence, some patients will choose to go forward with a treatment before receiving insurance approval. In those cases, the office must have an additional conversation in which the costs of the treatment are discussed. The office should obtain written confirmation of who will pay if the insurer does not, Wen says. While it’s the patient’s responsibility to keep track of their insurance benefits, oncology practices and hospitals must also exercise due diligence in monitoring the benefits that are available.
“That’s part of their contract with insurance companies if they’re in network, helping patients understand their benefits,” Wen says.
It’s also important for practices to keep clear, consistent records to make it easier to identify outstanding bills and the correct contact information for them. If bills had gone unpaid prior to a patient’s death and the office started legal action and received a judgment, that claim would typically go ahead of other creditors’ claims.
Jain says that some practices might also consider keeping a financial advisor or social worker on staff who can assist patients and their families with understanding their out-of-pocket costs for treatment.
“Financial toxicity in oncology and medical care is a very real problem,” she says. “At the beginning of the relationship, I recommend that my patients get set up with a financial specialist that can help them navigate that aspect, not only when a patient passes away but during the process of receiving treatment so they’re not shocked by the bills.”
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