In an Opinion and Order entered by the United States District Court for the Eastern District of Illinois, Eastern Division on January 22, 2024, the court held that an “early out” pre-collection medical debt servicer used by Amita Health Saint Joseph Hospital was not a “debt collector” as defined under the Fair Debt Collection Practices Act (FDCPA). Simeon Mladenov v R1 RCM INC d/b/a Medical Financial Solutions, 21-cv-1509.
The patient, Mladenov, suffered injuries from an auto accident and was treated by Amita Health Saint Joseph Hospital. Amita sent at least one billing statement to Mladenov and then referred the unpaid account to R1 RCM for billing services. R1 RCM provides revenue cycle assistance to hospitals and performs what is termed as “early out” pre-collection services to resolve unpaid accounts before they are deemed bad debt.
Mladenov brought suit against R1 RCM for damages under the FDCPA alleging two violations of the FDCPA: direct communication with a consumer represented by counsel as prohibited by 15 USC §1692c and false, deceptive, or misleading representations to a consumer under 15 USC §1692e. The court held that R1 RCM was not a debt collector as defined by the FDCPA because: (1) the debt was not in default and (2) that Mladenov’s perceptions that the debt was in default were not what a reasonable recipient would believe.
As a takeaway from this ruling, a medical provider that uses an early out program should ensure that any billing statements clearly indicate that the account is not in default and that its service agreements reflect that the relationship between the parties is clearly an extension of the hospital or other medical service provider.
January 31, 2024
Denise A. Baker
Attorney at Law
