Appeals Court Overturns Dismissal in Whistleblower Lawsuit Filed Against Collection Operation

The Court of Appeals for the Seventh Circuit has overturned a lower court’s dismissal of a whistleblower lawsuit filed against a collection agency that was accused of writing off bad debts owed to Medicare without undergoing reasonable collection efforts, while affirming the dismissal in favor of the healthcare provider and the billing company that were also sued.

A copy of the ruling in the case of USA, Kenya Sibley, Jasmeka Collins, and Jessica Lopez v. University of Chicago Medical Center (UCMC), Medical Business Office Corp., and Trustmark Recovery Services Inc.  can be accessed by clicking here.

The three employees worked for MBO and Trustmark, which are jointly owned companies that provide billing and collection services to healthcare clients. They allege that they were fired after raising concerns about their employers’ billing practices. A District Court judge dismissed the complaint, ruling that “reasonable” collection efforts were subjective and open to interpretation.

But there are rules that define a reasonable collection effort, the Seventh Circuit noted. Collection efforts must last for at least 120 days after the issuance of the original bill and collectors are required to restart the 120-day clock every time a payment is received. Hospitals were entitled to recover 65% of their allowable bad debt from the federal government. The agency was accused of disregarding the 120 day window before declaring a debt to be uncollectible, not sending multiple statements, as required under the statute, and not reviewing the debts before submitting them to the provider.

By providing concrete examples of how the collection operation failed to undertake the reasonable collection efforts required for reimbursement, the three employees “have pleaded facts that would be sufficient” to establish liability against the collection agency, ruled the Appeals Court. In overturning the dismissal, the Appeals Court ruled the employees are entitled to proceed to the discovery process on that claim.

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