HEALTH LAW SUPPLEMENT Fall 2009

Debt collection by psychotherapists: In addition to the difficulties faced by all creditors, therapists trying to collect on overdue accounts must deal with the legal, professional and ethical obligation to continue to respect the confidentiality of former patients. Regardless of whether therapists decide to refer overdue accounts (1) to an attorney or (2) to a collection agency or (3) to handle the matter themselves in Small Claims Court, all of these actions involve the release of some confidential information about patients. From legal and ethical perspectives, however, as long as prior notice is given, the unauthorized release is justified. Therapists are entitled to be paid and to redress the wrong of patients breaching contracts (to pay for services) and being unjustly enriched (by receiving services without paying for them).

After telephone calls have failed, the first written attempt to collect any overdue account of an ex-patient should be by brief correspondence, mild in tone, reminding the patient of the debt, and requesting either payment in full or the willingness to pay in installments within a brief period. The letter should be sent addressed to the patient or if the patient was a minor, to a parent, and marked, “Personal and Confidential.”

Most risk managers and malpractice carriers will recommend that therapists not sue patients for overdue accounts unless the amount is substantial enough to justify the risks. Risk arises for two reasons. The first is that suing provides motivation to countersue. If the patient is a person who usually pays bills, he or she probably did not pay because of some dissatisfaction with the treatment and has decided to express this dissatisfaction by withholding the therapist’s fee. If payment is compelled, the patient may express frustration in a more direct way by countersuing for malpractice.

The second reason for risk is that by suing, the therapist provides the debtor-patient with a no-cost forum in which to counter-attack. It is common for the defending patient, often upon advice of legal counsel, to offer as a rationale, or “counterclaim,” that he or she didn’t and won’t pay because the clinician was negligent in providing services, i.e., was guilty of malpractice. The clinician must now notify his or her malpractice insurer and defend the treatment against the counterclaim, as well as assert the debt in the main action. And the clinician must then report whenever asked, such as on applications for employment, for provider status on managed panels, and for malpractice insurance that he or she has been sued for malpractice, with the lengthy explanations and risks of possible exclusion or higher premiums.

For these reasons, many therapists do not refer collection matters to attorneys or sue as a matter of course. Although attorneys’ letters themselves may bring results, the action they threaten is a lawsuit. Not wanting to risk having to take the matter to court, many therapists instead use collection agencies that do not threaten or initiate lawsuits, at least not at first and not unless the therapist specifically requests it in a given case. Rather than threaten lawsuits, collection agencies may instead threaten to report unpaid debts to major credit reporting agencies. With the implications this has for credit ratings and future applications for credit cards, loans and mortgages, many debtors who are able to pay do so.

Some therapists wish, to sue debtor patients without legal assistance in Small Claims Court, where, in New York State, the limit is $5,000. This avoids paying fees to attorneys or collection agencies, which are often up to half of the amount collected. If this is your preferred course of action, then to prevent countersuits, consider waiting for three years after treatment ends before initiating the legal collection action. Once three years has passed, assuming the ex-patient is an adult, the statute of limitations in New York State for malpractice will have expired. But the debt will still be actionable because the statute of limitations for breach of contract (non-payment) is six years. Thus the ex-patient can no longer countersue you for malpractice. Therapists who wish to handle debt collection in Small Claims Court often also have written contracts with patients which state that unpaid debts will accrue interest at a set rate.

Ideally, therapists should inform patients in writing at the outset of therapy about the collection procedures of the practice and the limited breach of confidentiality patients can expect in any future collection action, i.e, name, address and telephone number of patient, dates and types of service, and amount due. If this is not done at the start of treatment, then it must be done prior to any collection action. Even if patients are notified at the outset of therapy of the possibility of collection action and its concomitant release of otherwise confidential information, it is probably wise to do so again immediately prior to the collection action. A “final collection letter” should be used to notify patients of the imminent and specific collection action you are planning to take and of the breach of confidentiality that will occur if you do. Such a letter must also be sent marked “Personal and Confidential,” give the patient the legally required opportunity to dispute the claim, state options for payment, and be sent by some form of receipted mail.

State and federal debt collection laws establish guidelines for all creditors that are relevant to the contents of a collection letter. See New York State Debt Collection Procedures, NY General Business Law Article 29-H, and federal Fair Debt Collection Practices Act (FDCPA) 15 USC §1692 et seq. These laws forbid creditors from: stating that they represent or possess authority from a governmental body, law enforcement agency, attorney or the judicial process if they don’t; asserting a right to collect fees that are not actually due; threatening to disclose information about credit-worthiness of a debtor that they know to be false; communicating with the debtor’s employer before they have a judgment against the debtor; threatening to disclose information concerning the debt if the debtor disputes the debt, without also disclosing the fact of the dispute; communicating with the debtor in an abusive or harassing manner; and threatening to take any action which they don’t in fact take in the ordinary course of business.

Of course, the best outcome is to avoid the necessity of any collection procedures at all. Regular billing, not letting balances accrue, and making non-payment a clinical issue (as it almost always is if fees are reasonable and affordable to patients) are all tried and true preventive practices. Also, therapists with large practices who accept credit card payments find that helps to reduce problems and is worth the cost.
Inebriated patient driving; duty to protect third parties? A legally knowledgeable client asked if she had a duty to call the police as a drunken client left a session stating an intention to drive home despite the therapist’s attempts to persuade him otherwise. She believed she might be so required because she had read of a recent case in Massachusetts, Coombes v Florio, 450 Mass 182 (2007), where a physician was found liable for not taking action to prevent a patient, to whom he had just administered and prescribed medicines with CNS depressant effects, from driving while impaired. (The patient did drive, got into an accident, and hurt someone; the victim sued the physician.) New York has had no similar case precedent so there’s no definitive answer. Still, in NY, under current legal principles and in some circumstances it’s possible that a prescribing physician might be obligated to try to prevent harm in such situations, including perhaps by calling the police. See ALI, Restatement of Torts, §41 (2005). A healthcare practitioner who has not prescribed or administered, however, such as the psychotherapist who called me, has some duty, but perhaps an attenuated one and only to the patient and not to third parties, that might be fulfilled by strongly advising the patient not to drive and by offering to assist with alternatives such as calling a relative or a taxi. I could not advise the client to call the police given the uncertainty in the law and countermanding risk of a complaint of breach of confidentiality.

INFORMATION IN THIS NEWSLETTER IS NOT LEGAL ADVICE FOR ANY PARTICULAR CLIENT OR SITUATION. CONSULT WITH AN ATTORNEY INDIVIDUALLY FOR LEGAL ADVICE REGARDING YOUR SITUATION.

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