BOISE – Eastern Idaho billionaire Frank VanderSloot was at the Capitol this week pushing hard for his current cause: Helping out ordinary folks who see small medical bills run up into thousands of dollars in debt through predatory collection practices and attorney fees.

“We want to protect them from egregious collection tactics that to me sound unbelievable,” VanderSloot said. “It became apparent to us that much of what they’re doing is actually legal. It shouldn’t be.”

VanderSloot, owner of Melaleuca in Idaho Falls, said he first learned about the issue when Melaleuca received a wage-garnishment order for one of its employees for $1,200 over a $294 medical bill. The order had the wrong name, but the right Social Security number; the employee never knew about the bill. The collectors demanded Melaleuca turn over the correct name to match the number. When the firm refused, the agency demanded Melaleuca pay the whole $1,200.

Melaleuca went to court, “and of course we won that,” VanderSloot said.

But then the collection firm hit the Melaleuca employee with an additional $5,000 charge for attorney fees “because they had sued Melaleuca and we had defended it. That’s when I heard about it.”

“I said, ‘That’s nuts,’” VanderSloot said.

“They had been sending the bill to the wrong name,” he said. “She didn’t even know there was a bill.”

The collection agency, Medical Recovery Services, obtained a default judgment in court against the employee, “not only for the bill but for some very high attorney fees,” VanderSloot said.

When he and Melaleuca’s attorneys began looking into it, they discovered there were thousands of such cases, just in eastern Idaho. “Ninety percent are from the same collection agency,” VanderSloot said.

“It’s apparent that the goal is to run up the attorneys’ bill,” VanderSloot said. “In my opinion, it’s a racket.”

VanderSloot is a major GOP donor; MRS and associated law firm Smith, Driscoll and Associates are connected to other major GOP figures in eastern Idaho. Bryan Smith, a vice chairman of both the state and Bonneville County Republican parties, co-owns the law firm, and state Rep. Bryan Zollinger, R-Idaho Falls, works for it as a lawyer. Smith was one of MRS’ founding managers in 2001 and listed himself as a partner when he ran for Congress in 2014, according to East Idaho News, while Zollinger was added as a partner in 2016 and is its registered agent.

Smith and Zollinger have bristled at VanderSloot’s claims and called his proposed legislative fixes unreasonable. In October, MRS spokesman Mark Harris, in a statement to the Post Register, accused VanderSloot of "laughable nonsense" and a "personal vendetta." 

VanderSloot has lined up House and Senate sponsors and has been talking with organizations representing doctors and hospitals about his bill, which is still in draft form. The “Idaho Patient Act” would sharply limit medical billing practices in Idaho, including new deadlines, caps on collection agency legal fees, notice requirements and more.

VanderSloot first floated his proposal in October 2019, when about half the Legislature stopped by Melaleuca while on a tour of eastern Idaho. He said he has spoken to doctors and medical groups and, while none have endorsed the bill, he has listened to their input.

“They have met with us and accepted many of the requests we have made for changes,” said Susie Pouliot, CEO of the Idaho Medical Association. “I think there’s still some changes we would like to see.”

She said she was concerned after hearing the stories about what was happening to patients in eastern Idaho. “I think it would be reasonable to try to regulate some of those bad practices,” Pouliot said.

Zollinger, who met with VanderSloot Wednesday to go over the bill, said he would oppose it as currently drafted.

“For me, it’s really easy,” he said. “I’ve never voted for a bill that increases regulation like this does, just on principle. I always vote for less regulation, and this bill is five-and-a-half pages of regulation. I’m worried about the costs that are going to be passed on to the end consumer.” 

Zollinger said he worries doctors would incur additional costs from having to send out registered mail and pass it on to their patients, and that capping attorneys’ fees would lead to lawyers passing on costs to doctors, driving up health care prices for everyone. He also said he had problems with putting more regulations about medical debt collection but leaving out other debt collectors.

“At least then it would be equal across the board, so I have philosophical problems with singling out any one profession,” he said.

Zollinger said he might consider a bill that addressed doctors’ cost concerns and didn’t have a fixed cap on attorneys’ fees.

“There would have been a way to limit that without making it completely unreasonable,” he said.

House Assistant Majority Leader Jason Monks, R-Nampa, who will be the lead House sponsor of the bill, said, “I think it’s the right thing to do. I think we have painstakingly worked with as many of the stakeholders as possible on this issue to come up with a reasonable solution to what arguably is a terrible injustice going on right now.”

The bill, as currently drafted, would give health care providers 30 days to submit all bills to a patient’s insurance provider, then 30 more to send the patient a summary of services, including the names and contact information of all health care providers from whom the patients will receive bills. Billers who didn’t meet the deadlines couldn’t go to court to enforce their billing.

Providers would have to wait 60 more days after sending the final statement before charging the patient any interest and 180 days to sue, hire a third-party collection agency or report the patient to a credit bureau. Collection agency legal fees would be capped at $350 for uncontested actions and $750 for contested ones.

“What we’re trying to do is push these small bills into small claims court,” VanderSloot said, where attorneys aren’t required, “so the patient doesn’t get saddled with these attorney fees when all they had was a little bill that they didn’t even know about.”

VanderSloot has put his own money into the cause as well. As he spoke out about the issue over the past year, hundreds of eastern Idaho residents contacted him about their cases. “People came out of the woodwork,” he said.

“My wife and I decided we’ve got some resources; we’d defend those folks. So we started a fund,” with a personal donation of $1 million.

The VanderSloots have received 700 requests so far, conducted more than 400 interviews, and accepted 201 cases. Currently, 51 are scheduled to go to trial in the coming months.

“In the process, I have learned so much about the medical billing process – I had no idea,” said VanderSloot, 71.

He said he was particularly surprised to learn that patients after a major hospitalization receive multiple bills, which sometimes trickle in months after the hospitalization, and often are from providers they’ve never heard of, all of whom were part of the services the patients received. Some might be from firms based out of the area or even out of the country.

“I am a champion of free enterprise to the max,” VanderSloot said. But, he said, “Free enterprise only works if there’s transparency, where people can make educated decisions about what services to purchase.”

Monks said he’s hoping to get the bill finalized and introduced next week.

Post Register reporter Nathan Brown contributed to this report.

Betsy Z. Russell is the Boise bureau chief and state capitol reporter for the Idaho Press and Adams Publishing Group. Follow her on Twitter at @BetsyZRussell.

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