Payment defaults in business transactions
The proposed late payment law will cause social insurance to suffer unjustified hardships.
UM – 12/2023
The European Commission's (EC) proposed
regulation to combat late payment in business transactions of 12 September
2023, aims to improve liquidity and access to finance, especially with regard
to SMEs (Small and Medium-sized Enterprises) and it should also reduce their
insolvency risks. A new regulation will replace the current Late
Payment Directive 2011/7/EU from 2011. According to the EC, this is now
inadequate, and it does not correct the asymmetry that often exists in the
negotiating power used by large customers against smaller suppliers.
Strict deadlines, strict fines
Even though the planned new regulations
will benefit companies of all sizes, SMEs should benefit more because late
payments affect them badly with regard to their liquidity and insolvency risk.
The draft regulation focuses on limiting the payment period to a maximum of 30
days for all business transactions. Nor should acceptance or verification
procedures exceed 30 calendar days. Exemptions that still exist in the current
Late Payment Directive will also be abolished. The option that member states
now have to grant public organisations providing healthcare services a maximum
extension of 60 days is in danger of becoming a thing of the past. Violations
of the above-mentioned deadlines will be penalised; through significantly
higher, mandatory default interest that is automatically due and flat-rate
compensation for debt recovery costs of 50 euros per invoice.
These regulations do not suit the social security contract business
The issue that the EC is pursuing through
its legislative initiative is understandable. It is unacceptable when large
companies abuse their market power to impose financing costs on smaller
suppliers, tradespeople or service providers. However, these regulations do not suit social insurances. But it does apply to the sector in which the social
insurance organisations fulfil their statutory mandate.
Invoices are subject to statutory regulation
Social insurance generally manages to pay
its invoices on time. Often meeting deadlines well under 30 days. However, the
downstream procedures that have been established for invoicing doctors,
hospitals and pharmacies take significantly longer than the EC's proposal
envisages. This is because the legislative authority has severely regulated
these procedures so that they can fulfil political objectives. The masses of
data generated by day-to-day care are broken down into separate items - be it
the insured person, the doctor or the hospital - using various verification
routines and the care provided is checked for appropriateness,
cost-effectiveness or manipulation based on the services to be invoiced. This
process involves the data not only being checked for one invoicing quarter, but
also for longer periods, as certain services can only be provided to a patient
once a year or even less frequently. Applying a 30-day deadline for acceptance
and verification procedures cannot succeed here. The argument that the aim is
to reduce the risk of insolvency for SMEs is invalid here, as advance payments
are made and the liquidity of the service providers is secured.
There is no real deadline for social insurance
It is clear that the EC was focussing on
completely different business transactions and presumably did not mean to
target social insurance. It would be helpful if this point is clarified in
forthcoming legislative processes and that a deadline for such downstream
verification and invoice correction processes is waived. DSV has made this
clear in our position paper. Because there is no real deadline. With regard to the
invoicing of fees for outpatient medical care, the documents justifying payment
can even be checked by the Association of Statutory Health Insurance Physicians
up to three years after submitting the mass data set. A three-year deadline
would amount to no deadline at all.