BILL ANALYSIS
AB 774
Page 1
ASSEMBLY THIRD READING
AB 774 (Chan)
As Introduced February 18, 2005
Majority vote
HEALTH 10-4 APPROPRIATIONS 13-5
-----------------------------------------------------------------
|Ayes:|Chan, Berg, Cohn, |Ayes:|Chu, Bass, Berg, |
| |Dymally, Frommer, De La | |Calderon, Mullin, |
| |Torre, Jones, Montanez, | |Karnette, Klehs, Leno, |
| |Negrete McLeod, | |Nation, Oropeza, |
| |Ridley-Thomas | |Ridley-Thomas, Saldana, |
| | | |Yee |
|-----+--------------------------+-----+--------------------------|
|Nays:|Aghazarian, Nakanishi, |Nays:|Sharon Runner, Emmerson, |
| |Richman, Strickland | |Haynes, Nakanishi, |
| | | |Walters |
-----------------------------------------------------------------
SUMMARY : Requires hospitals to develop a policy for determining
the financial liability for services rendered to financially
qualified and self-pay patients. Specifically, this bill :
1)Requires each hospital to develop a policy specifying how the
hospital will determine the financial liability for services
rendered to financially qualified patients and self-pay
patients.
2)Requires, for financially qualified patients, each hospital's
policy to specify how it will determine and apply allowances
for services provided to financially qualified patients.
Requires the allowance, at a minimum, to be equal to the
difference between the charge for the services set forth in
the hospital's established charge schedule and the greater of
the payments the hospital would receive from the Medicare
Program, the Medicaid Program, or workers' compensation.
3)Prohibits an allowance for financially qualified patients from
being required with respect to any service for which there is
no coverage under the Medi-Cal program, Medicare, or workers'
compensation. Permits, at the hospital's discretion, the
allowance for financially qualified patients to be applied by
the hospital to patients who do not meet the standards for
financially qualified patients.
AB 774
Page 2
4)Requires each hospital to include in its policy on financially
qualified and self-pay patients a section addressing charity
care patients. Requires the charity care section to specify
the financial criteria and the procedure used by the hospital
to determine whether a patient is eligible for charity care.
Permits the hospital to specify that no persons are eligible
for charity care under any circumstances.
5)Requires the charity care section to include financial
eligibility criteria, financial information required of the
patient, and a review process for charity care decisions.
6)Requires each hospital to provide patients with oral and
written notice of the hospital's policy for financially
qualified and self-pay patients at the time of admission and
discharge. Requires the notice to also be provided to patients
who receive emergency or outpatient care and who may be billed
for that care, but who were not admitted. Requires the notice
to be in the language spoken by the patient, as specified.
Requires all written correspondence to the patient required by
this bill to also be language appropriate.
7)Requires notice of the hospital's policy for financially
qualified and self-pay patients to be clearly and
conspicuously posted in locations that are visible to the
public, including, but not limited to, the emergency
department, if any; the billing office; the admissions office;
and any other locations that may be determined by the Office
of Statewide Health Planning and Development (OSHPD), to
ensure that patients are informed of the policy and how to
obtain a copy of the policy and related information.
8)Requires each hospital to submit to OSHPD a copy of the
application for financially qualified patients used by the
hospital, including the charity care section of that
application. Permits OSHPD, in consultation with interested
parties, to also develop a uniform self-pay application to be
used by all hospitals. Requires OSHPD, in developing the
application, to consider whether the application used for the
Medi-Cal and Healthy Families (HF) programs can be used as, or
incorporated in, the uniform self-pay application.
9)Requires each hospital to make all reasonable efforts to
AB 774
Page 3
obtain from the patient, or his or her representative,
information about whether private or public health insurance
or sponsorship may fully or partially cover the charges for
care rendered by the hospital to a patient, including, but not
limited to, private health insurance, Medicare, or Medi-Cal,
HF, the California Children's Services (CCS), or other
state-funded health coverage programs.
10) Requires the hospital, if it bills a patient who has not
provided proof of coverage by a third party at the time the
care is provided or upon discharge, as a part of that billing,
to provide the patient with a clear and conspicuous notice
that includes all of the following:
a) A statement of charges for services rendered by the
hospital;
b) A request that the patient inform the hospital if the
patient has health insurance coverage, Medicare, HF,
Medi-Cal, or other coverage;
c) A statement that if the consumer does not have health
insurance coverage, that they may be eligible for Medicare,
HF, Medi-Cal, CCS, or charity care;
d) A statement indicating how patients may obtain
applications for Medi-Cal and HF and that the hospital will
provide these applications on request. Requires the
hospital, if at the time care is provided the patient does
not show proof of coverage by a third-party payer specified
in #9) above, to send an application for Medi-Cal and HF to
the patient. Permits the application to accompany the
billing or be sent separately; and,
e) Information regarding the financially qualified patient
and charity care application, including the hospital
contact for resources for additional information regarding
charity care and a statement indicating how patients may
obtain an application for a financially qualified patient.
Requires the statement to provide information about the
family income requirements for financially qualified
patients as provided in this bill.
11) Requires a hospital, its assignee, collection agency, or
AB 774
Page 4
billing service, in order to facilitate payment by public or
private third-party payers, for at least 180 days after
discharge or after the final day service is provided, to be
limited to the following debt collection activities:
a) Sending a bill to the patient in accordance with
existing law;
b) Attempting to negotiate payment or a payment plan in
accordance with this bill;
c) Attempting to collect payment from any responsible
third-party public or private payer;
d) Providing any information that may assist the patient in
obtaining coverage through Medi-Cal or HF, or any other
public program for which the patient may be eligible; and,
e) Attempting to make a final determination as to whether
the patient may be considered a self-pay patient under the
hospital's self-pay policy or is eligible for charity care
under the hospital's charity care policy.
12) Requires a hospital, its assignee, collection agency, or
billing service to use reasonable efforts to negotiate a
payment plan, as defined, unless the patient has requested
that the hospital, its assignee, collection agency, or agent
not contact the patient.
13) Permits the hospital, its assignee, collection agency, or
billing service, after the time period specified in #11 above
has elapsed, to engage in any other debt collection activities
otherwise permitted by law, including, but not limited to,
reporting adverse information to a consumer credit reporting
agency or commencing civil action against the patient for
nonpayment.
14) Prohibits a hospital, its agent, collection agency, or
assignee from using wage garnishment or a lien on a primary
residence as a means of collection from a financially
qualified patient.
15) Prohibits anything in this bill from being construed to
diminish or eliminate any protections consumers have under
AB 774
Page 5
existing federal and state debt protection laws.
16) Requires the period described in #11 above to be extended
if the patient has a pending appeal, as specified, for
coverage of the services.
17) Requires the hospital, any assignee of the hospital, or
other owner of the patient debt, including a collection
agency, prior to commencing collection activities against a
patient, to provide the patient with a clear and conspicuous
written notice containing:
a) Information about nonprofit credit counseling services
in the area; and,
b) A plain language summary of the patient's rights
pursuant to this bill, the Rosenthal Fair Debt Collection
Practices Act, and the federal Fair Debt Collection
Practices Act. Requires the summary to include a statement
that the Federal Trade Commission enforces the federal act.
Specifies that the summary is sufficient if it appears in
substantially the following form:
"State and federal law require debt collectors to treat you
fairly and prohibit debt collectors from making false
statements or threats of violence, using obscene or profane
language, and making improper communications with third
parties, including your employer. Except under unusual
circumstances, debt collectors may not contact you before
8:00 a.m. or after 9:00 p.m. In general, a debt collector
may not give information about your debt to another person,
other than your attorney or spouse. A debt collector may
contact another person to confirm your location or to
enforce a judgment. For more information about debt
collection activities, you may contact the Federal Trade
Commission by telephone at 1-877-FTC-HELP (382-4357) or
online at www.ftc.gov ."
18) Requires the notice in #17 above to accompany any document
indicating that the commencement of collection activities may
occur.
19) Requires each hospital to provide to OSHPD, as specified, a
copy of its self-pay policy, eligibility procedures, review
AB 774
Page 6
process, and procedure for determining self-pay pricing.
Requires the information to be provided at least biennially on
January 1, or when a significant change is made. Specifies
that if no significant change has been made by the hospital
since the information was previously provided, notifying OSHPD
of the lack of change meets the requirements. Requires OSHPD
to make this information available to the public.
20) Permits, after appropriate notice and opportunity for
hearing, OSHPD to levy civil penalties for violations of this
bill as follows:
a) A hospital that violates any provision of this bill,
except for #3 above, is liable for civil penalties of not
more than $500 per day per patient affected for each
violation; and,
b) A hospital that bills a patient for amounts in excess of
those provided for in #2 and #3 above to be liable for a
civil penalty of three times the amount billed in error to
the patient.
21) Requires that any money that is received by OSHPD pursuant
to this bill be paid into the General Fund.
22) Permits the Attorney General (AG) to authorize an
investigation to determine whether a hospital is in compliance
with this bill. Permits private persons to act in the
capacity of the AG if the AG fails to determine that a
violation of this bill occurred within 90 days of receiving
notice of possible violation of this bill.
23) Permits any person damaged by a violation of this bill, if
OSHPD or the AG fails to make a determination that a violation
of this article occurred within 90 days of receiving notice of
a possible violation of this article, to bring an action to
recover specified damages, civil penalties, equitable relief,
attorneys' fees, and court costs, as specified.
24) Prohibits the rights, remedies, and penalties established
by this bill from superseding the rights, remedies, or
penalties established under other laws.
25) Prohibits anything in this bill from being construed to
AB 774
Page 7
prohibit a hospital from uniformly imposing charges from its
established charge schedule or published rates, nor preclude
the recognition of a hospital's established charge schedule or
published rates for the Medi-Cal program and the Medicare
Program reimbursement charges.
26) Prohibits the amounts paid by patients for services
resulting from the self-pay allowances or charity care
arrangements that are applied under a hospital's self-pay and
charity care policies from constituting a hospital's uniform,
published, prevailing, or customary charges, its usual fees to
the general public, or its charges to non-Medi-Cal purchasers
under comparable circumstances, for purposes of any payment
limit under federal Medicaid law, Medi-Cal law, or any other
federal or state-financed health care program.
27) Requires, to the extent that this bill results in a federal
determination that a hospital's established charge schedule or
published rates are not the hospital's customary or prevailing
charges for services, the requirement in question to be
inoperative with respect to a hospital that is licensed to and
operated by a county or a hospital authority, as specified.
Requires DHS to seek federal guidance regarding modifications
to the requirement in question and requires all other
requirements of this bill to remain in effect.
FISCAL EFFECT : According to the Assembly Appropriations
Committee analysis, one-time special fund cost (Health Data
Fund) to OSHPD of $106,000 beginning in 2005-06, and on-going
special fund costs of approximately $375,000. Indeterminate but
significant on-going General Fund costs to University of
California hospitals and to state-funded health care programs,
likely in the tens of millions of dollars annually. By limiting
the amount hospitals can charge certain self-pay patients and
delaying referral to collection, these costs could be shifted to
other payers, including the State of California, which purchases
coverage for state employees and retirees through CalPERS, and
pays for half to one-third of the costs of the over seven
million individuals enrolled in the Medi-Cal and HF Programs.
The actual fiscal impact of this bill upon the state as a
purchaser and to UC hospitals is unknown.
COMMENTS : According to the author, there is no current law
regarding the prices that uninsured and underinsured consumers
AB 774
Page 8
pay for health care or regarding collection practices for health
care debt. This bill would require hospitals to charge the
uninsured and people with high medical costs, who make below
400% of the federal poverty level (FPL), costs no more the
greater of the prices paid by Medicare, Medi-Cal or workers'
comp. According to the author, it protects consumers by giving
180 days during which payment disputes get sorted out before
hard collection activity begins and requires hospitals post and
disseminate notices so that consumers, both insured and
uninsured, know what options are available to them.
In February 2005, the journal Health Affairs published a Harvard
study conducted to investigate medical contributors to
bankruptcy. As part of the research, investigators surveyed
1,771 personal bankruptcy filers in five federal courts and
completed in-depth interviews with 931 of them. About half
cited medical causes, which researchers assert indicates that
between 1.9 and 2.2 million Americans (filers plus dependents)
experienced medical bankruptcy. The report found that among
those whose illnesses led to bankruptcy, out-of-pocket costs
averaged $11,854 since the start of illness and that medical
debtors were 42% more likely than other debtors to experience
lapses in health insurance coverage. The researchers concluded
by stressing the importance of health insurance coverage and
also noted that illness often leads to financial catastrophe
through loss of income, as well as high medical bills.
Earlier this year, the Centers for Medicare and Medicaid
Services (CMS), issued guidelines for hospitals regarding
charges. In a February 20, 2004 letter to American Hospital
Association (AHA) President Richard Davidson, U.S. Health and
Human Services (HHS) Secretary Tommy Thompson stated that
"Hospitals' (sic) charging the uninsured the highest rates is a
serious issue that demands all of our attention?This guidance
shows that hospitals can provide discounts to uninsured and
underinsured patients who cannot afford their hospital bills and
to Medicare beneficiaries who cannot afford their Medicare
cost-sharing obligations. Nothing in the Medicare program rules
or regulations prohibit such discounts. With this guidance as a
tool, I strongly encourage you to work with AHA member hospitals
to take action to assist the uninsured and underinsured and
therefore, end the situation where, as you said in your own
words, 'uninsured Americans and others of limited means are
often billed and required to pay higher charges.'"
AB 774
Page 9
In February 2004, the California Healthcare Association (CHA)
issued voluntary guidelines to protect consumers from hospital
overcharging. The document stated that regulatory reform is
needed to enable hospitals to effectively respond to the
individual needs of low-income uninsured patients and that CHA
anticipates that HHS will provide guidance on how hospitals can
appropriately bill the uninsured. In the meantime, CHA urged its
member hospitals to adopt the voluntary principles and
guidelines to better meet the needs of patients who cannot
afford the health care services they receive. The guidelines
encouraged hospitals to do a number of things with regards to
assisting low-income, uninsured patients, including:
1)Ensuring that its financial assistance policies clearly state
the eligibility criteria (i.e., income, assets) and the
process used to determine whether a patient is eligible for
financial assistance.
2)Limiting expected payments from these patients eligible for
financial assistance to amounts that do not exceed the payment
the hospital would receive from Medicare, other government
sponsored health programs, or as otherwise deemed appropriate
by the hospital.
3)Having written policies about when and under whose authority
patient debt is advanced for collection, and using their best
efforts to ensure that patient accounts are processed fairly
and consistently.
4)Posting notices regarding the availability of financial
assistance to low-income uninsured patients in visible
locations throughout the hospital, such as
admitting/registration, billing office, emergency department,
and other outpatient settings.
5)Sharing their financial assistance policies with appropriate
community health and health services agencies and other
organizations that assist such patients.
6)Attempting to communicate with patients in their primary
language when discussing the hospitals financial assistance
policies; and ensure that staff are knowledgeable about the
existence of the hospital's financial assistance policies.
AB 774
Page 10
There were a number of bills introduced last year related to
hospital billing. AB 232 (Chan) was substantially similar to
this bill and would have required each hospital to develop a
self-pay policy specifying how the hospital determines prices to
be paid by self-pay patients, as defined, and limits these
prices for patients below specified income levels. AB 232 died
on the Senate floor. SB 379 (Ortiz) would have required every
hospital to have a charity care policy and to provide that
policy to patients and would have required OSHPD to develop a
uniform charity care application to be used by all hospitals.
The Governor vetoed the bill, stating that "the voluntary
guidelines must be given time to be implemented and reviewed"
and that it was his expectation that "all hospitals in the state
uphold their important commitment to the voluntary guidelines
and that they are applied evenly, consistently and without
hesitation."
Analysis Prepared by : Melanie Moreno / HEALTH / (916)
319-2097 FN: 0010712