BILL ANALYSIS SENATE HEALTH COMMITTEE ANALYSIS Senator Deborah V. Ortiz, Chair BILL NO: AB 774 A AUTHOR: Chan B AMENDED: June 16, 2005 HEARING DATE: June 22, 2005 7 FISCAL: Judiciary / Appropriations 7 4 CONSULTANT: Hansel / ag SUBJECT Hospitals: self-pay policies SUMMARY This bill would require hospitals to develop a policy specifying how the hospital will determine financial liability for services rendered to financially qualified patients and self-pay patients, as defined. Requires each hospital to perform various functions in connection with the hospital self-pay policy, including notifying patients of the policy, and attempting to determine the availability of private or public health insurance coverage for each patient. Places limits on billing and collection procedures to be followed by hospitals and their billing agents. Requires hospitals to submit to the Office of Statewide Health Planning and Development a copy of their application for financially qualified patients and a copy of their self-pay policy, eligibility procedures, review process, and procedure for determining self-pay pricing. Authorizes the director of OSHPD to levy civil penalties for violations by a hospital of the above provisions and authorizes the Attorney General to investigate whether a hospital is in compliance with the above provisions and to seek remedies for hospitals it finds are not in compliance. Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 2 ABSTRACT Existing law: 1.Establishes the Office of Statewide Health Planning and Development (OSHPD), which is charged with enforcement of various provisions of law relating to health facilities, including hospitals. 2.Requires hospitals to report financial and utilization data to OSHPD in accordance with procedures and forms established by OSHPD. 3.Requires every private, non-profit hospital to submit annually to OSHPD a community benefits plan that details how the hospital identifies and addresses community needs within the hospital's service area. 4.Provides that a community benefits plan may include: (a) a description of the health care services rendered to uninsured, underinsured, and individuals eligible for public programs, (b) a description of other services rendered to the community, such as health promotion, medical research and medical education, and (c) an accounting of the cost of providing these services. 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.Defines, for purposes of the bill, financially qualified patients as those who have family incomes at or below 400 percent of the federal poverty level and who either do not have third party coverage from a health plan, Medicare, or Medicaid and whose injury is not compensable under workers compensation, automobile or other insurance; or are insured but whose deductibles, copayments, medical, or hospital bills after payment by third party payers exceed five percent of their annual income or a lower level if established by the hospital's charity care policy. Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 3 3.Requires 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. 4.Requires each hospital to include in its policy 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. 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, as specified. 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 OSHPD. 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 develop a uniform self-pay application to be used by all hospitals, as specified. 9.Requires each hospital to make all reasonable efforts to 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, Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 4 as specified. 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, to provide to the patient as a part of that billing 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. 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, as specified. 11. In order to facilitate payment by public or private third party payers, limits the allowable debt collection activities of hospitals or their assignees, including collection agencies or billing services, for at least 180 days after discharge or after the final day service is provided, to the following activities: a. Sending a bill to the patient in accordance with existing law; b. Attempting to negotiate payment of the bill or a payment plan in accordance with this article; c. Attempting to collect payment from any responsible third-party payer, either public or private; Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 5 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; 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. f. Assisting a financially qualified patient in obtaining the allowance for services required by the bill and assisting the patient in applying for the hospital's charity care policy, if any. g. Providing any notices required under state or federal law. 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 debt collection from a financially qualified patient. 15.Requires the period described in #11 above to be extended if the patient has a pending appeal, as specified, for coverage of the services. 16.Requires the hospital, any assignee of the hospital, or Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 6 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 information about nonprofit credit counseling services in the area and 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, as specified. 17.Requires each hospital to provide to OSHPD, in a format determined by OSHPD, a copy of its self-pay policy, eligibility procedures, review 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. 18.Permits, after appropriate notice and opportunity for hearing, the Director of OSHPD to levy civil penalties for violations of this bill as follows: a. A hospital that violates any provision of this bill, except for provisions pertaining to required allowances for financially qualified patients, is liable for civil penalties of not more than $500 per day per patient affected for each violation; b. A hospital that bills a patient for amounts in excess of the allowances required by the bill is liable for a civil penalty of three times the amount billed in error to the patient; c. Allows the Director, in lieu of civil penalties, to require the hospital to provide care at no cost to financially qualify persons in a value comparable to three times the value of the care provided in violation of provisions of the bill dealing with allowances for financially qualified patients; and, d. Allows the Director to require the hospital to provide notice to the public of its policy regarding financial liability for services to financially qualified and self-pay patients. 19.Permits the Attorney General to authorize an investigation, as specified, to determine whether a Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 7 hospital is complying with the bill and authorizes the Attorney General to seek to recover: a. Actual damages; b. Civil penalties of not more than $500 per day for each violation; c. For a violation of provisions dealing with required payment allowances for financially qualified patients, three times the amount billed to the patient; d. For intentional or willful violations of the provisions of the bill, exemplary damages, in an amount the court deems proper; e. Equitable relief as the court deems proper; and, f. Reasonable attorneys' fees and court costs. 20.Prohibits anything in this bill from being construed to 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. 21.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. 22.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. Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 8 FISCAL IMPACT According to the Assembly Appropriations Committee: 1.One-time special fund cost (Health Data Fund) OSHPD of $106,000 beginning in 2005-06, and on-going special fund costs of approximately $375,000. 2.Indeterminate but significant on-going General Fund (GF) costs to University of California (UC) 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 one third to one half of the costs of the over 7 million individuals enrolled in the Medi-Cal and Healthy Families Programs. BACKGROUND AND DISCUSSION According to the author, there is no current law regarding the prices that uninsured and underinsured consumers pay for health care or regarding collection practices for health care debt. The author points to a February 2005 study published in the journal Health Affairs which surveyed 1,771 personal bankruptcy filers and which found that about half cited medical causes for their bankruptcy. The study 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 percent more likely than other debtors to experience lapses in health insurance coverage. The author asserts that requiring hospitals to develop and disseminate policies on payment allowances and to provide payment allowances are modest steps to protect low-income uninsured and underinsured patients when they experience a need for hospital services. 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 Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 9 to the individual needs of low-income uninsured patients and that CHA anticipates that the United States Department of Health and Human Services 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 encourage hospitals to do a number of things with regards to low-income, uninsured patients, including: 1.Ensuring that 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 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 the hospital's 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 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. In the 2003 - 04 Session the Legislature passed SB 379 (Ortiz), which would have required hospitals to develop, Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 10 post, and disseminate charity care and reduced payment policies, and would have limited allowable charges for patients with incomes below 400 percent of the federal poverty to the greater of Medicare, Medicaid, or workers compensation payment amounts. In vetoing the bill, the Governor stated: "Recently, the hospital community voluntarily adopted guidelines to assist low-income uninsured Californians who receive services at a hospital but cannot afford to pay the bill in full. At a minimum, these guidelines allow patients who are at or below 300 percent of the federal poverty level to apply to the hospital for financial assistance. Additionally, the guidelines limit the costs of procedures to reflect the prices paid by government payers, require hospitals to post their financial assistance policies and their eligibility criteria and encourage hospitals to help eligible patients apply for public health programs. By choice, many hospital systems have adopted guidelines that exceed the aforementioned minimum standards adopted by the hospital community, further protecting patients at risk of financial harm. I recognize the proponents desire to assist self-pay patients with large hospital bills by requiring price discounts but I also recognize that the hospital community took a significant step in adopting these guidelines, especially those hospitals that are struggling financially themselves. Ultimately, I decided that the voluntary guidelines must be given time to be Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 11 implemented and reviewed." Arguments in support According to supporters, hospitals must stabilize any patient who needs emergency care, but hospitals can and do charge uninsured and underinsured patients the highest prices for services they provide. Hospitals report that they spend about one percent of their patient revenue on charity care, but hospitals are not required to disclose the circumstances under which a patient may qualify for free care. Supporters further argue that sending patients to collections 30 to 60 days after they receive care puts the credit rating of patients at risk if insurers fail to pay within that timeframe. For uninsured patients, 30 - 60 days does not provide adequate time to arrange their finances in order to make payments on their bills. Although the major hospital associations and systems have adopted voluntary guidelines for providing charity and reduce price care, nothing requires them to comply with the guidelines. Supporters further argue that the bill protects self-pay patients from being charged more than insured patients and reduces the chances that hospital costs result in personal bankruptcy and is therefore an important step in improving the equity of California's health care system. Supporters finally argue that the bill provides necessary protections to ensure that uninsured and underinsured patients are not discouraged from seeking hospital services when they need them. Arguments in opposition Opponents argue that although this bill incorporates many of the provisions of the hospital industry's voluntary guidelines for providing charity and reduced price care, the guidelines provide necessary flexibility for hospitals to tailor their policies to account for the characteristics of their patient populations and resources. In particular, hospitals need flexibility to determine whether they can offer charity and reduced price care to patients with incomes in excess of 300 percent of the federal poverty level, the level required under CHA's guidelines. Opponents also argue that this bill unfairly places the burden of a dysfunctional healthcare system on hospitals, which provide care to anyone who need help and operate emergency rooms and trauma centers around the clock. Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 12 Opponents further argue that the bill imposes rigid and punitive requirements on hospitals to provide free care without addressing any of the underlying factors that created the growing problem of the uninsured in the first place. Opponents further point out that hospitals face numerous unfunded mandates and that this bill will make it increasingly difficult to provide care and operate emergency rooms and trauma centers to serve those who need help. The University of California argues that this bill creates a new public benefit for a sizable population who may have some ability to pay for services rendered or otherwise afford health insurance coverage and contends that they already have an established commitment to provide free care and payment assistance to a disproportionate share of the state's uninsured patients. The California Association of Collectors opposes provisions of the bill that impose a blanket prohibition on the use of wage garnishments or liens to obtain payment of hospital bills irrespective of the debtor's ability to pay the debt, and states that existing requirements governing the use of wage garnishments and judgment liens provide substantial consumer protections to debtors. Related Bills SB 24 (Ortiz) -- Requires hospitals to develop, post, and disseminate charity care and reduced payment policies for hospitals, and limit allowable charges for patients with incomes below 400 percent of the federal poverty to the greater of Medicare, Medicaid, or workers compensation payment amounts, and requires non-profit hospitals to provide a minimum threshold of charity care. Currently in Senate Appropriations Committee. Previous legislation SB 379 (Ortiz) of 2003-04 Session -- Effective June 1, 2005, would have required hospitals to develop, post, and disseminate charity care and reduced payment policies, which include minimum eligibility requirements of 400 percent of the federal poverty level, limitations on expected payments from qualified patients, and limits on billing and collection activities. Vetoed by Governor. AB 232 (Chan) of 2003-04 Session -- Would have required each hospital to develop a self-pay policy specifying how Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 13 the hospital determines prices to be paid by self-pay patients, as defined, and limits these prices for patients below specified income levels. Would have established limits on billing and collection activities of hospitals and their agents. Died on Senate floor. SB 1394 (Ortiz) of 2001-02 Session -- Would have required hospitals to establish and publicize charity care policies and established a reduced payment schedule for uninsured and underinsured persons. Would have limited collections and billing activities of hospitals for 120 days following discharge. Died on Senate floor. COMMENTS AND QUESTIONS 1.Similarity to other bills heard by Health Committee. AB 774 is similar to SB 24 (Ortiz) which was heard by the Committee on March 30, and to SB 379 (Ortiz) and AB 232 (Chan), heard by the committee in the 2003-04 session. SB 379 would have required hospitals to develop and post charity care and reduced payment policies and placed limits on allowable charges and collection practices for persons eligible to receive charity care or payment allowances, similar to this bill; however, the bill was vetoed by the Governor. SB 24 (Ortiz), as it was heard by the committee, contains additional provisions requiring nonprofit hospitals, as a condition of maintaining their tax exempt status, to demonstrate compliance with the provisions of the bill dealing with development and posting of charity care and reduced payment policies and limits on charges and collection practices for persons eligible to receive charity care or payment allowances. The bill also establishes a minimum threshold for charity care expenditures for nonprofit hospitals. The bill is currently in Senate Appropriations Committee. Continued--- 2.Suggested technical amendments. a. Modify Section 127440 (a) as follows: 127440. (a) For violations of this article, the director of the office may, after appropriate notice and opportunity for hearing, levy civil penalties as follows: (1) A hospital that violates any provision of this article, except for subdivision(c)(b) of Section 127405, shall be liable for civil penalties of not more than five hundred dollars ($500) per day per patient affected for each violation. (2) A hospital that bills a patient for amounts in excess of those provided for in Section 127405 shall be liable for a civil penalty of three times the amount billed in error to the patient. (3) In lieu of the civil penalty, require the hospital to providecare at no cost to financially qualified persons in a value comparable to three times the value of the care provided in violation of Section 127405charity care and reduced payments in an amount equal to three times the difference between the amount billed to financially qualified and self-pay patients and the amount that should have been billed under subdivision (b) of Section 127405. (4) Require the hospital to provide notice to the public in a newspaper of general distribution of its policies pursuant to this article, of any violations of this act, and of the penalties assessed. (b) Modify Section 127442 as follows: Upon a determination that a hospital has violated this article, theTheAttorney General may seek to recover all of the following: (a) Actual damages. (b) Civil penalties of not more than five hundred dollars ($500) per day for each violation. Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 15 (c) For a violation of subdivision(c)(b) of Section 127405, three times the amount billed to the patient. (d) For intentional or willful violations of this article, exemplary damages, in an amount the court deems proper. (e) Equitable relief as the court deems proper. (f) Reasonable attorneys' fees and court costs. PRIOR ACTIONS Assembly Floor: 43 - 34 Pass Assembly Appropriations: 13 - 5 Do Pass Assembly Health: 10 - 4 Do Pass POSITIONS Support: Health Access California (sponsor) AARP California American Federation of State, County, and Municipal Employees Applied Research Center Asian and Pacific Islander American Health Forum California Acorn California Alliance for Retired Americans California Church Impact California Commission on the Status of Women California Federation of Teachers California Immigrant Welfare Collaborative California Labor Federation California National Organization for Women California Public Interest Research Group Coalition for Community Health Coalition for Humane Immigrant Rights of Los Angeles Congress of California Seniors Consumer's Union East Bay Alliance for a Sustainable Economy Gray Panthers California Greenlining Institute STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 16 Health Care for All - California Insure the Uninsured Project JERICHO Latino Coalition for a Healthy California Lawyers' Committee for Civil Rights Multicultural Area Health Education Center Screen Actors Guild Santa Cruz Chapter of Healthcare for All United Nurses Association of California/Union of Health Care Professionals Valley Seniors One individual Oppose: Adventist Health Alliance of Catholic Health Care Barlow Respiratory Hospital Biggs-Gridley Memorial Hospital California Association of Collectors California Hospital Association Catholic Healthcare West Citrus Valley Health Partners Community Hospital of the Monterey Peninsula Continental Rehabilitation Hospital of San Diego Lodi Memorial Hospital Loma Linda University Medical Center Mission Hospital Mission Hospital Regional Medical Center Paradise Valley Hospital Saddleback Memorial Medical Center Salinas Valley Memorial Healthcare System Seneca Healthcare District St. Jude Medical Center Saint Louise Regional Hospital Scripps Health University of California STAFF ANALYSIS OF ASSEMBLY BILL 774 (Chan) Page 17 -- END --