BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Sheila J. Kuehl, Chair
BILL NO: SB 350
S
AUTHOR: Runner
B
AMENDED: April 11, 2007
HEARING DATE: April 25, 2007
3
FISCAL: Appropriations
5
0
CONSULTANT:
Hansel/cjt
SUBJECT
Hospitals: discount payment and charity care policies
SUMMARY
Makes technical and clarifying changes to existing law
dealing with hospital charity care and discount payment
policies. Establishes time limits for patients to apply
for hospital charity care or discounted payments and for
hospitals to make determinations of their eligibility.
Provides that a hospital or its assignee may report adverse
information to a consumer credit reporting agency or
commence civil action against a patient who has received an
extended payment plan under a hospital's charity care and
discount payment policy, or other hospital policy, and who
defaults on their payment obligations.
CHANGES TO EXISTING LAW
Existing law:
Existing law requires hospitals, as a condition of
licensure, to maintain an understandable, written policy
regarding discount payments for financially qualified
patients, as well as an understandable, written charity
Continued---
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care policy. Existing law defines "financially qualified
patients" as patients whose family income does not exceed
350 percent of the federal poverty level and who are
self-pay patients or patients who have high medical costs,
as defined.
Existing law provides that uninsured patients or patients
with high medical costs who are at or below 350 percent of
the federal poverty level are eligible to apply for a
hospital's charity care or discount payment policies, and
provides that eligibility for charity care or discounted
payments may be determined at any time in which the
hospital is in receipt of information necessary to make a
determination of eligibility.
Existing law requires hospitals to limit expected payment
for services to any patient at or below 350 percent of the
poverty level who is eligible for its discount payment
policy to the amount it will receive from Medicare,
Medi-Cal, or other government programs.
Under existing law, hospitals must perform various
functions in connection with their hospital charity care
and discount pay policies, including providing patients
with a written summary of the policies, attempting to
determine the availability of private or public health
insurance coverage for each patient, providing notices of
their policies, and providing, at the time of billing or at
the time care is provided, applications for Medi-Cal and
other public programs.
Existing law prohibits a hospital or its assignee from
reporting adverse information to a credit reporting agency,
or commencing civil action, for 150 days after initial
billing for a patient who lacks coverage or may be a
patient with high medical costs. Existing law also
prohibits hospitals from using wage garnishments or liens
on primary residences as a means of collecting unpaid
hospital bills for patients eligible under their charity
care and discount payment policies, and limits the
conditions under which collection agencies may use wage
garnishments and liens on residences as a means of
collecting unpaid hospital bills for patients under a
hospital's charity care or discount payment policies.
Existing law requires a hospital or its assignee, prior to
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commencing collection activities against a patient, to
provide the patient with a clear and conspicuous written
notice containing specified information.
This bill:
This bill would clarify the types of out-of-pocket expenses
that may be considered in determining whether a patient is
a patient with high medical costs and, therefore, eligible
for discounted payments. The bill additionally would
clarify the types of financial documents patients may be
asked to provide in order to determine their eligibility
for charity care, and establish a time limit for patients
to apply for charity care or discounted payments of 60 days
after the date they are initially billed, as well as a time
limit for hospitals to make determinations of their
eligibility of 120 days after initial billing.
The bill would also provide that a hospital or its assignee
may report adverse information to a consumer credit
reporting agency or commence civil action against a patient
who has received an extended payment plan under a
hospital's charity care and discount payment policy, or
other hospital policy, and who defaults on their payment
obligations. The bill would allow a 30-day grace period
following the first default to allow the patient to cure
the default or attempt to renegotiate the terms of the
extended payment plan. The bill additionally would provide
that extended payment plans shall be interest free only if
payments are made on a timely basis.
The bill would provide that the notice of consumer rights
that is required to be given to patients, prior to
commencement of collection activities by a hospital or its
assignee, can be either in the form specified in existing
law pertaining to hospital charity care and discounted
payments, or in the form of the standard notice required
under the Civil Code to be given to consumers by
third-party debt collectors.
FISCAL IMPACT
Unknown.
BACKGROUND AND DISCUSSION
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According to the author, SB 350 is a clean-up bill that
addresses ambiguities in legislation passed last session
(AB 774 - Chan, Chapter 755, Statutes of 2006) which
requires hospitals to implement charity care and discount
payment policies and limits hospitals' billing and
collection practices vis-?-vis financially qualified
patients. The author states that SB 350 does this by more
clearly defining the types out-of-pocket medical expenses
that count in determining who is a patient with high
medical costs, clarifying the types of financial documents
patients may be asked for in order to determine their
eligibility for charity care, establishing time limits for
patients to apply for charity care or discounted payments
and for hospitals to make determinations of their
eligibility, establishing a grace period for patients on
interest-free, extended payment plans who default on those
payment plans before certain collection actions can
commence, clarifying that the payment obligations of
patients who do not receive extended payment plans may
include interest on the amount owed, and providing that the
required notice of consumer rights that is required to be
given to patients can be either in the form specified in AB
774, or in the form of the standard notice required to be
given to consumers by third-party debt collectors.
Prior legislation related to hospital charity care
practices
In response to reported inconsistencies in the way in which
hospitals provide charity care and discounted payments to
low-income patients, and in response to evidence that
hospitals were not complying with voluntary guidelines
issued by the California Hospital Association and other
hospital associations, a number of bills were introduced
beginning in 2002, to standardize and limit hospitals'
practices. The bills culminated with the passage of AB 774
in 2006, which requires hospitals to develop and implement
policies providing discounted payments or charity care for
low-income uninsured or underinsured patients, limits
hospital charges and collection practices involving
financially qualified patients, and requires hospitals to
comply with notice and reporting procedures.
Other prior legislation
SB 24 (Ortiz) of the 2005 - 06 Session - Would have
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required 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 would have required non-profit hospitals to
provide a minimum threshold of charity care. Held on
Senate Appropriations Committee suspense file.
SB 379 (Ortiz) of 2003-04 Session - Would have required
hospitals to develop, post, and disseminate charity care
and reduced payment policies, specified that patients with
income up to 400 percent of the federal poverty level are
eligible for charity care and reduced payments, placed
limitations on expected payments from qualified patients,
and placed 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
the hospital determines prices to be paid by self-pay
patients as defined, and limited their prices for patients
below specified income levels. Would have also 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.
Arguments in support
The California Association of Debt Collectors states that
SB 350 would address ambiguities in AB 774 (Chan) that
affect collection agencies' ability to collect unpaid
hospital bills.
COMMENTS AND QUESTIONS
1. Time limits for application for charity care and
discounted payments may hurt some patients. The bill, on
page 5, lines 29 - 37, provides that an application for
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charity care and discounted payments shall be submitted
within 60 days of the initial billing and that the hospital
shall make a final determination on the application within
120 days of the initial billing. In defense of this
provision, the California Association of Debt Collectors
states that without specific deadlines for patients to
apply and qualify for charity care and discounted payments,
patients may wait until collection actions have commenced
before they apply, delaying collections. However, such
time limits could harm consumers who may in some cases have
valid reasons for not applying for assistance sooner and/or
who are already attempting to settle their bills. In
addition, existing law already allows collection activities
to commence 150 days after the date of billing, and only
creates an exception if a patient is attempting to qualify
for eligibility under the hospital's charity care and
discounted payment policy and is attempting in good faith
to settle an outstanding bill. It is not clear that
specific time limits for applying and qualifying for
charity care and discounted payments are necessary. A
suggested amendment would be to delete these provisions of
the bill.
Suggested amendment language:
Page 5, lines 37:
(3) Eligibility for charity care or discounted payments or
charity care under this section may be determined at any
time by the hospital when it is in receipt of a timely
application and any information provided by the patient as
specified in paragraph (1) or paragraph (2), respectively.
Unless otherwise specified in the hospital policy, an
application for a patient shall be submitted within 60 days
of the initial billing and the hospital shall make a final
determination on the application within 120 days of the
initial billing .
2. Definition of "default" as it pertains to extended
payment plans is unclear.
The bill on page 7, lines 32 - 40 and page 8, lines 1 - 5
provides that a hospital or its assignee may report adverse
information to a consumer credit reporting agency or
commence civil action against a patient who has received an
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extended payment plan under a hospital's charity care and
discount payment policy, or other hospital policy, and who
defaults on their payment obligations. The bill would
allow a 30-day grace period following the first default to
allow the patient to cure the default or attempt to
renegotiate the terms of the extended payment plan. The
bill, however, does not define "default." A suggested
amendment would be to define it as a failure to make one or
more payments that are required by the patient's extended
payment plan. Additionally, the author should be asked why
the bill selects 30 days as the grace period for correcting
a default, as opposed to 60 or 90 days.
Suggested amendment language:
(g) Any extended payment plans offered by a hospital to
assist patients eligible under the hospital's charity care
policy, discount payment policy, or any other policy
adopted by the hospital for assisting low-income patients
with no insurance or high medical costs in settling
outstanding past due hospital bills, shall be interest free
if all payments are timely made under the terms of the
extended payment plan. Upon the occurrence of the first
default by a patient under the terms of a hospital's
extended payment plan, the
hospital, collection agency, or assignee shall not report
adverse information to a consumer credit reporting agency
or commence civil action against the patient for nonpayment
during the 30-day period from the date of the first default
to allow the patient to cure the defaults or attempt to
renegotiate the terms of the hospital extended
payment plan. For the purposes of this subdivision,
"default" shall mean failure to make one or more payments
that are required by the patient's payment plan.
3. Suggested technical amendment:
On page 3, lines 16 - 20:
(2) Annual out-of-pocket expenses for medical health care
services, including and medications, that exceed 10 percent
of the patient's family income, if the patient provides
documentation of the patient's medical expenses paid by the
patient or the patient's family in the prior 12 months.
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POSITIONS
Support: California Association of Debt Collectors
(sponsor)
Oppose: None received.
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