California changes hospital debt collection, charity care eligibility

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A California bill signed into law this month imposes new limitations on hospital debt collection practices and changes charity care eligibility.

The bill was signed by California Gov. Gavin Newsom on Oct. 4.

Charity care eligibility

The law changes the eligibility for charity care to include patients with incomes of more than 400 percent of the federal poverty level. This is an increase from the current law, which includes patients with incomes of more than 350 percent of the federal poverty level. 

Additionally, California law allows patients with "high medical costs" to get some form of charity care or discount payment policy. The new law alters the definition of high medical costs as 10 percent of the patient's current family income or family income in the prior 12 months, whichever is less.

Additionally, the law requires hospitals to prominently display a notice of the hospital's financial assistance policy for patients on its website.

Debt collection changes

Under the new law, hospitals are required to wait 180 days before reporting unpaid debt to consumer credit agencies or debt collectors. This is up from 150 days under the prior law. 

Additionally, the law prohibits hospitals from selling patient debt to a debt buyer unless specified conditions are met, including that the patient is ineligible for financial assistance and that the patient hasn't responded to billing attempts or financial assistance offerings. 

Before assigning a bill to collections or selling patient debt, hospitals will be required to send a notice to the patient that contains several items, including the date or services of the bill, the name of the entity the bill is being assigned or sold to, a statement that shows how to obtain an itemized bill and an application for the hospital's financial assistance program.

The law also requires hospitals to send the California Department of Health Care Access and Information a copy of its debt collection policy. The department will review the policy for compliance with the law by January 2023.

The law also requires the department to impose penalties against a hospital that violates the law, effective January 2024.

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