CHA News Article

CDPH Re-Issues AFL Related to California Hospital Fair Pricing Policies
Outlines recent changes to law under SB 1276

On Dec. 4, the California Department of Public Health (CDPH) re-issued an All Facilities Letter (AFL) notifying hospitals of recent changes to hospital fair billing policies — including charity care and discount payment plans — as a result of the enactment of SB 1276 (Chapter 758, Statutes of 2014). CDPH’s previous AFL 14-25 (dated Nov. 3) inaccurately stated that SB 1276 expands the availability of charity care and discount payment plans to all patients with high medical costs, including patients with third-party coverage. Under current hospital fair pricing policies, all uninsured patients or patients with high medical costs who are at or below 350 percent of the federal poverty level (FPL) are eligible to participate under a hospital’s charity care or discount payment policy (Health & Safety Code Section 127405(a)(1)(A)). The revised AFL clarifies the meaning of “patients with high medical costs” as “a person whose family income does not exceed 350 percent of the federal poverty level.”

Last month, the California Office of Statewide Health Planning and Development (OSHPD) also released the attached letter notifying hospitals of the recent changes to hospital fair billing policies — including charity care and discount payment plans — as a result of the enactment of SB 1276. The new law becomes effective Jan. 1, 2015, and will require significant changes to all existing charity and discounted payment policies.

Under current law, California Health and Safety Code Section 127435 requires each hospital to submit a copy of its charity care policy, discount payment policy, eligibility procedures for the policies, review process, and application forms for the charity care and/or discount payment programs at least every two years, or when a significant change is made to any of the required documentation. The last due date as mandated under this statute was Jan. 1, 2014. Passage of SB 1276 now requires implementation of many new changes. As a result, all hospitals will need to submit their revised charity and discounted payment policies to OSHPD by Jan. 1, 2015, using SyFPHR, the OSHPD-developed web application for online submission of fair pricing policies.

Following is a summary of the major changes required under the new law:

  • Changes the definition of a person with high medical costs to include those who receive a discounted rate from a hospital as a result of third-party coverage.
  • Defines a “reasonable payment plan” that must be offered to all patients meeting the eligibility requirements in situations where an agreement cannot be reached regarding a payment plan during the negotiation process between the hospital and patient. This payment plan will require that monthly payments do not exceed 10 percent of a patient’s family income for a month, excluding deductions for essential living expenses. “Essential living expenses” are defined as expenses for any of the following: rent or house payment and maintenance, food and household supplies, utilities and telephone, clothing, medical and dental payments, insurance, school or child care, child or spousal support, transportation and auto expenses (including insurance, gas and repairs), installment payments, laundry and cleaning expenses, and other extraordinary expenses. A hospital that uses an affiliate, subsidiary or external collection agency to collect debt must have an agreement with that entity requiring them to comply with the hospital’s definition and application of a reasonable payment plan.
  • Requires that hospitals, when determining if private or public health insurance is available to partially or fully cover a patient’s charges, consider coverage offered through the California Health Benefit Exchange as well as government-sponsored health programs, such as Medicare, Medi-Cal, Healthy Families Program, California Children’s Services, or other state or county-funded health coverage.
  • Mandates that the hospital’s required statement accompanying bills to patients who have not provided proof of third-party coverage now include language telling the patient that he or she may be eligible for coverage offered through the California Health Benefit Exchange and other state- or county-funded health coverage, as well as Medicare, Medi-Cal, Healthy Families and California Children’s Services. The statement must also indicate how patients may obtain applications for coverage offered through the California Health Benefit Exchange and other state- or county-funded health coverage programs, and that the hospital will provide these applications.
  • If a patient applies or has a pending application for another health coverage program at the time they apply for charity or discounted care at the hospital, then neither application shall preclude eligibility for the other program.
  • Requires hospitals to provide patients with a referral to a local consumer assistance center housed at legal services offices.
  • Requires hospitals to provide an application for the Medi-Cal program, the Healthy Families Program, or other state- or county-funded health coverage programs if the patient does not indicate coverage by a third-party payer or requests a discounted price or charity care. Requires hospitals to provide this application to the patient prior to discharge if the patient has been admitted, or to patients receiving emergency or outpatient care.

On Jan. 1, 2011, AB 1503 (Chapter 445, Statutes of 2010) became effective. AB 1503 amended the Hospital Fair Pricing Policies Law to require emergency room physicians who provide emergency medical services in a general acute care hospital to develop charity care and discounted payment policies that limit expected payment from eligible patients who are uninsured or have high medical costs and are at or below 350 percent of the federal poverty level. AB 1503 also required hospitals to provide a statement within their charity care and discounted payment policies about the availability of charity care and discounted payments from emergency room physicians. This statement also must include contact information for the emergency room physician who treated the patient. Hospitals should be sure their policies comply with AB 1503.

SB 1276 also modifies AB 1503, requiring emergency room physicians to offer a negotiable extended payment plan. If no agreement can be reached on the amount of the payment, then a reasonable payment formula must be used, similar to the methodology used for the hospitals, when determining the amount of the monthly payment.

CDPH Penalties for Hospital Fair Pricing Policy Violations
As a reminder, CDPH penalties for violations of the Hospital Fair Pricing Policies law became effective April 1, 2014. For deficiencies related to the Hospital Fair Pricing Policies law, CDPH will calculate a penalty, considering the extent of noncompliance, the amount of financial harm to the patient and the willfulness of the violation. CDPH starts by determining an initial penalty and then adjusting it. The result of this calculation is called the “base penalty” (sometimes called the “adjusted initial penalty”). The base penalty will then be adjusted a second time. The result of this second calculation is called the “adjusted base penalty” or the “final penalty.” The base penalty may exceed the statutory maximum, but the final penalty may not. The statutory maximum penalty is the amount of an immediate jeopardy penalty [Title 22, California Code of Regulations, Sections 70953, 70956 and 70958]. Each of these steps is explained more thoroughly below.

Initial Penalty > First Adjustment > Base Penalty > Second Adjustment > Final Penalty (Maximum = Amount of IJ Penalty)

Calculating the Initial Penalty

CDPH determines the initial penalty for a violation of the Hospital Fair Pricing Policies law by considering whether the noncompliance is major, moderate or minimal, as described below.

  • Major: The action or inaction deviates from the requirement to such an extent that the requirement is completely ignored and none of its provisions are complied with, or the function of the requirement is rendered ineffective because some of its provisions are not complied with. The initial penalty for this category is $25,000.
  • Moderate: The action or inaction deviates from the requirement, but it complies to some extent, although not all of its important provisions are complied with. The initial penalty for this category is $12,500.
  • Minimal: The action or inaction deviates somewhat from the requirement. The requirement functions nearly as intended, but not as well as if all provisions had been met. A violation in this category is a minor violation and no administrative penalty is assessed.

Adjusting the Initial Penalty

The initial penalty will be adjusted to determine the base penalty based on the financial harm to the patient and the willfulness of the violation. The initial penalty will be increased by 5 percent if the violation caused actual financial harm to the patient, based on information acquired by CDPH during its investigation. The initial penalty will be increased by 10 percent if the deficiency was the result of a willful violation. The base penalty may exceed the statutory maximum, although the final penalty may not.

Adjusting the Base Penalty

The base penalty will be adjusted to determine the final penalty. This adjustment is based on the hospital’s immediate correction of the violation (or not) and the hospital’s history of compliance with the Hospital Fair Pricing Policies law [Title 22, California Code of Regulations, Section 70959].

1. Immediate correction of the violation

When CDPH determines that a hospital subject to an administrative penalty promptly corrects the noncompliance, the base penalty will be reduced by 20 percent, if both of the following apply:

  1. The hospital identified and immediately corrected the noncompliance before it was identified by CDPH. Within 10 calendar days of the date that the hospital identified the noncompliance, the hospital must complete corrective action and steps necessary to prevent the violation from recurring. The hospital must promptly, and in detail, document the corrective action.
  2. A penalty was not imposed for a repeat deficiency that received a penalty reduction under these regulations within the 12-month period prior to the date of the violation.

2. History of compliance

The base penalty will be increased by 10 percent if the hospital has had one or more other violations of the Hospital Fair Pricing Policies law within the three-year period immediately prior to the date of the violation.

Determining the Final Penalty

The calculations above will result in the final penalty. The final penalty may not exceed the maximum penalty specified in Health and Safety Code Section 1280.3, which is $75,000 for the hospital’s first immediate jeopardy (IJ) penalty; $100,000 for the hospital’s second IJ penalty; and $125,000 for the third and subsequent IJ penalty. An IJ penalty is considered a first penalty if the date the violation occurred is more than three years from the date of the violation of the last issued IJ penalty, and if CDPH finds that the hospital has been in substantial compliance for three years prior to the date of the violation.

Other Factors Influencing the Penalty Amount
Hospitals Affiliated With Health Plans

In assessing an administrative penalty against a health facility owned by a nonprofit corporation that shares an identical board of directors with a nonprofit health care service plan licensed pursuant to the Knox-Keene Act, CDPH must consider whether the deficiency arises from an incident that is the subject of investigation of, or has resulted in a fine to the health care service plan by, the Department of Managed Health Care. If the deficiency results from the same incident, CDPH may adjust its penalty to take into consideration the penalty imposed by the Department of Managed Health Care [Health and Safety Code Section 1280.6; Title 22, California Code of Regulations, Section 70958.1].

Small and Rural Hospitals

A small and rural hospital that has been assessed an administrative penalty may request:

  1. Payment of the penalty extended over a period of time, if full payment would cause financial hardship;
  2. Reduction of the penalty, if extending the penalty payment over a period of time would cause financial hardship; or
  3. Both a penalty payment plan and reduction of the penalty.

The small and rural hospital must submit its request in writing to CDPH within 10 days after the issuance of the administrative penalty. The request must describe the special circumstances showing financial hardship to the hospital and the potential severe adverse effects on access to quality care in the hospital.

CDPH will base its decision on information provided by the small and rural hospital and on hospital financial information from OSHPD or another governmental agency [Title 22, California Code of Regulations, Sections 70960 and 71703].

Guidebook

CHA has published a new guidebook titled Hospital Financial Assistance Policies & Community Benefit Laws as a resource for hospitals to comply with state and federal financial assistance and community benefits laws, including the recent changes to California law made by SB 1276. The publication is available here and includes chapters on financial assistance policies, legal requirements of community benefit programs, charity care accounting and reporting obligations, and compliance tools.

 

Commands