California may soon become the first state to limit the amount hospitals can charge the uninsured through legislation that critics say could strike a death blow to the state's already beleaguered hospital industry.
The state Legislature last week passed a bill that would require hospitals to bill uninsured patients no more than the highest rate paid by Medicare, Medicaid or workers' compensation for any given service. Patients whose annual incomes fall below 400% of the federal poverty level, or about $37,000 for an individual and $75,000 for a family of four, would be eligible.
Hospitals also would be required to file charity-care reports with the state, post their reduced-fee policies in admitting areas and emergency rooms, inform patients of their financial-assistance options, including payment plans, and wait at least 150 days before trying to collect any unpaid bills from uninsured patients.
Gov. Arnold Schwarzenegger hasn't indicated if he will sign the bill, which is opposed by the California Healthcare Association, or CHA, and two state agencies.
The proposal comes as hospitals nationwide are under fire for charging uninsured patients far more than those covered under private or government insurance and for using overly aggressive tactics to collect unpaid bills. Roughly 400 hospitals are now embroiled in 44 class-action lawsuits filed by a team of law firms seeking refunds for uninsured patients who allegedly have been harmed by the industry's billing and collection practices.
Last year, in the wake of a federal probe into its billing practices, Tenet Healthcare Corp. pledged to charge the uninsured at the same rates its charges HMOs. Since then, several hospitals have followed suit, voluntarily establishing their own discount policies. But the bill, sponsored by state Sen. Deborah Ortiz, would codify those efforts.
Consumer groups say state measures like this one are becoming imperative as the nation's uninsured problem continues to worsen and more people are forced into bankruptcy because of medical debt. Critics say hospitals have contributed to the problem by failing to tell patients about the financial help they offer.
"This is a great first step," said Susan Sherry, deputy director of Community Catalyst, a national consumer advocacy group that has been lobbying states to adopt more stringent charity-care guidelines (June 21, p. 6). "A bill gives much more teeth to this very important issue. I have no question that other states will follow suit."
But CHA spokeswoman Jan Emerson argues that mandating specific discounts would heap an untenable burden on the state's hospitals, which are already straining under the financial weight of California's new nurse-staffing law and state-mandated seismic retrofitting requirements. California hospitals also shouldered $5 billion in uncompensated-care costs-which include both charity care and bad debt-last year, when the state's uninsured population topped 6.3 million people, or 15% of all residents, she said.
Los Angeles County alone has been hit with six emergency room closures this year, with all of them attributed at least partly to the growing cost of caring for the uninsured. And industry observers fear that as uninsured patients move from closed ERs to others that are already under financial strain, those facilities could close also.
"This bill would be another nail in the coffin," Emerson said. "With the new nurse-staffing ratios costing us $1 billion a year and $24 billion in seismic upgrades coming down the pike, hospitals are fighting just to stay open. Hospitals are absolutely willing to help patients at the lowest end of the income scale, but ... it's not our job to finance healthcare for people (whose families are) making $75,000 a year" or the equivalent of 400% of the poverty level for a family of four, she said.
The CHA issued a set of voluntary billing and collection guidelines in February, which recommend that hospitals grant discounts to patients who earn below 300% of the federal poverty level, or $55,000 for a family of four, and discontinue their most aggressive debt-collection practices, such as garnishing wages or placing liens on patients' homes. Emerson said half of the association's 450 members have already implemented the guidelines.
The American Hospital Association is also promoting its own voluntary guidelines, which call for hospitals to "assist patients who cannot pay" but don't specify the extent of assistance that should be provided. As of June 24, more than 2,600 of the nation's 5,545 hospitals had pledged their support, according to the AHA.
"It's unfair to impose a one-size-fits-all approach," Emerson said, adding that two large California hospital chains, Sutter Health and Catholic Healthcare West, have policies that exceed the CHA's guidelines. "But it may be that the little hospital in Mendocino can only afford 250% (of the federal poverty level). They shouldn't be punished for that if that's the best they can do."
California's Office of Statewide Health Planning and Development, which opposes the legislation, has urged lawmakers to give the voluntary standards a chance to work. The state Department of Health Services also opposes the bill, saying it could result in lower Medicaid payments to the state.