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Schwarzenegger Vetoes Charity Care Bill –
Calls for Hospitals to Implement Hospital Association’s
Voluntary Charity Care Guidelines
By John
P. Krave, Gerry
Hinkley, and Jill
H. Gordon
[September 2004]
Another chapter in the controversy over nonprofit hospitals’
charity care responsibilities unfolded on Sept. 22, 2004, as
Governor Schwarzenegger vetoed Senate Bill 379 (“SB 379”),
which would have required nonprofit hospitals to comply with
specific charity care and debt collection practices. The legislature
passed SB 379 in the wake of dozens of class-action lawsuits
against nonprofit hospitals and health systems across the country,
all challenging the inadequacy of nonprofit hospitals’
delivery of charity care to the uninsured and their pursuit
of overly aggressive collections practices. Instead of a legislative
solution, the governor called for voluntary compliance with
Guidelines put forward by the California Healthcare Association
(CHA).
Under SB 379, nonprofit hospitals would have had to develop
charity care and reduced payment policies including requirements
for discounted or free care to patients whose income is at or
below 400% of the federal poverty level. Nonprofit hospitals
would also have been required to develop applications for charity
care, provide oral and written notices to patients of the availability
of charity care and discount policies, and limit hospital debt
collection activities during the first 150 days after a patient’s
discharge.
In his veto message, Governor Schwarzenegger expressed sympathy
with the aims of SB 379 but noted the “hospital community’s”
recent adoption of charity care guidelines to assist low-income
uninsured Californians, and stated his decision that “the
voluntary guidelines must be given time to be implemented and
reviewed.” The governor also stated his “expectation
that all hospitals in the state uphold their important commitment
to the voluntary guidelines and that they are applied evenly,
consistently, and without hesitation.” Contrary to the
governor’s expectations, Health Access, a consumer group,
claims that less than one-half of all California hospitals comply
with the CHA Guidelines.
The “voluntary guidelines” mentioned by Governor
Schwarzenegger are, in fact, the “Voluntary Principles
and Guidelines for Assisting Low-Income and Uninsured Patients”
(the “Guidelines”) adopted on Feb. 6, 2004 by CHA.
The Guidelines propose, among other items, that hospitals adopt
and communicate policies whereby patients with incomes at or
below 300 percent of the federal poverty limit be eligible to
apply for financial assistance under charity care policies,
and that hospitals should limit expected payments from these
patients to “amounts that do not exceed the payment the
hospital would have received from Medicare, other government-sponsored
health programs, or as otherwise deemed appropriate by the hospital.”
The CHA Guidelines also recommend limiting hospital billing
and collection practices, including the adoption of a policy
against sending charity patients’ bills to a collection
agency for the first 120 days from the time of initial billing.
In dealing with low income patients, the Guidelines advise that
hospitals refrain from wage garnishments or liens on primary
residences as a means of collecting unpaid hospital bills.
The CHA Guidelines address issues raised in more than 50 class-action
lawsuits filed against nonprofit hospitals and health systems
in 23 states, including California. In the main, each of the
suits alleges that, by virtue of their tax exemptions, the nonprofit
defendants agreed to render significant amounts of charity care
to the uninsured, and that they have breached this obligation.
The suits also allege that the defendants routinely engage in
abusive collection practices in an effort to collect excessive
charges from the uninsured. While the soundness of legal theory
for these suits may be questionable, they raise the possibility
that unsympathetic courts and juries will award significant
damages, attorneys’ fees, and public opprobrium as the
price for nonprofit hospital’s refusal to take heed of
a pressing social concern.
Lawyers at Davis Wright Tremaine are well-prepared to assist
in your hospital’s or health system’s response to
this burgeoning issue. Among other things, our lawyers can advise
you concerning the extent of your hospital’s charity care
obligations under state and federal law; whether your policies
and procedures regarding charity care and billing and collection
practices are consistent with state and federal law and other
guidelines; the adoption of policies designed to conform to
the CHA Guidelines or other appropriate standards; the reimbursement
implications of changes in billing policies, including discounts
for services; and the education and training of your governing
board, administrators, employees, and medical staff concerning
their charity care obligations.
For additional information concerning how Davis Wright Tremaine
can help in addressing the troublesome issues raised by this
controversy, see our Charity
Care Fact Sheet.
If you wish to consult with one of our lawyers concerning
these vital issues or other aspects of charity care, please
contact any of the following attorneys:
Gerry
Hinkley, San Francisco, (415) 276-6500, gerryhinkley@dwt.com
John
P. Krave, Los Angeles, (213) 633-6800, johnkrave@dwt.com
Jill
H. Gordon, Los Angeles, (213) 633-6800, jillgordon@dwt.com
Brent
R. Eller, Seattle, (206) 622-3150, brenteller@dwt.com
This Advisory is a publication
of the Health Law Department of Davis Wright Tremaine LLP. Our
purpose in publishing this Advisory is to inform our clients
and friends of recent developments in health law. It is not
intended, nor should it be used, as a substitute for specific
legal advice as legal counsel may only be given in response
to inquiries regarding particular situations.
Copyright © 2004, Davis Wright
Tremaine LLP.
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