OVERVIEW:  Under California’s Hospital Fair Pricing Policies law, general acute hospitals must provide free or discounted care to financially qualified patients as a condition of licensure.  The law requires hospitals to have written financial assistance policies and to notify patients that financial assistance is available.  The law sets minimum eligibility requirements for free or discounted care for the uninsured and underinsured. It also limits what hospitals can charge patients whose income is less than 350 percent FPL. Hospitals are required to file their policies with the Office of Statewide Health Planning and Development (OSHPD).  OSHPD, in turn, is required to make these policies available to the public.  As of this writing, OSHPD publishes these policies in a searchable format on its website at

California Health Care for Indigents Program (CHIP)
California Welfare & Institutions Code §§ 16900 to 16996.2

Facilities Providing Free Care to Indigents; Exemption; Certificate of Need
California Health & Safety Code § 127190

Hospitals: Community Benefits
California Health & Safety Code §§ 127340 -127360

Hospital Fair Pricing Policies
California Health & Safety Code §§ 127400 - 127466

Charity care
Discounted care
Indigent care

The Office of Statewide Health Planning and Development (hereinafter “OSHPD”) is charged with adopting guidelines for identifying, assessing, and reporting charity care services; and conducting onsite assessments as necessary to ensure that reported data is collected in compliance with the guidelines it sets.  Calif. Health & Safety Code § 128740(d).

The State Department of Health is responsible for enforcing the Hospital Fair Pricing Policies provisions.  Calif. Health & Safety Code § 127401.

For the purposes of qualifying for an exemption from California’s Certificate of Need laws, “bad debt” may not be counted as “free care” unless the debtor applies for relief as an indigent.  Cal. Health & Safety Code 127190.

The term “charity care” frequently is used in definition sections, but is never itself defined.  See, e.g., Calif.  Health & Safety Code § 127345(c)(1).

“Vulnerable populations” is defined to include any population that is exposed to medical or financial risk by virtue of being uninsured, underinsured, or eligible for Medi-Cal, Medicare, California Children’s Services Program, or county indigent programs.  Calif. Health & Safety Code §§ 127345(c) and (h).

“Community benefit” is defined to include charity care and the unreimbursed cost of providing health care services to “vulnerable populations,” as defined above.  Calif. Health & Safety Code §§ 127345(c) and (h).

The Hospital Fair Pricing law sets minimum standards for determining who is eligible for free or discounted care under a hospital’s charity care policy.  At a minimum, hospitals must deem a person “financially qualified” to receive free or reduced cost care if he or she meets the following criteria:

Hospitals may choose to offer discounts to individuals whose incomes exceed 350 percent of the Federal Poverty Guidelines.  See Calif. Code Regs. tit. 11, § 999.5; Calif. Code Regs. tit. 22, § 97232.

Hospitals must maintain understandable, clearly written charity care and discounted care policies for financially qualified patients.  Calif. Health & Safety Code § 127405(a).  Both policies must state the process and criteria by which a determination of eligibility is made.  Id.; see also Calif. Health & Safety Code § 127405(b)-(c).  In making eligibility determinations, a hospital may consider a patient’s income and monetary assets, with certain exceptions: it may not count qualified retirement or deferred compensation plans; nonqualified deferred compensation plans; the first $10,000 of a patient’s monetary assets, and 50 percent of a patient’s monetary assets above that first $10,000.  Calif. Health & Safety Code § 127405(c).



Hospitals must maintain understandable written charity care and discounted care policies for financially qualified patients.  Calif. Health & Safety Code § 127405(a).  Both policies must state the process and criteria by which a determination of eligibility is made.  Id.; see also Calif. Health & Safety Code § 127405(b)-(c).

Notice of financial assistance policies must be given at several points along a patient’s journey through the hospital system.  First, notice must be clearly and conspicuously posted in locations that are visible to the public, including but not limited to the emergency department, billing and admissions offices, and other outpatient settings.  Calif. Health & Safety Code § 127410(b).  Second, hospitals must also give written notice of financial assistance policies, including eligibility information and contact information for the appropriate staff person or office from which the patient may obtain further information, to uninsured patients upon request and to patients who receive emergency or outpatient care who may be billed for that care but were not admitted for inpatient services. Calif. Health & Safety Code § 127410(a).  This notice must be given in English as well as other languages.  Id.  Third, notice of these policies must also be included in bills the hospital sends to a patient who has not provided any evidence of third-party coverage.  See Calif. Health & Safety Code § 127420(b).

Hospitals are also required to give uninsured patients a written estimate of charges for services rendered upon request.  Calif. Health & Safety Code §§ 1339.585.

Application processes turn on the individual hospital’s policies and procedures.  Any patient or patient’s representative who requests financial assistance from a hospital must make every reasonable effort to provide the hospital with documentation of income and health benefits coverage.  Calif. Health & Safety Code § 127405(e) (limiting the documentation of income to recent pay stubs or tax returns).  A patient’s failure to do so may be considered as the hospital makes its determination of eligibility. Id.

Patients who wish to dispute an eligibility determination under a hospital’s charity or discounted care policy may seek review from the business manager, chief financial officer, or other appropriate manager as designated in the policy.  Cal. Health & Safety Code § 127405(a)(1).

Hospitals must submit annual community benefits reports annually to OSHPD.  Calif. Health & Safety Code § 127350.

Every hospital must provide OSHPD with a copy of the following every two years or whenever a significant change to a policy is made:

OSHPD, in turn, is required to make this information available to the public.   Calif. Health & Safety Code § 127435; Cal. Code Regs. tit. 22, § 96041.

Compliance with the Hospital Fair Pricing Policies provisions is a condition of licensure for general acute hospitals.  Calif. Health & Safety Code § 127401.  Hospitals that overcharge patients eligible for charity or discounted care must reimburse those patients the excess amount, including interest.  Calif. Health & Safety Code § 127440.

Certificate of Need requirements.  State law also gives an exemption from Certificate of Need (CON) requirements to nonprofit hospitals that agree to provide a certain level of free health care services over a certain length of time.  Calif. Health & Safety Code § 127190.  These obligations survive a transfer of ownership. Id.  Failure to provide the level of care agreed upon can result in suspension of the hospital’s license or of the exemption until the hospital is in compliance. Id.

Negotiating payment plans for discounted care.  Hospitals’ discount payment policies must include an extended payment plan to allow patients to pay the discounted price over time.  Calif. Health & Safety Code § 127405(b).  The hospital and patient may negotiate the terms of the payment plan, but the plans must be interest free.  Calif. Health & Safety Code §§ 127405(b), 127425(g).

Debt collection and billing practices: consumer protection.  As of this publication, California’s Hospital Fair Pricing law contained what may arguably be some of the strongest protections for health care consumers with regard to hospital debt collection and billing practices. Some, though not all, of those provisions are included below.

First, while hospitals have some flexibility in developing their approaches to financial assistance policies, the Fair Pricing law caps what they can charge to patients whose income is at or below 350 percent FPL.  Calif. Health & Safety Code § 127405(d).  The law requires hospitals to limit what they charge such patients to the greater reimbursement rate they receive from any government-sponsored health benefit program in which they participate (e.g. Medicare, Medi-Cal, Healthy Families).  Id.  If the care in question is a service for which there is no established payment by Medicare or any other government-sponsored program of health benefits in which the hospital participates, the hospital shall establish an appropriate discounted payment. Id.

Second, the Fair Pricing law prohibits hospitals from using the information they gather when determining eligibility for discounted or charity care programs for collections purpose.  Calif. Health & Safety Code § 127405(e)(3).  Hospitals must have written policies about the timing and authority under which a patient account will be advanced for collection.  Calif. Health & Safety Code § 127425(a).  Hospitals must establish written policies defining their standards and practices for collecting debts, and they are required to obtain binding written agreements from all third -party collection agencies stating that those agencies will adhere to the same.  Calif. Health & Safety Code § 127425(b).

Third, the Fair Pricing law contains express bars on pursuing certain kinds of collection activity against patients who are eligible for charity or discounted care.  For example, hospitals and owners/assignees of hospital debt held by a “financially qualified” patient are precluded from reporting that debt to a consumer credit reporting agency and from proceeding a court action any earlier than 150 days after the initial billing.  Calif. Health & Safety Code § 127425(d).  Hospitals and their affiliates are barred from garnishing a “financially qualified” patient’s wages or placing a lien on his or her primary residence in order to collect a debt.  Calif. Health & Safety Code § 127425(f).  (NOTE: Different and seemingly less stringent rules apply to collection agencies.)

The California Healthcare for Indigents Program.  The analyses above notwithstanding, California’s counties bear ultimate responsibility for providing care for lawful indigent residents as well as “those incapacitated by age, disease, or accident.”  See Calif. Welf. & Inst. Code §§ 101836, 16930, 17000 et seq.  Under the California Healthcare for Indigents Program (hereinafter “CHIP”), counties are the “providers of last resort” for many indigent residents of the state.  Each county is given considerable discretion in determining funding levels, eligibility criteria, and covered services, although some general rules do apply.   Any hospital that receives funds under the CHIP program waives its rights to attempt to collect payment from patients who received services under this program.  Calif. Welf. & Inst. Code § 16947.

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