AB 774 (Chapter 755, Statutes of 2006) established Hospital Fair Pricing Policies effective January 1, 2007. This legislation requires each licensed general acute care hospital, psychiatric acute hospital, and special hospital to increase public awareness of the availability of charity care, payment discounts, and government-sponsored health insurance; and to standardize its billing and collections procedures.

OSHPD is required to collect from each hospital a copy of its charity care (free care) policy, discount payment (partial charity care) policy, eligibility procedures for those policies, review process, and application form; and to make this information available to the public.

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About Fair Pricing Policies

History and legislation on Hospital Fair Pricing Policies

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Availability and Technical Support

Availability

Submitted documents are available under Fair Pricing Policies Search and submitted data are available as an Excel file. Please contact OSHPD’s Healthcare Information Resource Center at (916) 326-3802 if additional assistance is needed.

Technical Support for Hospitals

If you have questions regarding implementation of the business-related requirements imposed by AB 774, it is suggested that you contact your legal representatives.

If you have questions concerning the reporting requirements to OSHPD, please call Harry Dhami at (916) 326-3905.

Office of Statewide Health Planning and Development
Accounting and Reporting Systems Section

2020 West El Camino Avenue, Suite 1100
Sacramento, CA 95833
(916) 326-3905


Reporting Requirements

Technical Support for Hospitals

If you have questions concerning the reporting requirements to OSHPD, please call Harry Dhami at (916) 326-3905.

Office of Statewide Health Planning and Development
Accounting and Reporting Systems Section

2020 West El Camino Avenue, Suite 1100
Sacramento, CA 95833
(916) 326-3905


OSHPD is required to collect from each hospital a copy of its charity care (free care) policy, discount payment (partial charity care) policy, eligibility procedures for those policies, review process, and application form; and to make this information available to the public. The initial submission date to OSHPD was January 1, 2008 as adopted by the regulatory process. After the initial reporting cycle in 2008, information must be submitted at least every other year on January 1 or whenever a significant change is made.

On August 8, 2007, the Office of Administrative Law approved regulations requiring on-line submission of the required information using OSHPD’s System for Fair Price Hospital Reporting. The regulations became effective September 7, 2007.

Summary of Approved Reporting Requirements

Beginning January 1, 2008, each hospital is required to submit two documents (files) using an OSHPD-developed web application. One document must contain the hospital’s charity care/discount payment policies and procedures, and submitted as a MS Word (.doc) file. The other document must be the application form submitted as either a MS Word (.doc) or Portable Document Format (.pdf) file. Submission by e-mail, fax, or hardcopy documents is not accepted.

The regulations allow hospitals to request a modification to the electronic reporting requirements. Hospitals must have an OSHPD-approved modification prior to implementation of any change to the applicable requirements. Modification requests must specify the precise changes being requested and the reason(s) the changes are needed. OSHPD will either approve or disapprove requests for modification on a case-by-case basis. For a more detailed description of AB 774 and the proposed reporting requirements, please read the applicable Frequently Asked Questions.


About Hospital Fair Pricing Policies

History

AB 774 (Chapter 755, Statutes of 2006) established Hospital Fair Pricing Policies effective January 1, 2007. This legislation requires each licensed general acute care hospital, psychiatric acute hospital, and special hospital to increase public awareness of the availability of charity care, payment discounts, and government-sponsored health insurance; and to standardize its billing and collections procedures.

SB 350 (Chapter 347, Statutes of 2007) and AB 1503 (Chapter 445, Statutes of 2010) amended portions of AB 774 effective January 1, 2008 and 2011, respectively:

OSHPD is required to collect from each hospital a copy of its charity care (free care) policy, discount payment (partial charity care) policy, eligibility procedures for those policies, review process, and application form; and to make this information available to the public. The initial submission date to OSHPD was January 1, 2008 as adopted by the regulatory process. After the initial reporting cycle in 2008, information must be submitted at least every other year on January 1 or whenever a significant change is made.

On August 8, 2007, the Office of Administrative Law approved regulations requiring on-line submission of the required information using OSHPD’s System for Fair Price Hospital Reporting. The regulations became effective September 7, 2007.

Timeline

Beginning January 1, 2007, each hospital is required to maintain understandable written policies for charity care (free care) and discount payments (partial charity care), clearly stated eligibility criteria and procedures for those policies, a description of the review process, and written policies for debt collection practices and procedures. The law includes specific criteria that each hospital must adopt regarding eligibility determination, hospital billing practices, and debt collection procedures.

The following table contains a listing of all hospitals that are required to submit by AB 774 with color coding for consolidated and exempted facilities:

Effective January 1, 2011, AB 1503 requires emergency room physicians who perform emergency services in a hospital that provides emergency care to provide discounts to uninsured patients or patients with high medical costs who are at or below 350 percent of the federal poverty level. Hospitals that provide emergency care are required to incorporate language into their current fair pricing policies to notify uninsured patients or patients with high medical costs that discounts are available for services received from an emergency room physician.

Effective January 1, 2015, SB 1276 made the following changes to AB 774:

  • All charges are now allowable for consideration under the revised definition for “high medical costs”. Originally AB 774 specifically stated that if a patient received a discounted rate from the hospital as a result of third party insurance coverage, then those discounted charges could not be considered under the definition for “high medical costs”.
  • SB 1276 adds an additional definition and requirements for a “reasonable payment plan” that is to be used when an agreement cannot be reached for a payment plan during negotiations between the hospital and patient. A reasonable payment plan is defined as monthly payments that do not exceed 10% of a patient’s familial income for a month after excluding deductions for “essential living expenses”. The statute further defines essential living expenses to be expenses for rent or mortgage payments, food and household supplies, utilities, clothing, medical and dental payments, insurance, school or child care, transportation expenses, laundry and cleaning expenses, and other extraordinary expenses.
  • The California Health Benefit Exchange must also be included in addition to the government sponsored health programs, such as Medicare, Medi-Cal, Healthy Families Program, California Children’s Services, or other State or county funded health coverage, when making a reasonable effort in determining if private or public health insurance is available to partially or fully cover a patient’s charges.
  • If a patient applies or has a pending application for another health coverage program at the same time they apply for charity or discounted care at the hospital, then neither application shall preclude eligibility for the other program. Meaning that a patient cannot be denied eligibility under the hospital’s charity or discounted care policies if they are making a reasonable effort to obtain private or public health insurance as described in the point above.
  • Hospitals will be required to provide patients with a referral to a local consumer assistance center housed at legal offices.
  • SB 1276 also modifies the provisions of AB 1503 by now requiring that all emergency room physicians must also offer a negotiable extended payment plan to eligible patients, and if no agreement can be reached on the amount of payment then a reasonable payment formula shall be used, similar to the methodology used for the hospitals, when determining the amount of the monthly payment.

General FAQs

AB 774 (Chapter 755, Statutes of 2006) added Hospital Fair Pricing (Charity Care) Policies to the California Health and Safety Code commencing with Section 127400. These statutes were amended by SB 350 (Chapter 347, Statutes of 2007) which became effective January 1, 2008. The replies to the following FAQs were based on our interpretation of the statutory requirements and adopted regulations.

To view the Hospital Fair Pricing Policies in California Law visit the California Law website. Follow the prompts to search for Health and Safety Code 127400-127446.

  1. What is the intent of AB 774?
    • The intent of AB 774 is to reduce the financial hardship of high medical costs on the uninsured and underinsured by regulating hospital charges and collection procedures. To meet this objective, hospitals are required to increase public awareness of the availability of charity care, payment discounts, and government-sponsored health insurance; and standardize procedures for determining charity care eligibility, and for billing and collection practices.
  2. Which hospitals must comply with AB 774?
    • Each hospital licensed under Section 1250 (a), (b), and (f) of the California Health and Safety Code is required to comply with AB 774. This includes each hospital licensed as a general acute care hospital, acute psychiatric hospital, and special hospital. For general acute care hospitals licensed under Section 1250 (a), compliance with AB 774 is a condition of licensure enforceable by the State Department of Public Health.
    • Exempt hospitals include those licensed as chemical dependency recovery hospitals and psychiatric health facilities, and those operated by the State of California.
  3. When does AB 774 become effective?
    • Hospitals must comply with AB 774 effective January 1, 2007. This means each hospital must have in place understandable written policies for charity care and discount payments, clearly stated eligibility criteria and procedures for those policies, a description of the review process, and written policies for debt collection practices and procedures on that date, along with several other mandated requirements regarding billing and collection procedures.
    • Reporting to OSHPD will begin on January 1, 2008, as adopted by the State’s regulatory process. The System for Fair Price Hospital Reporting is a web-based application being developed by OSHPD that must be used for AB 774 on-line reporting.
  4. Who is eligible to apply for charity care or a payment discount under AB 774?
    • The law states that patients who are (1) at or below 350% of the federal poverty level, and (2) are either uninsured or are insured and have high medical costs, are eligible to apply for participation in a hospital’s charity care policy or discount payment policy. Patients are required to make reasonable efforts to provide the hospital with documentation of income and insurance coverage, so that the hospital can determine if the patient is eligible.
  5. What information must be reported to OSHPD? When and how often?
    • Each general acute care hospital, acute psychiatric hospital, and special hospital is required to submit the following information to OSHPD:
      • Charity Care Policy
      • Discount Payment Policy
      • Eligibility Procedures for those policies
      • Review Process
      • Application Form
      The initial submission date to OSHPD is January 1, 2008. After the initial reporting cycle in 2008, information must be submitted at least every other year on January 1 or whenever a significant change is made to any of these five items.
  6. How does AB 774 affect OSHPD?
    • OSHPD is required to collect from each hospital a copy of its charity care policy, discount payment policy, eligibility procedures for those policies, review process, and application form; and to make this information available to the public. Submitted information will be reviewed to ensure compliance with these reporting requirements. OSHPD audit staff will contact hospitals on issues of possible non-compliance to obtain clarification and/or revised information. The submitted information will be made available to the public on our web-site.
  7. Are rural hospitals exempt from implementing AB 774?
    • Hospitals designated as “rural” in accordance with Section 124840 of the California Health and Safety Code must comply with the requirements of AB 774, except as provided by Section 127405 (a) (2). This sub-section states that rural hospitals may establish eligibility levels for charity care at less than 350% of the federal poverty level as appropriate to maintain their financial and operational integrity.
    • View a list of rural hospitals

Public FAQs

AB 774 (Chapter 755, Statutes of 2006) added Hospital Fair Pricing (Charity Care) Policies to the California Health and Safety Code commencing with Section 127400. These statutes were amended by SB 350 (Chapter 347, Statutes of 2007) which became effective January 1, 2008. The replies to the following FAQs were based on our interpretation of the statutory requirements and adopted regulations.

  1. How can I obtain a copy of a hospital’s charity care and discount payment policies, and eligibility procedures?
    • OSHPD has created a web-based system that will allow users to search, compare, and view each hospital’s submitted charity care policy, discount payment policy, eligibility procedures, review process, and application form. 
    • Access OSHPD’s Hospital Fair Pricing Search System
  2. Is OSHPD the only place where a hospital is required to post notices of its charity care and discount payment policies?
    • No. Effective January 1, 2007, AB 774 requires each hospital to post notices in clear and conspicuous locations about the availability of charity care and payment discounts. These notices must be posted in the emergency department, admissions office, patient billing office, and other outpatient settings. The State Department of Public Health Licensing and Certification Division will be monitoring these posting requirements.
    • All complaints alleging violations of AB 774 should be referred to the Department of Public Health Licensing and Certification’s District Offices.
  3. What is the difference between a charity care policy and a discount payment policy?
    • Although “charity care” is not defined in AB 774, the manner in which it is used in the law describes full charity care, where the patient is not expected to pay any amount for provided services, based on the hospital’s determination that the patient is unable to pay for that care. Many hospitals use the term “charity care” to describe full charity care or free hospital care.
    • The term “discount payment” describes a situation where the hospital has determined that the patient does not qualify for full charity care (free care) but is eligible for a discount and is expected to pay only a part of the bill. Under AB 774, a qualifying patient would not be expected to pay more than the amount paid by Medicare, Medi-Cal, Healthy Families, or other government-sponsored health programs, whichever is greater. Other commonly used terms to describe this discount include “partial charity care,” “financial discount,” “sliding fee schedule” and “reduced payment plan.”
  4. Will OSHPD adopt regulations that specify the charity care and discount payment policies a hospital must develop?
    • No, the law does not provide authority to OSHPD to determine the contents of a hospital’s charity care policy and discount payment policy. It does authorize OSHPD to specify how information about these policies is to be provided to OSHPD.
  5. Does AB 774 require hospitals to provide charity care or payment discounts for non-emergency services, such as elective surgeries or long-term care?
    • The law offers no guidance with respect to covered services for eligible patients. Each hospital will need to determine its scope of covered services and decide how to address this issue in its charity care and discount payment policies.
  6. What forms of income will be used to determine eligibility for charity care or a payment discount? Does this include alimony and child support payments?
    • The definition of “income” for eligibility purposes will vary by hospital. The hospital’s application form and policies for charity care or payment discount may indicate how income is being defined. We suggest that you obtain a copy of the application form and/or policies, or contact a hospital representative.
  7. Can a non-California resident qualify for charity care or a payment discount under AB 774?
    • Residency requirements are not mentioned in the law, so it is anticipated that the hospital policies will vary on this topic. It is advised that you contact the hospital to explain its eligibility criteria or to obtain its charity care and discount payment policies. As a general rule, an eligible patient must first apply for charity care or a discount payment, including submitting required documentation, before a hospital can determine if the patient is financially qualified.
  8. How large of a payment discount can a financially qualified patient expect to receive?
    • Qualified patients are not expected to pay a hospital any more than the amount paid by Medicare, Medi-Cal, Healthy Families, or other government-sponsored health insurance. Payment discount amounts for qualified patients will vary by hospital, depending on how the hospital is administering this aspect of the law. The hospital’s discount payment policy should explain how expected payment amounts are determined. Based on 2005 data submitted to OSHPD, a qualified patient might expect to receive a 65% to 85% discount from the hospital’s full-established rates.
  9. Are hospitals required to post and/or submit their policies in languages other than English?
    • The law requires each hospital to provide patients with a written notice that contains information about the availability of the hospital’s charity care and discount payment policies and related eligibility procedures in non-English languages. Written correspondence to the patient must also be in the language spoken by the patient. These language requirements apply if a patient does not speak English or is unable to communicate effectively in English because it is not their native language, and the patient is a member of a group that comprises 5% or more of the people served by that hospital.
    • For OSHPD reporting purposes, each hospital will be required to submit the English version of its policies, procedures, and application. When submitting this information to OSHPD over the Internet, each hospital will be able to indicate the availability of submitted documents in non-English languages and contact information on how to obtain copies directly from the hospital.

Hospital Reporting FAQs

AB 774 (Chapter 755, Statutes of 2006) added Hospital Fair Pricing (Charity Care) Policies to the California Health and Safety Code commencing with Section 127400. These statutes were amended by SB 350 (Chapter 347, Statutes of 2007) which became effective January 1, 2008. The replies to the following FAQs were based on our interpretation of the statutory requirements and adopted regulations.

  1. Do OSHPD’s accounting and reporting requirements for Charity Discounts apply to Payment Discounts?
    • Yes. Section 1400 of OSHPD’s Accounting and Reporting Manual for California Hospitals states that “charity care” applies to both full and partial charity care, recognizing that any portion of a patient’s accounts receivable may be accounted for as charity care if the hospital has determined that the patient is unable to pay for that portion of the bill. Uncollected co-payments, deductibles, and non-covered services may be written-off to charity care.
    • For AB 774, OSHPD interprets “charity care” to mean full charity care (free care) and “discount payment” to mean partial charity care. As a result, both full and partial charity care are to be accounted for and reported as Charity Discounts – Other (Account 5870). Use of sub-accounts under Account 5870 to track full and partial charity care is permissible, as long as accounts are rolled-up for reporting purposes.
  2. What are Policy Discounts and do they apply to AB 774?
    • Policy Discounts (Account 5920) are revenue deductions in the form of courtesy allowances, employee discounts, professional discounts, and prompt pay discounts; where ability to pay is not used to determine eligibility. Policy discounts are not accounted for or reported as charity care, and thus, do not apply to the provisions of AB 774. For example, if a hospital provides a discount from its full-established rates to all uninsured patients without performing any financial screenings, the patient’s accounts receivable is written-off to policy discounts and not charity care because there was no determination made regarding the patient’s ability to pay.
  3. Will OSHPD assist hospitals in developing their charity care and discount payment policies?
    • OSHPD can provide guidance regarding what we expect to collect from hospitals and how hospitals are to meet the reporting requirements; however, we are unable to provide technical assistance in policy development. Hospitals should consult with their legal representatives with respect to specific interpretation of AB 774 when establishing their charity care/discount payment policies and procedures.
  4. What should be included in the charity care and discount payment policies, eligibility procedures, review process, and application form?
    • This information may vary by hospital. Legal advice should be obtained as necessary. Below are some general expectations of what OSHPD would collect from each hospital:
    • A charity care policy that describes the eligibility criteria an uninsured patient must meet in order to qualify for full charity care (free care). A typical charity care policy should indicate which patients and/or services are covered, the qualifying income level, and how income and monetary assets are used in the determination process.
    • A discount payment policy typically describes the eligibility criteria that an uninsured patient or underinsured patient must meet in order to qualify for partial charity care (discount payment). A discount payment policy generally includes similar information as the charity care policy, but would also indicate how expected payment amounts are determined and contain information regarding the availability of extended payment plans.
    • Eligibility procedures should describe the steps the patient or patient’s representative must follow in order to apply for full charity care (free care) or partial charity care (discount payment). Instructions for completing the application form and required documentation would be expected to be included here.
    • The review process would describe the hospital’s application review and financial screening process used to determine if a patient is eligible for full charity care (free care) or partial charity care (discount payment). The document would include the processes and timelines by which applications are approved, denied, and appealed; along with the notification procedures related to outside collection agencies and consumer credit reporting bureaus.
    • The application form would contain enough information about the patient’s identification, income, and monetary assets to allow hospital personnel to determine whether the patient is eligible for full or partial charity care.
  5. Is there a penalty for non-submission?
    • For general acute care hospitals, compliance with AB 774 is a condition of licensure. Licensing requirements are enforced by the Department of Public Health, Licensing and Certification Division. The $100 per day penalty applied by OSHPD to delinquent hospital annual and quarterly financial disclosure reports does not apply to AB 774 reporting.
  6. Can we send the required information to OSHPD by e-mail?
    • No, the adopted regulations require on-line submission using the System for Fair Price Hospital Reporting, the OSHPD-developed web application. Hospitals that are unable to submit the required information on-line will be allowed to request a modification to the reporting requirements. Approval for e-mail submission would be granted only on a case-by-case basis if properly justified.
    • More information about the System for Fair Price Hospital Reporting will be made available after the technical and business design phases have been completed. Collecting the information on-line will allow OSHPD to efficiently collect, track, store, and publish this information over the Internet.
  7. What are the OSHPD reporting requirements with respect to the number of documents to submit and document format?
    • The adopted regulations require hospitals to submit two documents (files) over the Internet. OSHPD will provide each hospital with its login ID and password. After successful login, each hospital must submit the following two documents over a secure connection:
      • Document 1 – a file containing information about the hospital’s (1) charity care policy, (2) discount payment policy, (3) eligibility procedures, and (4) review process. Each of the four components must be clearly identified. The document would be submitted in Microsoft Word (.doc) format.
      • Document 2 – a file containing the hospital’s application form for charity care and discount payments. The application form must be submitted in Portable Document Format (.pdf) format.
    • The system will perform basic edits prior to accepting a submission and will not allow other file types to be submitted. After a successful submission, a confirmation web-page will be displayed and an e-mail confirmation sent to the submitter and hospital administrator. Restricting documents to these file types is necessary to allow OSHPD’s web-site to comply with the requirements of the Americans with Disabilities Act (ADA), which require government-sponsored web-sties to facilitate use of assistive technology for the visually impaired.
  8. What are the PC software requirements for using OSHPD’s on-line reporting application?
    • For reporting purposes, hospitals must use a Microsoft Internet Explorer web browser that supports a secure internet connection utilizing the Secure Hypertext Transfer Protocol (HTTPS or https) and 128-bit cypher strength Secure Socket Layer (SSL). As noted in the previous FAQ, only certain file formats will be accepted.
  9. Our hospital belongs to a multi-hospital health system, where most of the hospitals are separately licensed and many use the same charity care policy and eligibility procedures. How should this be reported to OSHPD?
    • Each separately licensed hospital in your health system is expected to submit the required information, even if it’s the same information.
  10. What are the filing requirements when two hospitals operate under a consolidated license? What are the signage requirements if only one location has an emergency room?
    • For OSHDP reporting purposes, one set of documents would be submitted under the name of the “parent facility” covering both hospital locations. See reply to General Information FAQ No. 2 to view a list of parent and consolidated facilities. With respect to signage requirements for the single emergency room, you should contact the Department of Public Health, Licensing and Certification Division, since they will be responsible for enforcement in this area.
  11. What are the AB 774 reporting requirements when a hospital changes licensure (ownership)?
    • As required by AB 774, if there has been a significant change to any of the hospital’s charity care policy, discount payment policy, or related procedures, the hospital must submit revised documents to OSHPD. If revised documents are not submitted by the new licensee, it will be assumed that no significant changes occurred. It is expected, however, that most new hospital licensees would review the charity care and discount payment policies and procedures of the former licensee following a change in licensure and revise these policies and procedures to meet their own mission and goals, coinciding with the effective date of licensure.