BILL NUMBER: AB 1952 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 2, 2014
AMENDED IN ASSEMBLY MARCH 6, 2014
INTRODUCED BY Assembly Member Pan
FEBRUARY 19, 2014
An act to add Article 1.5 (commencing with Section 127447.10) to
Chapter 2.5 of Part 2 of Division 107 of the Health and Safety Code,
relating to health facilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 1952, as amended, Pan. Nonprofit hospitals: charity care.
Existing law establishes the State Department of Public Health,
under the direction of the State Public Health Officer, and sets
forth its powers and duties, including, but not limited to, the
licensing and regulation of health facilities.
Existing law requires specified hospitals to maintain an
understandable discount policy and charity care policy, and makes
uninsured patients with high medical costs who are at or below 350%
of the federal poverty level eligible to apply for participation.
This bill would require , except as specified, a
nonprofit general acute care hospital to annually provide charity
care in an amount equaling at least of 5% of the
hospital's net patient revenue. The bill would require the State
Public Health Officer to assess a penalty against noncomplying
hospitals, would establish the Nonprofit Hospital Charity Care
Penalty Fund, would require the revenues collected pursuant to these
provisions to be deposited into the fund, and would declare these
funds available, upon appropriation by the Legislature, for the
support of the Medi-Cal program. program and
for indigent care and safety net programs. The bill would authorize
the State Department of Public Health and the Attorney General to
assess reasonable fees, as specified, and bring or intervene in a
civil action to collect fines and recover enforcement costs.
This bill would require the Office of Statewide Health Planning
and Development (OSHPD) to, no later than January 1, 2016, issue a
report to the Legislature addressing the unique accounting
difficulties in calculating charity care for integrated nonprofit
health systems and issue recommendations for how to calculate the
amount of charity care required by these provisions. The bill would
require each nonprofit hospital to file an annual report with the
State Department of Public Health stating the amount of charity care
provided by the hospital, and would require the State Department of
Public Health to enter into an interagency agreement with OSHPD
relating to the reporting and collection of data.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 1.5 (commencing with Section 127447.10) is
added to Chapter 2.5 of Part 2 of Division 107 of the Health and
Safety Code, to read:
Article 1.5. Nonprofit Hospital Charity Care
127447.10. (a) Commencing January 1, 2015, a nonprofit hospital,
pursuant to its charity care policy maintained under Article 1
(commencing with Section 127400), shall annually provide, for each
fiscal year, an appropriate level of charity care equal to at least 5
percent of the nonprofit hospital's net patient revenue.
(b) For purposes of satisfying subdivision (a), a nonprofit
hospital shall not change its existing fiscal year unless the
nonprofit hospital changes its ownership or corporate
structure as a result of a sale or merger.
(c) A determination of the amount of charity care and
contributions to the fund provided by a nonprofit
hospital shall be based on the most recently completed fiscal
year of the nonprofit hospital.
(d) If a nonprofit hospital at any time
reasonably determines that providing charity care in accordance with
this article in a given fiscal year would result in the
nonprofit hospital having an annual operating margin of less
than 1 percent, the nonprofit hospital may at any
time petition the department to be excused in whole or in part
from complying with subdivision (a) in that fiscal year or a
future fiscal year . The director may excuse compliance if he
or she concurs with the nonprofit hospital's conclusion
that compliance with subdivision (a) would result in the
nonprofit hospital having an operating margin of less than 1
percent in the fiscal year at issue.
(e) This section shall not apply to a nonprofit
hospital that is part of an integrated nonprofit health system.
No later than January 1, 2016, the Office of Statewide Health
Planning and Development shall issue a report to the Legislature
addressing the unique accounting difficulties in calculating charity
care for integrated nonprofit health systems and shall issue
recommendations to the Legislature addressing how to
calculate the amount of charity care required by subdivision (a) for
the integrated nonprofit health systems. The office shall, prior to
issuing its report, consult with stakeholders, including, but not
limited to, the integrated nonprofit systems, a nonprofit
organization that represents physicians who are employed by medi
cal groups associated with the systems, a trade union
organization that represents nurses and other employees employed by
the systems, an academic center located in a university in California
specializing in health care financing, and representatives of the
uninsured and underinsured, including representatives of the
undocumented.
(f) Nothing in this article shall invalidate an ordinance of, nor
be construed to prohibit the adoption of an ordinance by, a city,
county, or city and county, unless simultaneous compliance with this
article and the ordinance is impossible.
127447.15. (a) This article shall be administered and enforced by
the State Department of Public Health.
(b) The director shall assess a penalty to a nonprofit
hospital that does not provide the minimum charity care within a
fiscal year as required by this article.
(c) (1) The penalty shall be at least ____ dollars
($___), and shall not exceed ____ dollars ($___) per fiscal year in
which the nonprofit hospital is in violation.
(2) Notwithstanding paragraph (1), for a second and each
subsequent fiscal year of violation within a five-year period, the
penalty shall be a sum that is equivalent to at least twice the
nonprofit hospital's total shortfall in charity care for that
fiscal year, but shall not exceed a sum that is equivalent to ___
percent of the nonprofit hospital's net patient revenue.
(d) In determining the amount of the penalty, the director shall
consider all b oth of the
following:
(1) The severity of the shortfall in charity care provided by the
nonprofit hospital.
(2) The good-faith effort of the nonprofit hospital to
reach the required level of charity care.
(e) The department or the Attorney General may bring or intervene
in a civil action to collect fines imposed by the department for
violations of this article and to recover the state's enforcement
costs, including attorney's fees, and for appropriate equitable
relief.
(f) Fines or other moneys recovered under this section shall first
be used to offset any expenses of administering this article, and
any moneys beyond those necessary to offset those expenses shall be
deposited in the fund.
127447.20. As used in this article, the following terms have the
following meanings:
(a) "Fund" means the Nonprofit Hospital Charity Care Penalty Fund
established pursuant to Section 127447.25.
(a) (1) "Charity care" means the unreimbursed cost to a nonprofit
hospital of all of the following:
(A) Providing, funding, or otherwise financially supporting any of
the following community benefits, provided that providing, funding,
or financial support of the benefits is demonstrated to reduce
community health care costs:
(i) Vaccination programs and services for needy individuals.
(ii) Chronic illness prevention programs and services.
(iii) Nursing and caregiver training.
(iv) Home-based health care programs for needy individuals.
(v) Exercise or nutrition programs for needy individuals.
(vi) Community-based mental health outreach and assessment
programs for needy individuals.
(B) Providing, funding, or otherwise financially supporting health
care services or items on an inpatient or outpatient basis to needy
patients.
(C) Providing, funding, or otherwise financially supporting health
care services or items provided to needy patients through other
outpatient clinics, hospitals, or health care organizations.
(D) Any unreimbursed difference between the reimbursement a
nonprofit hospital receives from the Medi-Cal program for providing a
health care service or item pursuant to the Medi-Cal program, and
the reimbursement the nonprofit hospital would have received from the
Medicare program for providing the identical health care service or
item had it been eligible for reimbursement from the Medicare
program.
(2) For purposes of this definition, charity care does not include
the cost to a nonprofit hospital of paying any taxes or other
governmental assessments, uncollected fees, or accounts written off
as bad debt.
(3) For purposes of this definition, the "cost to a nonprofit
hospital" shall be calculated by applying the cost-to-charge ratios,
according to the nonprofit hospital's most recently filed Medicare
cost report, to billed charges.
(b) "Department" means the State Department of Public Health.
(c) "Director" means the State Public Health Officer.
(d) "Hospital" means any health facility licensed pursuant to
subdivision (a) of Section 1250 that is owned or operated by one or
more nonprofit corporations or associations in which no part of the
net earnings inures, or may lawfully inure, to the benefit of any
private shareholder or individual. "Hospital" does not include
children's hospitals, as defined in Section 16996 of the Welfare and
Institutions Code; or public hospitals, as defined in paragraph (25)
of subdivision (a) of Section 14105.98 of the Welfare and
Institutions Code.
(d) "Fund" means the Nonprofit Hospital Charity Care Penalty Fund
established pursuant to Section 127447.25.
(e) (1) "Integrated nonprofit health system" means a nonprofit
hospital and an affiliated health care service plan that are owned,
operated, or substantially controlled by the same person or persons
or other legal entity or entities, including, but not limited to, by
a shared corporate parent.
(2) (A) For purposes of this subdivision, "affiliated health care
service plan" means a health care service plan licensed under the
Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of Division 2) that in a nonprofit
hospital's most recently concluded fiscal year was the primary payer
for 5 percent or more of all annual inpatient discharges from the
nonprofit hospital on the date of the discharge, excluding inpatient
discharges when the primary payer was Medicare, Medi-Cal, or a county
indigent program pursuant to Part 5 (commencing with Section 17000)
of Division 9 the Welfare and Institutions Code, when the patient was
a self-pay patient, as defined in subdivision (f) of Section 127400,
or when the care was provided as unreimbursed charity care.
(B) For purposes of this subdivision, "primary payer" means the
person or other legal entity, other than the patient, that is or was
legally required or responsible to make payment with respect to an
item or service provided by a nonprofit hospital to a patient, or any
portion thereof, before any other person or other legal entity,
other than the patient.
(f) "Needy individual" and "needy patient" shall have the same
meaning as the term "financially qualified patient" is defined in
Section 127400. If a nonprofit hospital chooses to grant eligibility
for its discount payment policy or charity care policies to patients
with incomes over 350 percent of the federal poverty level, as
permitted by subparagraph (A) of paragraph (1) of subdivision (a) of
Section 127405, patients eligible under those policies shall also be
deemed "needy individuals" and "needy patients."
(g) "Net patient revenue" shall be calculated in accordance with
generally accepted accounting principles for hospitals, and shall be
consistent with information provided by a nonprofit hospital in a
compliant Hospital Annual Disclosure Report filed with the Office of
Statewide Health Planning and Development pursuant to Section 128735.
(h) "Nonprofit hospital" means any health facility licensed
pursuant to subdivision (a) of Section 1250 that is owned or operated
or substantially controlled by one or more nonprofit corporations or
associations, as defined in Division 2 (commencing with Section
5000) of Title 1 of the Corporations Code, in which no part of the
net earnings inures, or may lawfully inure, to the benefit of any
private shareholder or individual. "Nonprofit hospital" does not
include children's hospitals, as defined in Section 16996 of the
Welfare and Institutions Code, or public hospitals, as defined in
paragraph (25) of subdivision (a) of Section 14105.98 of the Welfare
and Institutions Code.
(i) "Operating margin" shall be calculated in accordance with
generally accepted accounting principles for hospitals, and shall be
based on a nonprofit hospital's operating earnings.
(j) "Unreimbursed costs" means either or in combination the costs
a nonprofit hospital incurs for providing individuals inpatient and
outpatient services or items for which the nonprofit hospital does
not receive reimbursement from any source, and for which the
nonprofit hospital has no expectation at the time the services or
items are provided that any third-party payer will pay in part or in
whole. "Unreimbursed costs" does not include payer discounts or
contractual adjustments in reimbursements to third-party payers or
costs for which the nonprofit hospital receives any partial payment
for the related service, including, but not limited to, third-party
insurance payments, Medicare payments, payments from TRICARE or the
Civilian Health and Medical Program of the Uniformed Services, state
reimbursements for education, payments from pharmaceutical companies
to pursue research, grant funds for research, and disproportionate
share payments.
127447.25. (a) The Nonprofit Hospital Charity Care Penalty Fund
is hereby established within the General Fund. Revenues derived from
penalties assessed pursuant to this article shall be deposited into
the fund . fund. Notwithstanding
Section 16305.7 of the Government Code, any interest and dividends
earned on deposits in the fund shall be retained in the fund for
purposes set forth in this article.
(b) All moneys in the fund shall be available for expenditure,
upon appropriation by the Legislature, for the support of the
Medi-Cal program and for indigent care and safety net programs
.
(c) It is the intent of the Legislature that moneys in the fund be
used to supplement, and not displace, existing funding for the
Medi-Cal program and for indigent care and safety net programs
.
(d) For purposes of this section, "existing funding for the
Medi-Cal program" means the total amount expended from appropriations
by the Legislature for the Medi-Cal program in the fiscal year in
which this section is enacted, or in any subsequent fiscal year,
whichever is greater. "Existing funding for the Medi-Cal program"
does not include any amount appropriated by the Legislature from the
fund. For purposes of this section, "existing funding for
indigent care and safety net programs" means the total amount
expended from appropriations by the Legislature for indigent care and
safety net programs in the fiscal year in which this section is
enacted, or in any subsequent fiscal year, whichever is greater.
"Existing funding for indigent care and safety net programs" does not
include any amount appropriated by the Legislature for the fund.
127447.30. (a) The department shall adopt necessary regulations
consistent with this section to govern the reporting and collection
of data and to ensure the confidentiality of any patient-specific
data.
(b) Each nonprofit hospital shall file an annual report with the
department stating the amount of charity care provided by the
nonprofit hospital. Nonprofit hospitals shall make these reports
publicly available, including by posting the report on an Internet
Web site, except that any confidential patient-specific data included
in the reports shall be removed before public disclosure.
(c) The department shall inform the Attorney General of any
nonprofit hospital that the department reasonably suspects may have
failed to comply with the requirements of subdivision (a) of Section
127447.10.
(d) The department shall enter into an interagency agreement with
the Office of Statewide Health Planning and Development relating to
the reporting and collection of data under this section.
(e) This article shall not preclude the department from requiring
nonprofit hospitals to provide additional information regarding their
charitable activities, or preclude the department from entering into
interagency agreements with other agencies and departments regarding
the reporting, collection, and analysis of data relating to charity
care.
127447.40. (a) The department shall assess reasonable fees on
nonprofit hospitals in amounts designed to cover the costs it incurs
in administering and enforcing this article. The Attorney General may
assess reasonable fees on nonprofit hospitals in amounts designed to
cover the costs it incurs in administering and enforcing this
article.
(b) The department, the Office of Statewide Health Planning and
Development, and Attorney General may adopt regulations implementing
this article.