Amended in Assembly April 2, 2014

Amended in Assembly March 6, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1952

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 begin insert , except as specified, end insert a nonprofit general acute care hospital to annually provide charity care in an amount equaling at least begin delete of end delete 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 begin delete program. end delete begin insert 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. end insert

begin insert

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.

end insert

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 begin insert nonprofit end insert hospital’s net patient revenue.

(b) For purposes of satisfying subdivision (a), a begin insert nonprofit end insert
hospital shall not change its existing fiscal year unless the begin insert nonprofit end insert
hospital changes its ownership or corporate structure as a result
of a sale or merger.

(c) A determination of the amount of charity care begin delete and
contributions to the fund end delete provided by a begin insert nonprofit end insert hospital shall be
based on the most recently completed fiscal year of the begin insert nonprofit end insert
hospital.

(d) If a begin insert nonprofit end insert hospital begin insert at any time end insert reasonably determines
that providing charity care in accordance with this article in a given
fiscal year would result in the begin insert nonprofit end insert hospital having an annual
operating margin of less than 1 percent, the begin insert nonprofit end insert hospital may
begin insert at any time end insert petition the department to be excused in whole or in
part from complying with subdivision (a) in that fiscal year begin insert or a
future fiscal year end insert . The director may excuse compliance if he or
she concurs with the begin insert nonprofit end insert hospital’s conclusion that
compliance with subdivision (a) would result in the begin insert nonprofit end insert
hospital having an operating margin of less than 1 percent in the
fiscal year at issue.

(e) This section shall not apply to a begin insert nonprofit end insert hospital that is
part of an integrated nonprofit health system. begin insert 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 medical 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. end insert

(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 begin insert nonprofit end insert 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 ____ begin insert end insert dollars ($___), and
shall not exceed ____ dollars ($___) per fiscal year in which the
begin insert nonprofit end insert 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
begin insert nonprofit end insert hospital’s total shortfall in charity care for that fiscal
year, but shall not exceed a sum that is equivalent to ___ percent
of the begin insert nonprofit end insert hospital’s net patient revenue.

(d) In determining the amount of the penalty, the director shall
consider begin delete all end delete begin insert b end insert begin insert oth end insert of the following:

(1) The severity of the shortfall in charity care provided by the
begin insert nonprofit end insert hospital.

(2) The good-faith effort of the begin insert nonprofit end insert hospital to reach the
required level of charity care.

begin insert

(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.

end insert begin insert

(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.

end insert

127447.20.  

As used in this article, the following terms have
the following meanings:

begin delete

(a) “Fund” means the Nonprofit Hospital Charity Care Penalty
Fund established pursuant to Section 127447.25.

end delete begin insert

(a) (1) “Charity care” means the unreimbursed cost to a
nonprofit hospital of all of the following:

end insert begin insert

(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:

end insert begin insert

(i) Vaccination programs and services for needy individuals.

end insert begin insert

(ii) Chronic illness prevention programs and services.

end insert begin insert

(iii) Nursing and caregiver training.

end insert begin insert

(iv) Home-based health care programs for needy individuals.

end insert begin insert

(v) Exercise or nutrition programs for needy individuals.

end insert begin insert

(vi) Community-based mental health outreach and assessment
programs for needy individuals.

end insert begin insert

(B) Providing, funding, or otherwise financially supporting
health care services or items on an inpatient or outpatient basis
to needy patients.

end insert begin insert

(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.

end insert begin insert

(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.

end insert begin insert

(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.

end insert begin insert

(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.

end insert

(b) “Department” means the State Department of Public Health.

(c) “Director” means the State Public Health Officer.

begin delete

(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.

end delete begin insert

(d) “Fund” means the Nonprofit Hospital Charity Care Penalty
Fund established pursuant to Section 127447.25.

end insert begin insert

(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.

end insert begin insert

(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.

end insert begin insert

(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.

end insert begin insert

(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.”

end insert begin insert

(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.

end insert begin insert

(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.

end insert begin insert

(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.

end insert begin insert

(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.

end insert

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 begin delete fund . end delete begin insert fund. end insert 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 begin insert and for indigent care and safety net programs end insert .

(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 begin insert and for indigent care and safety net programs end insert .

(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. begin insert 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. end insert

begin insert

begin insert 127447.30. end insert   

(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.

end insert begin insert

begin insert 127447.40. end insert   

(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.

end insert