About Fair Pricing Policy

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. Charity care policies and discount payment policies must be submitted bi-annually to the Office of Statewide Health Planning and Development (OSHPD). Health facilities operated by the State of California or licensed as a Chemical Dependency Recovery Hospital or a Psychiatric Health Facility are exempt from these requirements.

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: AB774 Hospital List.

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 will make 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.

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.


Hospital Fair Pricing Policies

Health and Safety Code Sections 127400 to 127446, Chapter 2 of Division 107, Article 3, Hospital Fair Pricing Policies

California Code of Regulations, Title 22, Division 7, Chapter 9, Article 2, Hospital Hospital Discount Payment and Charity Care Policies Reporting, commencing with Section 96040


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 FAQs:

General Information FAQs | Public FAQs | Hospital Reporting FAQs


Availability

Submitted documents are now 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) 326-3905 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


This page was last updated on Wednesday, October 26, 2016.