Hospitals must promptly report to the Los Angeles County Department of Public Health any time they attempt to collect medical debts from patients, according to an ordinance backed Tuesday by county supervisors.
The ordinance, which requires a second vote to be adopted, requires hospitals to report to the county within one to two months of initiating debt collection, which can include making phone calls or sending letters to request payment more than 180 days after the initial billing, selling the debt to a collection agency, garnishing wages, seizing a bank account or reporting to a consumer reporting agency.
The new rules would also require hospitals to report up to four times a year on the medical debt accumulated by their patients in recent months and what financial assistance they have been offered. If they fail to do so, they could face fines and legal action.
Public health officials said the rules would help shed light on hospital practices and address a crucial question: Where are the missed opportunities for hospitals to provide financial assistance?
Hospitals are supposed to provide financial help to patients who need it, but “the problem is implementation,” said Dr. Anish Mahajan, chief deputy director of the Los Angeles County Department of Public Health. In a survey by the national nonprofit Dollar For, fewer than 30% of patients who had hospital bills they couldn’t pay said they had applied for and ultimately received financial assistance.
Many hospitals are trying hard to provide help, Mahajan said, but the data show “there is too much medical debt, and that debt falls disproportionately on poor people.”
Los Angeles County officials estimate that medical debt will total more than $2.9 billion in the county in 2022, affecting 1 in 10 adults.
The public health department has launched an initiative to wipe out medical debt, including buying and forgiving existing debt. In June, it set aside $5 million for a planned settlement with a nonprofit to cancel such debt, which county officials say could eliminate $500 million in debt for 150,000 residents.
But the county has stressed that it also wants to prevent patients from incurring medical debt. Mahajan said that by gathering information under the new ordinance, “we can then understand how hospitals are doing … in terms of their patients who should be receiving financial assistance actually receiving it.”
For example, the county said it could cross-check data on patients whose medical bills were sent to collections to see if they might have been eligible for assistance and then contact hospitals with its findings.
“The goal is to help hospitals function better,” Mahajan said.
The numbers could also help shed light on whether financial assistance is not reaching particular groups of Los Angeles County residents, which could help guide future outreach and public education about the aid.
For example, Mahajan suggested that in some cases, hospitals may have good financial assistance policies, but some patients may be afraid to seek such help amid concerns about their immigration status.
Addressing those concerns could involve not only hospitals but also other members of the county coalition that has sought to address medical debt, including legal aid and consumer groups, he said.
Mandatory reporting could also give health centers insight into whether their financial assistance and debt collection practices fall outside the norm, compared with other hospitals in the area. Public health officials reported that hospitals across Los Angeles County provided more than $600 million in financial assistance in 2021, but more than half of that amount came from just four facilities — those run by the county itself.
“Those safety net hospitals can’t cover the entire county, and they’re the ones providing the majority of the financial assistance,” said Dr. Naman Shah, director of the medical and dental affairs division of the Los Angeles County Department of Public Health. “The reason for this ordinance is so we can do better.”
Dr. Elaine Batchlor, CEO of MLK Community Healthcare, told the county board that her Willowbrook hospital takes proactive steps to assess whether patients need assistance, using software and other tools to check whether they are likely to be able to afford co-pays and then writing off the debt if their finances appear unstable.
These financial tools “are widely available and not difficult to use,” Batchlor said Tuesday.
Los Angeles County will also create a website where the public can see aggregate data on medical debt at local hospitals, though it is still determining exactly what information will be published, Mahajan said.
The Southern California Hospital Association said its members are deeply concerned about medical debt as a problem, but the organization remains concerned about some aspects of the county's requirements.
In response to hospitals’ concerns, the county has relaxed some rules on how often reports must be provided, but “concerns remain about how voluminous” the data requirements will ultimately be, said Adena Tessler, the hospital association’s regional vice president for Los Angeles County.
For example, Tessler said that in some cases, hospitals may not be in a position to provide information because it has not been provided by patients themselves. Additionally, “the focus on hospitals remains a concern, because it is only one part of the medical debt problem.”
Public Health Director Barbara Ferrer said Tuesday that hospitals are a reasonable place to focus initially because “hospital bills comprise the bulk of the debt and the largest bills.” Supervisor Janice Hahn added that “the work will not stop here today” and that the county will explore how other entities, including insurance companies and private provider groups, play a role.
“Hospitals are not the only cause of medical debt,” he said, “but starting there will help us develop a plan.”
Neale Mahoney, an economics professor at Stanford University, welcomed the initiative and said he hoped it would spread to other jurisdictions. “Medical debt is a dark corner of the American health care system,” he said, and shedding light on it can be “a powerful disinfectant.”
The L.A. County requirements would apply only to a small number of hospitals in unincorporated areas — county officials estimated the number to be seven, including MLK Community Hospital — but local cities could adopt them to cover their jurisdictions as well. Hospitals will have about six months after the L.A. County ordinance takes effect before failing to submit reports becomes a violation.
Tessler, of the hospital association, said that because the rules will be implemented in unincorporated areas first, her hope is that government officials will take the time to make sure the reporting requirements make sense before expanding such rules to other parts of Los Angeles County.
Ferrer said his department would reevaluate the burden of collecting such data in a year. Given concerns about patient information, he said the portal that hospitals will use to provide information when trying to collect debts from individual patients complies with federal law on protecting patient privacy.
Batchlor, in her remarks Tuesday, described how she helped an uninsured friend who had been diagnosed with cancer get the care she needed, only to learn recently that the woman was again uninsured because “she now can't pay her medical debt or pay her health insurance premiums — she can't do both.”
The hospital executive said “the root cause of medical debt is the high cost of health care and the inability of health insurance to cover those costs.”
To solve the problem, he said, “we will ultimately have to address these root causes.”
