Change of Law: Hospital Action Required

Purpose
The purpose of this bulletin is to alert hospitals to upcoming changes to the state charity care law, chapter 70.170 RCW. The changes to state law in Substitute House Bill (SHB) 1616 apply to care provided on or after July 1, 2022, and all hospitals must establish compliant charity care policies by this date.

In late 2021 the Washington State Attorney General (AGO) announced a bill proposal to amend the state’s charity care law. The proposed bill would have broadly expanded charity care obligations for all hospitals in the state for patients up to 400% of the federal poverty level (FPL), expanded coverage to clinics affiliated with hospitals, and would have prevented hospitals from considering patient assets when determining charity care discounts. A definition for “indigent persons” was included in the original bill, however, there was no requirement that a patient exhaust sources of third-party coverage in order to meet that definition.

The Washington State Hospital Association’s (WSHA) advocacy resulted in a significantly improved bill. WSHA was successful in removing the expansion to affiliated clinics, adding back an allowance for patient asset consideration, clarifying that charity care is only available for patients who have exhausted third-party coverage and mitigating the significant financial burden on small, rural and independent hospitals by negotiating for a two-tiered charity care discount system. Even with these improvements, SHB 1616 makes consequential changes to state charity care law that hospitals should understand and be prepared to implement.

Applicability/Scope
Washington State’s charity care law applies to acute care hospitals licensed under RCW 70.41 and psychiatric hospitals licensed under RCW 71.12. The changes to the charity care law apply to all acute care and psychiatric hospitals.

Recommendations and Next Steps

  • Review this bulletin and Substitute House Bill (SHB) 1616 to understand the new requirements. WSHA has prepared a table to highlight changes made by SHB 1616. WSHA recommends hospitals engage legal, risk, compliance, and leadership as appropriate to evaluate compliance with the changes to charity care law.
  • Attend WSHA’s members only webinar on Changes to State Charity Care Law on April 28, 2022, from 12-1pm. WSHA staff will provide information for members about the upcoming changes to the charity care law, steps hospitals need to take to comply with the new requirements, and resources available to help members meet the new obligations. Click here to register for the webinar.
  • Review your hospital’s current charity care policy, update the policy to comply with the changes to the charity care law, and submit the updated policy to the Washington State Department of Health for review by June 1, 2022. Each hospital is required to have a charity care policy that is compliant with state law. Anytime a hospital updates its charity care policy, the new policy must be submitted to the Washington State Department of Health (DOH) at least 30 days before the policy goes into effect. Because (SHB) 1616 applies to care provided on or after July 1, 2022, hospitals must begin using your new policies by July 1, 2022 in order to remain in compliance with the law. Hospital charity care policies implementing the law changes, must be submitted to DOH by June 1, 2022 to meet the 30-day DOH review deadline.
    • Amended policies must be submitted via email to [email protected]
    • DOH may or may not respond within the 30-day review period. As long as the policy was submitted 30 days in advance and the DOH has not responded with concerns, the hospital may implement the policy after 30 days. DOH may subsequently respond with feedback and necessary changes.
    • Hospital charity care policies are publicly available on the DOH website here.
    • Hospitals must publicly post the hospital’s current charity care policy on the hospital’s own website.
  • Consider creating a policy that addresses charity care for care before and after July 1, 2022. As you update your policy, consider what your policy will be both for patients receiving care on or after July 1, 2022, and those that received care prior to July 1, 2022. The changes to the law are not retroactive and you may choose to have separate policies for these separate groups of patients.
  • Update your plain language summary to match your new policy and ensure that all new materials are easily accessible and posted on your hospital website. Hospitals are required to provide a plain language summary of the hospital’s charity care policy and make the summary widely available, including on the hospital’s website. The plain language summary must be available in all languages spoken by more than ten percent of the population of the hospital’s service area. Non-profit hospitals (those with federal 501(c)(3) status) have additional translation obligations under 26 CFR §1.501(r).
  • Update training programs to ensure appropriate staff are familiar with new charity care procedures and policies. As you update your charity care policies, ensure that all charity care training materials and programs are up to date including information on new discounts and asset consideration polices. You can find WSHA’s guidance on general staff training requirements for charity care here. Hospitals may also need to review and update training for staff around providing patient assistance when applying for retroactive Medicaid coverage.

Overview
SHB 1616 substantially expands who may qualify for free or discounted care under the charity care law by raising the incomes under which patients qualify for free and discounted care. The bill also provides details on how and when hospitals may consider assets as part of determining discounts and requires hospitals to assist eligible patients to apply for retroactive Medicaid coverage.

However, the fundamental structure of Washington State’s charity care law remains unchanged– patients who meet certain income and family size thresholds qualify for free or discounted hospital care. Charity care is available whether or not a patient has insurance. State law mandates free or reduced care be provided based on the federal poverty level. State law provides a minimum “floor” for who qualifies for free or discounted care – hospitals may be more generous. Hospitals are required to make charity care information publicly available. Hospitals may establish an application process and require documentation for patients to establish family size and income.

The main features of the changes included in SHB 1616 are:

1. Replaces “sliding fee schedule” discounts with mandatory discount standards. Under current law, patients are entitled to free care if they are at or below 100% of the federal poverty level (FPL) based on family size and income. Patients receive discounted care, based on a sliding fee schedule established by each individual hospital if they are between 101-200% FPL. It is up to each hospital to determine the discounts provided in the sliding fee schedule.

The new law removes hospital discretion from the sliding fee schedule and instead establishes mandatory patient discounts (see below for more detail), which can be reduced via hospital consideration of the existence, availability, and value of certain assets.

2. Expands charity care eligibility – for free care and discounted care – and groups hospitals into two tiers. SHB 1616 establishes two tiers of hospitals and establishes mandated free and discounted care for each tier based on a patient’s family size and income relative to Federal Poverty Level (FPL). Patient discounts apply only to the patient portion of the bill.

Based on membership direction, WSHA advocated a multi-tiered approach in the bill to reflect the different financial impact of providing expanded charity care for different types of hospitals in the state. Hospitals that are part of larger systems are placed in Tier 1 and are required to provide free care to a larger population and to provide more significant discounts. Smaller, independent, and rural hospitals are in Tier 2. Based on member guidance, WSHA advocated for this structure in order reflect that these Tier 2 hospitals may not be able to sustain the higher discount levels of the Tier 1 hospitals. This tiered approach maximizes patient access while recognizing the impact on hospital financial stability.

WSHA has created a current list of hospitals in each tier can be found here. WSHA is in discussions with DOH regarding whether a list of hospitals in each tier will be maintained on the DOH website.

Tier 1: The following hospitals are grouped together: “hospital owned or operated by a health system that owns or operates three or more acute hospitals licensed under chapter 70.41 RCW, an acute care hospital with over 300 licensed beds located in the most populous county in Washington, or an acute care hospital with over 200 licensed beds located in a county with at least 450,000 residents and located on Washington’s southern border…”

This group (referred to herein as a “tier”) includes acute care and behavioral health hospitals owned or operated by a health system that owns or operates three or more acute care hospitals licensed under chapter 70.41 RCW (acute care hospitals). The legislature also chose to include in this tier hospitals in King County and a hospital that is part of an out-of-state system that do not otherwise meet the requirement of being owned or operated by a health system with three or more acute care hospitals (the bill structure delineates these hospitals based on their location in certain populous counties and the number of licensed beds operated by the hospital). These conditions currently add Seattle Children’s Hospital, Overlake Medical Center, EvergreenHealth Kirkland, and Legacy Salmon Creek to Tier 1.

Hospitals in this tier must provide free care to patients with income and family size between 0-300% FPL. These hospitals must also provide specific discounts, which may be reduced by amounts reasonably related to asset considerations (see below for more detail):

    • Patients who are 301-350% FPL based on income and family size qualify for a 75% discount on the patient responsibility portion of their bill.
    • Patients who are 351-400% FPL based on income and family size qualify for a 50% discount on the patient responsibility portion of their bill.

Tier 2: All hospitals not included in Tier 1 are in Tier 2. This includes independent and small hospitals, and behavioral health hospitals not owned by a larger system. Note that the tier a hospital falls into depends on the number of hospitals owned by a health system, so hospitals will need to consider the impact of any future health care transactions.

Hospitals in this tier must provide free care to patients with income and family size between 0-200% FPL. These hospitals must also provide specific discounts, which may be reduced by amounts reasonably related to assets considerations (see next bulletin section):

    • Patients who are 201-250% FPL based on income and family size qualify for a 75% discount on the patient responsibility portion of their bill.
    • Patients who are 251-300% FPL based on income and family size qualify for a 50% discount on the patient responsibility portion of their bill.

Here is a brief summary of the tiers and related free/discounted care requirements:
Changes to State Charity Care Law Effective July 1, 2022

REMINDER: Hospitals whose current policies do not, at a minimum, meet these standards for free care and discounts in the relevant tier, must update their charity care policies and submit the policies to DOH for approval by June 1, 2022, so that the new policies may be put into effect by July 1, 2022.

3. Allows hospitals to choose to consider assets under certain conditions. Under current charity care law, hospitals are permitted to consider asset information to reduce sliding scale discounts for patients that are at 101% FPL or above. The law does not provide specific detail about the types of assets or how asset value may be considered. The initial version of HB 1616 would have prohibited any consideration of assets when calculating charity care discounts going forward. WSHA heard from members that asset consideration can be important and is required for Medicare cost reporting. WSHA advocated with the Attorney General’s Office and bill sponsor to revise the bill so that asset consideration will continue to be permitted.

Compared to current law, the changes under SHB 1616 provide more detail about the type of assets that may and may not be considered. The new law sets a specific list of assets, including monetary amounts, that are exempt from consideration. Similar to current law, hospitals may not consider assets for patients eligible for free care. Hospitals may consider the existence, availability and value of assets for patients qualifying for discounted care (301-400% FPL for Tier 1 hospitals and 201-300% FPL for Tier 2 hospitals) to reduce the discount extended.

Specific assets are exempt from consideration (meaning hospitals may not consider the value of these assets to reduce discounts provided to qualifying patients). Exempt assets include:

    • The first $5000 in monetary assets for an individual, $8000 for a family of two, and $1500 of monetary assets for each additional family member.
    • Equity in a primary residence.
    • Retirement plans other than 401(k) plans.
    • One motor vehicle (and a second motor vehicle if it is necessary for employment or medical purposes).
    • Prepaid burial contracts or burial plots.
    • Life insurance policies with a face value of $10,000 or less.

Asset consideration is optional. If a hospital chooses to consider assets, the hospital must make asset consideration and corresponding discount reductions publicly available in a policy. WSHA recommends the information be included in the hospitals’ charity care policy. WSHA’s standard charity care application form includes asset consideration but this may be updated by hospitals that prefer not to consider assets.

Hospitals that consider assets may not place an “unreasonable burden” on the responsible party in seeking information. This includes asking for only that information that is “reasonably necessary” and “readily available.” Hospitals may not use documentation requests as a way to discourage charity care applications. Hospitals must allow a written and signed statement from the responsible party to be sufficient if no documentation of the assets is available. Further, hospitals are prohibited from:

    • Requiring the verification of facts not relevant to charity care eligibility.
    • Requesting duplicate forms of verification of assets.
    • Requiring more than one current account statement as verification of monetary assets.
    • Using asset information obtained for charity care eligibility for collection activities.

Based on feedback from member hospitals, WSHA advocated that the change in law allows hospitals to collect any asset information necessary for Medicare cost reporting. The Centers for Medicare and Medicaid Services may require reporting of assets “convertible to cash and unnecessary for the patient’s daily living” for Medicare cost reporting. (The Provider Reimbursement Manual – Part 1 | CMS). Under the law changes, hospitals may collect any asset information necessary for these reporting purposes.

4. Addresses application for Medicaid and the Washington State health benefit exchange eligibility considerations. The changes to the charity care law includes a requirement for hospitals to adopt procedures to identify patients and guarantors eligible for medical assistance programs under Medicaid or the Washington State health benefit exchange and assist patients in applying for available coverage. If a patient or guarantor is eligible for retroactive Medicaid coverage, the hospital may choose not to provide charity care to any patient or guarantor who does not make reasonable efforts to cooperate with the hospital in the Medicaid application process.

When providing assistance to patients applying for retroactive coverage from Medicaid, hospitals may not impose procedures that place an unreasonable burden on the patient or guarantor. When considering what constitutes an “unreasonable burden,” hospitals should take into consideration any physical, mental, intellectual, or sensory deficiencies, or language barriers which might prevent or hinder the responsible party from following the application procedures. SHB 1616 specifies that it is an unreasonable burden to require a patient to apply for any state or federal aid program for which they are clearly ineligible, based on immigration status, for example, or for which they have been found ineligible in the past 12 months. Hospitals may wish to consider expanding policies regarding when and if they will require Medicaid applications. Some situations may be complex: for example, if a patient is individually eligible but does not want to apply because a family member is undocumented.

REMINDER: Hospitals should amend their policies, procedures, and charity care training programs to ensure that they are in compliance with the above new requirements.

5. Establishes a definition of “indigent persons” who may qualify for charity care. A definition of “indigent persons,” which was previously only defined in the Washington Administrative Code (WAC), was added to the statute. The definition specifies that indigent persons are those who meet the FPL thresholds and have exhausted any third-party coverage. The AGO’s original version of the bill did not include a requirement that “indigent persons” exhaust third-party coverage. WSHA advocated to add this language to the definition in order to maintain charity care as a safety net and payer’s last resort. During the 2018 session, WSHA also helped to create an expanded definition of “third party coverage,” including health care service contractors, health maintenance organizations, group health plans, tribal health benefits, and health care sharing ministries.

Continued Obligation to Comply with Interpretation and Translation Obligations
As hospitals update policies, plain language summaries, applications, and training programs to comply with the charity care law changes it is important to keep in mind that the charity care law contains translation and interpretation requirements so that charity care remains accessible to non-English speaking and limited English speaking patient populations.

Plain language summaries and applications must be available in all languages spoken by more than ten percent of the population of the hospital service area. Hospitals must also provide meaningful access to interpreter services for limited English speaking and non-English speaking patients. Non-profit hospitals (those with 501(c)(3) federal status) have additional requirements under 26 CFR §1.501(r).

Background
Under current state law, Washington hospitals are required to provide free or reduced care for all qualifying applicants. Free care for hospital services must be provided to patients (insured and uninsured) with incomes under 100 percent of the federal poverty level. Hospitals must provide discounted care for any patient with income under 200 percent of the poverty level. Access to charity care is an ongoing area of interest by Washington State legislators and HB 1616 was proposed in the 2022 legislative session to make changes to current law.

WSHA engaged in substantial negotiations with the Washington State Attorney General’s Office (AGO) as well as legislators and other stakeholders regarding SHB 1616 before and throughout the 2022 legislative session. WSHA advocated in support of access to patient care and advocate to lessen the significant financial impacts of the bill, especially on small and rural hospitals. The AGO based the first draft of the bill on Oregon’s recent charity care law that went into effect in January 2021. WSHA provided advocacy to distinguish between Oregon and Washington, including the fact that many of Oregon’s rural hospitals are affiliated with larger health systems, giving them more financial sustainability.

WSHA is also working to educate policy makers about the potential unintended consequences of how charity care expansion is messaged. The Attorney General’s Office has emphasized the legislation as providing “free care.” WSHA has expressed concerns with this messaging. Charity care is not a replacement for insurance coverage. Charity care does not cover physician fees and many preventive types of care, which adequate insurance would cover. WSHA continues to advocate that meaningful health care insurance is a necessary part of increasing access to care.

Finally, beginning in January 2023, hospitals will have a new obligation to submit quarterly reports to DOH regarding the number of charity care applications received and approved in the prior quarter. The Department of Health is developing a standardized form for these purposes. WSHA will keep members updated as this form is finalized and when the reporting obligation begins in 2023.

WSHA’s 2022 New Law Implementation Guide
Please visit WSHA’s new law implementation guide online. The Government Affairs team is hard at work preparing resources and information on the high priority bills that passed in 2022 to help members implement the new laws, as well as links to resources such as this bulletin. In addition, you will find the Government Affairs team’s schedule for release of upcoming resources on other laws and additional resources for implementation.

References