New York Broadly Revises Hospital Financial Assistance, Medical Debt Collection and Related Requirements

Effective October 20, 2024, New York hospitals must have in place State-mandated changes to their financial assistance (“FA”) programs (including FA eligibility criteria and debt collection practices) and their practices related to consent forms, and patient use of credit cards and medical financial products. The new requirements were enacted as part of the State’s health and mental hygiene budget legislation for fiscal year 2024 through 2025, signed into law by Governor Hochul on April 20, 2024. The legislation expands financial assistance eligibility to a wider range of patients and implements greater patient protections related to medical debt collection practices.

Expansion of Hospital FA Obligations

The newly enacted legislation amends several sections of the Public Health Law, including by:

• Defining “underinsured” as an individual with out-of-pocket medical costs accumulated in the past 12 months that amount to more than 10% of the individual’s gross income;
• Expanding the applicability of FA programs to such underinsured individuals;
• Prohibiting the use of immigration status in determining eligibility for FA;
• Requiring hospitals that do not participate in the distribution of the State Indigent Care Pool (the “Pool”) to use a State-approved uniform FA form and comply with certain other FA and collection procedures (which previously were only required for hospitals that do participate in the Pool);
• Requiring hospitals with 24-hour emergency departments to provide written notification about the availability of FA during the discharge process (i.e., not just during intake and registration);
• Limiting installment plan payments of outstanding balances to no more than 5% of the patient’s gross monthly income, and interest rates of no more than 2%; and
• Requiring hospitals that participate in the Pool to report statistics to the New York State Department of Health regarding the number of patients who applied for FA and were approved or denied, and specific patient demographics.

Revised Financial Thresholds

Hospitals must implement the following financial thresholds with respect to adjustments / reductions in charges for patients, based on their incomes:

• Hospitals will be required to waive all charges for individuals with incomes below at least 200% of the federal poverty level (“FPL”), and may no longer require patients to make any nominal payment;
• For patients with incomes between 200% and up to 300% of the FPL, hospitals may not collect more than either the amount specified in an applicable proportional sliding fee schedule and up to a maximum of 10% of the amount that would have been paid for the same services by the Medicaid program, or, for an underinsured patient, up to a maximum of 10% of the amount that would have been paid pursuant to the patient’s insurance cost sharing; and
• Similarly, for patients with incomes between 301% and up to 400% of the FPL, hospitals shall collect no more than either the amount specified in an applicable proportional sliding fee schedule and up to a maximum of 20% of the amount that would have been paid by Medicaid, or, for an underinsured patient, up to a maximum of 20% of the amount that would have been paid pursuant to the patient’s insurance.

Debt Collection Practices

Hospitals will also need to ensure the following requirements are implemented:

• Permitting patients to apply for FA at any time during the collection process;
• Prohibiting the denial of admission/treatment for services that are reasonably anticipated to be medically necessary because the patient has an unpaid medical bill;
• Prohibiting the sale of medical debt to a third party, unless the third party explicitly purchases the medical debt in order to relieve the patient’s debt; and
• Prohibiting commencement of a legal action to recover medical debt/unpaid bills against patients with incomes below 400% of the FPL.

Hospitals and/or collection agents will also be prohibited from commencing a civil action against a patient or from delegating collection activity to a debt collector for non-payment for at least 180 days after the first post-service bill is issued to the patient, and until the hospital has made reasonable attempts to determine if the patient qualifies for FA.

New Restrictions Related to Patient Consent, Credit Cards and Medical Financial Products

The legislation enacts a new section in the Public Health Law that will require hospitals and other healthcare providers to issue separate informed consent forms for treatment and for payment for services. Consent forms for payment must not be given prior to the patient receiving the treatment and discussing treatment costs.

In addition, the legislation amends the General Business Law to add sections prohibiting hospitals and other healthcare providers (and their employees and/or agents) from:

• Completing any portion of an application for medical financial products (i.e., medical credit cards and third-party medical installment loans) for patients; and
• Requiring credit card pre-authorization or requiring that a patient have a credit card on file prior to receiving emergency or medically necessary medical services.

Hospitals and other healthcare providers will be required to notify all patients about the risks of paying for medical services with a credit card, including notifying the patient that by doing so, the patient would be foregoing State and Federal protections related to medical debt. 

Action Required

In order to meet the legislative mandate, New York hospitals are encouraged to review their existing FA and debt collection policies and procedures and make the necessary adjustments, including the incorporation of new requirements, to ensure compliance by October. If you have any questions regarding the new FA and debt collection requirements, or the limitations on medical financial products, please contact a member of the Sheppard Mullin Healthcare Team.