HB 565
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
House Bill 565 (Delegate Charkoudian)
Health and Government Operations Finance
Health Facilities - Hospitals - Medical Debt Protection
This bill outlines requirements relating to hospital debt collection policies and payment
plans and prohibits a hospital from taking specified actions when collecting debt. A
hospital must annually submit its policy on the collection of debts owed by patients as well
as a specified report to the Health Services Cost Review Commission (HSCRC), which
HSCRC must compile into an annual medical debt collection report. By December 1, 2021,
the Maryland Health Care Commission (MHCC) must examine and report on the feasibility
of using the State-designated Health Information Exchange (HIE) to support determination
of patients’ financial status for determining eligibility for free or reduced-cost care or an
income-based payment plan. By January 1, 2022, HSCRC must develop and report on
guidelines for an income-based payment plan and study the impact on uncompensated care
of providing specified refunds or requiring hospitals to forgive specified judgments or
strike specified adverse information. The bill generally takes effect January 1, 2022;
provisions related to HSCRC and MHCC study and reporting requirements take
effect June 1, 2021.
Fiscal Summary
State Effect: No effect in FY 2021. HSCRC special fund expenditures increase by
$200,000 in FY 2022 only for contractual services; HSCRC can handle other requirements
with existing budgeted resources. To the extent hospital rates increase from additional
uncompensated care, Medicaid expenditures (61% federal funds, 39% general funds) and
federal matching revenues increase beginning as early as FY 2022, as discussed below.
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
FF Revenue - - - - -
SF Expenditure $200,000 $0 $0 $0 $0
GF/FF Exp. - - - - -
Net Effect ($200,000) ($-) ($-) ($-)0 ($-)
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: None.
Small Business Effect: None.
Analysis
Bill Summary:
Financial Assistance Policies
In providing free and reduced-cost care to patients who lack health care coverage or whose
health care coverage does not pay the full cost of the hospital bill, a patient’s family income
must be calculated at the time of service or updated, as appropriate, to account for any
change in financial circumstances of the patient that occurs within 240 days after the initial
hospital bill is provided. Each hospital must develop an information sheet that includes a
section that allows for patients to initial that they have been made aware of the financial
assistance policy.
Debt Collection Policies
In addition to several existing requirements, each hospital’s debt collection policy must
now be submitted annually to HSCRC and must:
 allow the patient and the hospital to mutually agree to modify the terms of a payment
plan offered or entered into;
 prohibit the hospital from collecting additional fees in an amount that exceeds the
approved charge for the hospital service as established by HSCRC for which the
medical debt is owed on a bill for a patient eligible for free or reduced-cost care
under the hospital’s financial assistance policy;
 prohibit the hospital from reporting to a consumer reporting agency or filing a civil
action to collect debt within 180 days after the initial bill was provided;
 provide for a refund of amounts collected from a patient found eligible for free care
within 240 days after the initial bill was provided; and
 require the hospital to seek to vacate a judgment or strike adverse information
reported to a consumer reporting agency if the patient was found to be eligible for
free care within 240 days after the initial bill was provided.
A hospital may not charge interest or fees on any debt incurred on or after the date of
service by a patient who is eligible for free or reduced-cost care.
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Payment Plans
Before a patient is discharged, with the hospital bill, on request, and in each written
communication regarding collection of hospital debt, the hospital must provide to a patient,
the patient’s family, the patient’s authorized representative, or the patient’s legal guardian
information about the availability of an installment payment plan for any debt owed. A
patient must be deemed to be compliant with a payment plan if the patient makes at least
11 scheduled monthly payments within a 12-month period.
A hospital may not seek legal action against a patient on a debt owed until the hospital has
established and implemented a payment plan policy that complies with guidelines
developed by HSCRC. If a patient misses a scheduled monthly payment, the patient must
contact the health care facility and identify a plan to make up the missed payment within
one year after the date of the missed payment. The health care facility may (but may not
be required to) waive any additional missed payments that occur within a 12-month period
and allow the patient to continue to participate in the income-based payment plan and not
refer the outstanding balance owed to a collection agency or for legal action.
Collections and Adverse Actions
A hospital must demonstrate that it attempted, in good faith, to offer a patient a payment
plan that complies with HSCRC guidelines before the hospital files an action to collect a
debt owed by a patient or delegates collection activity to a debt collector. A hospital is not
prohibited from using an eligibility vendor to provide outreach to a patient for purposes of
assisting the patient in qualifying for financial assistance. A hospital may not report adverse
information to a consumer reporting agency regarding a patient who was uninsured or
eligible for free or reduced-cost care at the time of service.
A hospital may not report adverse information about a patient to a consumer reporting
agency, commence a civil action against a patient for nonpayment, or delegate collection
activity to a debt collector if (1) the hospital was notified in accordance with federal law
by the patient or an insurance carrier that an appeal or a review of a health insurance
decision is pending within the immediately preceding 60 days or (2) the hospital has
completed a requested reconsideration of the denial of free or reduced-cost care that was
appropriately completed by the patient within the immediately preceding 60 days. If
adverse information about a patient has been reported to a consumer reporting agency, the
hospital must instruct the agency to delete the information if one of these criteria is met.
Also, for at least 180 days after issuing an initial patient bill, a hospital may not report
adverse information about a patient to a consumer reporting agency or commence civil
action against a patient for nonpayment, regardless of whether the hospital can document
the lack of cooperation of the patient (or the guarantor of the patient) in providing
information needed to determine the patient’s obligation with regard to the hospital bill.
HB 565/ Page 3
In an attempt to collect debt owed on a hospital bill, a hospital may not, among other things:
 request a lien against a patient’s primary residence;
 request the issuance of or take action causing a court to issue a body attachment or
an arrest warrant against a patient;
 request a writ of garnishment of wages or file an action resulting in an attachment
of wages if the patient is eligible for free or reduced-cost care;
 make a claim against the estate of a deceased patient if the deceased patient was
known by the hospital to be eligible for free care or if the value of the estate after
tax obligations are fulfilled is less than half of the debt owned (however, a hospital
may offer the family of the deceased patient the ability to apply for financial
assistance);
 file an action against a patient or give notice to a patient until after 180 days after
the initial bill was provided; or
 file an action against a patient until the hospital determines whether the patient is
eligible for free or reduced-cost care.
A spouse or another individual may not be held liable for the debt owed on a hospital bill
of an individual who is at least 18 years old. However, an individual may voluntarily
consent to assume liability for the debt owed, under specified circumstances.
At least 45 days before filing an action against a patient to collect on the debt owed, a
hospital must send the patient written notice of the intent to file an action. The notice
required must (1) be sent to the patient by certified mail and first-class mail; (2) be in
simplified language; (3) include specified contact and procedural information; and (4) be
provided in the patient’s preferred language or another language, as specified. The notice
must be accompanied by (1) an application for financial assistance under the hospital’s
financial assistance policy and instructions for completing the application; (2) the
availability of a payment plan to satisfy the medical debt; and (3) a specified information
sheet.
A complaint by a hospital in an action to collect a debt must include (1) an affidavit with
specified information; (2) a copy of the original and most recent hospital bill; (3) a
statement of the amount due; (4) a copy of the notice of intent to file an action; and (5) a
copy of the patient’s signed certified mail acknowledgement of receipt of the written notice
of intent to file an action, if received by the hospital.
If a hospital delegates collection activity to a debt collector, the hospital must require a
debt collector to, along with the hospital, be jointly and severally responsible for meeting
the hospital debt collection requirements.
HB 565/ Page 4
Required Reports
Hospital Reports: Each hospital must submit an annual report to HSCRC including (1) the
number of patients against whom the hospital (or a debt collector used by the hospital) has
filed an action to collect debt owed; (2) the number of patients the hospital has and has not
reported or classified a bad debt; and (3) the total dollar amount of the charges for hospital
services provided to patients but not collected by the hospital for patients covered by
insurance, including the out-of-pocket costs for patients covered by insurance, and patients
without insurance. Each report must be posted on the HSCRC website.
Annual Medical Debt Collection Report: By February 1, 2023, and annually thereafter,
HSCRC must prepare a medical debt collection report based on the compiled information
from hospitals. The report must be (1) made available to the public free of charge and
(2) submitted to the Senate Finance Committee and the House Health and Government
Operations Committee.
Guidelines for an Income-based Payment Plan: By January 1, 2022, HSCRC, with input
from specified stakeholders, must develop guidelines for an income-based payment plan
and report on the guidelines to the Senate Finance Committee and the House Health and
Government Operations Committee. The guidelines must include (1) the amount of
medical debt owed to the hospital; (2) the duration of the payment plan based on a patient’s
annual gross income; (3) guidelines for requiring appropriate documentation of income;
(4) guidelines for the payment amount, which may not exceed 5% of the patient’s adjusted
gross monthly income and must consider financial hardship; (5) guidelines for the
determination of possible interest payments for patients who do not qualify for free or
reduced-cost care, which may not begin before 180 days after the due date of the
first payment, and a prohibition on interest payments for patients who qualify for free or
reduced-cost care; (6) guidelines for modification of a payment plan that does not create a
greater financial burden on the patient; and (7) a prohibition on penalties or fees for
prepayment or early payment.
Study on the Impact on Uncompensated Care: By January 1, 2022, HSCRC must study
and report to the Senate Finance Committee and the House Health and Government
Operations Committee on the impact on uncompensated care of (1) providing for a refund
of amounts collected from patients who were later found to be eligible for reduced-cost
care and (2) requiring a hospital to forgive a judgment or strike adverse information if a
hospital obtains a judgment against, or reports adverse information to a consumer reporting
agency about, patients who were later found to be eligible for reduced-cost care. If HSCRC
determines that additional hospital data is required for the study, HSCRC must notify the
hospital of the data required, and a hospital must submit the required data no later than
30 days after receiving the request.
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Feasibility of Using the Health Information Exchange: MHCC must examine the
feasibility of using the State-designated HIE to support the determination of financial status
for purposes of determining eligibility for free or reduced-cost care or for an income-based
payment plan. MHCC must report its findings to the Senate Finance Committee and the
House Health and Government Operations Committee by December 1, 2021.
Current Law:
Hospital Financial Assistance and Hardship Policies
HSCRC requires each hospital to develop a financial assistance policy for providing
free and reduced-cost care to patients who lack health care coverage or whose health care
coverage does not pay the full cost of the hospital bill. Hospital financial assistance policies
must, at a minimum, provide free medically necessary care to patients with family income
at or below 200% of the federal poverty level (FPL) and reduced-cost medically necessary
care to patients with family income above 200% FPL.
HSCRC may establish higher income thresholds for financial assistance, but financial
assistance policies must provide reduced-cost medically necessary care to patients with
family income less than 500% FPL who have a financial hardship. For patients eligible for
reduced-cost medically necessary care, the hospital must apply the reduction that is most
favorable to the patient, whether that is the reduced-cost policy or financial hardship policy.
If a patient has received reduced-cost medically necessary care due to financial hardship,
the patient (or any immediate family member living in the same household) remains
eligible for reduced-cost care when seeking further care at the same hospital for 12 months
following the initial care. The patient or family member must inform the hospital of his or
her eligibility.
Hospital Debt Collection
A hospital must reasonably attempt to collect charges owed for care provided before
writing the charges off as bad debt. A hospital will pursue payments from patients that do
not apply or qualify for financial assistance or receive free or reduced-cost care and do not
pay the remaining balance owed. Currently, there are no limits to the actions hospitals may
take to collect debt owed.
Each hospital must develop and submit a debt collection policy to HSCRC. The debt
collection policy must (1) provide for active oversight of any contract for collection of
debts on behalf of the hospital; (2) prohibit the hospital from selling any debt; (3) prohibit
the charging of interest on bills incurred by self-pay patients before a court judgment is
obtained; (4) describe in detail the consideration by the hospital of patient income, assets,
HB 565/ Page 6
and other criteria; (5) describe the hospital’s procedures for collecting a debt; (6) describe
the circumstances in which the hospital will seek a judgment against a patient; (7) provide
for a refund of amounts collected from a patient who was later found to be eligible for
free care; and (8) require the hospital to vacate the judgment or strike the adverse
information reported if a patient is later found to be eligible for free care.
The policy must also provide a mechanism for a patient to (1) request the hospital
reconsider the denial of free or reduced-cost care and (2) file with the hospital a complaint
against the hospital or an outside collection agency regarding the handling of the patient’s
bill.
A hospital must provide a refund of amounts exceeding $25 collected from a patient (or
the patient’s guarantor) who, within a two-year period after the date of service, was found
to be eligible for free care on the date of service. A hospital may reduce the two-year period
to no less than 30 days after the date the hospital determines the patient’s eligibility for
free care, if the hospital documents the lack of cooperation of the patient in providing the
requested information.
Health Services Cost Review Commission
HSCRC is an independent State agency charged with constraining hospital growth and
establishing hospital rates to promote cost containment, access to care, equity, financial
stability, and hospital accountability. HSCRC oversees acute and chronic care hospitals.
HSCRC may review costs and rates and make any investigation it considers necessary to
assure each purchaser of health care facility services that (1) the total costs of all hospital
services are reasonable; (2) the aggregate rates of the facility are relate