New Colorado Law Has Major Impact on Debt Collections and Hospital Bills

A new law recently passed by the Colorado General Assembly is having a major impact on how hospitals collect patient bills.

The law stops a hospital or an entity working on behalf of a hospital from pursuing collection actions on a debt if the hospital isn’t in compliance with the federal hospital pricing transparency law. If the transparency law isn’t followed, it also prohibits the healthcare provider from suing the patient or reporting the debt to a consumer reporting agency. The Colorado law is now in effect, except for critical access hospitals which have until Feb. 15, 2023 to comply.

If the patient thinks a Colorado hospital is not in compliance with the price transparency law and a collection action is taken, the patient could file a lawsuit. If the court rules in favor of the patient and the hospital isn’t in compliance, the hospital is subject to a penalty equal to the amount of debt, and has to refund any amount paid on the debt. It would also require the hospital to pay attorney fees and costs the patient incurred in relation to the action. Nothing in the law stops a hospital from billing a patient or health insurance for services provided.

“People deserve to know what all their medical bills will look like and finally we will have better price transparency which is needed for the market to work better in health care and empower patients to take control of their own healthcare needs,” said Gov. Jared Polis in a press release. “This is a great step in improving the healthcare system to ensure affordable, high-quality care for all Coloradans And saving people money.”

Ishra Solieman, of counsel and health care attorney at Brownstein, said many of the issues dealing with health care transparency boil down to having the time and resources to implement the two main parts of the federal law, all while dealing with issues related to the pandemic.

“One of them is having a consumer-friendly area on their website where a consumer could go and see how much it would cost to get a particular service, if you’re paying out of pocket or you have insurance, so that I think a lot of hospitals already had a version of and they could comply pretty easily with,” Solieman said.

Where it gets complicated is dealing with machine-readable files which includes standard charges, gross charges and payer-specific negotiated charges. 

“The other part of the law is to have this machine-readable document or file on their website, but it’s publicly available,” Solieman continued. “That machine-readable file is required to have quite a bit of information on it and so that just takes time and resources to put all that information together, it’s pretty comprehensive.”

Solieman said what Colorado is doing is giving hospitals in the state another reason to comply with transparency law, adding the implementation of these policies is costly. The enforcement is also not given to a regulatory agency, but it puts it in the patient’s hands, which could lead to some interesting situations like frivolous lawsuits. 

Solieman said the new transparency law could lead to situations where a patient feels like their bill is too high and they use this law as a way to not have to pay or see a reduced bill, even though that would be a misuse of the law.

“Depending on the cost of litigation, it’s not a fun decision for a hospital to have to make,” Solieman said.  

So far, two hospitals in Georgia have been fined under the federal statute with penalties adding up to more than $1 million. To find out how Colorado hospitals fare under the federal statute, visit this website.

This transparency law also comes on the heels of a Colorado Supreme Court ruling in a hospital billing case in May. Lisa French had elective back surgery and got a bill for more than $300,000 with insurance picking up about $73,000, after being told previously she would have to pay about $1,300 after insurance. Centura Health sued to collect the bill saying she signed an agreement to pay the hospital’s chargemaster rates, which are like sticker prices. Chargemaster wasn’t mentioned in the contract French signed originally. The Colorado Supreme Court ruled that it was up to the jury to decide what she owes, which ended up being about $800.

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