Colorado Bill Aims to Limit Debt Collections, Boost Price Transparency

The Colorado House has passed a bill that seeks to prohibit hospitals from pursuing debt collections against patients if the health system does not comply with the CMS hospital price transparency rule.

The bipartisan bill is sponsored by State Sens. Dominick Moreno (D) and John Cooke (R), and State Reps. Daneya Esgar (D) and Patrick Neville (R).

According to the regulation, healthcare prices in Colorado are among the highest in the nation. Yet, not all hospitals are complying with the price transparency rule that requires facilities to publish prices online for 300 shoppable services.

The legislators introduced HB22-1285 to help protect consumers from high prices and medical debt collections when hospitals did not follow the price transparency requirements. The bill would make this act an unfair practice under the “Colorado Fair Debt Collections Act.”

If signed into law, the bill would ban non-compliant hospitals from attempting to collect a medical debt from a patient by indirectly or directly referring the debt to a debt collector, a collection agency, or another third party retained by or on behalf of the hospital.

Additionally, hospitals cannot sue a patient, enforce an arbitration or mediation clause in any hospital documents, or cause a report to be made to a consumer reporting agency, the regulation states.

Patients may file a lawsuit if they receive a debt collection action from a hospital that they believe was not complying with the price transparency law when the services were provided. Hospitals cannot pursue additional debt collections against patients during a pending lawsuit.

If a hospital violates the policies put forth in the bill, it will be subject to financial penalties. Hospitals will have to refund any amount of paid debt to whoever paid for it and pay a penalty to the patient equal to the total amount of the debt. Hospitals found guilty must also dismiss any court action and pay the attorney fees and costs incurred by the patient due to the action.

In addition, hospitals must take action to remove any reports of patient debt from the patient’s credit report.

The bill does not include any regulations that prohibit hospitals from billing a patient or health plan for items or services provided to the patient, nor does it require a hospital to refund a payment made to the hospital for services provided.

The legislation authorizes the department of public health and environment to consider whether the hospital has complied with the price transparency rule when reviewing a hospital’s license renewal application.

The bill was passed by the Colorado House and will now move to the Senate Health and Human Services Committee for consideration.

According to reporting from The Gazette, during a public hearing, large hospitals claimed that the bill would lead to frivolous lawsuits, and smaller health systems feared it would hurt their business as they do not have the proper resources to comply with the price transparency rule.

Although the hospital price transparency rule went into effect over a year ago, on January 1, 2021, compliance is still low among health systems. Data from PatientRightsAdvocate.org found that only 14 percent of hospitals met the rule requirements to publicly post the costs of their items and services online.

Additionally, revenue cycle leaders said the confusing regulations and the significant resources and software needed for compliance make it difficult for hospitals to meet the requirements, a recent KLAS report revealed.