The Weekly Articles

In passing SB 1061 last fall, the California legislature took aim at consumer medical debt by adding three statutes and amending ten statutes between the California Civil Code, Health and Safety Code, and Insurance Code. While most provisions of SB 1061 went into effect January 1, 2025, the mandatory contract language provision starts July 1, 2025.

Specifically, under Civil Code §1785.27(c)(1), contracts creating medical debt entered into on or after July 1, 2025 must contain a term stating, “A holder of this medical debt contract is prohibited by Section 1785.27 of the Civil Code from furnishing any information related to this debt to a consumer credit reporting agency. In addition to any other penalties allowed by law, if a person knowingly violates that section by furnishing information regarding this debt to a consumer credit reporting agency, the debt shall be void and unenforceable.”  As indicated, a contract failing to include this mandatory term is void and unenforceable.

Other notable provisions of SB 1061 include prohibiting a person from reporting information about medical debt to a consumer credit reporting agency, making the medical debt void and unenforceable if this reporting provision is knowingly violated, and deeming a violation of this law by a person license or permitted by the state a violation of the law governing their license or permit. Under this law, a person includes an individual or entity. Notably, medical debt is newly defined to include medical bills that have been paid or are not past due. Retention requirements for medical debt documentation were also added related to money owed to the hospital by the patient or their guarantor. 

SB 1061 added Civil Code §§1785.20.6 and 1785.27; added Insurance Code §10112.75; and amended Civil Code §§1785.3, 1785.13, 1786.18, and 1788.14; Health and Safety Code §§1371.56, 1371.9, 1797.233, and 127425; Insurance Code §§10112.8 and 10126.66.

Advocates and stakeholders have tried for decades to get health care regulators and elected officials to recognize the fundamental importance of housing as a component of health care. Advocates are beginning to see their long fight bear fruit.

This past January, Santa Clara County purchased two buildings through funding from the California Health Facilities Financing Authority. Vermont House, as the facility is called, just opened this past week, with a stated mission to help those leaving county jail and, especially, those with mental health issues. The facility offers live-in management as well as wrap-around services to provide the residents with skills to move out in six to twelve months. Although only 15 beds, Vermont House will add a new step in providing care that is intended to lead to independent living rather than homelessness in Santa Clara County.

The California Health Facilities Financing Act (CHFFA) (Gov. Code sections 15430-15462.5) was established in 1979 as California's vehicle for providing financial assistance to public and non-profit health care providers through loans, grants and tax-exempt bonds.  Lawmakers are looking to update the law to meet current needs.  Non-profit health systems continue to struggle and facilities in our hardest hit communities are closing.  Two bills have recently been introduced to attempt to expand the reach of the CHFFA and stem hospital closures.

AB 488 would extend the repayment term for non-designated public hospitals participating in the loan program that had received a loan approval from, and entered into a loan and security agreement with, the authority by requiring those hospitals to begin monthly repayments on the loan 32 months after the date of the loan and discharge the loan within 60 months of the date of the loan.  AB 488 would require the monthly payments to be amortized over the term of the loan, at 0% interest.  If enacted, AB 488 would provide loan recipients with relief from interest and immediate repayment.

AB 627 would amend CHFFA’s “working capital” program, which provides money for use in the ownership or operations of covered facilities. This bill would remove the 2-year cap on interest and remove the loan term of 24 months for repayment of working capital loans. If enacted, the bill also proposes to establish financial eligibility standards for working capital loans including creditworthiness of participating health institutions; hospitals determined to be “distressed” would be prohibited from participating in working capital loans.

With California’s budget woes, expect to see Legislators attempt creative solutions to shore up health care facility financing in the coming months and years.

Governor Gavin Newsom revised the Governor’s Budget in May after federal policy changes led to a significant downgrade in economic and revenue forecasts. Where January’s budget initially projected a modest surplus, the May budget revisions assume a growth recession leaving the state in a $12 billion shortfall, necessitating reductions and solutions planning. Those reductions significantly impact skilled nursing facilities (“SNFs”) through sweeping cuts to Medi-Cal, elimination of certain long-term benefits, elimination of the Workforce and Quality Incentive Program (“WQIP”), and suspension of the AB 2511 requirement for SNFs to maintain a backup power system for at least 96 hours.

WQIP, authorized by AB 186 in 2022, is a program designed to incentivize improvements in the quality of care and investment in the SNF workforce. Through the program, employers are encouraged to maintain safe staffing levels in facilities, and the Department of Health Care Services (“DHCS”) provides direct payments to facilities meeting certain measures. It is estimated that eliminating WQIP will decrease funding for SNFs by more than $280 million annually, resulting in staff reductions.

Perhaps to offset the loss of funding on SNFs, the Revised Budget suspends compliance with AB 2511, which increased the requirement of backup power for SNFs from six to 96 hours to ensure the operation of critical medical equipment during emergencies like wildfires and other climate-related threats. Costs for compliance are estimated to be significant ($1 million to $3.2 million per facility), and facilities have sought extensions due to the financial burden and challenges of the permitting process and supply chain issues for the required changes to electrical and HVAC systems required to add backup power supplies. Only 34 out of approximately 1,200 facilities subject to the law currently meet AB 2511’s standards. Suspending compliance saves the industry more than $1 billion, and while requests for assistance with meeting the requirements had been made, it is unclear whether the proposed savings in the budget include any savings to the state due to suspension of compliance. Critics of these revisions to the budget raise concerns about the welfare of seniors and those recuperating from illness or surgery, particularly given recent wildfires and climate-related power shutoffs.

The state constitution mandates that the Legislature pass a balanced budget by June 15, 2025.

For those who missed it, last week’s webinar about the legal landscape surrounding gender-affirming care in California is available for viewing on the CSHA website.  The distinguished panelists discussed the legal arguments, strategies, and implications of the anticipated U.S. Supreme Court decision in U.S. v. Skrmetti; the current federal administration’s policies on gender-affirming care; California’s response to ongoing national attacks on gender-affirming care access; and the on-the-ground realities for recipients and providers of gender-affirming care in California. 

On May 28, 2025, CMS sent “select hospitals” an information request relating to gender-affirming care services the hospitals provide. The request seeks information regarding the hospitals’ policies and procedures relating to informed consent for minors seeking such care and asks whether the hospitals have altered their clinical practice guidelines in light of a recent HHS report reviewing best practice for gender dysphoria treatment. The request also asks whether the hospitals have experienced adverse events relating to gender-affirming care, including whether children later decided to detransition. CMS does not identify the hospitals that received the request.

This latest move by CMS further complicates an already fraught landscape for the hospitals that received the request and for California hospitals generally. On January 28, 2025, President Trump signed Executive Order 14187, directing federal agencies to withhold funding from medical schools and hospitals providing gender-affirming care to minors and directing HHS to take comprehensive regulatory action to prohibit the provision of such care, including by revising the CMS conditions of participation for hospitals. California Attorney General Bonta issued a press release shortly thereafter, reminding hospitals of their obligations under California anti-discrimination laws not to withhold gender-affirming care. While multiple federal courts have enjoined the funding prohibitions in President Trump’s order, the CMS information requests make clear that California hospitals will need to continue balancing competing risks when it comes to gender affirming care. On the one hand, providing such care to minors could invite increased federal scrutiny. On the other hand, withholding such care could violate California law and deprive patients of medically necessary medications and procedures.

The Centers for Medicare and Medicaid Services (CMS) recently noticed a proposed rule to change the criteria for states to obtain waivers on state Medicaid tax proposals. The proposed rulemaking is “intended to address a loophole” in the Medicaid tax rules that could cost California billions of dollars in Medi-Cal funding.

Federal law requires each state’s Medicaid program to be financed jointly by the federal and state governments. The federal government’s share is determined based on formulas that are generally a percentage of the state’s eligible expenditures on covered Medicaid services. States may fund their share of the expenditures through taxes on health care entities, such as managed care organizations (MCOs), but the taxes must be uniform and broad-based across both Medicaid and non-Medicaid businesses. Alternatively, current federal rules allow states to obtain a waiver from CMS if the state’s proposed tax passes certain statistical tests designed to ensure it is “generally redistributive” and does not primarily affect Medicaid entities who would benefit from the resulting Medicaid payments.

States have used the waiver process to implement taxes on MCOs, which are then used to fund an increase in the state’s Medicaid expenditures, which in turn results in increased federal match funds paid to the state. California enacted a temporary MCO tax through the budget last year, and voters approved a state ballot initiative, Prop. 35, in November 2024 establishing a permanent MCO tax which would provide a projected $30 billion in Medi-Cal funding over the next four years.

The proposed rule would tighten the statistical tests to prohibit state MCO tax structures that have been permitted under the current federal rules for the past two decades. If adopted, the change could mean a drastic reduction in California’s funding for Medi-Cal.

CMS is accepting public comments on the proposed rulemaking until July 14, 2025.

If you have not responded to the survey yet, please do so! This is the last week the survey will be open. CSHA is committed to creating a culture that recognizes the value of individuals with diverse backgrounds, talents, experiences, and perspectives at all levels of the organization. For the first time, CSHA is conducting a voluntary and anonymous member demographic survey to understand the composition of CSHA membership and leadership. CSHA will aggregate the data and share a compilation of overall percentage by category with the entire CSHA membership (e.g., years in practice, practice area, sexuality, gender, race/ethnicity/ancestry, disability, and veteran status). CSHA leadership will review the data to understand the diversity within the organization and measure progress on creating an inclusive environment for all members. CSHA will not receive any identifying information along with the survey responses and therefore will not be able to tie any particular response to a specific member. Participation is purely voluntary, but sharing this information will provide important and meaningful data regarding the diversity of CSHA’s membership. Members can indicate that they prefer not to answer any or all of the questions. Members can also simply ignore the survey.

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Free to register for CSHA members!  Join our esteemed panelists for a conversation about the legal landscape surrounding gender-affirming care in California. Topics will include the legal arguments, strategies, and implications of the anticipated U.S. Supreme Court decision in U.S. v. Skrmetti; the current federal administration’s policies on gender-affirming care; California’s response to ongoing national attacks on gender-affirming care access; and the on-the-ground realities for recipients and providers of gender-affirming care in California. 

Panelists:

• Jessica Clarke (she/her) is the Robert C. and Nanette T. Packard Professor of Law at USC Gould School of Law.  She writes on antidiscrimination law, with a focus on sex, gender, and sexuality. 
• Pelecanos (they/them) is the Daniel H. Renberg Fellow at Lambda Legal, the nation’s oldest and largest legal organization working for full recognition of the civil rights of LGBTQ+ people and everyone living with HIV.
• Riley Robertson (they/them) (moderator) is a Health Care & Life Sciences attorney at Jones Day and a member of the CSHA Diversity Task Force.

CSHA is pleased to provide information on the following recent actions by the Trump administration that potentially impact health care in California.  Given how rapidly events are changing at the federal level, readers are cautioned to double check the current status of any article in this feature.

On May 7, a state court issued a ruling denying Providence St. Joseph Hospital’s demurrer to the California Attorney General’s lawsuit alleging that the hospital violated state laws by refusing to provide emergency abortion care to pregnant people experiencing obstetric emergencies. This lawsuit stems from a patient who was allegedly denied care after experiencing premature rupture of membranes while 15 weeks pregnant with twins. In its demurrer, the hospital argued that California’s Emergency Services Law infringed on its religious right to free expression and that the State had not sufficiently pled its claim under the Unruh Civil Rights Act, among other things. The court ruled in favor of the Attorney General on all grounds, finding that the state had sufficiently pled a claim under the Unruh Civil Rights Act and, assuming that the facts alleged in the complaint are true, that the state’s Emergency Services Law does not unconstitutionally infringe on the hospital’s religious rights. The case will now move forward, along with separate cases filed by two patients that have alleged that the hospital denied them abortion care during medical emergencies. A copy of the court’s decision can be found here.