Written for CPTA by Cory Huennekens, Law Clerk and Steven L. Simas, Esq.
Introduction
On September 24, 2024, Governor Gavin Newsom signed into law Senate Bill-1061 (SB-1061) which prevents health care providers, including physical therapists, from reporting medical debts to Credit Reporting Agencies (CRA). Specifically, SB-1061 makes some significant changes to medical debt laws such as:
- Defining “medical debt.”
- Requirements for contracts which create medical debt.
- Prohibitions on reporting medical debt to consumer credit reporting agencies (CRA) and investigative consumer reporting agencies (ICRA.)
- Notice and records requirements.
- Mandates concerning the sale of medical debt.
- Penalties for failure to comply with the changes.
Background
The California Legislature introduced SB-1061 in response to the growing number of Californians with medical debt—approximately one in three.[1] Medical debt, and its impact upon consumer credit, often becomes a barrier for people to (among other things) find housing and employment, despite the fact medical debt is a poor predictor of credit risk.[2] SB-1061 addresses this issue by prohibiting providers from reporting medical debt to CRAs. This prohibition essentially eliminates future medical debt reporting from consumer credit reports.
Who Does SB-1061 Apply To?
SB-1061 applies to a “person”[3] whose primary business is providing health care services, products, or devices.[4] This means that a physical therapy practice whose patient incurs medical debt is governed by this new law.
Defining “Medical Debt”
Medical debt is defined as “A debt owed by a consumer to a person whose primary business is providing medical services, products, or devices, or to the person’s agent or assignee, for the provision of medical services, products, or devices. Medical debt includes, but is not limited to, medical bills that are not past due or that have been paid.”[5]
Action Item –Update Contracts
Physical therapy practitioners should update their contracts with patients, or they can be void going forward. After July 1st, 2025, a contract that creates medical debt must include the following terms:
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.[6]
Providers should pay particular attention to this change. Violation of this statute may be considered a violation of the law governing a physical therapy license.
Prohibitions, Requirements, and Mandates
A person is prohibited from furnishing information regarding medical debt to a CRA.[7] If a person knowingly violates this statute, and provides such information to a CRA, the medical debt is void and unenforceable.[8]
Conclusion
In the past, California protected consumers by setting limits on how long medical debt could remain on a credit report. SB-0161 takes this a step further by prohibiting providers from reporting medical debt in the first place. Physical therapists should take steps to ensure compliance with medical debt laws to avoid potentially harsh penalties and collectability of the debt owed.
If you are a physical therapist or practice owner, please do not hesitate to contact Simas & Associates, Ltd. We offer discounted rates and special services to CPTA members. You can reach us at 888.999.0008 or at info@simasgovlaw.com.
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Cory Huennekens is a law clerk with the Health Care and Government and Administrative Law firm of Simas & Associates, Ltd., in Sacramento, San Diego, San Jose, San Luis Obispo, and Santa Monica, California. They specialize in the areas of Healthcare Regulation, Professional Licensing and Regulation, and Workplace and Employment Regulation. The firm has proudly served as legal counsel to the California Physical Therapy Association since 2004 and can be reached at 888.999.0008 and info@simasgovlaw.com.
[1] California Pan-Ethnic Health Network – New Legislation Helps Medical Patients.
[2] Consumer Financial Protection Bureau – Medical Bills.
[3] “Person” means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity. (Civ. Code 1785.3(k).)
[4] Senate Floor Analyses – Section 3.
[5] Civ. Code 1785.3 (j)(1)
[6] Civ. Code 1758.27 (c)(1)
[7] Civ. Code 1785.27 (a)
[8] Civ. Code 1785.27 (b)