Senate Bill 1061 (SB 1061), passed in 2024, is a new law designed to protect consumers by prohibiting credit reporting agencies from including medical debt on credit reports. It also restricts healthcare providers, billing vendors, and collection agencies from reporting such debt to credit bureaus.
SB 1061 introduced two significant changes that directly impact how physicians’ offices manage debt collection and communication with their patients. Effective January 1, 2025, physicians, their agents, and credit reporting agencies may no longer report medical debt to consumer credit reporting agencies (CRAs), regardless of the amount. Starting on July 1, 2025, any contract or financial agreement that creates a medical debt, must include specific consumer protection language, or the debt will be considered void and unenforceable. This new legislation impacts how you communicate with patients, structure payment plans, and collaborate with billing services.¹
What this means for private practices:
Effective January 1, 2025
- Physicians, billing vendors, and collection agencies may not report medical debt to credit reporting agencies.
- Medical debt will no longer impact a patient’s credit score.
- If a person knowingly violates this law, the debt becomes void and unenforceable.
Effective July 1, 2025
- Any financial agreement or contract entered into after July 1, 2025, that creates medical debt must include the following language: “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.”
- If the above language is not included in the contract or agreement, it will void the agreement and deem it to be unenforceable.²
- A violation of this section by a person holding a license or permit issued by the state shall be deemed to be a violation of the law governing that license or permit.³
What is the definition of medical debt?4
- Medical debt is a debt that is any service, drug, medication, product, or device sold, offered, or provided to a patient.
- It does NOT include cosmetic surgery. Debt for cosmetic surgery can still be reported to CRAs.
As a trusted healthcare provider, your strength lies in the relationships you build with your patients. Proactive communication and insurance verification may help in assuring patients receive financial expectations up front and know what to expect as they arrive in the clinic. This forward communication can help alleviate issues in collecting patient co-pays and co-insurance responsibilities at the time of check-in.
What can you do:
- Train staff and any vendors involved in billing and collections on the requirements of SB 1061 to assure understanding and compliance of the new law.
- Update all patient financial forms prior to July 1, 2025, with required language. You may consider updating the ABN (Advanced Beneficiary Notice) for Medicare patients to include this language for non-covered services.
SB 1061 isn’t about removing responsibility for payment; it is about proactive communication with patients and setting the expectations of payment.
By updating your financial policies and communications, you will be well positioned to continue delivering compassionate care without the added stress of credit reporting concerns.
Andie Tena is Assistant Vice President, Practice Management Services, at CAP. Questions or comments related to this column should be directed to ATena@CAPphysicians.com.
¹Digital Democracy CalMatters. California State Legislature. SB 1061: Consumer Debt: Medical Debt. 2023–2024 Legislative Session. SEC. 4. Section 1785.27 is added to the Civil Code, to read: 1785.27. https://calmatters.digitaldemocracy.org/bills/ca_202320240sb1061
²Digital Democracy CalMatters. California State Legislature. SB 1061: Consumer Debt: Medical Debt. 2023–2024 Legislative Session. SEC. 4. Section, (2) 1785.27 is added to the Civil Code, to read: 1785.27. https://calmatters.digitaldemocracy.org/bills/ca_202320240sb1061[1]
³Digital Democracy CalMatters. California State Legislature. SB 1061: Consumer Debt: Medical Debt. 2023–2024 Legislative Session. SEC. 4. (d) Section, 1785.27 is added to the Civil Code, to read:1785.27. https://calmatters.digitaldemocracy.org/bills/ca_202320240sb1061
4Digital Democracy CalMatters. California State Legislature. SB 1061: Consumer Debt: Medical Debt. 2023–2024 Legislative Session. https://calmatters.digitaldemocracy.org/bills/ ca_202320240sb1061#