If you’re collecting medical debt in California, AB 1020 is a regulation you can’t afford to overlook. This state law changes how hospitals handle billing and collections, especially when offering financial assistance before pursuing unpaid balances. Whether you’re a collection agency, law firm, or credit issuer working in the healthcare space, understanding the specifics of AB 1020 is essential to staying compliant and adjusting your strategy.
In this blog, we’ll break down what AB 1020 means for healthcare debt, how it impacts the billing timeline, and what actions you need to take before initiating collections. Clear procedures, detailed documentation, and timely communication are more critical than ever. Let’s walk through what the law requires and how you can align your processes.
Understanding AB 1020’s impact helps to start with the basics. This California law introduces significant changes to how hospitals and affiliated entities handle billing and collections, especially for patients facing high medical costs.
Here are two major updates under AB 1020:
The law expands the definition of “high medical costs,” making more patients eligible for financial assistance. It also revises income eligibility thresholds, which means a broader group of individuals now qualify for hospital financial aid before their accounts can be sent to collections.
AB 1020 strengthens patient protections by requiring hospitals to offer and screen for financial assistance genuinely. It also sets mandatory waiting periods before initiating collections, adds transparency requirements around patient notifications, and limits how and when debt can be reported or pursued.
Now that you understand the law’s core framework, let’s dive into the specific provisions of AB 1020 that directly affect healthcare debt collection. From debt sales to patient notices, these provisions set the stage for how you should be adjusting your processes.
AB 1020 isn’t just a set of policy suggestions; it’s a binding framework that significantly alters how and when hospitals and collection partners can pursue payment. These provisions increase transparency, extend patient protections, and give consumers more time and clarity before debt moves into collections.
Here are the core requirements you need to be aware of:
Under Section 127425(a)(1) of AB 1020, hospitals are prohibited from selling patient debt unless the purchasing entity contractually agrees to comply with the hospital’s financial assistance policy. The buyer must also halt collection activity if a patient is later found eligible and return any qualifying accounts. This provision limits who can purchase debt and imposes specific conditions to protect consumers.
According to Section 127425(a)(2), hospitals must make at least three documented attempts to inform patients about available financial assistance before engaging in any debt collection efforts. These notices must be provided in the patient's preferred language and include accessible instructions on applying for aid.
Per Section 127425(a)(3), hospitals and their collection partners may not begin collection activity until 180 days after the initial billing date. This waiting period ensures patients have adequate time to apply for financial assistance and protects them from premature collections.
In Section 127425(a)(4), the law restricts reporting medical debt to credit bureaus or initiating legal action until the 180-day period has lapsed. These steps are only permissible if the patient was adequately informed and determined ineligible for financial help.
Stay on top of compliance and performance with advanced insights from Tratta’s Reporting and Analytics platform. Get real-time data to track your progress.
With the rules outlined, it’s time to explore how AB 1020 will impact your debt collection strategy. These changes will affect the timing of collections, operational processes, and overall risk management, so understanding these impacts is crucial for adapting effectively.
Also Read: Understanding Interest-Bearing Payment Plans in Debt Recovery
AB 1020 significantly reshapes how healthcare-related debt can be pursued, especially for collection agencies, law firms, and credit issuers handling large volumes of medical accounts. With stricter regulations and a longer pre-collection window, the traditional timeline for recovery has shifted. These changes also introduce new compliance risks and operational adjustments.
The mandatory 180-day waiting period before initiating any collections or credit reporting activity alters the usual flow of accounts. This extended window requires agencies to adjust their schedules, forecasting models, and recovery timelines.
Hospitals and their collection partners need to collaborate more closely to ensure staff understand and follow the updated regulations. This includes revising financial assistance policies, updating patient communication procedures, and documenting compliance at every step.
With a longer lead time before collection and new limits on debt sales or lawsuits, providers and their partners face higher risks of delayed payments or non-recovery. Noncompliance, such as collecting too early, failing to notify patients properly, or ignoring financial aid eligibility, leads to penalties, reputational damage, or enforcement actions.
Need a tailored solution to fit your specific collection needs? Explore Tratta’s Customization & Flexibility features to adapt to AB 1020’s demands.
To meet the demands of AB 1020, healthcare providers and collection agencies must implement changes to their operations. Let’s look at adjusting workflows, training staff, and incorporating new procedures to stay compliant without disrupting your cash flow.
Complying with AB 1020 isn’t just about checking off legal requirements. It calls for meaningful shifts in how healthcare providers and their collection partners handle accounts from when billing begins. To reduce compliance risk and maintain steady cash flow, operational changes must be thoughtful and immediate.
Hospitals and agencies need to restructure their collections timeline to ensure no activity begins before the 180-day waiting period. This shift impacts intake processes, billing schedules, and when accounts are passed to recovery teams. Staff across departments should be trained to recognize new patient notice requirements and verify financial assistance eligibility early in the billing cycle.
Key steps include:
Extended timelines and extra steps can increase the chance of delayed payments and lost revenue. Healthcare organizations must find ways to stay compliant without sacrificing recovery opportunities. Technology, automation, and accurate recordkeeping will play a central role here.
Practical strategies include:
As you adjust to AB 1020’s new regulations, technology will play a critical role in ensuring compliance and efficiency. Here’s how the right technological solutions can streamline processes, reduce manual errors, and protect your revenue.
Also Read: Arkansas Statute of Limitations on Debt Collection
AB 1020 introduces strict timelines, expanded patient rights, and new documentation demands that healthcare providers and their recovery partners must meet. Without the right systems, manually tracking these requirements becomes nearly impossible. That’s where technology steps in as more than just a tool, it becomes the backbone of your compliance strategy.
Digital platforms and automation tools help you enforce critical rules across every account. From verifying that no collections begin before 180 days to confirming delivery of patient notices, technology can reduce manual errors and support consistent enforcement of AB 1020 provisions.
What to look for:
AB 1020 compliance isn’t just about following the law. It’s also about recognizing patterns, identifying risks, and adapting quickly. Advanced analytics help teams track performance, detect bottlenecks, and forecast revenue impacts tied to the new timeline restrictions.
Technology can support this with:
Meeting regulatory standards should not come at the cost of operational efficiency. Technology helps you do both. With centralized data, automation, and integrated workflows, your teams can focus on meaningful tasks rather than chasing down paperwork or double-checking timelines.
Benefits include:
For organizations working with healthcare debt, the right tech stack does more than ensure compliance. It helps protect revenue, improve patient trust, and give your teams the tools they need to perform at their best.
Reach diverse audiences with ease through Tratta’s Multilingual Payment IVR. Learn how our interactive voice response systems can enhance your collections process.
AB 1020 reshapes how healthcare debt is handled in California. The law significantly impacts how and when recovery teams can engage with patients by redefining high medical costs, extending collection timelines, and placing new responsibilities on hospitals and agencies. Adapting to these requirements is no longer optional for collection agencies, law firms, and revenue cycle teams; it’s critical for compliance and continued recovery performance.
To stay ahead, healthcare providers and their partners must invest in technology that supports automation, real-time analytics, and regulatory safeguards. Doing so helps meet AB 1020’s mandates and creates more transparent, patient-friendly financial interactions.
Want to see how the right platform simplifies compliance? Book a free Tratta demo to explore how we help you automate workflows, reduce risk, and stay compliant while protecting revenue.
1. Who does AB 1020 apply to?
AB 1020 applies to California hospitals and any third-party agencies (including law firms and debt buyers) that work on their behalf to collect medical debt.
2. Can collections begin before 180 days if the patient declines assistance?
No. Even if a patient refuses financial assistance, the 180-day waiting period must still be observed before any collection activity begins.
3. Are there penalties for early collection activity?
Yes. Starting collections before the 180-day window or failing to notify patients properly can result in legal penalties, fines, and regulatory investigations.
4. Does this law affect credit reporting timelines?
Yes. Medical debt cannot be reported to credit bureaus until after 180 days and only if the patient was screened for aid and found ineligible.
5. What languages must notices be sent in?
Patient notices must be provided in the preferred language of the patient, as documented by the hospital, to ensure accessibility and compliance.
