BY JOCELYN WIENER | CalMatters
The first bill arrived in Sultan Khan’s mailbox two years after he was released from Napa State Hospital. Khan had been receiving psychiatric treatment there for three years after pleading not guilty by reason of insanity to a criminal charge stemming from an assault.
He stared in disbelief at the paper in front of him.
The state Department of Hospitals wanted him to reimburse the cost of that stay: $769,490.
Wondering if he was being scammed, Khan called the department.
They suggested a payment plan.
The department’s practice of charging patients exorbitant amounts of money after their release has been going on for decades, according to lawyers and advocates. The billing has been required by state law since 1967 and allowed since the 1930s. The practice continues even though the state has passed laws in recent years to prevent other government entities from charging high fees to vulnerable populations. For example, people leaving prisons and jails no longer have to pay many of the costs associated with their incarceration.
“The state Department of Hospitals is quietly collecting hundreds of thousands of dollars from our most vulnerable clients, those who are least able to make any payments,” said Rachel Draznin-Nagy, Khan’s public defender in Contra Costa County. “I am so furious about this.”
California has five state mental hospitals that serve more than 5,500 patients, the vast majority of whom come from the criminal justice system. Most have been charged with or convicted of crimes related to their serious mental illness; some, like Khan, are sick enough to be found not guilty by reason of insanity. Medi-Cal does not insure people in state hospitals.
After their release months or years later, few of these patients have the financial resources to pay huge bills, Draznin-Nagy and other public advocates said.
The state Department of Hospitals declined to make people available to CalMatters to discuss its fee collection program. But in an unsigned email, department officials said they “recognize the stress and concern individuals may feel when receiving financial notifications.”
They pointed to laws “that require the department to collect the cost of care provided in public hospitals.” To be reimbursed by Medicare, they said, state agencies must bill patients for the cost of care when such billing is required by state law.
Last May, thanks to recent legislative changes, the department introduced a new financial assistance program that allows it to forgive some or all of a patient’s debt. But public defenders say many of their clients can’t afford to file the paperwork to apply for the program in a timely manner.
The day before publication, the department announced that it had fully cancelled the debt of its first applicant.
Data from a report submitted to the Legislature in 2022 showed the department collected $418,861 from an unspecified number of former patients between January 2018 and September 2021. The report also noted that the department filed six lawsuits seeking recovery during that time. It did not write off, reduce or cancel any patient debt during that period. The department did not provide CalMatters with more recent data. Its current budget is $3.4 billion.
In their email, department officials said they have not referred former patients to collection agencies or garnished their wages. But if patients have not made efforts to pay their bills or reached out to make payment arrangements, dispute their bill or apply for the financial assistance program, the department can submit a request to the Franchise Tax Board to collect unclaimed property, funds or tax returns to offset the cost of care.
‘Shocking’ hospital bills
In recent years, advocates and lawyers have convinced the legislature to roll back other policies that require charging vulnerable groups, often low-income people of color.
In 2018, California led the nation in waiving fees for juvenile offenders.
In 2022, the state ended charging incarcerated people fees for costs associated with their incarceration.
Stephanie Campos-Bui, a Berkeley law professor involved in the effort, said the size of the Department of State Hospitals bills, like the one Khan received, is “shocking.” Part of what led to legislative changes banning the collection of other types of fees is that the cost to the state often outweighs the revenue those fees could generate, she said.
“If we truly believe that it is in our best interest as a society to put these people in public hospitals, it should be funded by the general fund, by taxpayers, not by people being involuntarily committed to these facilities,” she said.
Joseph Gocke, a Yolo County public defender, said one of his clients was billed in 2022 for $81,491 after spending months in a state hospital.
“We went to court. We challenged that decision. Unfortunately, we lost,” he said.
Some of the case law that allows the department to collect such fees dates back to the 1950s and early 1960s, he said, even predating the right to counsel, which was established in 1963.
“It’s strange that this is still allowed because these are our customers who, by law, have to go to the public hospital to get treatment,” he said. “And then to bill them for something they didn’t choose seems fundamentally unfair to me.”
Elizabeth Madsen, a Placer County public defender, requested an itemized bill for a client in 2020 after he was deemed unfit to stand trial and sent to a state hospital. The state Department of Hospitals, according to the bill, charged $520 per day for his three-month stay. State officials sent multiple bills to his parents in an attempt to collect a total of $51,945, which included the per diem rate as well as the cost of medications and vaccines.
Madsen said it was the only bill of this type she had received over the years among her clients, leading her and other public defenders to believe that this type of billing is applied unevenly. She said public hospital representatives told her they send these types of bills all the time.
The Department of State Hospitals’ email earlier this month noted that “upon admission of an individual to a state hospital, the hospital trust office will inform the patient of his or her responsibility for care, support and maintenance in a state facility.”
“I’m going to be in debt for the rest of my life”
Khan doesn’t remember anyone telling him he’d be ordered to pay that much money. He was dealing with a new diagnosis of schizophrenia and his life was in turmoil at the time: “I had other things on my mind,” he said.
If hospital officials had explained to him how deeply in debt he would be, he said, he might have chosen to simply go to prison — although he believes the treatment he received at the public hospital ultimately helped him enormously.
“I mean, $760,000, I’m going to be in debt for the rest of my life,” he said recently, sitting in a conference room in downtown Martinez with his court-appointed attorney, Draznin-Nagy. “It’s not a good feeling, believe me.”
Khan landed in the justice system shortly after returning from a stint as a Pashtun interpreter at Guantanamo Bay, the controversial detention camp in Cuba where the U.S. military housed detainees after 9/11. The violence he witnessed during his work traumatized him, he said. In addition to suffering from post-traumatic stress disorder and depression, he was diagnosed with schizophrenia while in prison. At the state hospital, his illness responded well to medication and treatment. He was released in 2018 and began rebuilding his life. He moved in with his family. He began collecting disability benefits. He found a part-time job at a local grocery store.
He received his first bill two years later. The treatment team that worked with him through the county’s parole program sent the department proof of his inability to pay, he and Draznin-Nagy said.
A year passed before Khan received another letter from the department informing him that it was updating its policies and would not pursue recovery until that process was complete.
Nearly three years later, Khan received a third letter last May. If he did not contact the department’s patient cost recovery section to request financial assistance within 30 days, the department would resume billing.
Although he has contacted the state through his attorney, Khan says anxiety about the bill keeps him up at night. He thinks about it while he works and during walks in the local park that used to help clear his head.
“It’s like a weight off my shoulders,” he said. “It stays in my memory.”
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