New Law Reshapes Medical Debt Reporting: What SB 1061 Means for Physicians and Healthcare Organizations

A landmark law taking effect in California on July 1, 2025, is poised to significantly alter how medical debt is handled and reported—offering potential relief for patients while raising operational implications for physicians and healthcare organizations across Los Angeles County.

SB 1061, signed into law in 2023, prohibits consumer reporting agencies from including medical debt on individual credit reports, regardless of the amount owed or the age of the debt. This shift aligns California with a broader movement to de-stigmatize medical debt and prevent it from impacting patients’ access to housing, employment, and financial services.

Why It Matters to Physicians

While the intent of SB 1061 is to protect patients from long-term financial harm due to healthcare costs, the law introduces operational considerations for physician practices, medical groups, and health systems:

• Limits on Debt Leverage: Providers may lose a key tool historically used to encourage payment compliance—credit reporting. This could impact collections, particularly for smaller practices with limited administrative support.

• Contract Implications: Physicians should review current agreements with third-party billing services and collection agencies. Contracts may need to be updated to ensure compliance with the new law and avoid illegal credit reporting practices after July 1, 2025.

• Patient Communications: Practices are encouraged to reassess their financial policies and proactively communicate payment expectations with patients. Transparent conversations at the point of care about cost, insurance coverage, and payment plans may become even more critical.

• Administrative Updates: Practices should ensure that billing and administrative staff are trained on the implications of SB 1061 and that internal protocols are revised accordingly.

Impacts on the Healthcare Ecosystem

In California, nearly 1 in 10 consumers has a medical debt in collections. SB 1061 aims to decouple personal credit scores from healthcare affordability—particularly for low-income communities and patients experiencing chronic illness. For healthcare leaders, this represents both a challenge and an opportunity:

• Opportunity to Build Trust: Removing credit threats from the equation may foster stronger provider-patient relationships, especially in underserved areas where fear of debt can delay necessary care.

• Policy Alignment: SB 1061 supports a growing shift in public policy prioritizing equity in healthcare access, reinforcing the need for systems-level solutions to address rising out-of-pocket costs and underinsurance.

What Physicians Can Do Now

The California Medical Association (CMA) has released a comprehensive fact sheet outlining the law’s provisions and recommended next steps. LACMA+CMA encourages all members to:

• Review the CMA’s guidance on SB 1061

• Conduct an internal audit of current debt collection practices

• Train staff on compliant billing workflows

• Engage legal or financial counsel to update relevant policies

As the landscape of medical billing evolves, LACMA+CMA will continue to advocate for physician voices at the table—ensuring that patient protections don’t inadvertently harm the viability of medical practices or disrupt care delivery.