BILL ANALYSIS
AB 366
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 366 (Ruskin) - As Amended: April 2, 2009
SUBJECT : Medi-Cal: inpatient hospital services contracts.
SUMMARY : Requires the California Medical Assistance Commission
(CMAC) to provide for separate reimbursement for hospitals for
the full cost of orthopedic implants for cancers of the bone.
Specifically, this bill : Requires CMAC, in addition to
considering the specified factors in existing law, in
negotiating contracts under the selective provider contracting
program, or in drawing specifications for competitive bidding,
to provide for separate reimbursement for hospitals for the full
cost of orthopedic implants for cancers of the bone.
EXISTING LAW :
1)Requires the governor to designate a person in his or her
office to act as a special negotiator (in practice, CMAC) to
negotiate rates, terms, and conditions for contracts with
hospitals for inpatient services to be rendered to Medi-Cal
program beneficiaries.
2)Permits the negotiator, if he or she deems it expedient, to
call for bids, in lieu of negotiations, and requires the
special negotiator to consider, when contracting, the total
funds appropriated for inpatient hospital services.
3)Requires the negotiator to take into account over fifteen
specified factors in negotiating contracts or in drawing
specifications for competitive bidding.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . This bill is sponsored by the City of
Hope to require CMAC to negotiate separate reimbursements to
hospitals for the full cost of orthopedic implants in patients
with bone cancer. City of Hope states that, for contracting
hospitals, Medi-Cal will reimburse facilities for certain
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specialized treatments and procedures (bone marrow searches,
bone marrow and cord blood transplantation, and factor drugs)
at a separate negotiated price. The sponsor argues these
services are negotiated separately because of their high
costs, because Medi-Cal patients needing these procedures
normally have no other treatment options, and because not
reimbursing these charges at higher rates can prevent Medi-Cal
from meeting federal requirements to enlist enough providers
so that services to Medi-Cal recipients are available to the
same extent as those available to the general population.
City of Hope states that under-payment, or lack of payment,
for procedures and treatments have resulted in limited
treatment options for Medi-Cal recipients, and cites published
medical journal literature on lack of timely access for
children with Medi-Cal needing orthopedic care. Bone cancer
patients are often given the option of amputation or
orthopedic implants as part of their treatment, and few
patients ever choose amputation (which Medi-Cal will
reimburse). City of Hope and existing state reimbursement
policy fails to reflect medical advances that have succeeded
in allowing patients with bone cancer to avoid amputation.
The sponsor argues decades ago, amputation was the only option
and Medi-Cal paid for prosthetic limbs which cost an average
of $9,000 for above-the-knee pieces and had to be replaced
every year in children until age 15, but surgeons are now able
to spare the limbs of approximately 90% of patients with
malignant bone tumors. The sponsor states these advances save
the state money in the long-run and improve the lives of
Medi-Cal beneficiaries afflicted with this devastating
disease. According to City of Hope, due to the small number
of facilities in California that treat bone cancer patients
and the few orthopedic oncologists in California, it is
possible that finding a physician for Medi-Cal recipients in
need of treatment could be severely limited, and providing
adequate reimbursement helps ensure patients have access to
care. City of Hope argues this bill is necessary if the state
plans to enlist enough providers so that critical services to
Medi-Cal recipients are available to the same extent as those
available to the general population.
2)CMAC . Since 1983, CMAC has been the state agency responsible
for negotiating contracts with hospitals on behalf of the
state for inpatient services under the fee-for-service
Medi-Cal program through what is known as the Selective
Provider Contracting Program (SPCP). Through CMAC, the state
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selectively contracts on a competitive basis with hospitals
for fee-for-service inpatient services provided to Medi-Cal
beneficiaries. The CMAC competitive contracting model has
resulted in savings to the state General Fund. According to
its 2008 Annual Report, based on a fiscal year 2007-08 average
statewide Medi-Cal SPCP contract rate of $1,290 per day, the
average contract rate has increased 151.5%, or approximately
3.8% per year on a compounded basis, since the inception of
the SPCP program. For non-SPCP hospitals remaining under the
cost-based reimbursement system, the average Medi-Cal interim
payment rate was $2,195 per day, and the average cost-based
rate has increased 307%, or approximately 6.3% per year on a
compounded basis since the inception of SPCP. The average
SPCP contract rate is based on the negotiated rates of the 182
hospitals with which CMAC maintained rate contracts as of
December 1, 2007.
Existing law requires CMAC, in negotiating contracts or in
drawing specifications for competitive bidding, to take into
account an enumerated list of factors, that include but are
not limited to, beneficiary access, utilization controls, the
ability to render quality services efficiently and
economically, and the capacity to provide a given tertiary
service, such as specialized children's services, on a
regional basis. Additionally, CMAC is required to give
special consideration to the reimbursement issues faced by
hospitals caring for Medi-Cal beneficiaries who are receiving
treatment for AIDS.
CMAC indicates it has the statutory discretion and flexibility
to address unique circumstances at contracted hospitals,
whether through rate negotiations, supplemental funds or, in
selected situations, through contract terms that can, for
example, "carve out" certain high-cost inpatient items (such
as implants, prostheses, or blood factor) to be paid
separately from the per diem rate.
3)SUPPORT . The California Childrens Hospital Associations
(CCHA) writes in support that Medi-Cal and the California
Children's Services programs reimburse facilities for only
certain specialized treatments and procedures at a separate
negotiated price. Orthopedic implants are not reimbursed
separately or at the full cost. CCHA argues, as a result,
children's hospitals absorb most of the cost associated with
the implant, which on average cost $25,000 per implant. CCHA
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states its hospitals currently provides an orthopedic implant
when medically necessary and/or if it is in the best interest
of the child, regardless of reimbursement, and its member
hospitals want to continue to do so, but it is important that
the state's reimbursement system recognize and reward
providers that do what is best for the patient.
4)RELATED LEGISLATION . AB 1462 (Feuer), scheduled to be heard
in the Assembly Health Committee on April 28, 2009, would add
graduate medical education to the list of factors CMAC is
required to consider when negotiating Medi-Cal inpatient
hospital service contracts.
5)POLICY QUESTIONS .
a) This bill addresses an important issue in that provider
payment rates in public programs are a key factor in
beneficiaries' ability to access program services. Between
2001-2005, there were, on average, 304 individuals with
bone and joint cancer annually in California. In the case
of the orthopedic implants for bone cancer, implants have
reduced the need for amputations, improved survival rates
and reduced the need for external prosthesis. CMAC
selectively contracts on a competitive basis with hospitals
for inpatient services provided to Medi-Cal beneficiaries
in the fee-for-service Medi-Cal program. Existing law
requires CMAC to consider a number of factors in
negotiating contracts. By contrast, this bill requires
CMAC to provide for separate reimbursement for hospitals
for the full cost of orthopedic implants for cancers of the
bone, and hospitals have provided examples of implants
whose average cost far exceeds the Medi-Cal per diem
reimbursement rate. Should CMAC's ability to negotiate
rates be directed by statute to require hospitals to be
reimbursed for the full cost of a particular procedure?
Does the current CMAC negotiation process adequately ensure
that access is available for high-cost inpatient services
for Medi-Cal beneficiaries?
b) Under existing law, CMAC is required to take in account
a statutory list of factors when negotiating contracts,
including giving special consideration to the reimbursement
issues faced by hospitals caring for Medi-Cal beneficiaries
who are receiving treatment for AIDS. Could the statutory
approach used in requiring CMAC to provide special
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consideration to the reimbursement issues faced by
hospitals caring for Medi-Cal beneficiaries receiving
treatment for AIDS be used as a model for the reimbursement
of orthopedic implants for bone cancers in lieu of the
approach taken in this bill?
REGISTERED SUPPORT / OPPOSITION :
Support
City of Hope (sponsor)
California Children's Hospital Association
California Hospital Association
University of California
Opposition
None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097