BILL ANALYSIS                                                                                                                                                                                                    






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                        Senator Elaine K. Alquist, Chair


          BILL NO:       AB 366                                       
          A
          AUTHOR:        Ruskin                                       
          B
          AMENDED:       June 30, 2009                               
          HEARING DATE:  July 15, 2009                                
          3              
          CONSULTANT:                                                 
          6
          Dunstan/cjt                                                 
          6
                                        

                                     SUBJECT
                                         
          Medi-Cal: inpatient hospital services contracts: orthopedic  
                                  implantation
                                         
                                    SUMMARY  

          This bill requires the California Medical Assistance  
          Commission (CMAC) to consider, when negotiating contracts  
          for inpatient care or developing specifications for  
          competitive bidding, specialization in orthopedic  
          implantation relating to cancers of the bone, in addition  
          to the factors already required. 

                             CHANGES TO EXISTING LAW  

          Existing law:
          Establishes the Medi-Cal program, administered by the  
          Department of Health Care Services (DHCS), which provides  
          comprehensive health care coverage for low-income  
          individuals and their families; pregnant women; elderly,  
          blind, or disabled persons; nursing home residents; and  
          refugees who meet specified eligibility criteria. 

          Requires the governor to designate a person in his or her  
          office to act as a special negotiator to negotiate rates,  
          terms, and conditions for contracts with hospitals for  
          inpatient services to be rendered to Medi-Cal program  
                                                         Continued---



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          beneficiaries. 

          Permits the special negotiator 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. 

          Requires the negotiator to take into account specified  
          factors in negotiating contracts or in drawing  
          specifications for competitive bidding. 

          Requires CMAC to assume the duties and powers of the  
          special negotiator.

          


          This bill:
          Requires CMAC to consider, when negotiating contracts for  
          inpatient care or developing specifications for competitive  
          bidding, specialization in orthopedic implantation relating  
          to cancers of the bone, in addition to the factors already  
          required.


                                  FISCAL IMPACT  

          This version of the bill has not been analyzed by a fiscal  
          committee.


                            BACKGROUND AND DISCUSSION  

          According to the author, the bill was prompted by refusals  
          by CMAC to negotiate higher rates or carve-outs for these  
          implants, which can cost up to $30,000.  The author argues  
          that the cost of these implants, even when replacements are  
          considered, are largely equivalent to the costs of external  
          prostheses (which must be replaced much more often) over  
          time.

          This bill is sponsored by the City of Hope, which states  
          that, for contracting hospitals, Medi-Cal will reimburse  
          facilities for certain specialized treatments and  
          procedures at a separate negotiated price.  The sponsor  




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          argues these services are negotiated separately because of  
          their high costs.  Orthopedic implants, however, are not  
          reimbursed separately, nor are the costs of these expensive  
          implants being considered in the development of rates.   
          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.   
          City of Hope argues that 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 up to age 15,  
          but surgeons are now able to spare the limbs of  
          approximately 90 percent 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.  

          City of Hope also argues that, 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 to the same extent as those services  
          are available to the general population.  City of Hope  
          argues this bill is necessary if the state plans to enlist  
          enough providers to meet that federal standard so that  
          critical services to Medi-Cal recipients are available to  
          the same extent as those available to the general  
          population. 

          Background
          Since 1983, through what is known as the Selective Provider  
          Contracting Program (SPCP), 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 CMAC, the state  
          selectively contracts on a competitive basis with hospitals  
          for fee-for-service inpatient services provided to Medi-Cal  
          beneficiaries.  According to CMAC, the competitive  
          contracting model has resulted in savings to the state  




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          General Fund of over $600 million this fiscal year.  CMAC  
          has negotiated a rate on behalf of the state with 179  
          hospitals as of December 1, 2008. 

          Existing law requires CMAC, in negotiating contracts or in  
          drawing specifications for competitive bidding, to take  
          into account an enumerated list of factors.  This list  
          includes 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 acquired immunodeficiency syndrome  
          (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. 

          Related bills
          AB 1462 (Feur) requires the California Medical Assistance  
          Commission (CMAC) to include reimbursement for the costs of  
          graduate medical education, in addition to the factors  
          already required, when negotiating contracts for inpatient  
          care or developing specifications for competitive bidding.   
          This bill is in the Senate Appropriations Committee.

          Prior legislation 
          AB 249 (Papan) of 1999 would have would have required CMAC  
          to take into consideration medical education programs for  
          physicians, nurses, or allied health professionals in  
          negotiating Medi-Cal inpatient contracts with hospitals or  
          in drawing specifications for competitive bidding.  AB 249  
          was vetoed by Governor Davis. 

          Arguments in support
          The California Children's Hospital Associations (CCHA)  
          argues that Medi-Cal and the California Children's Services  
          programs reimburse facilities for only certain specialized  




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          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 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.



                                  PRIOR ACTIONS

           Assembly Floor:     77-0
          Assembly Appropriations:13-3
          Assembly Health:    17-0

                                     COMMENTS

           1.  CMAC has authority to consider orthopedic implantation  
          under existing law.  
            The law names certain factors that CMAC must consider,  
            but states the list is not exhaustive.  CMAC reports they  
            have the authority already to consider other factors.   
            However, in negotiations the supporting hospitals have  
            not been successful in gaining increased reimbursement  
            for this specialization.  This bill can be seen as an  
            effort to make CMAC pay more attention to this issue.

                                         
                                   POSITIONS  
                                        
          Support:  City of Hope (sponsor)
                 American Cancer Society
                 California Children's Hospital Association
                 California Hospital Association
                 Disability Rights California


          Oppose:  None received






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