BILL ANALYSIS
AB 542
Page 1
ASSEMBLY THIRD READING
AB 542 (Feuer)
As Amended May 5, 2009
Majority vote
HEALTH 13-3 APPROPRIATIONS 12-5
------------------------------------------------------------------
|Ayes:|Jones, Ammiano, Block, |Ayes:|De Leon, Ammiano, Charles |
| |Carter, De La Torre, | |Calderon, Davis, Fuentes, |
| |De Leon, Hall, Hayashi, | |Hall, John A. Perez, |
| |Hernandez, Bonnie | |Price, Skinner, Solorio, |
| |Lowenthal, Nava, V. | |Torlakson, Krekorian |
| |Manuel Perez, Salas | | |
| | | | |
|-----+--------------------------+-----+---------------------------|
|Nays:|Adams, Conway, Audra |Nays:|Nielsen, Duvall, Harkey, |
| |Strickland | |Miller, |
| | | |Audra Stickland |
------------------------------------------------------------------
SUMMARY : Requires the Department of Managed Health Care (DMHC) to
adopt regulations establishing uniform policies and practices
governing the nonpayment of hospitals for substantiated adverse events
by public and private payers, consistent with those developed by the
federal Centers for Medicare and Medicaid Services (CMS), and revises
and expands the existing requirements for hospitals to report
specified adverse events. Specifically, this bill :
1)Requires DMHC, in collaboration with Department of Public Health
(DPH), Department of Health Care Services (DHCS), the California
Public Employees' Retirement System (CalPERS), and the California
Department of Insurance (CDI) to adopt and implement regulations
that establish uniform policies and practices governing the
nonpayment of hospitals for substantiated adverse events, as
follows:
a) On or before September 1, 2010, adopt regulations for
nonpayment polices and practices consistent with those developed
by CMS pursuant to the Deficit Reduction Act of 2005 (DRA), that
have the following characteristics:
i) Are high cost, high volume, or both;
ii) Are not present on admission; and,
AB 542
Page 2
iii) Could reasonably have been prevented through the
application of evidence-based guidelines.
b) Synchronize definitions, coding, and practices, to the extent
feasible, with CMS policies regarding nonpayment for
substantiated adverse events; and,
c) By January 1, 2012, and annually thereafter, update payment
policies and practices regarding nonpayment for substantiated
adverse events to reflect changes made to those developed and
implemented by CMS.
2)Authorizes DMHC and other departments involved to consult with
individuals with relevant clinical expertise to assist in the
development of the regulations.
3)Following the adoption of the regulations by DMHC, requires the
collaborating agencies listed in 1) above to adopt regulations that
are identical or substantially similar to those promulgated by DMHC.
4)In accordance with the DMHC regulations, prohibits a hospital from
charging a patient or payer, and exempts a patient or payer from
being required to pay for, substantiated adverse events.
5)Requires contracts between hospitals, and health plans and health
insurers, to be consistent with the DMHC nonpayment regulations.
6)Requires the adoption of the nonpayment policies developed by DMHC
by the Healthy Families Program (HFP) administered by the Managed
Risk Medical Insurance Board (MRMIB), and by Medi-Cal, administered
by DHCS, and to the extent feasible, all other programs administered
by DHCS, but limits the implementation of the nonpayment policies
for state and local government programs to the extent federal
financial participation for those programs is not jeopardized.
7)Prohibits a hospital from billing a HFP enrollee, a Medi-Cal
recipient, or an enrollee of a health plan or health insurer for
care and services denied as a result of the nonpayment regulations,
as specified.
8)Requires a hospital to exclude from specified Medi-Cal cost reports
costs related to adverse events subject to the nonpayment
regulations.
AB 542
Page 3
9)Revises the existing adverse event reporting requirements applicable
to hospitals, adds additional reportable events in compliance with
reportable events developed by CMS, applies the reporting
requirements to licensed surgical clinics, and requires DPH to
determine whether an adverse event reported by a hospital was
substantiated or not.
10)Requires hospitals to report annually to the hospital board of
directors, or other similar governing body, the following: a) the
number of adverse events that occurred in the facility in the most
recent 12-month period; b) the outcomes for each patient involved;
and, c) a comparison to comparable institutions of rates of adverse
events, if this data exists and is publicly available. Specifies
that disclosure of the required information to the hospital board
will not be considered a waiver of privilege for the purposes of the
statutory peer review process.
11)Requires DPH to collect information regarding substantiated adverse
events, including patient name and payer source, and to provide the
information to state government payers, including but not limited
to, DHCS and MRMIB. Requires state payers to use the information
collected only for program administration and requires the agencies
to maintain the confidentiality of the information. Prohibits state
payers from further disclosing the information except to consultants
and contractors for the purposes of program administration, as
specified. Requires any costs associated with the collection of
data to be shared on a pro rata basis by the state agencies
receiving the information.
12)Makes legislative findings and declarations regarding the right of
patients to quality medical care delivered in a timely and
appropriate manner, the opportunity for health facilities to prevent
most adverse events, as specified, and stating that it is the policy
of the state that patients and purchasers not be billed for
substantiated adverse events.
EXISTING LAW :
1)Establishes state licensing and federal Medicare and Medicaid
program certification requirements for health facilities, including
general acute care hospitals. Requires DPH to administer licensing
and certification requirements for California health facilities.
Requires health facilities to pay annual licensing fees, describes
specified hospital fees, and requires the fees to be adjusted
AB 542
Page 4
annually, as directed by the Legislature in the annual Budget Act.
2)Requires every health facility for which a license or special permit
has been issued to be periodically inspected by a representative or
representatives appointed by DPH, depending upon the type and
complexity of the health facility or special service to be
inspected. Requires inspections to be conducted no less than once
every two years and as often as necessary to insure the quality of
care being provided.
3)Requires general acute care hospitals, acute psychiatric hospitals,
and special hospitals to report an adverse event, as defined, to
DPH, no later than five days after the event has been detected or in
the case of an urgent or emergent threat, no later than 24 hours
after the adverse event has been detected. Reportable adverse
events are:
a) Surgical
i) Surgery performed on the wrong body part;
ii) Surgery performed on the wrong patient;
iii) Retention of a foreign object in a patient after surgery
or other procedure; and,
iv) Intraoperative or immediately post-operative death in a
normal, healthy patient.
a) Product or device
i) Patient death or serious disability associated with the
use of contaminated drugs, devices, or biologics provided by
the health care facility;
ii) Patient death or serious disability associated with the
use or function of a device in patient care in which the device
is used or functions other than as intended; and,
iii) Patient death or serious disability associated with
intravascular air embolism that occurs while being cared for in
a health care facility.
b) Patient protection
i) Infant discharged to the wrong person;
ii) Patient death or serious disability associated with
patient disappearance for more than four hours; and,
iii) Patient suicide or attempted suicide resulting in serious
AB 542
Page 5
disability while being cared for in a health care facility.
c) Care management
i) Patient death or serious disability associated with a
medication error;
ii) Patient death or serious disability associated with a
hemolytic reaction due to the administration of
ABO-incompatible blood or blood products;
iii) Maternal death or serious disability associated with labor
or delivery on a low-risk pregnancy while being cared for in a
health care facility;
iv) Patient death or serious disability associated with
hypoglycemia, the onset of which occurs while the patient is
being cared for in a health care facility;
v) Death or serious disability associated with failure to
identify and treat hyperbilirubinemia in neonates;
vi) Stage 3 or 4 pressure ulcers acquired after admission to a
health care facility; and,
vii) Patient death or serious disability due to spinal
manipulative therapy.
d) Environmental
i) Patient death or serious disability associated with an
electric shock while being cared for in a health care facility;
ii) Any incident in which a line designated for oxygen or
other gas to be delivered to a patient contains the wrong gas
or is contaminated by a toxic substance;
iii) Patient death or serious disability associated with a burn
incurred from any source while being cared for in a health care
facility;
iv) Patient death associated with a fall while being cared for
in a health care facility; and,
v) Patient death or serious disability associated with the
use of restraints or bedrails while being cared for in a health
care facility.
e) Criminal
i) Any instance of care ordered by or provided by someone
impersonating a physician, nurse, pharmacist, or other licensed
health care provider;
ii) Abduction of a patient of any age;
AB 542
Page 6
iii) Sexual assault on a patient within or on the grounds of a
health care facility; and,
iv) Death or significant injury of a patient or staff member
resulting from a physical assault that occurs within or on the
grounds of a health care facility.
FISCAL EFFECT : According to the Assembly Appropriations Committee:
1)One-time fee-supported special fund costs of $500,000, combined, to
DMHC, CDI, DHCS, MRMIB and CalPERS to establish non-payment policies
and procedures, promulgate regulations, and provide oversight to the
initial requirements of this bill;
2)Unknown on-going costs for administering agencies and programs to
provide oversight and support workload related to updating payment
prohibitions, and to handle appeals; and,
3)Significant annual savings to Medi-Cal and HFP of more than $10
million to the extent the payment prohibitions reduce public costs.
According to 2008 data, 1,500 adverse events were reported to DPH.
The estimated medical costs of these events were more than $50
million and the Medi-Cal portion was more than $13 million (50%
General Fund). Actual savings to payers may grow as reporting
strengthens. However, part of the policy rationale for the payment
prohibitions is to focus attention on error prevention efforts. To
the extent the prohibitions improve care, savings to payers will be
less.
COMMENTS : The author states this bill is necessary to improve health
care practices and protect patients by shielding them from having to
pay for medical errors. The author states that while California
passed legislation [SB 1301 (Alquist), Chapter 647, Statutes of 2006]
making California the 24th state to require reporting of "never
events," California did not join with the 11 other states where
billing for such events is prohibited. The author argues that this
bill will protect patients who have been harmed by medical errors from
also being responsible for paying the bill for those errors. The
author contends that making health care providers financially
responsible for the commission of medical errors will provide a
greater incentive to ensure such grievous and devastating errors never
occur.
In 2003, The National Quality Forum (NQF) published a consensus report
titled "Serious Reportable Events in Healthcare." In that report, the
AB 542
Page 7
NQF noted the historic lack of any national reporting system of health
care errors and adverse events, and the lack of a standard definition
of what constitutes an error or adverse event. The NQF identified 27
serious adverse events it determined are serious, largely preventable
and of concern to the public and health care providers.
CMS is implementing a provision of the DRA dealing with nonpayment for
specified adverse events. The DRA required hospitals to begin
reporting secondary diagnoses that are present on admission, starting
with discharges on or after October 1, 2007. Since October 2008, CMS
will not reimburse hospitals for the added cost of care for ten
conditions, including three serious preventable events, unless the
conditions are present on admission. Private payers, including Anthem
Blue Cross (the new trade name for Blue Cross of California) and
Aetna, have also announced similar nonpayment policies. Anthem Blue
Cross (the new trade name for Blue Cross of California) a policy aimed
at ensuring that members will not be charged if any of these three
events occur: 1) Surgery performed on the wrong body part; 2) Surgery
performed on the wrong patient; and, 3) Wrong surgery performed on a
patient. In addition, Anthem announced steps to ensure that "only the
appropriate payment is made and no additional charges [will be]
incurred" if any of eight other events occur.
Effective July 1, 2007, in California, hospitals are required to
report specified adverse events to DPH within five days of their
discovery. Events that are ongoing, urgent or emergent threats to the
welfare, health, or safety of patients, personnel, or visitors must be
reported within 24 hours. California's definition of adverse events
was borrowed from the list of events developed by the NQF in
conjunction with CMS. The reportable adverse events include a wide
array of medical, pharmaceutical, and nursing care errors, as well as
criminal acts. DPH is required to investigate all adverse event
reports, and if substantiated, the reports and outcomes of the
investigations and inspections become public information. DPH must
make an onsite inspection within 48 hours for ongoing urgent or
emergent threats of imminent danger or serious bodily harm. DPH must
complete other investigations where there is no threat of imminent
danger or serious bodily harm within 45 days. In addition, before
making the report, hospitals must inform affected patients about the
report.
Consumer and labor organizations, and some private health plans, have
supported prior versions of this bill. Consumer groups argue that
this bill operates on the simple premise that doctors and hospitals
AB 542
Page 8
should be paid for doing the right thing, not the wrong thing.
Supporters maintain that the approach in this bill offers protections
to the consumer and will help reduce the incidence of adverse events
by properly placing the responsibility of cost on the party able to
prevent the mistakes in the first place.
Provider organizations have opposed this bill in prior versions.
Generally, providers are concerned that the medical events for which
payment may be denied should be preventable and within the provider's
control. The most recent amendments to this bill will require DMHC to
adopt regulations that apply the CMS nonpayment policies to all state
and private payers.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097
`FN: 0001149