BILL ANALYSIS SENATE HEALTH COMMITTEE ANALYSIS Senator Elaine K. Alquist, Chair BILL NO: AB 542 A AUTHOR: Feuer B AMENDED: June 23, 2010 HEARING DATE: June 30, 2010 5 CONSULTANT: 4 Hansel/ 2 SUBJECT Hospital acquired conditions SUMMARY Requires the Department of Health Care Services (DHCS) to convene a technical working group to evaluate options for implementing non-payment policies and procedures for hospital acquired conditions (HACs) for the fee-for-service Medi-Cal program consistent with federal laws and regulations. Requires DHCS to implement non-payment policies and procedures for HACs for the fee-for-service Medi-Cal program by July 1, 2011 that are consistent with the Patient Protection and Affordable Care Act (PPACA) and to consider the recommendations of the technical working group. Requires MRMIB to implement non-payment policies and practices, consistent with those adopted by DHCS for the Medi-Cal program, for the programs it administers. Requires hospitals to report to their governing boards specified information concerning adverse events and hospital acquired conditions. CHANGES TO EXISTING LAW Existing federal law: Requires, under the federal Deficit Reduction Act of 2005 Continued--- STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 2 or "DRA," the Secretary of the Department of Health and Human Services to select Medicare diagnosis codes associated with at least two hospital-acquired conditions (HACs) that are: (a) high cost or high volume, or both; (b) result in the assignment of a patient to a diagnosis-related group (DRGs are generally how Medicare pays hospitals) that has a higher payment when the code is present as a secondary diagnosis; and, (c) are conditions that could reasonably have been prevented through the application of evidence-based guidelines. Provides, pursuant to regulations adopted by the Centers for Medicare and Medicaid Services (CMS), for the non-payment under the Medicare program for specified categories of HACs, when they are present on the admission of the patient. Instead, the case is paid as though the secondary diagnosis was not present. This requirement applies to hospital discharges on or after October 1, 2008. Requires, under the Patient Protection and Affordable Care Act (Public Law 111 - 148) (PPACA), the Secretary of HHS to adopt regulations that are effective July 1, 2011, that prohibit payment for HACs in the Medicaid program. Directs the Secretary to apply to state Medicaid plans the Medicare non-payment requirements as appropriate for the Medicaid program, and to exclude certain conditions if the Secretary finds them to be inapplicable to Medicaid beneficiaries. Existing state law: Establishes the Medi-Cal program as California's Medicaid 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. Establishes various programs, including the Healthy Families program, the Major Risk Medical Insurance Program (MRMIP), the Access for Infants and Mothers program (AIM) and the Medi-Cal program, which provide health coverage to individuals meeting specified eligibility criteria, and which are administered by the Managed Risk Medical Insurance Board (MRMIB). STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 3 Requires the Department of Public Health (DPH) to license and inspect health facilities, including general acute care hospitals, acute psychiatric hospitals, and special hospitals (hospitals). Requires hospitals to report an adverse event to DHS no later than five days after the adverse event has been detected, or, if the event is an ongoing urgent or emergency threat to the welfare, health, or safety of patients, personnel, or visitors, not later than 24 hours after the adverse event has been detected. Existing state law defines an "adverse event" to include any of 27 specified occurrences. This bill: Requires DHCS to convene a technical working group to evaluate options for implementing non-payment policies and procedures for hospital acquired conditions (HACs) for the fee-for-service Medi-Cal program consistent with federal laws and regulations, including, but not limited to the PPACA. Requires by February 1, 2011, the technical working group to provide recommendations to the Director of DHCS, the Secretary of the California Health and Human Services Agency, and the Legislature on the best options for these purposes. Sunsets these provisions on February 1, 2015. Requires the technical working group to be made up of consumer advocates, technical experts, physicians, hospital representatives, employers, representatives of hospital staff, and departmental representatives, as specified. Requires DHCS to implement non-payment policies and procedures for HACs for the fee-for-service Medi-Cal program by July 1, 2011 that are consistent with the PPACA and, in doing so, to strongly consider the recommendations of the technical working group. Provides that these policies shall apply to payments to health care facilities, defined as general acute care, acute psychiatric, and special hospitals, and surgical clinics. Provides that DHCS shall only do this to the extent federal financial participation is not jeopardized for programs receiving federal funds. STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 4 Requires Medi-Cal managed care plans to implement similar non-payment policies through their contracts with health care facilities. Requires health facilities subject to Medi-Cal non-payment policies to exclude costs related to HACs from specified cost reports that they are required to file. Requires MRMIB to implement non-payment policies and practices, consistent with those adopted by DHCS for the Medi-Cal program, for Healthy Families, AIM, and MRMIP. Allows DHCS and MRMIB to contract with a peer review organization that meets applicable state and federal requirements for the purposes of carrying out non-payment policies and practices adopted pursuant to the bill. Prohibits health care facilities that are subject to the non-payment policies established pursuant to the bill from charging a patient for care and services for which payment is denied. Provides that the bill's requirements on DHCS to establish non-payment policies and procedures shall not be interpreted or implemented in a way that would limit patient access to needed health care services or payment to a health facility for medically necessary follow-up care to correct or treat complications or consequences of a hospital acquired condition or for the care originally sought by the patient. Establishes several requirements pertaining to disclosure and use of information associated with implementation of the non-payment policies: Provides that implementation shall not be construed to authorize the disclosure of contract rates between health care providers and payers or of information on the relative or comparative cost to payers or purchasers of health care services. Provides that patient social security numbers and other data elements DHCS determines may be used to determine the identity of an individual patient shall not be deemed public records. STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 5 Provides that no person reporting data pursuant to the Medi-Cal non-payment policies and procedures shall be liable for damages in an action based on the use or misuse of patient-identifiable data that has transmitted to DHCS. Provides that no communication of data or information to DHCS shall constitute a waiver of the right to exclude records from evidence that currently pertains to certain health care settings, such as medical peer review bodies. Provides that information, documents, and records from original sources subject to discovery or introduction into evidence shall not be immune from discovery or evidence because the information, document, or record was also provided to the DHCS pursuant to the Medi-Cal non-payment policies. Requires the medical director and the director of nursing of each general acute care, acute psychiatric, and special hospital to report annually, to the board of directors or other similar hospital governing body, the following: The number of adverse events and HACs that occurred in the facility in the most recent 12-month period; The outcomes for each patient involved; and, A comparison to comparable institutions of rates of adverse events and HACs, if this data exists and is publicly available. Provides that the communication of data or information by an officer or employee of the hospital under the above reporting provision shall not constitute a waiver of the right to exclude records from evidence that currently pertains in certain health care settings, such as medical peer review bodies. FISCAL IMPACT According to the Assembly Appropriations Committee analysis of the May 5, 2010 amended version of this bill: One-time fee-supported special fund costs of $500,000, STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 6 combined, to DMHC, CDI, DHCS, MRMIB and CalPERS to establish non-payment policies and procedures, promulgate regulations, and provide oversight related to the initial requirements of this bill; Unknown ongoing costs for administering agencies and programs to provide oversight and support workload related to updating payment prohibitions, and to handle appeals; and, 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 percent 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 improves care, savings to payers will be less. BACKGROUND AND DISCUSSION According to the author, this bill will improve the quality of health care in California hospitals by ensuring that the most effective systems and safeguards are in place to protect patients from preventable errors and other HACs. These events include severe pressure ulcers, burns, and retention of foreign objects (e.g., a sponge) inside a patient after surgery, among other tragic events. The author states that this bill ensures that there are incentives for improving patient safety, and patients who are the victims of such tragic events are not also subjected to the added indignity of having to pay for them as well. The author cites the Institute of Medicine's 1999 report that estimated as many as 98,000 people die each year as a result of medical errors. The author states this report led to a surge in research and interest in the patient safety field over the last 10 years. In 2002, the National Quality Forum (NQF) identified 27 adverse events that were clearly identifiable and measurable, are significantly STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 7 influenced by policies and procedures of hospitals, and are of great concern to providers and patients. They include such events as retention of objects (e.g., sponges) inside a patient after surgery, medication errors, or surgery on the wrong body part. The author points out that CMS has adopted policies denying Medicare reimbursement for 12 of these adverse events, which they refer to as HACs, and many health plans, such as Anthem and Aetna, are developing similar policies for the private market. At least 11 states have enacted non-payment policies through statute or other agreements. Most hospital-acquired conditions are easily preventable when systems and safeguards become part of the culture of care. A recent international study found that surgical deaths and complications dropped by almost 50 percent when a simple, 19-item safety checklist was adopted for surgical procedures. The author states that this bill ensures that these types of evidence-based best practices are shared with health professionals, and provides a financial incentive for hospitals to implement these patient safety innovations. Medicare provisions related to HACs In February 2006, President Bush signed the DRA into law. One provision of the DRA requires the Secretary of the Department of Health and Human Services to take steps to prevent Medicare from paying hospitals for the additional costs of treating patients who acquire specified conditions during hospitalization. The DRA required CMS to select at least two HACs that would be subject to a quality payment adjustment. CMS consulted with the Centers for Disease Control and Prevention (CDC) to identify the conditions proposed for reduced payment beginning October 2008, and additional conditions that would be considered for reduced payment in subsequent years. Under the DRA, the CMS is directed to identify conditions that meet all of the following conditions: Are associated with a high cost of treatment or high occurrence rates within hospital settings; Result in higher payment to the hospital when submitted as a secondary diagnosis; and, STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 8 Can reasonably be prevented by adoption and implementation of evidence-based guidelines. Pursuant to the DRA, for discharges occurring on or after October 1, 2008, hospitals do not receive additional Medicare payment for cases in which one of the selected conditions was not "present on admission." In other words, Medicare would pay the hospital as though the secondary diagnosis were not present. On July 31, 2008, CMS adopted regulations that included 10 categories of conditions that are subject to the HAC payment provision. The 10 categories of HACs include: Foreign object retained after surgery. Air embolism. Blood incompatibility. Stage III and IV pressure ulcers. Falls and trauma, including fractures, dislocations, intracranial injuries, crushing injuries, burns, and electric shock. Manifestations of poor glycemic control. Catheter-Associated Urinary Tract Infection. Vascular Catheter-Associated Infection. Surgical site infection following coronary artery bypass graft surgery (mediastinitis), bariatric surgery, or STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 9 certain orthopedic procedures. Deep Vein Thrombosis (DVT)/Pulmonary Embolism (PE) associated with total knee replacement or hip replacement. In addition, CMS initiated a process in 2008 to review Medicare coverage of three so-called "never events"-surgery on the wrong body part, surgery on the wrong patient, and performing the wrong surgery on a patient. In 2008, CMS also provided guidance to state Medicaid Directors on payment policies for Medicaid when it is a secondary payer for care to dual eligibles (persons eligible for Medicare and Medicaid). The guidance states that states wishing to avoid loss of federal payments for treatment for dual eligible for which Medicare will not pay may do so by amending their state plans to provide a mechanism to limit attempts by providers to bill Medicaid as a secondary payer. Federal health care reform provisions pertaining to non-payment for HACs in Medicaid Section 2702 of the PPACA requires the Secretary of HHS to identify current state practices that prohibit payment for health care-acquired conditions and to incorporate them, or elements of them in regulations governing the Medicaid program, which are required to be effective as of July 1, 2011. Section 2702 requires that the regulations must ensure that the prohibition on payment for health care-acquired conditions does not result in a loss of access to care or services for Medicaid beneficiaries. The Secretary is further directed to apply to state Medicaid plans the Medicare non-payment requirements as appropriate for the Medicaid program, and is allowed to exclude certain conditions for which non-payment is required under the Medicare program if the Secretary finds them to be inapplicable to Medicaid beneficiaries. Adoption of non-payment policies by insurers and other states STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 10 A number of insurers have implemented policies to withhold payments to hospitals for certain serious, preventable errors. In 2009, Aetna began not paying facility charges for three basic "never events" -- surgery on the wrong patient, surgery on the wrong body part, and the wrong surgical procedure - and began not paying charges directly related or solely related to eight other serious, preventable errors. Anthem Blue Cross withholds payment for four basic "never events"-surgery on the wrong patient, surgery on the wrong body part, the wrong surgical procedure, and retention of a foreign object after surgery. Several states have implemented hospital non-payment policies for selected HACs, in some cases focused on preventable serious adverse events. Adverse event reporting Pursuant to SB 1301 (Alquist), Chapter 647, Statutes of 2006, state law requires hospitals to report adverse events to DPH. California's definition of "adverse events" was adapted from the list of events developed by the NQF in conjunction with CMS. Additionally, state law (SB 1058 (Alquist), Chapter 296, Statutes of 2008) requires specified health care-associated bloodstream and surgical infections to be reported by hospitals to DPH. Other than deep vein thrombosis and pulmonary embolism following certain orthopedic procedures and certain actions under falls and trauma, the current list of HACs from CMS are reportable to DPH under state law. Prior legislation AB 2146 (Feuer) of 2007 -08 would have prohibited hospitals and health care professionals from billing a patient or a payer, as defined, for care or services provided during which occurred or that resulted in specified adverse events (instead of HAC in this bill). AB 2146 was held on the Senate Appropriations suspense file. SB 1058 (Alquist), Chapter 296, Statutes of 2008, established the Medical Facility Infection Control and Prevention Act, which requires hospitals to implement certain procedures for screening, prevention, and reporting of specified health facility acquired infections. SB 1058 also requires DPH to establish an internet-based public STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 11 reporting system that provides information regarding the relative incidence of central line associated blood stream infections, surgical site infections, ventilator acquired pneumonia, and catheter acquired urinary tract infections, as specified. SB 1301 (Alquist), Chapter 647, Statutes of 2006, requires general acute care, acute psychiatric, and special hospitals to report adverse events, 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, not later than 24 hours after the adverse event has been detected. SB 1312 (Alquist), Chapter 395, Statutes of 2006, authorizes DHS to assess administrative penalties against hospitals for deficiencies that constitute immediate jeopardy to the health and safety of a patient. AB 1312 also requires inspections and investigations of long-term care facilities certified by the Medicare or Medicaid program to assess their compliance with federal standards and California statutes and regulations. Finally, SB 1312 eliminated an exemption for specified health care facilities from periodic inspections by DHS. SB 739 (Speier), Chapter 526, Statutes of 2006, created a state Healthcare Associated Infection (HAI) advisory committee to make recommendations regarding reporting cases of HAI in hospitals. The bill also requires each general acute care hospital, after January 1, 2008, to implement and annually report to DPH its implementation of infection surveillance and infection prevention process measures that have been recommended by the Centers for Disease Control and Prevention's Healthcare Infection Control Practices Advisory Committee as suitable for a mandatory public reporting program. Arguments in support Health Access California (Health Access), and the Service Employees International Union (SEIU) argue in support that this bill would end the practice of paying for "never" events. Health Access and SEIU state "never" events describe several dozen specific events that should never happen in health care, and this bill operates on the same principle that Medicare is adopting: doctors and hospitals should not be paid for preventable "never" events. STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 12 Taking a support in concept position, the California Hospital Association (CHA) stresses that any state non-payment methodology for HACs must conform to the methodology adopted by CMS for the Medicare and Medicaid programs, and should be applied to the Medi-Cal fee-for-service program, and not to Medi-Cal managed care contracts. CHA states that the make up of the proposed technical advisory group should be limited to technical experts that DHCS deems necessary to assist it in developing regulations and, assuming the focus of the effort is on adopting non-payment policies for the Medi-Cal fee-for-service program, should not include persons who are involved in managed health care delivery. CHA additionally questions the inclusion of language authorizing MRMIB and DHCS to contract with a peer review organization to carry out the non-payment policies. CHA also states that it believes that making the determination that an event is a non-pay event should not be treated as an admission of fault and should not be discoverable or admissible in court and requests a technical amendment to clarify that hospitals may not accept and retain payments from patients related to care provided for HACs. Arguments in opposition The Doctors Company states that it opposes AB 542 because it does not safeguard information about non-payment from being used as an admission of liability or from being admissible or discoverable in connection with claims alleging professional negligence and expresses concern that absence language to this effect, barring charging of payment for HACs implies negligence on the part of a practitioner, and notes that privileged protection of non-payment information is provided in the bill when the information is communicated internally within a hospital to its governing body. Oppose unless amended Taking an oppose unless amended position, the California Association of Professional Liability Insurers (CAPLI) states it's concern that non-payment determinations should not be used to set a standard of care in liability actions. CAPLI states that a determination of non-payment could be STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 13 regarded as a de facto determination of fault, which is contrary to current practice in malpractice litigation, in which the plaintiff bears the burden of proof of establishing that the provider deviated from the standard of care. CAPLI urges that the bill include a provision that a non-payment shall not constitute a determination that the provider has not met the applicable standard of care, or be admissible as evidence. PRIOR ACTIONS Assembly Floor: 50-26 Assembly Appropriations:12-5 Assembly Health: 13-3 COMMENTS 1. Use of medical review organizations. The bill contains authority for DHCS and MRMIB to contract with utilization and quality control peer review organizations for the purposes of carrying out the non-payment policies that DHCS is required to develop pursuant to the bill. However, it is not clear that the regulations CMS develops will necessitate review of individual patient cases. A suggested amendment would be to instead include consideration of the role of the organizations in the functions of the technical advisory committee established by the bill. 2. Required cost reports. The bill requires health care facilities to exclude from the annual disclosure reports and Medi-Cal cost reports costs related to HACs, subject to the non-payment policies implemented pursuant to the bill. However, it is not clear that the regulations CMS develops will require this. Instead, the regulations may require or allow DHCS to adjust the payment to account for the HAC in a manner that does not necessitate separating costs out in the cost reports. A suggested amendment would be to instead include consideration of changes in the cost reports in the functions of the technical advisory committee. STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 14 3. Effective date of regulations. The bill requires DHCS to implement non-payment policies for the fee-for-service Medi-Cal program by July 1, 2011. The PPACA directs the Secretary of HHS to adopt effective regulations by that date, but it is not clear that the regulations will require states to actually have in place non-payment policies by that date. A suggested amendment would be to remove the July 1, 2011 date, allow the state's implementation to coincide with the effective date of the federal requirements. 4. Make-up of technical advisory committee. The bill requires representation of several entities on the advisory committee, but does not require that they be experts in hospital reimbursement practices. A suggested amendment would be to require that all of the outside appointments to the committee have expertise in this area. 5. Patient confidentiality provisions. The bill provides that patient Social Security numbers and other data elements that DHCS determines may be used to determine the identity of an individual patient shall not be deemed to be public records. However, existing state and federal medical confidentiality laws already prescribe when and under what conditions individually identifying information may be disclosed. A suggested amendment would be to defer to existing state and federal medical confidentiality law on this point. 6. Scope of health care facilities affected by the bill. The bill would apply the non-payment policies that DHCS develops to acute care, acute psychiatric, and special hospitals, and also to licensed surgical clinics. However, licensed surgical clinics are currently not subject to the Medicare non-payment policies, and it is not clear that they will be subject to the forthcoming federal regulations establishing non-payment policies in the Medicaid program. A suggested amendment would be to require the scope of facilities to be that required by the federal regulations, and to include consideration of additional facilities that would be subject to the nonpayment policies in the functions of the technical advisory committee established by the bill. 7. Suggested technical amendments: STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 15 a. Change references to "hospital acquired conditions" in subdivision (f) of the Section 1 of the bill (findings and declarations) to "hospital acquired conditions that are reasonably preventable by adoption and implementation of evidence-based guidelines." b. On page 4, line 38, amend as follows: (2) The outcomes for each patient involved, if known. c. In the sections directing health facilities to not charge patients for care and services for which payment is denied, instead direct health facilities to not charge a patient any applicable cost-sharing amounts for care or services for which payment is denied. d. Throughout the bill, change references to "health facilities" to "health care facilities." e. Delete lines 38 - 39 on page 13 and lines 1 - 2 on page 14 as redundant. f. On page 14, lines 3 - 9, delete lines 6 - 9. It's not clear what type of disclosure of comparative costs to payers is going to be required or allowed by the federal regulations. g. On page 14, lines 16 - 20, amend as follows: (2) No person reporting data pursuant to this article shall be liable for damages in an action based on the use or misuse of patient-identifiable data by the department that has been properly mailed or otherwise properly transmitted to the department pursuant to the requirements of this article. 8. Payment methodology in Medi-Cal versus Medicare. One of the challenges to implementing non-payment policies in many states' Medicaid programs, including California's, is that hospitals are paid per diem payments instead of being paid through diagnosis related groups or DRGs, which are acuity-based, capitated payments that cover the entire range of services related to a particular diagnosis. Under a DRG payment methodology, it is relatively straightforward to adjust the payment to account for an HAC that was not STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 16 present upon the admission of the patient. It is not clear at this point whether the CMS non-payment regulations that take effect on July 1, 2011 will require states to change their reimbursement systems for hospitals to a DRG based system, or allow states to continue to use fee-for-service reimbursement systems that incorporate methods of payment adjustment that are comparable to the adjustments that occur in a DRG based system. California's proposed Medi-Cal waiver plan includes provisions to move the state eventually to a DRG-based payment system for hospital payments. POSITIONS Support: California Hospital Association (in concept) Health Access Service Employees International Union Support (prior version): American Federation of State, County and Municipal Employees, AFL-CIO Blue Shield of California California Association of Health Plans (if amended) CalPERS Board of Administration (if amended) California School Employees Association Consumers Union Oppose: California Association of Professional Liability Insurers (unless amended) The Doctors Company California Orthopedic Association (unless amended) Oppose (prior version): California Children's Hospital Association (unless amended) Children's Specialty Care Coalition (unless amended) Association of California Healthcare Districts California Chapter of the American College of Emergency Physicians (unless amended) STAFF ANALYSIS OF ASSEMBLY BILL 542 (Feuer) Page 17 California Society of Anesthesiologists University of California (unless amended)