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---



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          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).  





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          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.  





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          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. 




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           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,  




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            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  




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          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, 




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           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   




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            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




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          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  




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          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.
  



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          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  




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          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.  





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          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:




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          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  




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          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)         




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          17


          

                   California Society of Anesthesiologists
                   University of California (unless amended)