BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 542| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 542 Author: Feuer (D) Amended: 8/17/10 in Senate Vote: 21 PRIOR VOTES NOT RELEVANT SENATE HEALTH COMMITTEE : 6-2, 6/30/10 AYES: Alquist, Cedillo, Leno, Negrete McLeod, Pavley, Romero NOES: Strickland, Aanestad NO VOTE RECORDED: Cox SENATE APPROPRIATIONS COMMITTEE : 7-3, 8/12/10 AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee NOES: Ashburn, Walters, Wyland NO VOTE RECORDED: Emmerson SUBJECT : Hospital acquired conditions SOURCE : Author DIGEST : This bill requires the Department of Health Care Services (DHCS) to convene a technical working group to evaluate options for implementing nonpayment policies and procedures for hospital acquired conditions for fee-for-service Medi-Cal consistent with federal laws and regulations and to submit recommendations to DHCS, the California Health and Human Services Agency, and the Legislature by February 1, 2011. This bill also requires CONTINUED AB 542 Page 2 both DHCS and the Managed Risk Medical Insurance Board to implement non-payment policies and procedures for Medi-Cal and the Healthy Families Program and, when doing so, to strongly consider the workgroup's recommendations. ANALYSIS : Existing federal law: 1. Requires, under the federal Deficit Reduction Act of 2005 or "DRA," the Secretary of the Department of Health and Human Services (HHS) 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. 2. 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. 3. 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. 4. 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: AB 542 Page 3 1. 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. 2. 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). 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). 4. Requires hospitals to report an adverse event to DHCS 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. 5. Defines an "adverse event" to include any of 27 specified occurrences. This bill: 1. Requires DHCS to convene a technical working group to evaluate options for implementing nonpayment policies and procedures for hospital acquired conditions for fee-for-service Medi-Cal consistent with federal laws and regulations and to submit recommendations to DHCS, the California Health and Human Services Agency, and the Legislature by February 1, 2011. 2. Requires the technical working group to be made up of consumer advocates, technical experts, physicians, hospital representatives, employers, representatives of AB 542 Page 4 hospital staff, departmental representatives, and representatives of MRMIB. 3. Requires both DHCS and MRMIB to implement non-payment policies and procedures for Medi-Cal and the Healthy Families Program and, when doing so, to strongly consider the workgroup's recommendations. 4. Requires both DHCS and MRMIB to implement non-payment policies and procedures for both Medi-Cal and the Healthy Families Program that are consistent with federal regulations promulgated pursuant to PPACA, and, when doing so, to strongly consider the workgroup's recommendations. PPACA does not require that Healthy Families be included in implementing non-payment policies. 5. References relevant federal statues to clarify the hospital acquired conditions to be considered by the workgroup. 6. States that this bill be implemented only to the extent that federal financial participation is available and is not jeopardized. Background Medicare provisions related to HACs In February 2006, President Bush signed the DRA into law. One provision of the DRA requires the Secretary of HHS 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 AB 542 Page 5 occurrence rates within hospital settings. Result in higher payment to the hospital when submitted as a secondary diagnosis. 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 certain orthopedic procedures. Deep Vein Thrombosis/Pulmonary Embolism associated with total knee replacement or hip replacement. In addition, CMS initiated a process in 2008 to review AB 542 Page 6 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 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 AB 542 Page 7 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 National Quality Forum, 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund DHCS workgroup $100 $0 $0 General/* staff & contracts Federal DHCS and MRMIB likely in the hundreds of thousands toGeneral/** implementation millions of dollars commencing in FY recommendations 2011-12 and going through FY 2012-13 to the extent exceeds federal requirements Potential savings due potentially in the hundreds of thousands General/ to non-payment to millions of dollars commencing after AB 542 Page 8 reforms are in place * Medi-Cal shares costs approximately 50 percent General Fund, 50 percent federal funds ** Healthy Families shares funds approximately 35 percent General Fund, 65 percent federal funds SUPPORT : (Verified 8/17/10) American Federation of State, County and Municipal Employees, AFL-CIO Blue Shield of California California Hospital Association California School Employees Association Consumers Union Health Access Service Employees International Union ARGUMENTS IN SUPPORT : Health Access California (Health Access), and the Service Employees International Union (SEIU) argue that this bill will 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. 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 AB 542 Page 9 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. CTW:mw 8/17/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****