BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   AB 542|
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                                 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  
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          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: 








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          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  







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             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  







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            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  







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          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  







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          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







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                              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  







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          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

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