BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 1817 (Arambula) Hearing Date: 08/02/2010 Amended: 04/26/2010 Consultant: Jacqueline Wong-HernandezPolicy Vote: Public Safety 7-0 _________________________________________________________________ ____ BILL SUMMARY: AB 1817 would require the Department of Corrections and Rehabilitation (CDCR) to maintain a statewide utilization management program with respect to inmate health care. Specifically, this bill would require CDCR to: 1) Develop and implement policies and procedures to ensure that all prisons employ that program and require that a copy of these policies and procedures be provided to specified legislative committees by July 1, 2011. 2) Establish annual quantitative utilization management performance objectives, as specified, and, on July 1, 2011, report the objectives it intends to accomplish in each adult prison during the next 12 months to specified legislative committees. 3) Report on March 1, 2012, and each March 1 thereafter, to specified legislative committees, performance objectives achieved or not achieved and reasons for each, as well as costs for inmate health care for the previous fiscal year. This bill makes legislative findings and declarations. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Codifies existing plans/practice Potentially substantial future cost avoidance General _________________________________________________________________ ____ STAFF COMMENTS: AB 1817 codifies the healthcare utilization management program currently being implemented by the Federal Receiver. The utilization management program was restructured in 2008, and in part of the Receiver's Turnaround Plan of Action. This healthcare delivery process uses standardized, nationally tested, and updated criteria to control when inmates are referred to expensive outside specialists, as well as control the utilization of expensive community hospital beds. When it is fully utilized, it will likely save more than $70 million per year, compared to the cost of the previous CDCR system. As specified in this bill, CDCR must, by January 1, 2011, must develop and implement utilization management policies and procedures, as well as performance objectives, as specified. By March 1, 2010, CDCR must report its progress and outcomes for those objectives to the Joint Legislative Budget Committee, the Public Safety, Budget, Health, and Appropriations committees of both houses. The Federal Receiver has already directed that these activities occur, and they are in process under his authority (and in the absence of statute). Thus, any increase in workload to create and implement the utilization management system, and the initial report, is attributable to the Receiver's Page 2 AB 1817 (Arambula) order, and not to the bill. Similarly, any savings achieved from the implementation of this new process while prison health care is still under federal receivership is also the result of the Receiver's directives and not this codifying bill. When the receivership ends, the bill will serve to continue these policies, which will have already begun to achieve ongoing cost avoidance. CDCR prison health care is currently in federal receivership. In 2005, the United States District Court for the Northern District of California established a Receivership to take control of the delivery of medical services to all CDCR inmates. In its order, the Court set forth comprehensive duties for the Receiver, including leadership and executive management of the California prison medical health care delivery system. The Court expressly ordered the Receiver to "exercise all powers vested by law in the Secretary of the CDCR as they relate to the administration, control, management, operation, and financing of the California Medical health care system." The Court suspended the Secretary's exercise of these powers for the duration of the Receivership. Moreover, the Court's order expressly provides that, "all costs incurred in the implementation of the policies, plans, and decisions of the Receiver relating to the fulfillment of his duties under this Order shall be borne by (the state). (The state) shall also bear all costs of establishing and maintaining the Office of Receiver, including the compensation of the Receiver and his staff." After the Receivership ends, which is unlikely to occur before the first report is due (in March 2012) to the Legislature, the reporting requirement would continue as a result of this bill. At that time, both the savings from utilization management and the cost of the report would continue because this bill would add both to statute. Because the report on utilization management cannot occur without the continued employment of utilization management, the cost would functionally be a minor reduction in savings from utilization management. The majority of costs for the report would be incurred in the first year (under federal receivership) to develop the initial system for collecting and compiling data.