BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2389| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 2389 Author: Gaines (R) Amended: 8/20/10 in Senate Vote: 21 SENATE HEALTH COMMITTEE : 5-1, 6/23/10 AYES: Alquist, Aanestad, Leno, Negrete McLeod, Pavley NOES: Cedillo NO VOTE RECORDED: Strickland, Cox, Romero ASSEMBLY FLOOR : 61-0, 5/28/10 - See last page for vote SUBJECT : Health care coverage: provider contracts SOURCE : Aetna DIGEST : This bill prohibits a contract by, or on behalf of, a licensed health care facility, as defined, and a health plan or insurer from containing a provision that restricts the ability of the health plan or insurer to furnish information to enrollees and insured on the cost range of procedures or quality of services performed by the facility, as specified, and provides an appeals process for cost and quality of care data, as specified. Senate Floor Amendments of 8/20/10 prohibit health facility contracts, as specified, from containing a provision that restricts the ability of the health plan or insurer to furnish information to subscribers, enrollees or insureds concerning cost range of procedures or quality of services CONTINUED AB 2389 Page 2 performed by the facility, requires the health plan or insurer to provide an appeals process for cost and quality of care data, as specified. ANALYSIS : Existing law: 1.Provides for the regulation of health plans and insurers by the Department of Managed Health Care and the California Department of Insurance, respectively. 2.Requires hospitals to make a written or electronic copy of its charge description master (a list of prices for services) available, either by posting an electronic copy on the hospital's website, or by making a written or electronic copy available at the hospital. 3.Requires hospitals to submit their average charges for 25 common outpatient procedures, as specified, annually to the Office of Statewide Health Planning and Development who is required to publish this information on its website. 4.Requires the Office of Statewide Health Planning and Development to publish and update on its website, a list of the 25 inpatient procedures most commonly performed in California hospitals, along with each hospital's average charges for those procedures. This bill: 1. As a condition of prohibiting health facility contracts, as specified, from containing a provision that restricts the ability of the health plan or insurer to furnish information to subscribers, enrollees or insureds concerning cost range of procedures or quality of services performed by the facility, requires the health plan or insurer to provide an appeals process for cost and quality of care data, as specified. 2. Provides that, among other requirements, the cost information is limited to certain elective, uncomplicated procedures, the plan or insurer also discloses the location of its facility cost ranges and quality measurements and makes specified disclosures CONTINUED AB 2389 Page 3 regarding those measurements and the cost information provided, and the plan or insurer provides affected facilities an opportunity to review the information prior to furnishing it to subscribers, enrollees, policyholders, or insureds, as specified. 3. Clarifies the process by which a facility may review how data is compiled, reviewed and proved to health plan enrollees and providers. 4. Specifies that, if a health plan includes the allocated capitation payment for an episode of care in the cost information provided to subscribers and enrollees, the plan and the facility shall consult on an appropriate and reasonable methodology for doing so. 5. Requires a health plan or insurer, which provides subscribers and enrollees with quality measurements of facilities based on quality of care data developed and compiled by the plan or insurer, to meet all of the following requirements: A. The information is based on consensus-based, or nationally recognized evidence-based, clinical recommendations or guidelines. When available, a plan shall use measures endorsed by the National Quality Forum or other entities nationally recognized for quality or performance review. B. The plan or insurer must utilize appropriate risk adjustment factors to account for different characteristics of the population, as specified. C. The data used for the cost profile or quality rating must be updated at appropriate intervals, but no less than annually. D. The health plan or insurer must link quality measurements and cost range of procedures for comparison purposes, when appropriate. 6. States that the plan provide all of the following to the affected health care facility prior to furnishing the information to enrollees or subscribers: CONTINUED AB 2389 Page 4 A. A minimum 45 days written notice to review the information. B. The criteria used to develop and evaluate quality measurements, and reasonable access to these criteria, which must be sufficiently detailed and reasonably understandable to allow the facility to verify the data against its own records. C. An explanation of the facility's right to correct errors and seek review of the data used to measure the quality of services provided at the facility. D. A reasonable, prompt, and transparent appeals process. Specifies that, if a facility makes an appeal prior to the expiration of the 45-day time period, the health plan or insurer shall make no changes to its current information about the facility until the appeal is completed. 7. States that the plan also discloses the following its subscribers or enrollees: A. Where the facility's quality measurements can be found. B. A disclaimer that the facility's quality measurement provided is only a guide to choosing a facility, that enrollees or subscribers should confer with their existing facility before making decisions, and that these measures contain an element of error and should not be the sole basis for selecting a facility. C. Information explaining the facility's quality measurement process, including the basis upon which quality is measured and any limitations of the data used. D. Reasonable details on the factors and criteria used to measure quality, including whether severity cost adjustments have been utilized. CONTINUED AB 2389 Page 5 E. Information on how an enrollee or subscriber may register a complaint or provide feedback about the quality measurement system. 8. Makes any contractual provision that is inconsistent with this bill void and unenforceable. 9. Defines "licensed hospital," consistent with existing law, as an institution, place, building, or agency that maintains and operates organized facilities for one or more persons for the diagnosis, care, and treatment of human illnesses to which persons may be admitted for overnight stay, including any institution classified under regulations issued by the State Department of Health Services (now the Department of Public Health) as a general or specialized hospital, as a maternity hospital, or as a tuberculosis hospital, but does not include a sanitarium, rest home, a nursing or convalescent home, a maternity home, or an institution for treating alcoholics. 10. Defines "licensed health care facility" as any institution or health facility, other than long-term health care facility as defined in existing law, licensed by the Department of Public Health to deliver or furnish health care services. 11. Defines "health care facility" as a licensed hospital or any other licensed health care facility owned by a licensed hospital. 12. Prohibits specified fines and penalties, established in existing law, from applying to the provisions in this bill. Background Price transparency encourages consumers and their representatives to use price and quality information in their health care decisions. Governments, employers, and insurers are increasingly interested in price transparency, in an effort to improve outcomes and slow the rate of health care expenditures. The concept behind price transparency is to make comparative information on the CONTINUED AB 2389 Page 6 prices charged by health care providers for specific services publicly available. The intent is to encourage consumers, and others who make decisions on their behalf (e.g., employers, health plans, referring practitioners), to consider price alongside quality in deciding among health care providers and services, ultimately to foster a more value-driven health care delivery system. According to a 2007 National Quality Forum report, price transparency is not simply "pulling back the curtain" on health care industry financial data, much of which might not be useful for the typical consumer. To make price information "actionable," it needs to be not only accurate and reliable, but also specifically tailored to the perspectives and needs of a particular audience. The report points out that "relevant" information might be different for each audience. Their different definitions of "price" might include the following: ? Retail Prices - list prices for services that are charged by providers to patients who are not covered by insurance or otherwise eligible for discounts. ? Negotiated Prices - the price a provider agrees to charge patients covered by a specific health plan. In general, health plans and insurers with greater purchasing power have greater leverage to negotiate discounts. ? Patient out-of-pocket payments (i.e., coinsurance, deductibles, and exclusions) - the share the patient is responsible for paying. This is the "price tag" of most interest to patients and their families. Health plans and insurers, under current law, are allowed to establish economic profiles of providers and provider groups. Efforts are underway nationally and in California to also establish quality rating systems of individual providers and provider groups. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No CONTINUED AB 2389 Page 7 SUPPORT : (Verified 8/26/10) Aetna (source) 100 Black Men of Los Angeles, Inc. America's Health Insurance Plans California Association of Health Underwriters California Grocers Association California Retailers Association Safeway OPPOSITION : (Verified 8/26/10) Blue Shield California Hospital Association Sharp HealthCare ARGUMENTS IN SUPPORT : Aetna states that the cost of health care continues to grow at a rate faster than both general inflation and wages, making health insurance increasingly difficult for individuals to afford and for employers to offer in the workplace. According to Aetna, the development and disclosure of health care quality and cost measurements gives consumers the health care information they need to seek out hospitals and other health care providers with a proven track record for high quality care and efficiency. According to the America's Health Insurance Plans, this bill presents a valuable opportunity for California consumers to gain a greater understanding of the quality and costs of health care, while also creating a transparent, fair and systematic standard for tracking health care quality data. The California Association of Health Plans concurs, stating that price and quality are two important factors that patients should consider when purchasing health care coverage and choosing where to receive health care services. The California Association of Health Underwriters also writes that this is an important measure to support increasing transparency for health care costs. The California Retailers Association and Safeway state that, if this bill is not passed, consumers and employers risk losing access both to cost information and to provider performance measurements, at a time when cost efficiency and quality improvement are of paramount importance to CONTINUED AB 2389 Page 8 improving the health care system. The California Grocers Association concurs and further points out that it is important to ensure that consumers have all information available to make informed purchasing decisions regarding their health care. ARGUMENTS IN OPPOSITION : The California Hospital Association (CHA) opposes this bill on the basis that the bill allows public displays of confidential contract information, without any protections to ensure that information is meaningful, accurate and reliable. Moreover, CHA believes that cost and quality information should be required to be linked so that the information is useful and "actionable" for consumers. CHA believes that public disclosure of confidential information related to negotiated contract rates could hurt competition, raising issues of antitrust. CHA also asserts that hospitals report that health plans frequently post false information on their website regarding hospital costs and quality. If hospitals are prohibited from addressing this common problem contractually, insurers should be required to provide hospitals the opportunity to validate both cost and quality information with an appeals process to make corrections and settle disputes over the data. Sharp HealthCare writes in opposition, stating that insurers should not be allowed to misrepresent that a hospital is "high cost" when costs are higher because that hospital treats the sickest and neediest patients. Some hospitals, such as academic teaching hospitals, may see a larger number of higher acuity cases, compared to other facilities. Insurers should normalize cost data to account for such differences in severity and complexity of cases in order to achieve "apples-to-apples" comparisons. Sharp HealthCare also points out that the bill, as currently written, could exclude services reimbursed via hospital capitation from its analysis. Such exclusion of services misrepresents the overall and true cost to the payer, by eliminating many of the lower cost cases, and overstating the hospital's overall level of reimbursement. ASSEMBLY FLOOR : AYES: Adams, Ammiano, Anderson, Arambula, Beall, Block, CONTINUED AB 2389 Page 9 Blumenfield, Bradford, Brownley, Buchanan, Charles Calderon, Conway, Cook, Coto, DeVore, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Gaines, Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, Norby, V. Manuel Perez, Portantino, Ruskin, Saldana, Skinner, Solorio, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, John A. Perez NO VOTE RECORDED: Bass, Bill Berryhill, Tom Berryhill, Blakeslee, Caballero, Carter, Chesbro, Davis, De La Torre, De Leon, Emmerson, Furutani, Hall, Jeffries, Salas, Silva, Smyth, Audra Strickland CTW:nl 8/26/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED