BILL ANALYSIS Ó
AB 969
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Date of Hearing: April 12, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 969 (Atkins) - As Amended: March 25, 2011
SUBJECT : Medi-Cal: clinical laboratory and laboratory services.
SUMMARY : Prohibits discounts or donations of laboratory
services provided to Federally Qualified Health Centers (FQHCs)
by commercial clinical laboratories from being included in the
calculation of the usual and customary charges for purposes of
determining the Medi-Cal reimbursement rate. Specifically, this
bill :
1)Defines, for purposes of this bill:
a) "Commercial clinical reference laboratory provider" as a
clinical laboratory that provides clinical laboratory tests
or examinations or laboratory services to the general
public for profit and as excluding a physician office
laboratory or a government laboratory; and,
b) "Usual and customary charge" as the lower of either of
the following:
i) Lowest price paid by third party payers, excluding
Medi-Cal managed care plans; or,
ii) Lowest price offered to any segment of the public.
2)Prohibits donations of or discounts for clinical reference
laboratory tests or examinations or for laboratory services
provided to an FQHC from being considered a usual and
customary charge.
3)Requires commercial clinical reference laboratory providers to
submit their usual and customary charges when billing for
Medi-Cal services.
4)Requires payment to commercial clinical reference laboratories
to be the lower of usual and customary of rates.
5)Authorizes the Department of Health Care Services (DHCS) to
implement this bill by provider bulletin without taking
regulatory action.
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6)Requires the DHCS to do all of the following:
a) Notify and consult with interested parties and
stakeholders in implementing the provisions of this bill;
b) Schedule at least one meeting with interested parties
and stakeholders;
c) Provide notice at least 10 days prior to the meeting;
and,
d) Provide notice at least 30 days prior to the effective
date of the action or change.
EXISTING LAW :
1)Establishes the Medi-Cal Program, administered by DHCS, which
provides comprehensive health benefits to low-income children,
their parents or caretaker relatives, pregnant women, elderly,
blind or disabled persons, nursing home residents, and
refugees who meet specified eligibility criteria.
2)Defines, in federal law, a "health center" as a public or
private nonprofit entity that serves a population that is
medically underserved, or a special medically underserved
population, as defined, and provides that health centers may
apply for and receive federal Public Health Service (PHS) Act
Section 330 grant funds to support health center planning and
operation.
3)Defines in federal law an FQHC as a health center, as in 1)
above, receiving PHS grant funds, but also including certain
tribal organizations, and requires the Medicare and Medicaid
programs to reimburse FQHCs at enhanced rates of payment.
4)Provides, by state regulation, that no provider shall charge
the Medi-Cal Program for any service or any article more than
would have been charged for the same service or article to
other purchasers of comparable services or articles under
comparable circumstances.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
needed to ensure that FQHC clinics may continue to enjoy the
benefit of discount arrangements for lab services. The author
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refers to pending lawsuits against seven large clinical
reference laboratories filed by the Attorney General (AG) in
2009 contending that they had been systematically overcharging
the Medi-Cal program. The author acknowledges that no FQHC
has explicitly been named as a defendant in the pending
lawsuit against the laboratories nor has DHCS taken any action
against the health centers. However, the author argues, these
actions against the laboratories directly impact health
centers and the patients they serve by potentially reducing
access to needed laboratory services for uninsured patients.
2)BACKGROUND . In 2009, the AG filed a lawsuit against seven
large clinical reference laboratories contending they had been
systematically overcharging the Medi-Cal Program over the past
fifteen years. The suit uses, as examples, lower charges to
Medicare, insurance companies and patients. The suit alleges
that laboratories have been engaging in discriminatory billing
practices in violation of Medi-Cal regulations that require
them to provide services to Medi-Cal patients at their most
favorable rates and have engaged in practices in violation of
California's anti-kickback law. Late last summer, DHCS issued
letters to over 300 labs providing services to Medi-Cal
beneficiaries directing them to conduct a self-audit
identifying all instances where pricing was below the Medi-Cal
rate. According to the California Primary Care Association
(CPCA), the sponsors of this bill, the main question is
whether discounted services provided by clinical reference
laboratories to FQHC patients are "comparable services."
3)FEDERAL "SAFE HARBOR ." The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 specifically
excluded from the application of the anti-kickback statute any
remuneration between a FQHC and an individual or entity
providing goods, items, services, donations, loans, or a
combination thereof, to the health center pursuant to a
contract, lease grant, loan, or other agreement, if the
agreement contributes to the ability of the health center to
maintain or increase the availability, or enhance the quality,
of services provided to the medically underserved population
that it serves. AB 2282 (Oropeza), Chapter 772, Statutes of
2006, exempted such beneficial arrangements from the reach of
California's anti-kickback laws. Based on this "safe harbor"
protection, the sponsors argue that discounted or free lab
services provided to FQHCs should be specifically exempted by
statute from the definition of the price that the Medi-Cal
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Program must pay for these services. In order to effectuate
this purpose, this bill includes a definition of "usual and
customary charge" that is based on a section relating to
pharmacy charges.
4)COMMUNITY HEALTH CENTERS . In the 1960s, Congress enacted the
health center programs to assist individuals in medically
underserved communities and special populations, such as
uninsured persons, gain access to primary and preventive
health care. In 1996, the health center programs (migrant
health centers, community health centers, health care for the
homeless, and health centers for residents of public housing)
were consolidated under Section 330 of the PHS. All 330 grant
recipients are public, nonprofit or tax-exempt. According to
the CPCA, there are currently 118 federal health center
grantees in California operating almost 900 delivery sites and
serving over 2.8 million patients statewide.
5)SUPPORT . CPCA states in support that this bill clarifies that
Medi-Cal best pricing regulations do not apply when discounts
are provided for services to the uninsured through arrangement
with FQHCs that are protected by the federal anti-kickback
safe harbor rule. CPCA argues that due to the recent action
by the state, the FQHCs have become exceedingly concerned that
the current arrangement between reference clinical
laboratories and the health centers to provide essential
discounted pricing for uninsured patients may be at risk.
According to CPCA, this bill attempts to reaffirm existing
federal and state protections (safe harbor) for FQHCs to enter
into business arrangements that benefit the FQHCs overall
mission and ability to provide quality health care for all,
including California's growing uninsured population. CPCA
argues that, essentially this bill maintains the "status quo"
by protecting FQHCs from unintended consequences of Medi-Cal's
best-price regulation.
6)POLICY ISSUE . DHCS has taken no action that would that would
jeopardize the ability of FQHCs to obtain discounted or
donated services. Furthermore, on January 10, 2011, CPCA sent
a letter to California Health and Human Services Secretary
Diana Dooley requesting timely guidance on the question of
whether discounted services provided by clinical reference
laboratories to FQHC patients are comparable services provided
under comparable circumstances such that the laboratories are
compelled to bill Medi-Cal at the FQHC discounted rate. Given
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this, the author may wish to explain why this bill is needed
now rather than await DHCS action or response.
REGISTERED SUPPORT / OPPOSITION :
Support
California Primary Care Association (sponsor)
Family Health Centers of San Diego
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097