BILL ANALYSIS Ó
AB 969
Page 1
Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 969 (Atkins) - As Amended: March 25, 2011
Policy Committee: HealthVote:17-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill 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
applying Medi-Cal best pricing regulations.
FISCAL EFFECT
The fiscal effect of this bill is unknown, and depends upon the
resolution of ongoing litigation and how the pricing behavior of
clinical laboratories changes in response to the resolution of
the litigation. Assuming the state is successful in litigation,
it is unlikely that clinical laboratories would maintain
discounts for FQHCs if they were forced to pass the same
discounts on to Medi-Cal; labs would be more likely to raise
FQHC pricing to the rates established by Medi-Cal. In this
scenario, there would be a negligible effect on state costs.
However, under some scenarios, the exemptions created for FQHCs
in this bill could have significant state costs, potentially
exceeding $100 million annually, in terms of higher laboratory
charges on a prospective basis.
COMMENTS
1)Rationale . This bill intends to clarify that the application
of a state regulation that provides the Medi-Cal program
favorable pricing, as compared to other payers, should not
take into account discounts or donations of services provided
to FQHCs by commercial clinical laboratories. The author
states concern that due to a recent lawsuit brought by the
AB 969
Page 2
state, the current arrangement of discounts or donations of
services from laboratories to FQHCs could be at risk.
2)Medi-Cal best pricing . State regulation prohibits providers
from charging Medi-Cal "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." In 2009, the state Attorney
General filed a lawsuit against seven large clinical reference
laboratories contending they had been systematically
overcharging the Medi-Cal Program over the past 15 years,
citing lower charges to Medicare, private insurance companies,
and patients. According to the California Primary Care
Association (CPCA), the sponsors of this bill, if discounted
services provided by clinical reference laboratories to FQHC
patients are "comparable services" and the state claimed that
Medi-Cal deserved similar discounts, labs would raise the
prices charged to FQHCs up to current Medi-Cal rates and
discontinue discounts and donations of services. It is
unclear whether the state has cited FQHC pricing specifically
in its lawsuits that allege over-charging Medi-Cal.
3)Anti-kickback and safe harbor rules . A federal law known as
the anti-kickback statute, in attempting to reduce fraud and
abuse, generally forbids receiving remuneration for referral
of patients enrolled in health programs paid for in part or
whole by the federal government. California has a similar
anti-kickback law. In 2003, a new federal law explicitly
defined a new "safe harbor" from the anti-kickback statute
allowing an FQHC to receive goods, items, services, donations,
loans, or a combination thereof (including free or discounted
laboratory services), if it allows the FQHC to enhance
services to the medically underserved population it serves
4)Concerns . Representatives of clinical laboratories have
indicated that the bill's definitions of "usual and customary
charge" and "commercial clinical reference laboratory
provider" are problematic and may lead to unintended
consequences outside the scope and intent of this bill.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081
AB 969
Page 3