BILL ANALYSIS Ó
AB 969
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ASSEMBLY THIRD READING
AB 969 (Atkins)
As Amended January 23, 2012
Majority vote
HEALTH 17-0 APPROPRIATIONS 17-0
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|Ayes:|Monning, Logue, Ammiano, |Ayes:|Fuentes, Harkey, |
| |Atkins, Bonilla, Eng, | |Blumenfield, Bradford, |
| |Garrick, Gordon, Hayashi, | |Charles Calderon, Campos, |
| |Roger Hernández, | |Chesbro, Donnelly, Gatto, |
| |Bonnie Lowenthal, | |Hall, Hill, Ammiano, |
| |Nestande, Pan, | |Mitchell, Nielsen, Norby, |
| |V. Manuel Pérez, Silva, | |Solorio, Wagner |
| |Smyth, Williams | | |
| | | | |
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SUMMARY: Specifies that donation of or discounts for clinical
laboratory services provided to a federally qualified health
center (FQHC) is not to be considered as a basis of reduction of
Medi-Cal payments below the reimbursement rate established under
existing law.
EXISTING LAW :
1)Establishes the Medi-Cal Program, administered by the
Department of Health Care Services (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 2)
above, receiving PHS grant funds, but also including certain
tribal organizations, and requires the Medicare and Medicaid
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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.
5)Provides that reimbursement for clinical laboratory services
may not exceed 80% of the maximum rate established by the
federal Medicare program.
FISCAL : According to the Assembly Appropriations Committee, by
protecting discount arrangements between FQHCs and clinical
laboratories, this bill is likely to increase future Medi-Cal
laboratory costs as compared to what would occur under a
status-quo scenario where these discount arrangements are
threatened. The extent of the increase is unknown, because
market forces would influence the ultimate price paid by
Medi-Cal in absence of this protection. However, the increase
in Medi-Cal costs is likely to be in the range of tens of
millions of dollars annually in total funds (50% state General
Fund, 50% federal funds).
In addition, this bill could potentially weaken the legal
arguments used by the state in enforcing Medi-Cal's low price
rule, decreasing the state's chances for successfully enforcing
the rule, and decreasing the likelihood of the state receiving
lower prices, monetary awards, or settlements related to
enforcement of the rule.
COMMENTS : 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 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.
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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 (low price rule)
and have engaged in practices in violation of California's
anti-kickback law.
In May of 2011 (after this bill passed out of Assembly Health
Committee), the AG announced a $241 million settlement of one of
the lawsuits-against Quest Diagnostics, the state's biggest
provider of medical laboratory testing. According to the AG,
this is the largest recovery in the history of the California
False Claims Act. The AG stated that Quest charged Medi-Cal up
to six times as much as it was charging other customers even
though state law prohibits a provider from charging Medi-Cal any
more than other purchasers would be charged. Based on the
allegations, DHCS performed an independent statewide audit of
medical laboratories. According to the AG at the time of the
settlement, reform of industry pricing practices stemming from
this case was expected to save hundreds of millions of dollars.
In July of 2011, the lawsuit against the other laboratory
companies was also settled. The second largest Medi-Cal
provider, LabCorp, settled for $49.5 million.
This bill, as it passed the Assembly Health Committee provided
that the discounts or donated services could not be considered
as part of the usual and customary charges. At the suggestion
of the California Clinical Laboratory Association, it was
subsequently amended to allow a specific exemption for FQHCs
instead.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0003038
AB 969
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