BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 969 (Atkins) - Medi-Cal: clinical laboratory and laboratory
services.
Amended: June 26, 2012 Policy Vote: Health 8-0
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Brendan McCarthy
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 969 would prohibit the Department of Health
Care Services from reducing rates paid for laboratory services,
based on donations or discounts provided to federally qualified
health centers for care of the uninsured.
Fiscal Impact: The bill is not likely to have a significant
impact on Medi-Cal costs for laboratory services.
Under current law are regulation, providers of laboratory
services for Medi-Cal clients are prohibited from charging more
than would be charged to other purchasers. This is referred to
as the "best price" regulation and is intended to ensure that
Medi-Cal does not pay more than any other payer (such as private
health plans or Medicare).
Federally qualified health centers receive federal grant funding
to provide care to the uninsured, among other patients. Under
current practice, many laboratories provide free or discounted
services to federally qualified health centers. In principle,
under the best price regulation, laboratories should extend the
same discounts to Medi-Cal. In practice, this has not occurred.
The 2012-13 budget imposed a 10 percent budget reduction for
laboratory rates in Medi-Cal. As part of the implantation of the
rate reduction, the health trailer bill (Committee on Budget, AB
1494, Chapter 28, Statutes of 2012) suspended the existing best
price regulation for twelve months and directed the Department
to develop a new methodology for determining the rates Medi-Cal
will pay for laboratory services. Under the new methodology,
Medi-Cal will pay rates based on the average of what other
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payers and other state Medicaid programs are paying for similar
services.
Because the use of the best price regulation has been suspended
for twelve months and the Department will develop a new
reimbursement methodology that will not be based on the best
price, discounts provided to federally qualified health centers
would not have an impact on Medi-Cal reimbursement rates.
If the Department does not implement a new rate methodology
within twelve months, the state would return to using the best
price regulation. Even if that were to occur, however, it is
unlikely that discounts provided to federally qualified health
clinics would lead to significant rate reductions for Medi-Cal.
In practice, it is much more likely that laboratories would
increase rates paid by federally qualified health centers rather
than extend those low prices to Medi-Cal, which purchases more
than $400 million per year for laboratory services.
Proposed Law: AB 969 would prohibit the Department of Health
Care Services from reducing rates paid for laboratory services,
based on donations or discounts provided to federally qualified
health centers for care of the uninsured.
Related Legislation: AB 1494 (Committee on Budget, Chapter 28,
Statutes of 2012), the budget trailer bill on health, suspended
the existing best price regulation for twelve months and
directed the Department to develop a new methodology for
determining the rates Medi-Cal will pay for laboratory services.
Staff Comments: In 2008, the Attorney General brought suit
against several laboratories, alleging that the laboratories had
charged Medi-Cal more for laboratory services than others had
been charged. In addition, the Attorney General alleged that
laboratories used discounted services to induce providers to
refer additional Medi-Cal clients to the laboratories - a form
of illegal kickback. The Attorney General recently settled suits
against seven laboratories for a total of about $300 million.
The sponsors of this bill are concerned that with increased
focus on rates charged to Medi-Cal under best price regulation,
laboratories will begin limiting or eliminate discounted
services to federally qualified health centers, rather than
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extend those discounts to Medi-Cal.