BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                   AB 969|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  AB 969
          Author:   Atkins (D)
          Amended:  6/26/12 in Senate
          Vote:     21

           
           SENATE HEALTH COMMITTEE  :  8-0, 6/20/12
          AYES:  Hernandez, Harman, Alquist, Anderson, Blakeslee, De 
            León, DeSaulnier, Wolk
          NO VOTE RECORDED:  Rubio

           SENATE APPROPRIATIONS COMMITTEE  :  7-0, 8/6/12
          AYES:  Kehoe, Walters, Alquist, Dutton, Lieu, Price, 
            Steinberg

           ASSEMBLY FLOOR  :  73-0, 1/26/12 - See last page for vote


           SUBJECT  :    Medi-Cal:  clinical laboratory and laboratory 
          services

           SOURCE  :     California Primary Care Association 
                      Council of Community Clinics 


           DIGEST  :    This bill prohibits the Department of Health 
          Care Services (DHCS) from reducing rates paid for 
          laboratory services, based on donations or discounts 
          provided to federally qualified health centers for care of 
          the insured.

           ANALYSIS  :    

                                                           CONTINUED





                                                                AB 969
                                                                Page 
          2

          Existing law:

          1. Establishes the Medi-Cal program, administered by DHCS, 
             under which qualified low-income individuals receive 
             health care services.

          2. Establishes a schedule of benefits of the Medi-Cal 
             program, which includes outpatient laboratory services. 

          3. Prohibits Medi-Cal reimbursement for clinical laboratory 
             or laboratory services from exceeding 80% of the lowest 
             maximum allowance established by the federal Medicare 
             program for the same or similar services.  Establishes, 
             through Medi-Cal regulation, reimbursement for 
             laboratory services as the least of the following:

             A.    The amount billed; 
             B.    The charge to the general public; or
             C.    Medicare's maximum allowance. 

          4. Prohibits, through Medi-Cal regulation: 

             A.    A provider from charging 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 (this regulation is referred to as the 
                Medi-Cal "Best Price" regulation);

             B.    A provider from billing or submitting a claim for 
                reimbursement for rendering health care services to a 
                Medi-Cal beneficiary in any amount greater or higher 
                than the usual fee charged by the provider to the 
                general public for the same service.

          5. Establishes, for federally qualified health centers 
             (FQHCs), a state and federal "safe harbor" exception to 
             the anti-kickback statutes that prohibit health care 
             providers from receiving rebates, refunds, discounts, 
             commissions or other consideration for referring 
             patients, clients, or customers, subject to specified 
             conditions contained in federal regulation.  The 
             conditions specified in federal regulation include that 
             the arrangement contributes to the FQHC's ability to 

                                                           CONTINUED





                                                                AB 969
                                                                Page 
          3

             maintain or increase the availability of services 
             provided to a medically underserved population served by 
             the FQHC. 

          This bill prohibits DHCS from reducing rates paid for 
          laboratory services, based on donations or discounts 
          provided to federally qualified health centers for care of 
          the insured.

           Background  

           Litigation involving violations of "Best Price regulation" 
          and anti-kickback statutes  .  In 2008, the state Attorney 
          General (AG) brought a lawsuit against several 
          laboratories, alleging the laboratories submitted false 
          claims for payment to the Medi-Cal program by charging 
          Medi-Cal more for laboratory tests than they charged other 
          purchasers of "comparable services" under "comparable 
          circumstances," in violation of several regulations, 
          including the Best Price regulation.  The AG alleged that 
          labs fraudulently billed Medi-Cal some of the highest 
          rates, while deeply discounting many of their fees charged 
          to private payors to attract Medi-Cal business and 
          referrals from physicians, clinics, and hospitals.  In 
          addition, the AG's lawsuit alleged the discounts provided 
          on laboratory tests for non-Medi-Cal services was done to 
          induce health care providers, clinics and hospitals to 
          refer Medi-Cal business to the laboratories in violation of 
          federal, state and Medi-Cal specific anti-kickback 
          statutes.  The AG has reached settlement agreements with 
          seven laboratories for a total of $299.6 million, of which 
          $213 million will go to the state and federal government.

          Following the filing of the AG lawsuit, DHCS directed 
          laboratories to self-audit to identify all instances where 
          their pricing was below the Medi-Cal rate.  DHCS indicated 
          the required self-audit was the result of DHCS' Laboratory 
          Price Sweeps Special Project, where it was discovered that 
          laboratory providers had routinely charged and been 
          reimbursed by Medi-Cal with rates higher than the rates 
          charged to other payors for the same services under 
          comparable circumstances.

          In meetings with DHCS and in a memo to the California 

                                                           CONTINUED





                                                                AB 969
                                                                Page 
          4

          Health and Human Services Secretary, the California Primary 
          Care Association (CPCA) argued DHCS' actions jeopardized 
          FQHCs' ability to negotiate discounted pricing for 
          laboratory services for the uninsured.  CPCA argued that if 
          DHCS did not provide an exemption from the Best Price 
          regulation for laboratory services for FQHC patients, the 
          most likely outcome was that labs would increase their 
          charges to FQHCs to be in line with Medi-Cal rates.  CPCA 
          also argued DHCS' interpretation of the Best Price 
          regulation undercut a "safe harbor" provision in state and 
          federal law that exempted discounts provided to FQHC 
          patients from prosecution under state and federal 
          anti-kickback statutes.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Senate Appropriations Committee, this bill 
          is not likely to have a significant impact on Medi-Cal 
          costs for laboratory services.

           SUPPORT  :   (Verified  8/7/12)

          California Primary Care Association (co-source)
          Council of Community Clinics (co-source)
          Community Clinic Association of Los Angeles County
          Family Health Centers of San Diego
          Latino Coalition for a Healthy California
          Salud Para La Gente

           ARGUMENTS IN SUPPORT  :    This bill is sponsored by the 
          California Primary Care Association (CPCA) to clarify that 
          Medi-Cal Best Pricing regulations do not apply when 
          discounts are provided for services to the uninsured 
          through arrangements with FQHCs that are protected by the 
          federal anti-kickback safe harbor rule.  CPCA states the 
          FQHC safe harbor rule was designed to protect arrangements 
          between health center grantees and other providers, 
          suppliers, and vendors for no-cost, low-cost, and 
          discounted services furnished to the health center's 
          underserved and uninsured patients without the risk of 
          prosecution under the anti-kickback laws.  Due to recent 
          action by the state as related to discounted lab services, 
          FQHCs have become exceedingly concerned that the current 

                                                           CONTINUED





                                                                AB 969
                                                                Page 
          5

          arrangements between clinical laboratories and the health 
          centers to provide essential discounted pricing for 
          uninsured patients may be at risk.  This bill will allow 
          FQHCs to obtain discounted pricing for laboratory services 
          by providing an exception from the Best Pricing regulation. 
           CPCA argues this bill is imperative to the success and 
          sustainability of California's community health centers.


           ASSEMBLY FLOOR  :  73-0, 1/26/12
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Campos, Carter, Cedillo, 
            Chesbro, Conway, Cook, Dickinson, Donnelly, Eng, Feuer, 
            Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, 
            Garrick, Gatto, Gordon, Grove, Hagman, Hall, Hayashi, 
            Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, 
            Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, 
            Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, 
            Nestande, Nielsen, Olsen, Pan, Perea, V. Manuel Pérez, 
            Portantino, Silva, Skinner, Solorio, Swanson, Torres, 
            Valadao, Wagner, Wieckowski, Williams, Yamada, John A. 
            Pérez
          NO VOTE RECORDED:  Charles Calderon, Davis, Gorell, 
            Halderman, Harkey, Norby, Smyth


          CTW:m  8/8/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****
          












                                                           CONTINUED