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