BILL ANALYSIS Ó AB 969 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 969 (Atkins) As Amended June 26, 2012 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |73-0 |(January 26, |SENATE: |37-0 |(August 23, | | | |2012) | | |2012) | ----------------------------------------------------------------- Original Committee Reference: HEALTH SUMMARY : Prohibits the Department of Health Care Services (DHCS) from considering the cost of donated or discounted services provided to federally qualified health centers (FQHC) for care of the uninsured as a basis for reducing the rates paid for laboratory services in the Medi-Cal Program. The Senate amendments limit the services that may be considered to those provided to the uninsured instead of all FQHC services. EXISTING LAW : 1)Establishes the Medi-Cal Program, administered by 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 an FQHC and requires the Medicare and Medicaid programs to reimburse FQHCs at enhanced rates of payment. 3)Prohibits, in state regulation, a provider to 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 (also known as the "best price regulation"). 4)Imposes a 10% budget reduction for laboratory rates in Medi-Cal for fiscal year 2102-13, suspends the existing best price regulation for 12 months and directs DHCS to develop a new methodology for determining the rates Medi-Cal will pay AB 969 Page 2 for laboratory services. Under the new methodology, Medi-Cal will pay rates based on the average of what other payers and other state Medicaid programs are paying for similar services. 5)Prohibits reimbursement for clinical laboratory services to exceed 80% of the maximum rate established by the federal Medicare program. AS PASSED BY THE ASSEMBLY , this bill specified that donation of or discounts for any clinical laboratory services provided to an FQHC is not to be considered as a basis of reduction of Medi-Cal payments below the reimbursement rate established under existing law. FISCAL EFFECT : According to the Senate Appropriations Committee, this bill is not likely to have a significant impact on Medi-Cal costs for laboratory services. 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. In 2009, the Attorney General (AG) filed a lawsuit against seven large clinical reference laboratories contending they had been systematically overcharging the Medi-Cal Program over the past 15 years. The suit uses, as examples, lower charges to Medicare, insurance companies and patients. The suit alleged 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, 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 AB 969 Page 3 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. In the Senate, it was further amended to limit the exemption to services provided to uninsured patients served by the FQHCs. Analysis Prepared by : Marjorie Swartz / HEALTH / (916) 319-2097 FN: 0004620