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