BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 751|
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THIRD READING
Bill No: SB 751
Author: Gaines (R), et al
Amended: 5/11/11
Vote: 21
SENATE HEALTH COMMITTEE : 9-0, 5/4/11
AYES: Hernandez, Strickland, Alquist, Anderson, Blakeslee,
De León, DeSaulnier, Rubio, Wolk
SUBJECT : Health care coverage: provider contracts
SOURCE : Author
DIGEST : This bill prohibits a contract by or on behalf
of a licensed health care facility, as defined, and a
health care service plan (health plan) or health insurer
from containing a provision that restricts the ability of
the health plan or insurer to furnish information to
enrollees and insureds on the cost range of procedures at
the hospital or facility or the quality of services
performed by the hospital or facility. This bill states
that the cost range of a procedure shall not include
procedures for enrollees covered by capitated payments in a
contract between a health plan and a licensed hospital or a
licensed health care facility owned by a licensed hospital.
ANALYSIS :
Existing law :
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1. Provides for the licensure and regulation of health
plans and insurers by the Department of Managed Health
Care (DMHC) and the California Department of Insurance
(CDI), respectively.
2. Requires hospitals to make a written or electronic copy
of its charge description master (a list of prices for
services) available, either by posting an electronic
copy on the hospital's website, or by making a written
or electronic copy available at the hospital.
3. Requires hospitals to submit their average charges for
25 common outpatient procedures, as specified, annually
to the Office of Statewide Health Planning and
Development (OSHPD), who is required to publish this
information on its website.
4. Requires OSHPD to publish and update on its website, a
list of the 25 inpatient procedures most commonly
performed in California hospitals, along with each
hospital's average charges for those procedures.
5. Defines "licensed hospital" as an institution, place,
building, or agency that maintains and operates
organized facilities for one or more persons for the
diagnosis, care, and treatment of human illnesses to
which persons may be admitted for overnight stay,
including any institution classified under regulations
issued by the State Department of Public Health (DPH) as
a general or specialized hospital, as a maternity
hospital, or as a tuberculosis hospital, but does not
include a sanitarium, rest home, a nursing or
convalescent home, a maternity home, or an institution
for treating alcoholics.
This bill:
1. Prohibits a contract issued, amended, renewed or
delivered on or after January 1, 2012, by or on behalf
of a health plan or insurer and a licensed hospital, or
any other licensed health care facility owned by a
licensed hospital, to provide inpatient hospital
services or ambulatory care services, from containing a
provision that restricts the ability of the plan or
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insurer to furnish information to subscribers or
enrollees concerning the cost range of procedures or the
quality of services performed by the hospital or
facility.
2. Makes any contractual provision that is inconsistent
with this bill void and unenforceable.
3. Defines "licensed hospital," consistent with existing
law.
4. States that a health care service plan shall, at a
minimum, on an annual basis, provide the hospital or
facility a reasonable opportunity to review and validate
data provided to subscribers or enrollees.
5. States that if the information proposed to be furnished
to enrollees and subscribers on the quality of services
performed by a hospital or facility is data that the
plan has developed and compiled, the plan shall utilize
appropriate risk adjustment factors to account for
different characteristics of the population, such as
case mix, severity of patient's condition,
comorbidities, outlier episodes, and other factors to
account for differences in the use of health care
resources among hospitals and facilities.
6. States that the cost range of a procedure shall not
include procedures for enrollees covered by capitated
payments in a contract between a health plan and a
licensed hospital or a licensed health care facility
owned by a licensed hospital.
7. Prohibits specified fines and penalties, established in
existing law, from applying to the provisions in this
bill.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/11/11)
Aetna, Inc.
America's Health Insurance Plans
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Association of California Life and Health Insurance
Companies
Blue Shield of California
California Association of Health Plans
California Association of Health Underwriters
California Association of Joint Powers Authorities
California Retailers Association
California School Employees Association
Pacific Business Group on Health
Service Employees International Union
OPPOSITION : (Verified 5/11/11)
California Healthcare West
California Hospital Association
Sharp HealthCare
University of California
ARGUMENTS IN SUPPORT : Blue Shield states that people
routinely receive quality and cost data on a variety of
goods and services they purchase, yet that is not the case
with something as important as the health care someone
receives. Blue Shield argues that this bill makes a modest
step in the right direction towards unlocking the mystery
behind rising hospital costs, which represents one of the
biggest cost drivers in the system.
The California Association of Health Plans (CAHP) concurs,
stating that there is a growing recognition at the state
and federal level that the only way to control health care
costs is to focus on the costs and quality of medical
services. CAHP points out that rising hospital costs have
contributed to rising premiums, and that hospitals have
shortfalls in funding for services provided to the
uninsured and government programs. However, that should
not mean that insured patients should be barred from
receiving cost and quality information.
Service Employees International Union (SEIU) asserts that
SEIU members and California consumers are increasingly
being required to pay more for health care as costs
continue to increase. SEIU states that as members are
forced to shoulder the burden of higher co-pays and
deductibles, it is critical that they be personally armed
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with data and tools to make informed decisions about the
costs of the services they are receiving and the quality of
those services.
The California Retailers Association supports this bill and
states that when deciding which products and services to
buy, most consumers base their decisions on price and
quality. Health care should be no different, and in fact,
transparency rises to an even more important level for
consumers making what can literally become life-changing
health care decisions.
ARGUMENTS IN OPPOSITION : The University of California
(UC) states that, while UC endorses the concept of
transparency, it believes that the bill as written will
result in consumers receiving misleading information that
will not assist them in making informed choices about their
medical care. UC argues that a robust risk-adjustment
methodology is necessary to enable meaningful comparisons
across hospitals and providers that have a very different
mix of services and roles in the community. For example,
the cost and quality of complex second and third hip
replacements performed at an academic medical center should
not be compared to a simple first-time hip replacement that
is commonly performed in community hospitals. Although UC
contracts do not contain confidentiality clauses, UC
believes that quality and cost information should be
risk-adjusted or "normalized" to ensure that consumers can
make apples-to-apples comparisons of services across
hospitals.
Catholic Healthcare West (CHW) states that hospitals
support providing meaningful, accurate and reliable
information to consumers. However, without appropriate
standards on how that information is provided, insurance
companies could potentially provide patients with
information that is wrong or misleading. Although most
insurance companies already choose to provide bundled cost
information for an episode of care, as recommended in the
aforementioned 2008 CHCF report, this bill does not make
this best practice mandatory, thereby allowing an insurance
company the option to selectively post disaggregated
information that may be misleading. CHW argues that
insurers should be required to provide consumers with data
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that provides an accurate comparison and tells the whole
story.
The California Hospital Association (CHA) concurs with
CHW's assertions, and points out that many hospitals report
that health plans frequently post false information on
their websites regarding hospital costs and quality. If
hospitals are to be prohibited from addressing this common
problem contractually, insurers should be required to use a
scientifically valid and unbiased methodology that applies
to all hospitals, instead of allowing this to be negotiated
on a contract-by-contract basis. CHA argues that consumers
and hospitals should not be placed in the position of
having to trust that the insurance company's rating
methodology is accurate and unbiased, and that providers
who are being rated should be given an opportunity to
review and make corrections to inaccurate data prior to the
distribution of ratings. Furthermore, CHA states that
presentation of hospital costs should properly address
capitation and that exclusion of capitation rates in price
information can materially skew the results.
Sharp HealthCare opposes this bill and writes, "SB7 51
lacks clarity on how insurers will calculate and
appropriately display cost of care by providers who are
paid under a capitated payment methodology. Capitation is
currently excluded from the bill, meaning that it is
possible this care option is not represented at all.
Should insurers choose to go ahead and display capitated
cost information, it is not clear how they will calculate
and treat these products in the disclosure. SB 751 should
be amended to ensure that consumers have relevant
information and that providers who are providing capitated
products are fairly presented in any disclosure.
Additionally at a minimum we believe that consumer should
be given meaningful cost information while also preserving
the confidentiality and competitive nature of the
negotiated rates under which the current insurance model
operates. Consumers want to know what their out- of-pocket
costs and co-pays are for an entire episode of care. As
drafted this bill would allow disaggregation of the various
components of that episode of care. Both the California
HealthCare Foundation and National Quality Forum agree that
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all expenses associated with an episode of care be bundled
or combined in order to be meaningful for the consumer and
to prevent the disclosure of any single expense.
CTW:do 5/16/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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