BILL ANALYSIS Ó
SB 751
Page 1
Date of Hearing: June 13, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 751 (Gaines and Ed Hernández) - As Amended: May 11, 2011
SENATE VOTE : 39-0
SUBJECT : Health care coverage: provider contracts.
SUMMARY : Prohibits contracts between health care service plans
and health insurers (carriers) and a licensed hospital or health
care facility owned by a licensed hospital from containing any
provision that restricts the ability of the carrier from
furnishing information to subscribers, enrollees, policyholders,
or insureds (members) concerning cost range of procedures or the
quality of services. Provides hospitals a reasonable
opportunity to validate data on an annual basis, requires risk
adjustment factors for quality data, and excludes costs of
procedures to patients in capitated arrangements. Specifically,
this bill :
1) Prohibits a contract issued, amended, renewed, or delivered
on or after January 1, 2012, by or on behalf of a carrier and
a licensed hospital or any other licensed health care
facility owned by a licensed hospital to provide inpatient
hospital or ambulatory care services to members from
containing any provision that restricts the ability of the
carrier to furnish information to members concerning the cost
range of procedures at the hospital or facility or the
quality of services performed by the hospital or facility.
2) Makes any contractual provision inconsistent with this bill
void and unenforceable.
3) Requires a carrier, at a minimum, on an annual basis, to
provide the hospital or facility a reasonable opportunity to
review and validate data provided to members.
4) Requires data developed and compiled by the carrier on the
quality of services performed by a hospital or facility to
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
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use of health care resources among hospitals and facilities.
5) Prohibits the cost range of a procedure from including
procedures for enrollees covered by capitated payments in a
contract between a health care service plan (health plan) and
a licensed hospital or a licensed health care facility owned
by a licensed hospital.
6) Exempts a violation of this bill from existing penalties, as
specified.
EXISTING LAW :
1)Licenses and regulates health facilities through the
Department of Public Health, and licenses and regulates health
care professionals, typically through licensing boards in the
Department of Consumer Affairs.
2)Regulates health plans under the Knox-Keene Health Care
Service Plan Act of 1975 through the Department of Managed
Health Care (DMHC) and regulates health insurers under the
Insurance Code through the California Department of Insurance
(CDI).
3)Establishes the Office of the Patient Advocate (OPA) within
DMHC, and requires the OPA to prepare and make available a
quality of care report card that includes a rating of health
plans.
4)Requires hospitals to make a written or electronic copy of its
charge description master (CDM-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.
5)Requires hospitals to submit their average charges for 25
common outpatient procedures, as specified, annually to Office
of Statewide Health Planning and Development (OSHPD).
Requires OSHPD to publish this information on its Website
along with a list of the 25 inpatient procedures most commonly
performed in California hospitals, and each hospital's average
charges for those procedures.
6)Requires OSHPD to publish risk-adjusted outcome reports for
medical, surgical, and obstetric conditions or procedures, as
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specified.
7)Requires hospitals, upon request, to provide to a person who
has no health coverage, a written estimate of the amount the
hospital will charge for the health care services, procedures,
and supplies that are reasonably expected to be provided to
the person by the hospital, as well as information about its
financial assistance and charity care policies, as specified.
FISCAL EFFECT : None
COMMENTS :
1)PURPOSE OF THIS BILL . The authors have introduced this bill
to prohibit a carrier contract with a provider for hospital
services from containing a provision that would block the
dissemination and disclosure of cost and quality data to
members of the health plan or insurer, but not to the general
public. The authors state that contractual agreements
between carriers and providers can prevent this information
from being released, particularly when a large provider has
market power. The authors believe this bill is needed to
ensure that carriers are not restricted in their ability to
provide cost and quality information to their members because
some hospitals are turning to "gag clauses" in contracts with
carriers that preclude carriers from sharing cost and quality
information about hospitals with members of the plan. The
authors state that a majority of hospitals in this state
already allow this information to be shared.
2)PRICE AND QUALITY TRANSPARENCY . With increasing emphasis on
controlling the growth of health care costs and trends
shifting more of the cost of health care to health insurance
members, many are turning to quality, and in particular price,
transparency efforts to inform individual decision-making and
rein in spending. A 2011 article published in the New England
Journal of Medicine (NEJM) on price transparency refers to the
wide variation in medical prices within the United States.
According to the NEJM article, publishing price information
could narrow the range and lower the level of prices, by
permitting consumers to engage cost-conscience shopping and
stimulate price competition on the supply side, forcing
high-priced providers to lower their prices to remain
competitive. The NEJM article authors add that patients are
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also concerned about quality but that comparative quality
information is not always available, so price is used as a
proxy. According to this NEJM article, successful
price-transparency initiatives should provide episode level
costs (including all related doctor's visits, tests, facility
charges, etc), meaningful information about quality must also
be provided, and most fundamentally, consumers must be engaged
in considering price information in their decisions to use
medical care.
The National Quality Forum (NQF), a national nonprofit
organization dedicated to improving the quality of health care
through building consensus around health care performance
measurement and public reporting, has monitored and engaged in
several state and national level transparency efforts.
According to a 2007 NQF report, private sector reporting
initiatives have focused on providing information to support
new benefit designs - such as high deductible health plans and
health savings accounts - that encourage consumers to consider
price when choosing providers or selecting services. The NQF
report describes two commercial health plan efforts: Aetna's
DOCFind and United Healthcare's "Estimate Your Treatment
Costs." The Aetna site provides estimate expenditures for
certain conditions based on episodes of care according to
level of severity provided by in-network providers within
designated zip codes and explains that costs may be higher if
out-of-network providers are used or lower if outpatient
(versus hospital) settings are used. The United site allows
individuals to obtain their out-of-pocket expenses and track
deductible account balances. NQF predicts that more health
plans will develop web sites that personalize price-shopping
information for health insurance subscribers like the Aetna
and United sites. Both of these sites are intended only for
members, not the public. According to NQF, this information,
when combined with provider-specific quality-of-care measures,
helps patients choose providers wisely.
NQF suggests making the information "actionable" it needs to be
accurate, reliable, and tailored. Price information should
include the negotiated price and patient out-of-pocket
payments (co-insurance, deductibles, and exclusions). NQF
makes a distinction between unit price (price of visit,
procedure, or test) and total price for episode of care (total
price, including pre- and post-operative care). NQF raises
the issue that price information based on unit of services may
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not yield the intended benefits of reducing costs as much as
information of an episode of care.
3)SUPPORT . Proponents argue that this bill is needed to prevent
contractual agreements between health carriers and providers,
in particular hospitals with dominate market power, that
interferes with the dissemination and disclosure of cost and
quality data to health insurance members. Many proponents
suggest that transparency of price and quality information
about health care providers will allow health insurance
members to make informed decisions about their health care.
Proponents point out that the data will not be made public.
4)OPPOSITION UNLESS AMENDED .
a) The California Hospital Association (CHA) believes that
patients deserve to have meaningful, accurate and reliable
information regarding the cost and quality of hospital care
to make informed choices but that some insurance companies
provide patients with information that is wrong and
misleading. CHA thinks the issues with providing
information to consumers are more appropriately and
effectively resolved in negotiations between the parties.
CHA would like this bill to be amended to ensure that the
information is meaningful and bundled into an episode of
care, accurate, reliable and addresses the differences in
hospitals that treat the sickest and neediest patients.
CHA states that the amendments taken in the Senate were
meant to address this issue, and do so for quality but not
cost. CHA also has issues with amendments taken in the
Senate to exclude costs of procedures provided under
capitated arrangements. Finally, CHA requests a
scientifically valid and unbiased methodology that will
allow for adequate opportunity for review, validation and
testing of the data integrity, data quality, and
methodology.
b) The University of California (UC) does not have
contracts that contain confidentiality provisions that bar
member access to pricing data, but is concerned that
information regarding relative value of services is
accurate and meaningful in order to enable consumers to
make informed choices. UC requests an amendment that would
apply risk adjustment to cost information. UC proposes the
following amendments to Health and Safety Code 1367.49 (d)
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and Insurance Code 10133.64 (d):
If the information proposed to be furnished to enrollees and
subscribers on the cost and/ or 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 or establish a
homogeneous cohort of patients and procedures included in
each comparison group to ensure that the type, level and
severity of procedures and patients being compared are
substantially comparable across hospitals and facilities.
5)OPPOSITION . Sharp HealthCare believes this bill would result
in an inability to enter into capitated payment agreements
with insurers. Sharp indicates that capitation is excluded
from this bill but if insurers display capitated cost
information it is not clear how it will be treated in the
disclosure. Sharp thinks this bill should be amended to
ensure that consumers have relevant information and that
providers in capitated products are fairly presented in any
disclosure. Sharp also believes consumers should be given
meaningful cost information.
6)PREVIOUS LEGISLATION .
a) AB 2389 (Gaines) of 2009 would have prohibited a
contract between a health facility and a carrier from
containing a provision that restricts the ability of the
carrier to furnish information on the cost of procedures or
health care quality information to carrier enrollees. AB
2389 died in the Assembly on Concurrence.
b) SB 1300 (Corbett) of 2008 would have prohibited a
contract between a health care provider and a health plan
from containing a provision that restricts the ability of
the health plan to furnish information on the cost of
procedures or health care quality information to plan
enrollees. SB 1300 died on the Senate Floor.
c) AB 2967 (Lieber) of 2007, would have established a
Health Care Cost and Quality Transparency Committee to
develop and recommend to the Secretary of the Health and
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Human Services Agency a health care cost and quality
transparency plan, and would have made the Secretary
responsible for the timely implementation of the
transparency plan. AB 2967 died in the Senate
Appropriations Committee on the inactive file.
d) AB 1296 (Torrico), Chapter 698, Statutes of 2007,
requires a health plan or contractor offering health
benefits to California Public Employees' Retirement System
(CalPERS) members and annuitants to disclose to CalPERS the
cost, utilization, actual claim payments, and contract
allowance amounts for health care services rendered by
participating hospitals to each member and annuitant.
Requires this information to be deemed confidential
information.
7)QUESTIONS AND DISCUSSION . There are many public policy issues
raised by this bill but the primary questions are:
a) Should contracts between carriers and hospitals be
permitted to contain confidentiality agreements that
prevent the disclosure of cost and quality information to
subscribers, enrollees, policyholders, or insureds?
It is unclear if these types of confidentiality or "gag"
clauses are common. Many industry stakeholders say most
hospitals do not contain them. A 2008 San Francisco
Business Times article provided by the author, indicates
that Sutter Health system established confidential contract
terms in Northern California contracts after CalPERS and
Blue Shield of California conducted a cost study that
resulted in the expulsion of 24 hospitals, including 13
operated by Sutter, from the Blue Shield HMO used by
CalPERS members. According to the article, excluding those
higher-cost facilities resulted in an estimated $122
million in savings over three years. Sutter indicated
that it has always had those terms in its contract and that
it has been an industry standard for years.
b) If these confidentiality agreements should be prohibited
should this bill include parameters on the cost and quality
information that carriers can make available to their
members?
It has been documented in national and state research
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publications, including peer reviewed journals, that in
order to allow patients to make informed choices data must
be accurate, linked to quality measures, and incorporate
the full range of costs the patients are likely to
encounter. This bill has been amended to give hospitals an
opportunity to review and validate data provided to
members. Additionally, the bill requires quality
information to utilize appropriate risk factors to account
for different characteristics of the population, such as
case mix and comorbidities. Should this bill also be
amended to link national or state quality measures, if
available, to cost information provided by the carrier and
include in the cost information a reasonable estimate of
the financial liability a patient may be expected to pay
for all treatment and services associated with the
procedure?
REGISTERED SUPPORT / OPPOSITION :
Support
Aetna, Inc.
America's Health Insurance Plans
Blue Shield of California
California Association of Health Underwriters
California Association of Health Plans
California Association of Joint Powers Authorities
California Professional Firefighters
California Public Employees' Retirement System
California Retailers Association
California School Employees Association, AFL-CIO
Pacific Business Group on Health
Service Employees International Union
Opposition
Sharp HealthCare
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
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