BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING
          SB 751 (Ted Gaines and Ed Hernandez)
          As Amended July 7, 2011
          Majority vote

           SENATE VOTE  :39-0 
           
           HEALTH              19-0                                        
           
           ----------------------------------- 
          |Ayes:|Monning, Logue, Ammiano,     |
          |     |Atkins, Bonilla, Eng,        |
          |     |Garrick, Gordon, Hayashi,    |
          |     |Roger Hernández, Bonnie      |
          |     |Lowenthal, Mansoor,          |
          |     |Mitchell, Nestande, Pan,     |
          |     |V. Manuel Pérez, Silva,      |
          |     |Smyth, Williams              |
          |     |                             |
           ----------------------------------- 
           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 at least 20 days in 
          advance to review the methodology and data developed and 
          compiled by the carriers, requires risk adjustment factors for 
          quality data, requires a disclosure on the carrier's Web site 
          about the data developed and compiled by the carriers and an 
          opportunity for a hospital to provide a link where the 
          hospital's response to the data can be accessed.  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.









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           2) Requires the carrier to provide the hospital or facility an 
             advance opportunity of at least 20 days to review the 
             methodology and data developed and compiled by the carriers 
             used before cost or quality information is provided, 
             including material revisions or the addition of new 
             information.

           3) 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 
             use of health care resources among hospitals and facilities.

           4) Requires a carrier's Web site to include a disclosure that 
             individual hospitals may disagree with the methodology, and 
             that many factors may influence cost or quality, as 
             specified.
            
           5) Requires the carrier to notify the hospital or facility in 
             writing of their opportunity to provide a Web site link where 
             a response to the carrier's posting may be found.

           FISCAL EFFECT  :  None

           COMMENTS  :  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.

          With increasing emphasis on controlling the growth of health 
          care costs, health plans and purchasers are shifting more of the 








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          cost of health care to patients.  Many health plans are turning 
          to quality, and in particular price, transparency efforts to 
          inform individual decisionmaking 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 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.

          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.

          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.  


          Amendments were adopted in the Assembly Health Committee to 
          address concerns of the California Hospital Association and 
          Aetna.


           Analysis Prepared by  :    Teri Boughton / HEALTH / (916) 319-2097 








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