BILL ANALYSIS Ó SB 751 Page 1 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. SB 751 Page 2 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 SB 751 Page 3 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 SB 751 Page 4 FN: 0001538