BILL ANALYSIS                                                                                                                                                                                                    

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          SB 945 (Committee on Health)
          Hearing Date: 5/16/2011         Amended: As Introduced
          Consultant: Katie Johnson       Policy Vote: Health 9-0
          BILL SUMMARY: SB 945, an urgency measure, would require the 
          Department of Health Care Services to establish and administer 
          the Medi-Cal Electronic Health Records Incentive Program for the 
          purposes of providing federal incentive payments to Medi-Cal 
          providers for the implementation and use of electronic health 
          records systems.
                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund

           EHRI payments to                                  up to 
          $1,400,000 FY 2011-12                             Federal
          Medi-Cal providers                                through FY 

          State administrative costs                        $2,200 ongoing 
          through FY 2020-21  Federal/*

          *90 percent federal funds, 10 percent state match. See Staff 

          STAFF COMMENTS: This bill meets the criteria for referral to the 
          Suspense File.
          This bill would require the Department of Health Care Services 
          (DHCS) to establish and administer the Medi-Cal Electronic 
          Health Records Incentive Program (EHRI) for the purposes of 
          providing federal incentive payments to Medi-Cal providers for 


          SB 945 (Committee on Health)
          Page 1

          the implementation and use of electronic health records systems 
          in accordance with the State Medicaid Health Information 
          Technology Plan (Plan), as developed by DHCS and approved by the 
          Centers for Medicare and Medicaid Services (CMS). These 
          provisions would sunset June 30, 2021. Upon CMS approval, the 
          department would be required to accept applications from and 
          make incentive payments to eligible professionals and 
          facilities. The department would be required to report to the 
          Legislature on this program, as specified, each fiscal year 
          commencing July 1, 2012.

          This bill would require the Plan to identify and establish the 
          planning, policies, and procedures required to operationalize 
          the program, specify criteria for enrollment, eligibility, and 
          data collection, specify timeframes for technology 
          modifications, specify the process for provider outreach, 
          establish an appeals process, and to participate in the National 
          Level Registry. This bill would require eligible professionals 
          and facilities applying for these funds to meet all of the 
          standards of the federal Electronic Health Record Technology 
          Program, including criteria for meaningful use pursuant to Part 
          495 of Title 42 of the Code of Federal Regulations.

          This bill would exempt any contracts entered into by DHCS for 
          the purposes of implementing this program from the provisions of 
          the Public Contract Code and from review by the Department of 
          General Services. Additionally, this bill would exempt DHCS from 
          the Administrative Procedure Act and permit the department to 
          implement these provisions through provider bulletins.

          DHCS Action to Date
          Existing federal law, the American Recovery and Reinvestment Act 
          (ARRA) provided up to $36 billion in Medicaid incentive payments 
          to qualified health care providers who adopt and use electronic 
          health records in accordance with meaningful use requirements 
          set forth in the act. DHCS' Plan requested $2,979,881, at 90 
          percent federal financial participation and 10 percent state 
          match; the department is awaiting official CMS approval. As of 
          September 2010, DHCS had been awarded $2.4 million by CMS and 
          has spent $1.4 million. 

          According to a DHCS study, approximately 12 percent of 
          California's providers are eligible for these payments-more than 
          10,000 medical providers and 435 hospitals. If all eligible 


          SB 945 (Committee on Health)
          Page 2

          California providers and facilities took advantage of these 
          federal incentive payments, then approximately $1.4 billion 
          would be distributed over the 10 period of this program. 
          Specified hospitals and providers may receive payments. All 
          incentive payments would be 100 percent federally funded.

          State Administrative Expenses
          Additionally, state administrative costs related to this program 
          are eligible for 90 percent federal financial participation. 
          This means that the state would pay 10 percent of the 
          administrative costs and the federal government would pay the 
          other 90 percent. The California HealthCare Foundation (CHCF) 
          has committed for providing the state match for administration 
          of this program for the first two years of operation. This bill 
          would state that it is the intent of the Legislature that the 
          activities associated with health information exchange be funded 
          solely through federal and private contributions identified by 
          the department. It is unknown whether ongoing private funds 
          would be secured for ongoing administration or if an 
          appropriation from the General Fund would be necessary. Ongoing 
          administrative costs are estimated to be $2.2 million annually 
          through the end of the program at the 90/10 funding arrangement. 
          DHCS will continue to submit a request for funding from CHCF at 
          six-month grant intervals.

          DHCS submitted a budget change proposal requesting 16 
          2-year-limited term positions at a cost of $2.2 million 
          annually, shared 90 percent federal funds and 10 percent private 
          funds from CHCF, for funding for a contract for the planning and 
          implementation of the plan. The positions were approved, but the 
          trailer bill was sent to policy committee because it establishes 
          a new program. Additionally, the budget reflects an increase of 
          $634.8 million federal funds in Medi-Cal for this program, about 
          half of the anticipated incentives payments.