BILL ANALYSIS                                                                                                                                                                                                    Ó


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                                 THIRD READING

          Bill No:  SB 945
          Author:   Senate Health Committee
          Amended:  5/31/11
          Vote:     27 - Urgency

           SENATE HEALTH COMMITTEE  :  9-0, 5/4/11
          AYES:  Hernandez, Strickland, Alquist, Anderson, Blakeslee, 
            De León, DeSaulnier, Rubio, Wolk

           SENATE APPROPRIATIONS COMMITTEE  :  8-0, 5/26/11
          AYES:  Kehoe, Walters, Alquist, Lieu, Pavley, Price, 
            Runner, Steinberg
          NO VOTE RECORDED:  Emmerson

           SUBJECT  :    Medi-Cal:  electronic records

           SOURCE  :     Author

           DIGEST  :    This bill directs the California Department of 
          Health Care Services, until July 1, 2021 and only to the 
          extent that federal financial participation is available, 
          to establish and administer the Medi-Cal Electronic Health 
          Records (EHR) Program for the purposes of providing federal 
          incentive payments to Medi-Cal providers for the 
          implementation and use of EHR systems, as specified.  This 
          bill prohibits the use of General Fund money.

           ANALYSIS  :    

          Existing federal law:


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          1. Establishes the federal Medicaid program to provide 
             comprehensive health benefits to low-income persons.  

          2. Authorizes, under the federal American Recovery and 
             Reinvestment Act of 2009 (ARRA), the outlay of federal 
             money for, among other things, Medicaid incentive 
             payments to qualified health care providers who adopt 
             and use EHRs in accordance with specified provisions in 
             the ARRA, which are referenced to as meaningful use 
             provisions and which include use of electronic 
             prescribing, submission of information on clinical 
             quality measures, reporting to immunization and disease 
             registries, and exchanging health information to improve 
             the quality of care.

          Existing state law:

          1. Establishes the Medi-Cal program, the state's Medicaid 
             program, administered by Department of Health Care 
             Services (DHCS), under which basic health care services 
             are provided to qualified low-income persons.  

          2. Authorizes the California Health and Human Services 
             Agency (CHHSA), or one of its departments, to apply for 
             federal health information technology (HIT) grants, as 
             specified.  Also requires CHHSA or a state-designated 
             entity to facilitate and expand the use of electronic 
             health information according to nationally recognized 
             standards and specifications, as specified. 

          This bill:

          1. Directs DHCS to establish and administer the Medi-Cal 
             EHR Incentive Program (Program) in accordance with the 
             State Medicaid HIT Plan, as developed by DHCS and 
             approved by the federal Centers for Medicare and 
             Medicaid Services.

          2. Directs DHCS to accept applications from, and make 
             incentive payments to, eligible providers and 

          3. Requires eligible providers and facilities seeking 



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             incentive payments to meet all standards for the federal 
             EHR Technology Program established in federal law and 
             regulations, as specified.

          4. Provides for an appeals process.

          5. Allows DHCS to contract with public or private entities 
             to implement this program, including utilizing existing 
             provider enrollment and payment mechanisms.

          6. Allows contracts entered into by DHCS to implement the 
             program to be exempt from established competitive 
             bidding requirements in state law and, instead, provides 
             for an alternative competitive bidding process, as 

          7. Allows DHCS to implement the program through provider 
             bulletins or similar instruction without regulatory 

          8. Establishes reporting requirements to the appropriate 
             fiscal and policy committees of the Legislature and to 
             the Legislative Analyst's Office, as specified.

          9. Specifies that this program be implemented only to the 
             extent federal financial participation is available.  
             Further specifies legislative intent that this program 
             be funded solely through federal funds and private 
             contributions identified by DHCS.

          10.Sunsets the program on June 30, 2021.

          11.Makes various legislative findings and declarations.

          In January 2009, President Obama challenged the nation with 
          a goal to computerize health records for all Americans by 
          2014 through the implementation and use EHR systems.  To 
          support the needs of providers and states, the federal 
          economic stimulus bill, ARRA, was enacted in February of 
          2009, which includes more than $36 billion for HIT over the 
          next several years.  



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          The majority of these funds ($34 billion) are incentive 
          payments that will go to Medicaid and Medicare providers 
          who are able to meet prescribed "meaningful use" criteria.  
          Under these provisions, California providers could receive 
          upwards of $3.4 billion in direct incentive payments.  

          Specifically, providers are eligible for: 

           Up to $64,000 per Medi-Cal provider (non-hospital) over 
            four years.  In total, California's Medi-Cal providers 
            are estimated to draw down $1.4 billion in ARRA funds.

           Up to $44,000 per Medicare provider (non-hospital) over 
            four years, beginning October 2010.  In total, 
            California's Medicare providers are estimated to draw 
            down $2 billion in ARRA funds.

           Between $2 and $8 million per hospital in Medicare and 
            Medicaid incentives, depending on size, over 4 years.  
            Hospitals are expected to deploy HIT systems on behalf of 
            their providers.  As such, hospital-based physicians are 
            ineligible to apply on their own for Medicare or Medi-Cal 

           Eligible providers for federal incentive payments under 
          ARRA  .  According to December 2009 interim regulations 
          released by the federal Centers for Medicare and Medicaid 
          Services, eligible providers include physicians, dentists, 
          nurse practitioners, certified nurse-midwives and physician 
          assistants that practice in a federally qualified health 
          center or a regional health center. 

          Federal rules specify that non-hospital providers will 
          qualify for incentive payments if at least 30 percent of 
          their total encounters are with Medicaid beneficiaries.  
          There are some exceptions to this patient volume threshold 
          criterion, including: 

           Pediatricians are eligible for an incentive if at least 
            20 percent of their total encounters are with Medi-Cal 

           Providers practicing in federally qualified health 
            centers and regional health centers can include "needy 



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            individuals" who are not eligible for Medi-Cal to reach 
            the 30 percent threshold. 

          By 2015, Medicare providers who are not meaningful users 
          will have their Medicare reimbursement rate decreased by 
          one percent per year, up to a potential maximum penalty of 
          five percent.  Recipients of Medicaid incentives will have 
          one year to meet the meaningful use criteria after 
          receiving the first incentive payment.  There are no 
          federal penalties for failure to adopt EMRs for Medicaid 

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Senate Appropriations Committee:

                         Fiscal Impact (in thousands)

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

          EHRI payments to    Up to $1,400,000 FY 2011-12Federal
          Medi-Cal providers            through FY 2020-21

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

          This bill prohibits the use of General Fund money.

           SUPPORT  :   (Verified  5/26/11)

          Healdsburg District Hospital
          Seneca Healthcare District

           ARGUMENTS IN SUPPORT  :    The author points out that ARRA 
          included significant funding to implement wide-scale use 
          and sharing of EHRs and patient health information.  This 
          bill directs DHCS to establish and administer the Medi-Cal 
          EHR Incentive Program to distribute these federal funds.  
          The author states that this bill is needed to ensure DHCS 
          may distribute federal incentive payments to Medi-Cal 
          providers in an expedited manner, which will help many 
          California health care providers change their practices and 



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          utilize electronic tools.  This may result in significant 
          improvements in health care quality and efficiency that 
          should benefit all Californians.

          CTW:kc  5/27/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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