BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 945 (Committee on Health) Hearing Date: 5/26/2011 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 2020-21 State administrative costs $2,200 ongoing through FY 2020-21 Federal/* Private *90 percent federal funds, 10 percent state match. See Staff Comments. _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED. 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 the implementation and use of electronic health records systems SB 945 (Committee on Health) Page 1 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 California providers and facilities took advantage of these SB 945 (Committee on Health) Page 2 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. The author's proposed amendments would prohibit the use of General Fund monies for the purposes of these provisions.