BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: SB 1320 AUTHOR: Harman AMENDED: March 28, 2012 HEARING DATE: April 25, 2012 CONSULTANT: Rubin SUBJECT : Retainer practices. SUMMARY : Defines a "retainer practice" as a person who is licensed to practice medicine and contracts with patients to provide primary care services, as defined, at least in part based on a periodic fee and prohibits a retainer practice from being subject to regulation as a health care service plan (health plan) by the Department of Managed Health Care (DMHC) or as a health insurer by the California Department of Insurance (CDI). Existing law: 1.Requires the Medical Board of California (MBC) to issue licenses to holders of physician certificates and holders of doctor of podiatric medicine certificates who are engaged in the professional practice. 2.Provides for the licensing and regulation of health plans by DMHC under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and provides for the regulation of health insurers by CDI. 3.Defines a health plan as either: a. Any person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees or b. Any person, whether located within or outside this state, who solicits or contracts with a subscriber or enrollee in this state to pay for or reimburse any part of the cost of, or who undertakes to arrange or arranges for, the provision of health care services that are to be provided wholly or in part in a foreign country in return for a prepaid or periodic charge paid by or on behalf of the subscriber or enrollee. Continued--- SB 1320 | Page 2 4.Defines an insurer as the person who undertakes to indemnify another by insurance and defines health insurance as an individual or group disability insurance policy that provides coverage for hospital, medical, or surgical benefits. This bill: 1.Declares the intent of the Legislature to define the term "retainer practice" in a manner that ensures patient safety and allows the model to operate efficiently and unencumbered by unnecessary state government regulation. 2.Declares that a retainer practice is not a health plan subject to regulation by DMHC under the Knox-Keene Act, and that a retainer practice is not a health insurer subject to regulation by CDI. 3.Defines a retainer practice as any person who is licensed to practice medicine by MBC and contracts with patients to provide primary care services, in whole or in part, based on a periodic fee. 4.Defines "primary care services" as medical services for which no specialty is commonly required, and specifically excludes acupuncture, chiropractic, dental, emergency, hospital, and vision services FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. COMMENTS : 1.Author's statement. According to the author, California needs a multipronged approach to make health care services more readily available and affordable to the many residents of the state who lack adequate access to those services. Retainer practices represent an innovative, affordable option that could improve access to medical care as well as free up emergency rooms for actual emergency care rather than for the primary care needs of those without access to care. California law lacks a definition for "retainer practice" which creates some confusion with regard to their regulation. SB 1320 states that retainer practices are not insurance companies or health plans, and that they should not be regulated as such. SB 1320 also defines a retainer practice as any person licensed to practice medicine by the MBC and contracts with patients to provide primary care services, in whole or in part, based on a periodic fee. SB 1320 | Page 3 2.Background. According to an August 2005 report by the United States Government Accountability Office entitled "Concierge care characteristics and considerations for Medicare" (GAO report), concierge care, also called retainer-based medicine, is an approach to medical practice in which physicians charge their patients a membership fee in return for enhanced services or amenities. The report was mandated by the Medicare Prescription Drug Improvement and Modernization Act of 2003 and was borne out of federal concern for how the recent rise of this approach might affect beneficiaries of Medicare, the federal health insurance program for the aged and some disabled individuals. An April 2008 article in the Journal of Health & Life Sciences Law on "Concierge medicine: legal issues, ethical dilemmas, and policy challenges" (JHLSL article) reports that the concept of retainer practices evolved out of physician frustration from the confluence of decreased physician reimbursement, increased practice costs (including higher malpractice premiums), and greater administrative burdens imposed by both Medicare and private insurers. According to an October 2010 report of the Medicare Payment Advisory Commission (MedPAC report), retainer practices originated from a Seattle-based practice in 1996 and have since grown rapidly. The report adds that retainer-based medicine advocates describe the change to this model of practice as having a large impact on physician satisfaction and stress and that the vast majority of physicians interviewed described wanting to spend more time with patients as their primary motivation for becoming a retainer-based physician. The report described three models of retainer practice based on the types of services that are provided, but noted that even within the three main models there is a great deal of variation in practice management, services offered, fees charged, and acceptance of insurance. In the first model, "fee for extra services," a patient pays an annual fee to be part of a physician's patient panel, and the patient receives an annual physical in exchange for this fee, but continues to pay for office visits other than the physical. In the second model, "fee for care," the patient pays a fee that covers all primary care provided by the physician; patients do not pay per-visit fees and physicians typically do not charge Medicare or insurance. In the third, "hybrid" model, physicians continue to see non-retainer patients, while charging a fee to SB 1320 | Page 4 some of their patients for increased services. According to the JHLSL article, the greatest policy concern expressed against retainer practices is that as this form of practice becomes more prevalent, it may create a multi-tiered system of health care, with lower-income patients having decreased access to primary and other types of care as the result of fewer primary care physicians being available for those who cannot afford to pay retainer fees. 3.Retainer practice characteristics. The GAO report surveyed 112 physicians in retainer practices in October 2004 and found that the annual membership fee for a person to join a retainer practice varied from $60 to $15,000, with the most frequently reported fee being $1,500. For the MedPAC report, 28 physicians in retainer practices were interviewed and fees ranged from $600 to $5,400, with most in the $1,500 to $2,000 range. In exchange for these fees, patients were part of panels that were much smaller than non-retainer patient panels. Retainer physicians responding to the GAO survey reported having, on average, 490 patients, compared to an average of 2,716 patients the year prior to starting their retainer practice. The panels were even smaller for the physicians interviewed for the MedPAC report, with averages of 250 patients compared to 2,265 patients prior to starting a retainer practice. According to the reports, the extra time physicians had to spend with patients as a result of having smaller patient panels enabled them to offer services such as same- or next-day appointments for nonurgent care, extended office visits, 24-hour cell phone access, periodic preventive care physical examinations, wellness and nutrition planning, smoking cessation services, and more patient education. According to the MedPAC report, because the field of retainer medicine is so new, there have not been extensive studies to compare patient outcomes between retainer care and standard care. 4.Retainer practices and Medicare. Retainer practices have prompted federal concerns about how the model might impact Medicare. The GAO report was conducted with particular attention to concerns that retainer fees may constitute additional charges for services that Medicare already pays physicians for and that retainer practices may affect Medicare beneficiaries' access to physician services. The MedPAC report discusses how retainer physicians who wish to see Medicare patients have two basic options: either take the formal step SB 1320 | Page 5 of opting out of Medicare entirely, or maintain a relationship with the program but take the steps necessary to stay within the restrictions imposed by Medicare's billing. Those who do not opt out of Medicare are subject to the program's billing limits: participating physicians agree not to charge the patient any amounts beyond the Medicare fee schedule amount, while nonparticipating physicians must limit any extra billing (balance bills) to no more than 9.25 percent of the Medicare Fee Schedule amount received by participating physicians. Any billing above this limiting charge can be prosecuted under the False Claims Act. The question for retainer practices is whether retainer fees are extra charges and in violation of the balance billing rules. In response to questions on this issue, the Health and Human Services Office of the Inspector General (OIG) issued an "OIG Alert" to retainer physicians about such fees in 2004, stating that extra payments are allowed only when services are not covered by Medicare, and clarifying that services such as coordination of care with other providers, comprehensive assessment and plan for optimum health, or extra time spent on patient care could potentially be considered covered as part of Medicare services; they are not enough in and of themselves to justify charging a retainer fee. 5.The Affordable Care Act. According to a February 24, 2011 article in CaliforniaHealthline, beginning in 2014, the Patient Protection and Affordable Care Act (ACA) will allow retainer practices to market their coverage alongside traditional health plans in health insurance exchanges. The ACA includes the model in its definition of a "qualified health plan." Since the California Health Benefit Exchange (Exchange) will be open to all qualified health plans, any retainer practice that meets the requirements outlined by ACA and subsequent regulations will qualify to be purchased through the Exchange. Qualification could potentially be accomplished by coordinating with a high-deductible health plan that ensures coverage for emergency services and other essential health benefits mandated by the ACA that are not provided by retainer practices. 6.American Medical Association (AMA) opinion. In December 2003, AMA adopted Opinion 8.055 on retainer practices for the AMA Code of Medical Ethics. According to the Opinion, retainer contracts are consistent with pluralism in the delivery and financing health care but raise ethical concerns that warrant careful attention, particularly if retainer practices become SB 1320 | Page 6 so widespread as to threaten access to care. AMA advocates that particular attention be paid to: a. Honesty, transparency, and lack of coercion in the contracted agreement; b. Not promising more or better diagnostic or therapeutic services when promoting a retainer practice; c. Facilitating the transfer of nonparticipating patients when transitioning to a retainer practice, in accord with medicine's ethical mandate to provide for continuity of care; d. Honest billing for reimbursement under a retainer contract and observance of relevant laws, rules, and contracts; and e. The professional obligation to provide care to those in need, regardless of the ability to pay. 1.Prevalence of retainer practices. The 2005 GAO report identified 146 physicians with retainer practices nationwide, including 26 in California, the most in any state. The 2010 MedPAC report found 756 retainer-based physicians nationwide and 157 in California, while noting that this should be considered a lower limit and that most experts estimated the number of retainer-based physicians in the country to be between 1,000 and 2,500. Some estimates are considerably higher; for example, a March 23 2012, article in The Wall Street Journal quotes the American Academy of Private Physicians, a trade group, as estimating that 4,400 physicians now run retainer-based practices, with about 1,000 changing their practice within the last year. According to the MedPAC report, four metropolitan statistical areas (MSAs) in California ranked in the top 20 in the country for most retainer practices: Los Angeles (1), San Francisco (13), San Diego (15), and Riverside-San Bernardino (20). The highest ratios of retainer physicians to population in California are found in Santa Barbara and Ventura, ranking them as the MSAs with 5th and 13th highest ratios in the country. 2.Other states. Washington and Oregon have recently enacted laws addressing retainer practices. Washington's law, enacted in 2007, includes a number of consumer protection measures and requires retainer practices to provide a disclaimer indicating that retainer agreements do not constitute comprehensive health coverage and to submit annual statements to the office of insurance. A December 2009 report to the Legislature indicated that from 2007 to 09, overall patient participation nearly doubled to 8,093 patients, which represents less than one-tenth of one percent of the total population, the number SB 1320 | Page 7 of providers increased from 21.5 to 29, monthly fees grew from $85 to $135, and the Insurance Consumer Hotline received no complaints regarding any of the state's 10 retainer practices. Oregon's retainer practice law was signed in 2011 and contains many measures similar to those in the Washington law, including prohibitions on a retainer practice being controlled by a health carrier, patient discrimination, double billing, and false advertising. Retainer practices must provide a written disclaimer to prospective patients, and be certified by the Department of Consumer and Business Services. 3.Policy questions and concerns. a. Need for the bill. The author states that California law lacks a definition for "retainer practice," which creates some confusion with regard to their regulation. However, it is unclear where this confusion lies - with consumers, physicians, retainer practices, plans and insurers, or regulators? What problems are being caused by the lack of a definition? The term "retainer practice" is intended to be defined in a manner that ensures patient safety and remains unencumbered by unnecessary state government regulation, raising the question: what is necessary for state government to regulate in order to ensure patient safety? b. Consumer protection. Currently, DMHC and CDI protect consumers of health plans and health insurance by regulating against various occurrences. This bill prohibits regulation as a health plan or insurer, leaving open questions about who patients should turn to if they encounter fraud or abuse; an inability or unwillingness of the provider to provide contracted services in a timely fashion; frequent or large increases in retainer fees; financial insolvency of the provider; false advertising in the terms of an agreement or the conduct of a direct practice business; or discrimination based on health status, race, religion, national origin, disability, economic status, education, or sexual orientation. Should patients that contract with retainer practices be afforded protection or recourse from these possible events beyond currently available mechanisms such as MBC, medical malpractice law, and small claims courts, particularly if retainer practices will be in the Exchange with health plans and insurers? 1.Oppose. Health Access California (HAC) writes that retainer SB 1320 | Page 8 practices give consumers a false sense of security that their health care needs will be covered when in fact, as defined by this bill, these practices will have no regulation and provide no assurance that contracted physicians must provide or cover a comprehensive range of necessary care. HAC states that California provides regulation of health plans and insurance products to protect health care consumers from the physical, emotional, and financial trauma that can ensue from inadequate health coverage and that this bill would circumvent all of these protections and put consumers in danger. SUPPORT AND OPPOSITION : Support: None received. Oppose: Health Access California -- END --