BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 1124
AUTHOR: Muratsuchi
AMENDED: January 17, 2014
HEARING DATE: February 12, 2014
CONSULTANT: Bain
SUBJECT : Medi-Cal: reimbursement rates (Urgency).
SUMMARY : Extends the duration of the exemption for laboratory
providers from compliance with the Medi-Cal "comparable price"
regulation until July 1, 2015. Delays the requirement that the
Department of Health Care Services adopt regulations regarding
Medi-Cal laboratory service rates until January 1, 2015.
Contains an urgency clause that will make this bill effective
upon enactment.
Existing law:
1.Establishes the Medi-Cal program, administered by Department
of Health Care Services (DHCS), under which health care
services are provided to qualified low-income persons.
Outpatient laboratory are a covered benefit under the Medi-Cal
program, subject to utilization controls.
2.States legislative intent that DHCS develop reimbursement
rates for laboratory services that are comparable to the
payment amounts received from other payers for clinical
laboratory or laboratory services.
3.Requires, in addition to the 10 percent Medi-Cal payment
reduction required under AB 97 (Chapter 3, Statutes of 2012),
Medi-Cal laboratory service payments to be reduced by up to 10
percent for dates of service on and after July 1, 2012.
Requires this payment reduction to continue until the new rate
methodology has been approved by the federal Centers for
Medicare and Medicaid Services (CMS).
4.Prohibits, under Medi-Cal regulation, a health care provider
from charging for any service or any article more than would
have been charged for the same service or article to other
purchasers of comparable services or articles under comparable
circumstances. This regulation is known as the "comparable
price" regulation.
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AB 1124 | Page 2
5.Exempts laboratory providers from compliance with the Medi-Cal
comparable price regulation when the laboratory provider is
subject to the additional Medi-Cal payment reduction in 3)
above for 21 months following the date of implementation of
that reduction.
6.Exempts laboratory providers reimbursed under the new Medi-Cal
rate methodology in 3) above from the comparable price
regulation.
7.Requires DHCS to adopt emergency regulations to implement the
laboratory reimbursement-related provisions by July 1, 2014.
This bill:
1.Extends the exemption for laboratory providers from compliance
with the Medi-Cal comparable price regulation until July 1,
2015 (the existing law exemption ends in March 2014).
2.Delays the requirement that DHCS adopt emergency regulations
from July 1, 2014 to January 1, 2015.
3.Contains an urgency clause that will make this bill effective
upon enactment.
FISCAL EFFECT : The current form of this bill has not been
analyzed by a fiscal committee.
COMMENTS :
1.Author's statement. According to the author, DHCS has projected
that they will not be able to complete the development of a new
rate methodology for reimbursing clinical lab services under
Medi-Cal by the April 1, 2014 deadline. This bill extends the
deadline to June 30, 2015. If the extension is not granted, the
comparable price regulation would go back into effect. This price
regulation has resulted in lawsuits and been deemed difficult to
enforce. This bill would provide DHCS with the time needed to
fully develop their new rate methodology.
2.Background. AB 1494 (Committee on Budget), Chapter 28, Statutes of
2012, a health budget trailer bill, changed the Medi-Cal
reimbursement methodology for lab services. Prior to the enactment
of AB 1494, Medi-Cal reimbursement for laboratory services was
capped at an amount that could not exceed 80 percent of the lowest
maximum allowance established by the federal Medicare program for
the same or similar services. AB 1494 stated legislative intent
that DHCS develop reimbursement rates for laboratory services that
AB 1124 | Page
3
are comparable to the payment amounts received from other payers
for laboratory services, and capped Medi-Cal reimbursement for lab
providers at an amount not to exceed the lowest of the following:
a. The amount billed;
b. The charge to the general public;
c. Eighty percent of the lowest maximum allowance established
by the federal Medicare Program for the same or similar
services; or,
d. A reimbursement rate based on an average of the lowest
amount that other payers and other state Medicaid programs are
paying for similar clinical laboratory or laboratory services.
In addition to the new reimbursement methodology, AB 1494 imposed
an additional Medi-Cal payment reduction of up to 10 percent in
order to achieve General Fund budget savings (this reduction has
not taken effect). In return, AB 1494 exempted labs from the
Medi-Cal comparable price regulation for 12 months when the labs
were subject to the additional 10 percent Medi-Cal rate reduction.
The time-limited 12 month exemption from the comparable price
requirement was intended to give lab providers a financial
incentive to agree to a new rate methodology as these providers
would not want the re-imposition of the comparable price
regulation following the end of the 12-month period. The
comparable price requirement has been the subject of litigation,
and the state Department of Justice and has reached multi-million
dollar settlements with lab providers.
To develop the new Medi-Cal lab rates, DHCS has had to collect
rate data from lab providers and develop a new methodology based
on those rate submissions. This process has taken longer than
originally envisioned in AB 1494, and would have resulted in labs
again being subject to the comparable price regulation because the
new Medi-Cal rate methodology was not yet implemented during the
12-month exemption from the comparable price regulation.
AB 82 (Committee on Budget), Chapter 23, Statutes of 2013, which
delayed the re-imposition of the comparable price regulation an
additional nine months (until April 2014) to allow for more time
to develop the new rate methodology. Lab stakeholders and DHCS
indicate the new rate methodology will not be implemented by DHCS
and approved by CMS by April 2014, so this bill would extend the
re-imposition of the comparable price regulation until July 1,
2015 so that lab providers are not subject to that regulation due
to delays in implementation of the new rate methodology.
AB 1124 | Page 4
The DHCS November 2013 Medi-Cal Estimate assumes implementation of
the new rate methodology on April 1, 2014. Savings from the
lab-related reimbursement provisions of AB 1494 are projected to
be $7.3 million General Fund in 2014-15.
3.Support. The California Clinical Laboratory Association (CCLA) and
Quest Diagnostics write in support to extend the time period for
the exemption from the comparable price regulation until July 1,
2015. CCLA states DHCS has been working with stakeholders on the
development of a new rate methodology, but the process has taken a
long time and the new rate methodology has not yet been developed
by DHCS or approved by CMS. This bill is necessary because the
process to develop the new rate methodology has taken much longer
than anticipated.
4.Author's amendment. The author is proposing, at the request of
DHCS, to delay the date by which DHCS must adopt regulations to
June 30, 2016, instead of January 1, 2015 in the current version
of the bill.
SUPPORT AND OPPOSITION :
Support: California Clinical Laboratory Association
Quest Diagnostics
Oppose: None received
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