BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1124
Author: Muratsuchi (D)
Amended: 2/14/14 in Senate
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 7-0, 2/12/14
AYES: Hernandez, Beall, De León, DeSaulnier, Evans, Monning,
Wolk
NO VOTE RECORDED: Anderson, Nielsen
SENATE APPROPRIATIONS COMMITTEE : 5-0, 2/24/14
AYES: De León, Gaines, Hill, Lara, Steinberg
NO VOTE RECORDED: Walters, Padilla
ASSEMBLY FLOOR : 78-0, 5/30/13 - See last page for vote
SUBJECT : Medi-Cal: reimbursement rates
SOURCE : Author
DIGEST : This bill 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 (DHCS)
adopt regulations regarding Medi-Cal laboratory service rates,
until
June 30, 2016.
ANALYSIS :
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Existing law:
1.Establishes the Medi-Cal program, administered by 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% Medi-Cal payment reduction
required under AB 97 (Committee on Budget, Chapter 3, Statutes
of 2012), Medi-Cal laboratory service payments to be reduced
by up to 10% 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.
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
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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 June 30, 2016.
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% 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 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:
1.The amount billed;
2.The charge to the general public;
3.Eighty percent of the lowest maximum allowance established by
the federal Medicare Program for the same or similar services;
or
4.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% 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% 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
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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 will 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.
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Unknown potential loss of savings due to higher Medi-Cal costs
for laboratory services than would occur under the comparable
price regulation (General Fund and Federal Funds).
Because this bill extends the exemption from the comparable
price regulation for laboratory services providers, it is
possible that the state would pay more for those services than
would occur if providers were subject to the comparable price
requirement. However, enforcement of the comparable price
regulation has been difficult (owing to the complexity of
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pricing for health care services). Therefore it is unknown
whether continuing to exempt laboratory service providers from
the comparable price regulation would actually increase state
costs between enactment of this bill and the adoption of the
new rate methodology.
SUPPORT : (Verified 2/25/14)
California Clinical Laboratory Association
Quest Diagnostics
ARGUMENTS IN SUPPORT : The California Clinical Laboratory
Association (CCLA) and Quest Diagnostics write 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. They state that this bill is necessary because the
process to develop the new rate methodology has taken much
longer than anticipated.
ASSEMBLY FLOOR : 78-0, 5/30/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell,
Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,
Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas,
Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,
Wilk, Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Holden, Vacancy
JL:e 2/25/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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