BILL ANALYSIS Ó
AB 658
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Date of Hearing: May 12, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
AB 658
(Wilk) - As Amended May 5, 2015
SUBJECT: County jails: inmate health care services: rates.
SUMMARY: Allows providers of health care services to local law
enforcement patients to calculate costs for care according to
the most recent approved cost-to-charge ratio (CCR) from the
Medicare Program, with the approval of the local law enforcement
agency responsible for the inmate patient, and makes technical
changes, as specified.
EXISTING LAW:
1)Permits a county sheriff, police chief, or other public agency
that contracts for health care services, to contract with
providers of health care services for care to local law
enforcement patients.
2)Requires hospitals that do not contract with the county
sheriff, police chief, or other public agency that contracts
for health care services to provide health care services to
local law enforcement patients at a rate equal to 110% of the
hospital's actual costs according to the most recent Hospital
Annual Financial Data report issued by the Office of Statewide
Health Planning and Development (OSHPD), as calculated using a
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cost-to-charge ratio.
3)Prohibits a county sheriff or police chief from requesting the
release of an inmate from custody for the purpose of allowing
the inmate to seek medical care at a hospital, and then
immediately rearrests the same individual upon discharge from
the hospital, unless the hospital determines this action would
enable it to bill and collect from a third-party payment
source.
4)Requires the California Hospital Association, the University
of California, the California State Sheriffs' Association and
the California Police Chiefs' Association to convene the
Inmate Health Care and Medical Provider Fair Pricing Working
Group to identify and resolve industry issues that create
fiscal barriers to timely and affordable inmate health care.
5)Specifies that nothing require or encourage a hospital or
public agency to replace any existing arrangements that any
city police chief, county sheriff, or other public agency
maintains for health care services.
6)Requires an entity that provides ambulance or any other
emergency or nonemergency response service to a sheriff or
police chief that does not contract with their departments for
that service, to be reimbursed for the service at the rate
established by Medicare.
7)Specifies that in those counties in which the sheriff does not
administer a jail facility, a director or administrator of a
local department of corrections is the person who may contract
for services provided to jail inmates in the facilities he or
she administers in those counties.
FISCAL EFFECT: None.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, this bill is
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necessary to fix a local issue that arose at a hospital in his
district, Henry Mayo Newhall Hospital (Henry Mayo) located in
Valencia. Henry Mayo treats hundreds of inmates in their
emergency department, but they do not have a contract with
local law enforcement. Consequently, the payment they receive
for these services is a default rate calculated pursuant to
current law. The calculation of this payment requires the use
of the hospital's CCR as determined by OSHPD.
The author states that a few years ago Henry Mayo decided to
go through an extensive process of lowering all of their
charges, a process which requires approval from the Centers
for Medicare and Medicaid Services (CMS). In the fall of
2013, Henry Mayo received approval from CMS to move forward
with their proposal, and at that time received an alternative
CCR. However, the publically available OSHPD CCR was
different than the Medicare CCR, and the payments they were
receiving for care provided to local inmates was less than
they had received historically. The author states that this
bill solves this problem by giving hospitals the option to
have the local law enforcement agency use the OSHPD CCR or to
provide the agency with a current approved CCR from the
Medicare program.
The author concludes that this bill is a technical fix to
current law that will allow hospitals to receive adequate
payments for services provided to inmates and gives local law
enforcement the ability to approve, or not approve, a
hospital's request to use the CMS CCR when calculating a
payment.
2)BACKGROUND. Current law establishes a default rate for
non-contracted hospitals equal to 110% of the actual costs,
using the most recent CCR from the Hospital Annual Financial
Disclosure report as reported to the OSHPD. This rate is to
be paid to hospitals for emergency health care services if a
contract does not otherwise exist. The cost to charge ratio
is determined by OSHPD by dividing the total hospital charges
by the total hospital expenses. This is a common approach in
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the hospital industry for determining or estimating costs for
procedures or types of care. The default rate has been in
place since 2008.
a) Cost to Charge Ratios. CCRs are often used to describe
a hospital's finances. A low CCR can be caused by
excessive charges or lower costs. The lower the CCR, the
larger the profit margin on the charges. Similar to the
manufacturer's suggested retail price for a car, this
information is useful in creating a common baseline of
costs and charges for various hospital services and
provides information for negotiating the price that a
patient will be charged. The charge in the ratio is the
list price or asking price. Discounts may be given to
patients and insurance companies depending upon the
healthcare facility's policy. The CCR may vary to a large
degree within the same institution for different services.
CCRs are used to examine a variety of topics, including use
and cost of hospital services, health care cost inflation,
and how the costs of a given hospital or health plan
compare with national or state trends.
b) Medicare review of CCRs. In 2000, CMS established the
outpatient prospective payment system (OPPS), where
hospitals are paid a set amount of money to provide certain
outpatient services to people with Medicare. When the OPPS
was implemented, hospital-specific CCRs for hospitals and
community mental health centers were calculated. Since
that time, a provider could request a recalculation of its
CCR only under limited circumstances. CCRs are subject to
review by Medicare when hospitals submit their annual
financial cost care reports.
c) OSHPD Data. OSHPD is not statutorily required to
publish a CCR, but it is offered as a data extract when
hospitals submit financial information. This data is
typically updated once a year, primarily with information
submitted by the hospitals as well as updated information
from OSHPD audits. Once OSHPD receives the annual
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financial reports from the hospitals they are audited over
the next three years. OSHPD posts the unaudited hospitals'
annual financial reports (with revisions) on February 1
each year. The most recent CCR can be derived from these
reports.
d) Cost Calculation Example. If a hospital was charging
$3,000 and their costs were $1,000, the hospital had a cost
to charge ratio of 33.3%. If the charge to the jail was
$3,000, the default payment rate would be $3,000 x 110%
(per statute) x 33.3% totaling $1,100 that the local law
enforcement agency would pay the hospital. But if that
same hospital completely redesigned their charge structure
so that they were now charging $1,500 and their costs were
still $1,000, the hospital would have a revised cost to
charge ratio of 67%. So if that hospital now charged the
jail $1,500 for services, the default payment rate would be
$1,500 x 110% x 67% totaling the same $1,100.
OSHPD has not updated their CCRs since 2008, so in this example
the most current CCR available for the calculation would be the
33.3%. Therefore, the hospital would charge the jail (the new
lower revised charges) $1,500 x 110% x 33.3% (the most recent
publicly available CCR) for a total payment to the hospital of
$550.
3)SUPPORT. The California Hospital Association (CHA), the
sponsor of the bill, states current statute creates a default
payment rate to be paid to hospitals for emergency health care
services if a contract does not otherwise exist. This applies
to county sheriffs, chiefs of police, and directors or
administrators of local detention facilities. The default
rate has been in place since 2008. Hospitals often make
changes to their charges, including adding new services,
lowering charges on items, or removing services or items,
which have little impact on the resulting cost to charge
ratio. However, from time to time, hospitals make sweeping
changes to their charge structure, resulting in a major swing
in their CCR, which is based on data provided by OSHPD. The
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OSHPD report is not up-to-date and it will take over a year
for the correct CCR to be published by OSHPD.
CHA further states that this bill solves this problem by
giving hospitals the option to have the local law enforcement
agency use the OSHPD CCR or to provide the agency with a CMS
approved CCR. When hospitals make sweeping changes to their
charges, Medicare must approve those major changes and approve
a revised cost to charge ratio. The fix as proposed in this
bill will be revenue and cost neutral for hospitals and local
law enforcement.
4)PREVIOUS LEGISLATION.
a) AB 117 (Committee on Budget), Chapter 39, Statutes of
2011, made statutory changes necessary to implement the
Public Safety Realignment portions of the 2011-12 budget by
making additional substantive and technical changes
relevant to AB 109 (Budget Committee), Chapter 15, Statutes
of 2011, pertaining to the realignment of certain low level
felony offenders, and adult parolees from state to local
jurisdiction.
b) SB 1169 (George Runner), Chapter 142, Statutes of 2008,
extended for five years the January 1, 2009 sunset on the
statute that provides specified mechanisms and requirements
concerning the payment of emergency health care services
for local law enforcement patients.
REGISTERED SUPPORT / OPPOSITION:
Support
California Hospital Association (sponsor)
AB 658
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Opposition
None on file.
Analysis Prepared by:Paula Villescaz / HEALTH / (916) 319-2097