BILL ANALYSIS                                                                                                                                                                                                    Ó



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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)









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          Opposition


          None on file.




          Analysis Prepared by:Paula Villescaz / HEALTH / (916) 319-2097