BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 658|
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CONSENT
Bill No: AB 658
Author: Wilk (R)
Amended: 6/19/15 in Senate
Vote: 21
SENATE HEALTH COMMITTEE: 9-0, 6/17/15
AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen,
Pan, Roth, Wolk
ASSEMBLY FLOOR: 74-0, 5/22/15 (Consent) - See last page for
vote
SUBJECT: County jails: inmate health care services: rates
SOURCE: California Hospital Association
DIGEST: This bill permits a hospital without a contract with a
local law enforcement agency to request the most appropriate
cost-to-charge ratio for determining reimbursement of services
provided to law enforcement patients.
ANALYSIS:
Existing law:
1)Establishes, under federal law, the Medicare program, to help
pay for health care costs for qualified Americans over the age
of 65 years of age, and qualified individuals under 65 with
disabilities.
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2)Establishes the Office of Statewide Health Planning and
Development (OSHPD), and requires hospitals to make specified
reports to OSHPD, including quarterly summary financial and
utilization data that includes the number of discharges, the
number of inpatient days, the number of outpatient visits,
total operating expenses, and inpatient and outpatient gross
revenue by payer.
3)Requires county sheriffs, chiefs of police, and directors or
administrators of local detention facilities to pay for the
treatment or examination of persons lawfully in their custody.
4)Requires hospitals that do not contract with the county
sheriff, police chief, or other public agency to provide
health care services to law enforcement patients at a rate
equal to 110 percent of the hospital's actual cost according
to the most recent Hospital Annual Financial Data report
issued by OSHPD, as calculated using a cost-to-charge ratio.
This bill:
1)Permits claims to be paid that have not previously been paid
or otherwise determined by local law enforcement according to
the most recently approved cost-to-charge ratio from the
Medicare program.
2)Permits the hospital, with the approval of the county sheriff,
police chief, or other public agency responsible for providing
health care services to the local law enforcement patients, to
choose the most appropriate cost-to-charge ratio. Requires
the hospital to provide notice to the county sheriff, police
chief, or other public agency, as applicable, of any change.
3)Requires the hospital to attach supporting Medicare
documentation and an expected calculation to the claim if the
hospital uses the cost-to-charge ratio from the Medicare
Program.
4)Requires, if the Medicare supporting documentation and
expected payment calculation is not included, or if the
request is not approved by the county sheriff, policy chief,
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or other public agency within 60 days of the request, the
OSHPD cost-to-charge ratio to be used to calculate the
payment.
Comments
1)Author's statement. According to the author, "Assembly Bill
658 is needed because of an issue that arose at a hospital in
my district, Henry Mayo Newhall Hospital, located in Valencia.
This is a hospital that treats hundreds of inmates in their
emergency department. They do not have a contract with local
law enforcement, so 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 cost-to-charge ratio as determined by OSHPD. A few
years ago this hospital decided to go through an extensive
process of lowering all their charges, a process which
requires approval from the Centers for Medicare and Medicaid
Services. One of the problems the hospital discovered in 2014
was that the publically available OSHPD cost-to-charge ratio
was different than their current Medicare cost-to-charge
ratio, and that the payments they were receiving for care
provided to local inmates was less than they had received
historically. This was because the ratio reflected on the
OSHPD report was about a year out of date. AB 658 fixes what
we consider to be a glitch in the law, so that hospitals, when
they choose to go through a process similar to what my local
hospital undertook, will receive the same payment for services
provided to inmates."
2)Medicare Payment Principles. According to federal
regulations, in formulating methods for making fair and
equitable reimbursement for services rendered to beneficiaries
of the Medicare program, payment is to be made on the basis of
current costs of the individual provider, rather than costs of
a past period or a fixed negotiated rate. All necessary and
proper expenses of an institution in the production of
services are recognized. Furthermore, the share of the total
institutional cost that is borne by Medicare is related to the
care furnished to beneficiaries so that no part of their cost
would need to be borne by other patients. Conversely, costs
attributable to other patients of the institution are not to
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be borne by the Medicare program. This approach results in
meeting actual costs of services to beneficiaries, as such,
costs vary from institution to institution.
3)OSHPD data. Within four months of the fiscal year end,
California hospitals must submit an annual financial report to
OSHPD that includes a detailed income statement, balance
sheet, statements of revenue and expense, and supporting
schedules. These financial reports are based on a uniform
accounting and reporting system developed and maintained by
OSHPD and undergoes a thorough desk audit. Several products
are created from these audited financial reports, including
Annual Financial Disclosure Reports. The most current data
available are from the January to December 2013 reporting
period. The data were extracted on April 29, 2015. In the
2013 Annual Financial Disclosure Reports for Henry Mayo
Newhall Memorial the cost-to-charge ratio is 17.77 percent.
This means for $100 in charges, the costs are $17. According
to the California Hospital Association (CHA), this hospital's
charges have been reduced by 50 percent from 2013 to 2014 but
costs have remained constant. The 2014 cost-to-charge ratio
is not publically available until 2015.
4)Hospital mark-ups. A recent Health Affairs article, Extreme
Markup: The Fifty US Hospitals With the Highest
Charge-to-Cost Ratios, examined the fifty US hospitals with
the highest charge-to-cost ratios in 2012, that have mark-ups
of approximately 10 times their Medicare-allowable costs
compared to a national average of 3.4 (which means for every
$100 of Medicare-allowable costs, there are $340 in charges).
The article explains that these charges have increased
overtime beginning in the late 1980s. The focus of the
article is on the implications for uninsured patients, who are
more likely to be asked to pay charges, and out-of-network
patients and casualty and workers' compensation insurers who
are asked to pay a large portion of the full charges.
However, the article points out that most public and private
insurers do not use hospital charges to set payment rates. In
addition, the article points out that California's Hospital
Fair Pricing Act provides some protections for the uninsured
in California. Three of the top 50 hospitals with the highest
charge-to-cost ratios are in California. More hospitals, like
Henry Mayo, may pursue exercises to reduce their charges in
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response to attention to hospitals charges relative to costs
brought about by articles similar to the one published in
Health Affairs.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified 6/18/15)
California Hospital Association (source)
OPPOSITION: (Verified6/18/15)
None received
ARGUMENTS IN SUPPORT: CHA writes that hospitals often make
changes to their charges (adding new services, lowering charges
on items, removing services or items, etc.) which have little
impact on the resulting cost-to-charge ratio. However, from
time to time, hospitals make sweeping changes to their charge
structure and this can result in a major swing in their
cost-to-charge ratio. A problem arises because the OSHPD report
is lagged, so the most current cost-to-charge ratio is an old
ratio. Current law requires the hospital to charge the new
lower revised charge but then multiply by the publicly available
cost-to-charge ratio, which will mean the hospital will suffer
significant financial losses during the transition period. AB
658 solves this problem by giving hospitals the option to have
the local law enforcement agency use the OSHPD cost-to-charge
ratio or to provide the agency with a current approved
cost-to-charge ratio from the Medicare program. This bill also
gives local law enforcement the ability to approve, or not
approve, a hospital's request to use the CMS cost-to-charge
ratio when calculating a payment. When hospitals make sweeping
changes to their charges, Medicare must approve those major
changes and approve a revised cost-to-charge ratio. The updated
cost-to-charge ratio can be applied to the current level of
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charges. This fix will be revenue/cost neutral for hospitals and
local law enforcement agencies.
ASSEMBLY FLOOR: 74-0, 5/22/15
AYES: Achadjian, Travis Allen, Baker, Bigelow, Bloom, Bonilla,
Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau,
Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,
Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, Patterson, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Alejo, Jones, O'Donnell, Olsen, Waldron,
Weber
Prepared by:Teri Boughton / HEALTH /
6/19/15 14:28:49
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