BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 658


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          658 (Wilk)


          As Amended  June 19, 2015


          Majority vote


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          Original Committee Reference:  HEALTH


          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.


          The Senate amendments clarify that the provisions of this bill  
          pertain only to contracts related to providing health care  
          services between hospitals and law enforcement, and make other  
          technical, non-substantive changes.


          FISCAL EFFECT:  None


          COMMENTS:  According to the author, this bill is necessary to  








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          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 the Office of Statewide Health  
          Planning and Development (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. 


          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 the hospital  
          industry for determining or estimating costs for procedures or  








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          types of care.  The default rate has been in place since 2008.


          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.


          Support.  The California Hospital Association (CHA), the sponsor  
          of this 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 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,  








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          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. 


          Opposition.  There is no known opposition to this bill.


          Analysis Prepared by:                                             
                          Paula Villescaz / HEALTH / (916) 319-2097  FN:  
          0001087