BILL ANALYSIS Ó
AB 658
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
658 (Wilk)
As Amended June 19, 2015
Majority vote
--------------------------------------------------------------------
|ASSEMBLY: | 74-0 | (May 22, |SENATE: | 37-0 | (June 25, 2015) |
| | |2015) | | | |
| | | | | | |
| | | | | | |
--------------------------------------------------------------------
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
AB 658
Page 2
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
AB 658
Page 3
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,
AB 658
Page 4
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