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