BILL ANALYSIS                                                                                                                                                                                                    

                                                                     AB 690

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          Date of Hearing:  April 22, 2015


                                 Jimmy Gomez, Chair

          690 (Wood) - As Introduced February 25, 2015

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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill adds marriage and family therapists (MFTs) to the list  
          of health care professionals whose services are reimbursed  
          through Medi-Cal on a per-visit basis to federally qualified  
          health centers (FQHC) or rural health clinics (RHCs). 


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          FISCAL EFFECT:

          This bill may result in costs as follows: 

          1)If this bill increases access to mental health services in  
            Medi-Cal by allowing and incentivizing clinics to hire MFTs  
            where they were previously constrained on labor supply of  
            mental health professionals, it could result in cost pressure  
            to Medi-Cal to fund additional visits, potentially in the  
            millions of dollars (GF/federal).  The impact of this bill is  
            somewhat blunted by another provision of law that prevents  
            clinics from receiving reimbursement for both a mental health  
            visit and a physical health visit in the same day. 

          2)In other cases, this bill could result in some clinics being  
            able to bill for visits that were previously not billable,  
            without changing anything about the care being delivered-for  
            example, if a clinic employed MFTs to provide care to Medi-Cal  
            beneficiaries, but was not billing Medi-Cal for MFT visits. In  
            that case, AB 690 could result in Medi-Cal costs by millions  
            or tens of millions of dollars (GF/federal) without providing  
            increased access or care.  This dynamic is explained below.  

            Increased state costs would be incurred for clinics where a  
            clinic-specific prospective payment system (PPS) rate had  
            costs related to MFT visits "baked in" to the PPS rate prior  
            to this bill becoming law, and then were allowed to bill for  
            MFT visits after this bill became law.  Because of how a  
            clinic's PPS rate is constructed, this is essentially  
            "double-dipping" or, from a state perspective, paying twice.   
            If clinics are able receive reimbursement for MFT visits  
            without recalculating their PPS rate to adjust for the fact  
            that MFT visits are reimbursable, costs could be significant. 


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            Consider an example where a clinic has $12 million in costs  
            for Medi-Cal-reimbursable services and 100,000 Medi-Cal  
            reimbursable visits, equating to a PPS rate of $120/visit.   
            If, in addition to the 100,000 reimbursable visits, the clinic  
            also had 5,000 visits with MFTs (which are not reimbursable),  
            the costs of these covered mental health services would be  
            included in the $12 million numerator, but the visits would  
            not be reflected in the denominator.  In this way, even though  
            MFT visits are not billable themselves, the costs this clinic  
            incurs to provide those 5,000 MFT visits are paid for  
            indirectly when the clinic receives a slightly "inflated" PPS  
            rate for each reimbursable visit, because the rate accounts  
            for such ancillary costs. By their very definition, PPS rates  
            are designed to cover the costs clinics incur for serving  
            Medi-Cal beneficiaries, and are designed such that the clinic  
            is made whole on an aggregate, but not necessarily a  
            per-visit, basis. To conclude the example above, the clinic in  
            question has a $120 PPS rate based on inclusion of MFT costs  
            in the numerator but exclusion of the visits in the  
            denominator.  If this bill passes, this single clinic would  
            now be able to bill the state an additional $600,000  
            (GF/federal) ($120 PPS rate* 5,000 visits) without changing  
            anything or providing additional care. On the other hand, if a  
            different clinic's PPS rate does not include any costs for MFT  
            visits, there would be no cost impact attributable to that  

            Due to a lack of data, it is unclear how many clinics have MFT  
            visits built in to their costs as described above, and how  
            many don't.   But as stated, costs as a result of this dynamic  
            could plausibly be in the millions or tens of millions of  
            dollars (GF/federal funds).

          3)Alternatively to (2), above, in a case where MFT-related costs  
            were included in a PPS rate as ancillary costs, the  


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            "double-dipping" scenario could theoretically be avoided if  
            the PPS rate were recalculated to adjust for MFT visits now  
            being reimbursable through a process called a "change in scope  
            request." However, this process itself would lead to  
            administrative costs.  DHCS administrative costs to  
            recalculate a PPS rate are estimated at $10,000 (GF/federal)  
            for each clinic.  If a significant number of the 1,275  
            participating clinics needed recalculation of their PPS rates,  
            costs could be in the millions (GF/federal).  It is unclear  
            whether this bill's change would trigger or even allow for a  
            recalculation through a change in scope request, since other  
            criteria are generally necessary to be able to submit such a  
            request. However, recalculating PPS rates could alleviate the  
            concern about double-billing. As an additional caveat, such a  
            recalculation could have unknown overall cost impacts, since  
            additional factors may have changed from the last PPS rate  

            To demonstrate how the recalculation would work: if the PPS  
            rate in the example above were recalculated to account for the  
            fact that MFT visits were now billable, it would equate to  
            about $114/visit, instead of the current $120/visit. Thus,  
            each MFT visit would be reimbursed, but every other visit  
            would also be reimbursed at a slightly lower rate.


          1)Purpose. According to the author, Medi-Cal reimbursement for  
            MFTs will allow clinics to see more low-income patients in  
            need of mental health services. The author states that under  
            existing law, psychologists and licensed clinical social  
            workers (LCSWs) are employed by RHCs and FQHCs to provide  
            mental health services, and receive reimbursement through  
            Medi-Cal for that care.  However, the author points out that  
            while a RHC or FQHC can employ an MFT, the lack of  
            reimbursement for the care provided to Medi-Cal patients acts  


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            as a disincentive for hiring.  This bill is sponsored by the  
            California Primary Care Association (CPCA).

          2)Clinic Reimbursement. Because of their unique role in  
            providing health care to underserved communities and the  
            uninsured, policymakers have historically attempted to ensure  
            that community clinics remain financially viable.  Federal law  
            requires federally funded health programs, including Medicaid  
            and Children's Health Insurance Program (CHIP), to pay clinics  
            using a special reimbursement structure commonly called a  
            prospective payment system (PPS).  According to DHCS Form  
            3090, the Freestanding FQHC Cost Report Form, PPS rates are a  
            clinic-specific per-visit rate, and are calculated by dividing  
            costs for Medi-Cal-reimbursable services by Medi-Cal  
            reimbursable visits. PPS rates are also adjusted by a growth  
            rate to account for inflation.  In addition, clinics can  
            request a recalculation of their PPS rates based on a change  
            in their scope of services.  All clinics must provide at least  
            a defined scope of primary care and mental health services,  
            but may provide additional services as well.  If clinics are  
            paid by managed care plans in amounts less than their PPS  
            rates, there is a reconciliation performed to ensure clinics  
            get paid the full PPS rate through a wrap-around payment paid  
            by DCHS. For Medi-Cal, current PPS rates vary from around $80  
            to over $650 per visit, depending on the mix of services  
            provided at each clinic.  

            According to the Centers for Medicare and Medicaid Services  
            (CMS), in October 2014, Medicare also began paying FQHCs a  
            national visit-based PPS rate of $158.85, with some  
            adjustments. FQHCs also are able to bill Medicare for separate  
            visits when a mental health visit occurs on the same day as a  
            medical visit.  

          3)Costs for MFT Services May Already Be Reflected in Base PPS  
            Rate.  Under current state law, an FQHC or RHC "visit" means a  
            face-to-face encounter between a patient and certain type of  
            health care provider defined in state law. A visit must be  
            documented in order for a clinic to be reimbursed.   According  


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            to DHCS, for clinics that provide MFTs within their approved  
            scope of service, MFT services are included in the  
            all-inclusive calculation of the PPS rate, but are not  
            separately billable.  

            For example, a patient could visit a clinic to receive a  
            medical check-up and be referred directly to an MFT employed  
            by the clinic for mental health services.   According to DHCS,  
            MFT services rendered are reflected in the baseline PPS  
            cost-based rate as long as they are within the approved clinic  
            scope of service.  At this time, however, a facility could not  
            receive reimbursement for an MFT visit without receiving other  
            services. This bill would allow such reimbursement.  

          4)One-Visit Rule.  Under current law, clinics are limited to  
            reimbursement for one visit per day, unless the second visit  
            is dental-related.  This so-called "one-visit rule" has caused  
            difficulty in integrating behavioral with physical health  
            services at clinics, since clinics are either forced to absorb  
            the cost of a mental health visit or direct a patient to  
            return the next day, which often results in missed  
            appointments and lack of care. The one-visit rule is often  
            cited as the most significant impediment to providing mental  
            health services on the same day.  DHCS indicates the PPS rate  
            already accounts for costs of same-day visits by a dynamic  
            similar to that explained in comment #3, above. 

          5)FQHC Payment Reform. The PPS system has been criticized as  
            encouraging a higher volume of services rather than rewarding  
            quality and efficiency, as well as limiting innovation by  
            restricting provider types and care delivery settings that are  
            reimbursable. DHCS and the California Primary Care Association  
            (of community clinics) have been discussing reforming the PPS  
            methodology for several years. 
            DHCS proposed to seek federal approval for a different payment  
            methodology for clinics beginning in 2012-13.  Instead of  
            paying clinics per-visit PPS rates, the department proposed to  
            integrate all FQHC/RHC costs into managed care capitated rates  
            and reduce rates by a percentage. Under this proposal,  


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            payments made to FQHCs and RHCs would be in the form of a  
            capitated payment to provide a broad range of services for  
            Medi-Cal managed care beneficiaries who have selected or been  
            assigned to their clinic. The Legislature rejected this  
            proposal during budget deliberations, though there appears to  
            be broad agreement that some payment reforms are worth  
            pursuing.  On April 24, 2014, DHCS proposed an alternative  
            payment model for urban FQHCs that provided for capitated  
            payments and increased flexibility.  The California Primary  
            Care Association and DHCS are in discussion about alternative  
            payment models.  If it were to occur, a wholesale  
            transformation of the way FQHCs are paid would likely obviate  
            the need for this bill. However, such a transformation does  
            not appear imminent, at least on a statewide basis.    

          6)Opposition.  The National Association of Social  
            Workers-California Chapter (NASW-CA) opposes the bill because  
            they believe there is a sufficient workforce of social  
            workers, and only social workers have the training and skills  
            necessary to treat this community.  

          7)Related Legislation. 
             a)   SB 147 (Hernandez), pending in the Senate Appropriations  
               Committee, requires the DHCS to authorize a three-year  
               payment reform pilot project for FQHCs using an alternative  
               payment methodology.

             b)   AB 858 (Wood), pending in this Committee, requires  
               Medi-Cal reimbursement to FQHCs and RHCs for two visits  
               taking place on the same day at a single location when the  
               patient suffers illness or injury requiring additional  
               diagnosis or treatment after the first visit, or when the  
               patient has a medical visit and another health visit with a  
               mental health provider or dental provider. 

          1)Previous Legislation. 
             a)   AB 1785 (Lowenthal) of 2012 was similar to this bill and  
               was held on the Suspense File of this committee. 


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             b)   AB 1445 (Chesbro) of 2009 was similar to AB 848 (Wood),  
               and was held on the Suspense file in the Senate  
               Appropriations Committee.

             c)   SB 260 (Steinberg) of 2007 was similar to AB 1445 and  
               was vetoed by Governor Schwarzenegger on budgetary  

          1)Staff Comments. If MFTs are added to the list of billable  
            providers, the committee may wish to consider how to mitigate  
            potential increased costs described in fiscal comment #2.   
            These potential costs represent a pure transfer of funds from  
            the state to certain FQHCs, without providing increased access  
            or care.   

          Analysis Prepared by:Lisa Murawski / APPR. / (916)