BILL ANALYSIS Ó AB 1257 Page 1 Date of Hearing: May 13, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1257 (Gray) - As Amended March 26, 2015 ----------------------------------------------------------------- |Policy |Health |Vote:|19 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill requires the Department of Health Care Services (DHCS) to establish payment rates for ground ambulance services using specified indices and evidence. Specifically, this bill: AB 1257 Page 2 1)Requires DHCS to establish payment rates for ground ambulance services based on changes in both the Consumer Price Index for All Urban Consumers (CPI-U) and the California weighted average Geographic Practice Cost Index (GPCI). 2)Requires DHCS to use the 2007 ambulance cost study conducted by the federal Government Accountability Office (GAO) as the evidentiary basis for the payment rates. FISCAL EFFECT: 1)Estimated annual increased costs of $215 million (GF/federal), assuming $415 per transport is used as the 2007 "evidentiary base" for establishing an ambulance rate, and adjusting for the GPCI, as well as CPI-U growth since 2007. 2)Annual cost increases in the range of $5-10 million per year (GF/federal), depending on changes in the CPI-U. 3)Because there are nine different GPCIs that apply to different areas of the state, DHCS may incur unknown administrative and information technology systems costs to pay differential rates in different locations. 4)With the adjustments required in this bill, ambulance rates would increase by $367, from $150 on average (before AB 1257 Page 3 accounting for 10% payment reductions) to $517 in 2016, a 245% increase. COMMENTS: 1)Purpose. This bill is intended to increase Medi-Cal ambulance rates to better reflect the cost of doing business, given ambulance providers have a legal mandate to respond to all calls. This bill is supported by ambulance providers and first responders. 2)Costs Versus Medi-Cal Payments. The average $150 Medi-Cal payment rate per transport, even excluding the 10% payment reduction discussed below, is 32% of the median 2012 Medicare payment of $464. Accounting for the 10% cuts puts payments at about 29% of Medicare rates. This compares poorly even with Medi-Cal's low FFS payment rates, which average $51% of Medicare levels across all services. A 2012 GAO study found the median cost per transport was $429 nationally. 3)Recent Payment Reduction. Pursuant to AB 97 (Committee on Budget), Chapter 3, Statutes of 2011, Medi-Cal provider rates were reduced by 10% for dates of services on and after June 1, 2011, subject to federal approval, and federal financial participation. This rate reduction was blocked by court action for many providers, but it took effect for ambulance providers in September 2013. DHCS has announced ambulance providers would not be subject to a retroactive recoupment of their rates. 4)Payment Adjustments. This bill requires DHCS to establish payment rates for ground ambulance services based on changes in the CPI-U and the California weighted average GPCI, designating a federal GAO report as the evidentiary basis. AB 1257 Page 4 The referenced 2007 GAO report on ambulance rates, entitled "Costs and Expected Medicare Margins Vary Greatly," cites costs per transport for ambulance providers averaged $415, but varied from $99 to $1,218 per transport. The CPI-U is a measure that examines the changes in the price of a basket of goods and services purchased by urban consumers, and has averaged about 2% over the last decade. The GPCI is an adjustment Medicare uses to adjust payments based on local cost of doing business. There are nine values specific to different areas of California based on differences in costs, which provide for an average 13% increase to base Medicare rates. 5)Prior Legislation. a) SB 1374 (Ed Hernandez) of 2014 would have required the DHCS, by July 1, 2015, to adopt regulations establishing the Medi-Cal reimbursement rate for ground ambulance services using one of two specified methodologies. SB 1374 was held on the Senate Appropriations Committee Suspense File. b) SB 359 (Ed Hernandez) of 2011 was similar to this bill in that it would have required DHCS, by July 1, 2012, to adopt regulations establishing the Medi-Cal reimbursement rate for ground ambulance services using one of two specified methodologies. SB 359 designated one of the two methodologies as 120% of the Medicare ambulance fee schedule. SB 359 was held on the Senate Appropriations Committee Suspense File and was later amended for another purpose. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081 AB 1257 Page 5