BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  May 13, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          1257 (Gray) - As Amended March 26, 2015


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          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:  









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          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  








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            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.   








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            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








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