BILL ANALYSIS                                                                                                                                                                                                    

                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 26 (Hernandez) - California Health Care Cost and Quality  
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          |Version: May 5, 2015            |Policy Vote: HEALTH 7 - 0, JUD. |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 18, 2015      |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.


          Summary:  SB 26 would require the California Health and Human  
          Services Agency to contract with a nonprofit entity to create a  
          health care cost and quality database.

          Impact:  The state of Colorado has developed an all payer claims  
          database similar in functionality to the one required in this  
          bill. The following cost estimates are informed by the actual  
          expenditures to develop and operate the Colorado All Payer  
          Claims Database. Due to the size and complexity of the  
          California healthcare marketplace, staff anticipates that the  
          cost to develop and maintain an all payer claims database is  
          likely to be two to five times the cost incurred in Colorado.


          SB 26 (Hernandez)                                      Page 1 of  

              One-time costs between $3 million and $10 million for  
              planning and initial policy development relating to the  
              proposed all payer claims database (unknown fund source).

              One-time costs between $15 million and $30 million to  
              create the database, including the information technology  
              infrastructure to accept data submissions from payers,  
              review submitted claims data, and analyze claims data  
              (unknown fund source).

              Ongoing operations and maintenance costs between $5 million  
              and $12 million per year for operations and maintenance of  
              the database, data analysis, and other administrative costs  
              (unknown fund source).

              Unknown potential fee revenues. The Colorado All Payer  
              Claims Database is supported, in part, by fees charged for  
              access to data or specific reports prepared by the staff. SB  
              26 does not specifically address whether this would be  
              allowed under the bill. The bill does generally require  
              information in the database to be searchable by the public.  
              It may be possible to meet this requirement for public  
              accessibility, while also developing data sets and analyses  
              for outsider purchasers as a revenue generating mechanism.

          Background:  Several other states have established all payer databases to  
          assist in the analysis of health care markets, to increase  
          transparency and potentially reduce health care spending over  
          the long run. In general, an all payer claims database is used  
          to collect claims data from some or all payers (potentially  
          including private insurers, private health plans, employers, and  
          state and federal health care programs such as Medicare or  
          Medicaid programs). By collecting claims data in a central  
          database, states hope to improve transparency by analyzing the  
          costs for health care services and potentially tying those costs  
          to outcomes.

          Currently there are two efforts to implement all payer claims  
          databases in California. The California Healthcare Performance  
          Information system is a database that will include data on  
          physician services from three health plans and Medicare. Also,  
          the University of California, San Francisco is developing a  


          SB 26 (Hernandez)                                      Page 2 of  
          medical cost and quality database under contract from the  
          Department of Insurance. That database will include information  
          on prices for care for certain chronic conditions.

          Proposed Law:  
            SB 26 would require the Health and Human Services Agency to  
          contract with a nonprofit entity to create a health care cost  
          and quality database.
          Specific provisions of the bill would:
              Require the California Health and Human Services agency, by  
              January 1, 2017, to use a competitive process to contract  
              with one or more nonprofit corporations to develop the  
              California Health Care Cost and Quality Database;
              Specify the requirements for the contracting nonprofit;
              Require health plans, health insurers, self-insured  
              employers, and licensed health care providers to provide  
              information for inclusion in the database, including  
              utilization and pricing data;
              Authorize multiemployer self-insured plans and trust  
              administrators for multiemployer self-insured plans to  
              report similar data;
              Authorize the nonprofit to report noncompliance with  
              reporting requirements to the appropriate regulating entity;
              Authorize the regulating entity to enforce compliance;
              Specify the requirements for protection of confidential  
              information by the nonprofit;
              Specify the types of data to be collected and analyzed;
              Require the nonprofit to create a publicly-accessible,  
              searchable database of information on health care costs and  
              quality information;
              Prohibit the use of General Fund for the development or  
              operations of the system;
              Require the Agency to convene a review committee to develop  
              plans for the development and administration of the system,  
              including a business plan;
              Require annual reporting to the Legislature by the Agency;
              Prohibit the establishment of the review committee until  
              the Director of Finance determines that sufficient private  
              funds or federal funds have been received and have been  
              appropriated for that purpose.



          SB 26 (Hernandez)                                      Page 3 of  
              SB 1322 (Hernandez, 2014) was substantially similar to this  
              bill. That bill was held on the Assembly Appropriations  
              Committee's Suspense File.
              AB 1558 (R. Hernandez, 2014) would have requested the  
              University of California to develop a cost and quality  
              database. That bill was held on this Committee's Suspense  

          Comments:  The California Health and Human Services Agency has  
          developed a State Health Care Innovation Plan, which is a plan  
          to improve the state's health care system. Among the many  
          elements of the plan is a plan for an all payer claims database,  
          similar to what is required in this bill. However, upon applying  
          for federal funding for the Innovation Plan, the state received  
          only a $3 million grant for future planning efforts and no grant  
          funds for implementation of the Innovation Plan. At this time,  
          the federal government has not indicated that there will be  
          additional funds for implementation available to the state.

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