Amended in Senate April 7, 2015

Senate Bill No. 147

Introduced by Senator Hernandez

January 28, 2015

An act to add begin delete Section 14132.103 to end delete begin insert Article 4.1 (commencing with Section 14138.1) to Chapter 7 of Part 3 of Division 9 of end insert the Welfare and Institutions Code, relating to Medi-Cal.

LEGISLATIVE COUNSEL’S DIGEST

SB 147, as amended, Hernandez. Federally qualified health centers.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid Program provisions. Existing law provides that federally qualified health center (FQHC) services, as described, are covered benefits under the Medi-Cal program, to be reimbursed, to the extent that federal financial participation is obtained, to providers on a per-visit basis. “Visit” is defined as a face-to-face encounter between a patient of an FQHC and specified health care professionals. Existing federal law authorizes a state plan to provide for payment in any fiscal year to an FQHC for specified services in an amount that is determined under an alternative payment methodology (APM) if it is agreed to by the state and the FQHC and results in a payment to the FQHC of an amount that is at least equal to the amount otherwise required to be paid to the FQHC.

This bill would require the department to authorize a 3-year APM pilot begin delete project end delete begin insert project, to commence no sooner than July 1, 2016, end insert for FQHCs begin delete that would be implemented in any county and FQHC willing to participate. end delete begin insert that agree to participate. The bill would require the department to determine an APM supplemental capitation amount for each APM aid category to be paid by the department to each principle health plan that contains at least one participating FQHC in its provider network, as specified. end insert Under the APM pilot project, participating FQHCs would receive begin delete capitated monthly payments for each Medi-Cal managed care enrollee assigned to the FQHC in place of the wrap-around, fee-for-service per-visit payments from the department. end delete begin insert a per member per month wrap-cap payment for each of its APM enrollees, as specified. The bill would require each principal health plan to pay a participating FQHC that is in the plan provider network the wrap-cap amounts, as determined, for each APM enrollee of that FQHC. end insert The bill would require, except as specified, that an evaluation of the APM pilot project be begin delete conducted end delete begin insert completed end insert by an independent entity within 6 months begin delete after the APM pilot project is completed, end delete begin insert of the conclusion of the APM pilot project, end insert and begin delete that end delete begin insert would require end insert the independent entity begin insert to end insert report the findings to the department and the Legislature.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Article 4.1 (commencing with Section 14138.1)
is added to Chapter 7 of Part 3 of Division 9 of the end insert begin insert Welfare and
Institutions Code end insert begin insert , to read: end insert

begin insert

 

Article begin insert 4.1. end insert   Payment Reform Pilot Program for Federally
Qualified Health Centers.

 

begin insert 14138.1. end insert   

For purposes of this article, the following definitions
apply:

(a) “Alternative payment methodology” (APM) has the same
meaning as specified in Section 1396a(bb)(6) of Title 42 of the
United States Code.

(b) “APM aid category” means a Medi-Cal category of aid
designated by the department. For all its APM enrollees in an
APM aid category, a participating FQHC site shall receive
compensation as described under the APM pilot project. The APM
aid categories may include, but are not limited to, all of the
following categories of aid:

(1) Adults.

(2) Children.

(3) Seniors and persons with disabilities.

(4) The adult expansion population eligible pursuant to Section
14005.60.

(c) “APM enrollee” means a member who is assigned by a
principal health plan or secondary payer to a participating FQHC
for primary care services and who is within one of the designated
APM aid categories.

(d) “APM enrollee true-up” means the process by which
payments are adjusted to reflect changes in the number of APM
enrollees, by APM aid category, for participating FQHCs.

(e) “APM pilot project” means the pilot project authorized by
this article.

(f) “APM scope of services” means the scope of services for a
participating FQHC for which its per-visit rate was determined
pursuant to Section 14132.100.

(g) “APM supplemental capitation” means an additional, APM
aid category-specific, PMPM amount that is paid by the department
to a principal health plan having one or more participating FQHCs
in its provider network.

(h) “Base payment” means the amount that would have been
paid, in the absence of the APM pilot project, by a principal health
plan and any secondary payer, as applicable, to an FQHC for
patient services in the APM scope of services with respect to APM
enrollees of the FQHC pursuant to its contract, exclusive of any
incentive payments.

(i) “FQHC” means any community or public “federally
qualified health center,” as defined in Section 1396d(l)(2)(B) of
Title 42 of the United States Code and providing services as defined
in Section 1396d(a)(2)(C) of Title 42 of the United States Code.

(j) “Member” means a Medi-Cal beneficiary who is enrolled
with a principal health plan or secondary payer.

(k) “Participating FQHC” means a FQHC participating in the
APM pilot project at one or more of the FQHC’s sites.

(l) “PMPM” and “per member per month” both mean a monthly
payment made for providing or arranging health care services for
a member and may refer to a payment by the department to a
principal health plan, or by a principal health plan to a secondary
payer, or by a principal health plan or secondary payer to an
FQHC, or from and to other entities as specified in this article.

(m) “Principal health plan” means an organization or entity
that enters into a contract with the department pursuant to Article
2.7 (commencing with Section 14087.3), Article 2.8 (commencing
with Section 14087.5), Article 2.81 (commencing with Section
14087.96), Article 2.82 (commencing with Section 14087.98),
Article 2.91 (commencing with Section 14089), or Chapter 8
(commencing with Section 14200), to provide or arrange for the
care of Medi-Cal beneficiaries within a county in which the APM
pilot project is implemented.

(n) “Secondary payer” means an organization or entity that
subcontracts with a principal health plan to provide or arrange
for the care of its members and contains one or more participating
FQHCs in its provider network.

(o) “Traditional wrap-around payment” means the supplemental
payments payable to an FQHC in the absence of the APM pilot
project with respect to services provided to Medi-Cal managed
care enrollees, which are made by the department pursuant to
subdivision (e) of Section 14087.325 and subdivision (h) of Section
14132.100.

(p) “Wrap-cap” means a prospective PMPM amount that is
determined by APM aid category for each participating FQHC
site, and is paid monthly by a principal health plan or secondary
payer to the participating FQHC with respect to its APM enrollees
in each APM aid category in lieu of a traditional wraparound
payment.

begin insert 14138.10. end insert   

The Legislature finds and declares all of the
following :

(a) The federal Affordable Care Act has made and continues to
make significant progress in driving health care delivery system
reforms that emphasize health outcomes, efficiency, patient
satisfaction and value.

(b) California has expanded Medi-Cal to cover more than 12
million residents, roughly one-third of the state’s population. To
meet the needs of the state’s growing patient population, California
must continue to explore new strategies to expand access to high
quality and cost effective primary care services.

(c) With such a large portion of the state’s population receiving
health care services through Medi-Cal, it is imperative that
patient-centered innovations drive Medi-Cal reforms.

(d) Health care today is more than a face to face visit with a
provider, but rather a whole-person approach, often including a
physician, a care team of other health care providers, technology
inside and outside of a health center, and wellness activities
including nutrition and exercise classes, all of which are designed
to be more easily incorporated into a patient’s daily life.

(e) Accessible health care in a manner that fits a patient’s needs
is important for improving patient satisfaction, building trust, and
ultimately improving health outcomes.

(f) In an attempt to invest up-front in health care services that
can prevent longer-term avoidable high cost services, the
Affordable Care Act made a significant investment in FQHCs.

(g) FQHCs are essential community providers, providing high
quality, cost-effective comprehensive primary care services to
underserved communities.

(h) Today FQHCs face restrictions, however, because the
current payment structure reimburses an FQHC only when there
is a face-to-face visit with a provider. Current law prohibits
payment for a primary care visit and mental health visit on the
same day, a restriction that inhibits coordination and efficiency.

(i) A more practical approach financially incentivizes FQHCs
to provide the right care at the right time. Restructuring the current
visit based, fee-for-service model with a capitated equivalent
affords FQHCs the assurance of payment and the flexibility to
deliver care in the most appropriate patient-centered manner.

(j) A reformed payment methodology will enable FQHCs to take
advantage of alternative touches. Alternative touches, such as
same-day mental health services and phone and email
consultations, are effective care delivery methods and contribute
to a patient’s overall health and well-being.

begin insert 14138.11. end insert   

It is the intent of the Legislature to test an alternative
payment methodology for FQHCs, as permitted by federal law,
and to design and implement the APM to do all of the following:

(a) Provide patient centered care delivery options to California’s
expansive Medi-Cal population.

(b) Promote cost efficiencies, and improve population health
and patient satisfaction.

(c) Improve the capacity of FQHCs to deliver high quality care
to a population growing in numbers and in complexity of needs.

(d) Transition away from a payment system that rewards volume
with a flexible alternative that recognizes the value added when
Medi-Cal beneficiaries are able to more easily access the care
they need and when providers are able to deliver care in the most
appropriate manner to patients.

(e) Track alternative touches at FQHCs in order to establish a
data set from which alternative touches may be assigned a value
that can be used in future rate setting.

(f) Implement the APM where the FQHC receives at least the
same amount of funding it would receive under the current payment
system, and in a manner that does not disrupt patient care or
threaten FQHC viability.

begin insert 14138.12. end insert   

(a) The department shall authorize a three-year
payment reform pilot project for FQHCs using an APM in
accordance with this article. Implementation of the APM pilot
project shall begin no sooner than July 1, 2016, subject to federal
approval.

(b) The APM pilot project shall comply with federal APM
requirements and the department shall file a state plan amendment
as necessary for the implementation of this article.

(c) Nothing in this article shall be construed to limit or eliminate
services provided by FQHCs as covered benefits in the Medi-Cal
program.

begin insert 14138.13. end insert   

(a) To implement this article, the department shall
notify every FQHC of the APM pilot project and shall invite any
interested FQHC to notify the department that the FQHC agrees
to participate with respect to one or more of the FQHC’s sites.
Consistent with federal law, the state plan amendment described
in subdivision (b) of Section 14138.12 shall specify that the
department and participating FQHCs agree to the APM.

(b) The APM shall be applied only with respect to a
participating FQHC for services the FQHC provides to its APM
enrollees that are within its APM scope of services.

(c) Payment to the participating FQHC shall continue to be
governed by the provisions of Sections 14132.100 and 14087.325
for services provided with respect to both of the following
categories of patients:

(1) A beneficiary who receives services from any FQHC to
which the beneficiary is not assigned for primary care services
under the APM pilot project by a principal health plan or
secondary payer.

(2) A person who is not a Medi-Cal beneficiary within a
designated APM aid category.

(d) (1) A participating FQHC, with respect to one or more sites
of its choosing, may opt to discontinue its participation in the pilot
project subject to a notice requirement of no less than 30 days and
no greater than 45 days, as established by the department.

(2) A principal health plan may opt to discontinue its
participation in the pilot project, subject to a notice requirement
of no less than 30 days and no greater than 45 days, as established
by the department, if subdivision (f) of Section 14138.14 is amended
at any time while the pilot project is in effect. The department shall
place a provision in a plan's contract giving the plan the ability
to discontinue its participation in the APM pilot project pursuant
to this paragraph.

begin insert 14138.14. end insert   

(a) A participating FQHC shall be compensated
for the APM scope of services provided to its APM enrollees
pursuant to this section.

(b) (1) A participating FQHC shall, in addition to its base
payment, and any applicable incentive payment, receive a PMPM
wrap-cap payment for each of its APM enrollees as described in
subdivision (d). The department shall determine the wrap-cap
amount specific to each participating FQHC, and for each APM
aid category. For this purpose, the department shall, in
consultation with each participating FQHC and health plan, use
the best available data for a recent agreed-upon time period that
reflects the audit and reconciliation payment adjustments for the
participating FQHC, which may be composite data from different
or multiple periods. The determinations shall, at a minimum, take
into account the following factors:

(A) An estimation of the amount of traditional wrap-around
payments that would have been paid to the participating FQHC
with respect to APM enrollees for the APM scope of services in
the absence of the APM pilot project. For each APM aid category,
the estimation shall be no less than the participating FQHC’s
historical utilization for assigned members for a 12 month period
reflected in the data being used, multiplied by its prospective
payment system rate, as determined pursuant to Section 14132.100,
less any payments for the APM scope of services, exclusive of
incentive payments, that were received from principal health plans
and any secondary payers for the relevant period for assigned
members, and shall be calculated on a PMPM basis.

(B) An estimation of service utilization for each APM aid
category in the absence of the APM pilot project, including
estimates of the utilization of services to be provided, and
utilization and types of services not previously provided, reflected
or identifiable in the prior period data.

(2) The wrap-cap payments shall not be decreased for the first
three years of the APM pilot project, unless agreed to by the
department and the applicable participating FQHC.

(c) (1) For each principal health plan that contains at least
one participating FQHC in its provider network, the department
shall determine an APM supplemental capitation amount for each
APM aid category to be paid by the department to the principal
health plan, which shall be expressed as a PMPM amount. The
APM supplemental capitation amount shall be a weighted average
of the aggregate wrap-cap amounts determined in subdivision (b),
that at a minimum takes into account an estimation of the
distribution of APM enrollees among the participating FQHCs
for each APM aid category.

(2) The APM supplemental capitation amounts shall not be
decreased for the first three years of the APM pilot project, unless
agreed to by the department and the principal health plan.

(d) Notwithstanding any other law, each principal health plan
shall pay a participating FQHC that is in the plan provider network
the wrap-cap amounts determined in subdivision (b) for each APM
enrollee of that FQHC, or, in cases where a secondary payer is
involved, provide the necessary amounts to the secondary payer
and require that secondary payer to make the required wrap-cap
payments to the FQHC. The principal health plan, secondary
payer, as applicable, and the participating FQHC may choose the
manner in which the wrap-cap payments are made, provided the
resulting payment is equal to the full amount of the wrap-cap
payments to which the participating FQHC is entitled, taking into
account, among others, changes in the number of APM enrollees
within the APM aid categories. In cases where a secondary payer
is involved, the principal health plan shall demonstrate and certify
to the department that it has contracts or other arrangements in
place that provide for meeting the requirements herein and to the
extent that the secondary payer fails to comply with the applicable
requirements in this article, the principal health plan shall then
be responsible to ensure the participating FQHC receives all
payments due under this article in a timely manner.

(e) The department shall adjust the amounts in subdivisions (b)
and (c) at least annually for any change to the prospective payment
system rate for participating FQHCs, including changes resulting
from a change in the Medicare Economic Index pursuant to
subdivision (d) of Section 14132.100, and any changes in the
FQHC’s scope of services pursuant to subdivision (e) of Section
14132.100.

(f) During the duration of the APM pilot project, the department
shall establish a risk corridor structure for the principal health
plans relating to the payment requirement of subdivision (d),
designed within the following parameters:

(1) (A) The principal health plan is fully responsible for the
total aggregate costs of the wrap-cap payments for all APM aid
categories to participating FQHCs in its network in excess of the
total aggregate APM supplemental capitation amount for all APM
aid categories up to one half of one percent.

(B) The principal health plan shall fully retain the aggregate
APM supplemental capitation amount in excess of the total
aggregate costs of the wrap-cap payments for all APM aid
categories incurred up to one half of one percent.

(2) (A) The principal health plan and the department shall
share responsibility for the total aggregate costs of the wrap-cap
payments for all APM aid categories to participating FQHCs in
the principal health plan’s network that are between one half of
one percent above and up to one percent above the total aggregate
APM supplemental capitation amount for all APM aid categories.

(B) The principal health plan and the department shall share
the benefit of the aggregate APM supplemental capitation amount
in excess of the total aggregate costs of the wrap-cap payments
for all APM aid categories incurred that are between one half of
one percent and up to one percent below the total aggregate APM
supplemental capitation amount.

(3) (A) The department shall be fully responsible for the total
aggregate costs of the wrap-cap payments for all APM aid
categories to participating FQHCs in the principal health plan’s
network that are more than one percent in excess of the principal
health plan’s total aggregate APM supplemental capitation amount
for all APM aid categories.

(B) The department shall fully retain the aggregate APM
supplemental capitation amount in excess of the total aggregate
costs of the wrap-cap payments for all APM aid categories to
participating FQHCs in the principal health plan’s network that
are greater than one percent below the total aggregate APM
supplemental capitation amount.

(g) In order to ensure participating FQHCs have an incentive
to manage visits and costs, while at the same time exercising a
reasonable amount of flexibility to deliver care in the most efficient
and quality driven manner, during the duration of the APM pilot
project the department shall, in accordance with this subdivision,
establish a rate adjustment structure. The rate adjustment structure
shall be developed with stakeholder input and shall meet the
requirements of Section 1396a(bb)(6)(B) of title 42 of the United
States Code.

(1) The rate adjustment structure shall be applicable on a
site-specific basis.

(2) The rate adjustment structure shall permit an aggregate
adjustment to the wrap-cap when actual utilization of services for
a participating FQHC’s site exceeds or falls below expectations
that were reflected within the calculation of the rates developed
pursuant to subdivisions (b), (c), and (d). For purposes of this rate
adjustment structure, both actual and expected utilization shall
be expressed as the total number of visits that would be recognized
pursuant to subdivision (g) of Section 14132.100 for the APM
enrollees of the participating FQHC’s site across all APM aid
categories and averaged on a per member per year basis.

(3) An adjustment pursuant to this subdivision shall occur no
more than once per year per participating FQHC’s site during the
three years of the APM pilot project and shall be subject to
approval by the department.

(A) An adjustment to the wrap-cap payments in the case of
higher than expected utilization shall be triggered when utilization
exceeds projections by more than five percent for the first year,
seven and one-half percent for the second year, and ten percent
for the third year. If the trigger level is reached, the affected
FQHC’s site shall receive an aggregate payment adjustment that
is based upon the difference between its actual utilization for the
year and one hundred five percent of projected utilization for the
first year, the difference between actual utilization and one hundred
seven and one-half percent of projected utilization for the second
year, and the difference between actual utilization and one hundred
ten percent of projected utilization for the third year. The payment
adjustment in each instance shall be calculated as follows:

(i) The difference in the applicable utilization levels shall be
multiplied by the per-visit rate that was determined pursuant to
Section 14132.100 for the participating FQHC’s site.

(ii) The total number of member months for the APM enrollees
of the participating FQHC’s site for the year shall be divided by
twelve.

(iii) The amount in clause (i) shall be multiplied by the amount
in clause (ii), yielding the aggregate wrap-cap payment adjustment
for the participating FQHC’s site. The rate adjustment shall be
paid to the participating FQHC site by the principal health plan,
or secondary payer as applicable, in one aggregate payment.

(B) (i) To incentivize care delivery in ways that may vary from
traditional delivery of care, participating FQHCs shall have the
flexibility to experience a lower than expected visit utilization of
up to thirty percent of projected utilization. If an FQHC site’s
actual utilization is at a level that is more than thirty percent lower
than the projected utilization, the principal health plan, or
secondary payer as applicable, shall review the FQHC site’s
relevant data to identify the cause or causes of the difference. If
the principal health plan or secondary payer determines that the
lower than expected utilization was due to factors unrelated to
delivery system transformation and enhancements, it may require
the FQHC’s site to refund a portion of the wrap-cap payments.

(ii) The total amount refunded by the participating FQHC’s site
to the principal health plan or secondary payer shall be limited
to an amount calculated as follows:

(I) The difference between the participating FQHC site’s actual
utilization and seventy percent of the projected utilization shall
be multiplied by the site’s per-visit rate that was determined
pursuant to Section 14132.100.

(II) The total number of member months for the APM enrollees
of the participating FQHC’s site for the year shall be divided by
twelve.

(III) The amount in subclause (I) shall be multiplied by the
amount in subclause (II), yielding the maximum amount of the
refund to be made by the participating FQHC’s site. The refund
shall be paid in one aggregate payment.

(iii) Any adjustment made pursuant to this subparagraph shall
be requested by a principal health plan, secondary payer, or
FQHC, no later than 90 days after the last day of the fiscal year
for which the adjustment is sought.

(4) The department, in consultation with FQHCs and principal
health plans interested in participating in the APM pilot project,
may modify the adjustment process or methodology specified in
this section to the extent necessary to comply with federal law and
obtain federal approval of necessary amendments to the Medi-Cal
state plan.

(h) The total APM supplemental capitation amounts paid to
principal health plans shall be adjusted by the department as
necessary to take into account adjustments to the number of APM
enrollees by APM aid category no later than the 10th day of each
month.

(i) A participating FQHC or principal health plan or the
department may request an APM enrollee true-up to assure the
total amount of the APM supplemental capitation or wrap-cap
payments, as applicable, are adjusted to accurately reflect the
number of applicable APM enrollees.

(j) An FQHC site participating in the APM pilot project shall
not receive traditional wrap-around payments pursuant to Sections
14132.100 and 14087.325 for visits within the APM scope of
services it provides to its APM enrollees.

begin insert 14138.15. end insert   

(a) (1) Within six months of the conclusion of pilot
project, an evaluation shall be completed by an independent entity.
This independent entity shall report its findings to the department
and the Legislature. The evaluation shall be contingent on the
availability of nonstate General Fund moneys for this purpose.

(2) A report submitted pursuant to this subdivision shall be
submitted in compliance with Section 9795 of the Government
Code.

(b) The evaluation shall assess whether the APM pilot project
produced improvements in access to primary care services, care
quality, patient experience, and overall health outcomes for APM
enrollees. The evaluation shall include existing FQHC required
quality metrics and an assessment of how the changes in financing
allowed for alternative types of primary care visits and alternative
touches between the participating FQHC and the patient. The
evaluation shall also assess whether the APM pilot project’s efforts
to improve primary care resulted in changes to patient service
utilization patterns, including the reduced utilization of avoidable
high cost services.

end insert

begin delete

SECTION 1.  

Section 14132.103 is added to the Welfare and
Institutions Code, to read:

14132.103.  

(a) Notwithstanding any other law, the department
shall authorize a three-year alternative payment methodology
(APM) pilot project for federally qualified health centers (FQHCs)
in accordance with this section.

(b) The APM shall be implemented in any county and FQHC
willing to participate.

(c) Under the APM pilot project, participating FQHCs shall
receive capitated monthly payments for each Medi-Cal managed
care enrollee assigned to the FQHC in place of the wrap-around,
fee-for-service per-visit payments from the department.

(d) The APM shall include all necessary protections and
safeguards, for both the FQHCs and the health plans, to ensure
that neither are financially harmed by the implementation of the
APM in relation to both rates and number of enrollees assigned.

(e) (1) Within six months after the APM pilot project is
completed, an evaluation of the pilot project shall be conducted
by an independent entity that takes into consideration payment
adequacy, delivery system transformation, and quality measures.
The independent entity shall report its findings to the department
and the Legislature. An evaluation pursuant to this subdivision
shall be completed only if there are nonstate General Fund moneys
available for this purpose.

(2) A report submitted pursuant to this subdivision shall be
submitted in compliance with Section 9795 of the Government
Code.

(f) The department shall seek any federal approvals necessary
for the implementation of this section.

end delete