BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 147 (Hernandez) - Federally qualified health centers
          
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          |Version: April 21, 2015         |Policy Vote: HEALTH 9 - 0       |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 4, 2015       |Consultant: Brendan McCarthy    |
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          This bill meets the criteria for referral to the Suspense File.



          


          Bill  
          Summary:  SB 147 would require the Department of Health Care  
          Services to authorize a three-year pilot project, under which  
          federally qualified health centers would receive capitated  
          monthly payments from Medi-Cal managed care plans in lieu of  
          wrap-around payments from Medi-Cal for individual visits.


          Fiscal  
          Impact:  
           Likely costs of $450,000 per year for one to two years to  
            develop the pilot project and apply for federal approval of  
            the pilot project (General Fund and federal funds).

           One-time costs of $150,000 to $300,000 to prepare an  
            evaluation of the pilot project (private funds).








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           Unknown potential additional tax revenues to the state  
            (General Fund). The state imposes a tax on Medi-Cal managed  
            care organizations. To the extent that payments for services  
            provided in federally qualified health centers shift from  
            direct payments from the Department of Health Care Services to  
            capitated payments made to managed care plans (who would then  
            provide capitated payments to centers), the bill will increase  
            managed care plan revenues and subsequent tax revenues. The  
            size of this impact will depend on the scale of the pilot  
            project.


          Background:  Under current law, the Medi-Cal program provides health care  
          coverage for certain low income and disabled individuals.

          In the Medi-Cal fee-for-service system, federally qualified  
          health centers are paid a per-visit payment known as the  
          prospective payment system (PPS). The PPS rate is based on a  
          baseline rate that reflects a federally qualified health  
          center's costs to provide services in 1999-2000, adjusted for  
          inflation. When a Medi-Cal beneficiary in the managed care  
          system receives care from a federally qualified health center,  
          the managed care plan makes a per-visit payment to the center.  
          Because the rates paid by managed care plans are significantly  
          below the PPS rate, the state makes a supplemental "wrap-around"  
          payment to the federally qualified health center to bring the  
          total payment up to the PPS rate.

          In the 2012-13 Governor's Budget Proposal, the administration  
          proposed a new method to make payments to federally qualified  
          health centers, based on a capitated payment structure. The  
          proposal would have also given greater flexibility to federally  
          qualified health centers to provide services in new ways. The  
          Legislature rejected that proposal.


          Proposed Law:  
            SB 147 would require the Department of Health Care Services to  
          authorize a three-year pilot project, under which federally  
          qualified health centers would receive capitated monthly  
          payments from Medi-Cal managed care plans in lieu of wrap-around  
          payments from Medi-Cal for individual visits.

          Specific provisions of the bill would:








          SB 147 (Hernandez)                                     Page 2 of  
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              Require the Department of Health Care Services to develop  
              an alternate payment methodology pilot project for federally  
              qualified health centers, beginning no sooner than July 1,  
              2016;
              Require the pilot to be implemented in any county and any  
              federally qualified health center willing to participate;
              Require any participating federally qualified health center  
              to receive capitated monthly payments from Medi-Cal managed  
              care plans for Medi-Cal enrollees whose care is covered by  
              the pilot program, in lieu of wrap-around payments from the  
              Department;
              Require the pilot to include financial protections for both  
              the participating federally qualified health centers and  
              managed care plans;
              Require an evaluation of the pilot, to be funded with  
              non-state funds;
              Require the Department to seek all necessary federal  
              approvals.


          Related  
          Legislation:  
              AB 690 (Wood) would add marriage and family therapists to  
              the list of providers for which FQHCs and RHCs can bill  
              Medi-Cal. That bill will be heard in the Assembly  
              Appropriations Committee.
              AB 858 (Wood) would require Medi-Cal reimbursement to FQHCs  
              and RHCs for two visits taking place on the same day, under  
              certain circumstances. That bill will be heard in the  
              Assembly Appropriations Committee.
              SB 1081 (Hernandez, 2014) was substantially similar to this  
              bill. That bill was held on this committee's Suspense File.


          Staff  
          Comments:  Under current law, the state imposes a 3.9% tax on  
          Medi-Cal managed care plans, which is used to draw down federal  
          funding and support the Medi-Cal program. Recent federal  
          guidance indicates that the state's existing tax on Medi-Cal  
          managed care plans is not allowed under federal rules, because  
          it does not apply to managed care plans in general. The Governor  
          has proposed to replace the existing tax with a tax on all  
          managed care plans. By spreading the tax burden across all  
          managed care plans, which the federal guidance would require to  








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          some degree, any revised managed care tax would likely generate  
          less tax revenue from Medi-Cal managed care plans than is  
          currently the case. 





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