BILL ANALYSIS                                                                                                                                                                                                    Ó






           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                        SB 147|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  SB 147
          Author:   Hernandez (D)
          Amended:  4/21/15  
          Vote:     21  

           SENATE HEALTH COMMITTEE:  9-0, 4/15/15
           AYES:  Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen,  
            Pan, Roth, Wolk

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/28/15
           AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           SUBJECT:   Federally qualified health centers


          SOURCE:    California Association of Public Hospitals
                     California Primary Care Association
                     L.A. Care Health Plan


          DIGEST:  This bill requires the Department of Health Care  
          Services (DHCS) to authorize a three-year payment reform pilot  
          project for federally qualified health centers (FQHCs) using an  
          alternative payment methodology (APM) authorized under federal  
          Medicaid law. This bill requires an FQHC participating in the  
          pilot to receive a per member per month (PMPM) wrap-cap payment  
          for each of its APM enrollees from a Medi-Cal managed care  
          health plan, instead of the wrap around payment FQHCs currently  
          receive from DHCS.


          ANALYSIS:   









                                                                     SB 147  
                                                                    Page  2



          Existing law:


           1) Establishes the Medi-Cal program as California's Medicaid  
             program, administered by DHCS, which provides comprehensive  
             health care coverage for low-income individuals. FQHC  
             services are covered benefits under the Medi-Cal program.

           2) Requires FQHCs to be reimbursed on a per-visit basis.  
             Defines a "visit" as a face-to-face encounter between an FQHC  
             patient and specified health care providers.

           3) Authorizes, under federal Medicaid law, states to provide  
             for payment to an FQHC in an amount which is determined under  
             an APM that is:


              a)    Agreed to by the state and the FQHC; and, 

              b)    Results in payment to the FQHC of an amount which is  
                at least equal to the amount otherwise required to be paid  
                to the FQHC.

          This bill:

           1) Requires DHCS to authorize a three-year payment reform pilot  
             project for FQHCs using an APM. Requires implementation of  
             the APM pilot project to begin no sooner than July 1, 2016,  
             subject to federal approval. Requires the APM pilot project  
             to comply with federal APM requirements, and requires DHCS to  
             file a state plan amendment as necessary for the  
             implementation of this bill.

           2) Requires an FQHC participating in the pilot, in addition to  
             its base payment, and any applicable incentive payment, to  
             receive a PMPM wrap-cap payment from the health plan or its  
             secondary payor (such as a medical group or independent  
             practice association) for each of its APM enrollees.

           3) Requires DHCS to determine the wrap-cap amount specific to  
             each participating FQHC, and for each APM aid category.  
             Defines the APM aid categories for purposes of the pilot as  
             adults, children, seniors and persons with disabilities, and  







                                                                     SB 147  
                                                                    Page  3


             the adult Medicaid expansion population.

           4) Requires each health plan to pay a participating FQHC that  
             is in the plan provider network the wrap-cap amounts 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. 

           5) Requires DHCS to determine an APM supplemental capitation  
             amount for each APM aid category to be paid by DHCS to the  
             health plan, expressed as a PMPM amount. Requires the APM  
             supplemental capitation amount to be a weighted average of  
             the aggregate wrap-cap amounts determined, that at a minimum  
             takes into account an estimation of the distribution of APM  
             enrollees among the participating FQHCs for each APM aid  
             category.

           6) Prohibits the APM supplemental capitation amounts to health  
             plans from being decreased for the first three years of the  
             APM pilot project, unless agreed to by DHCS and the health  
             plan, and prohibits the wrap-cap payments to FQHCs from being  
             decreased for the first three years of the APM pilot project,  
             unless agreed to by DHCS and the applicable participating  
             FQHC.

           7) Requires DHCS to adjust the amounts paid to health plans and  
             FQHCs in the pilot 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 and any changes in the FQHC's scope of  
             services.

           8) Requires the total APM supplemental capitation amounts paid  
             to health plans to be adjusted by DHCS 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.  

            9) Requires DHCS, during the duration of the APM pilot project,  
             to establish a risk corridor structure for the health plans  
             relating to the payment requirement, designed within  
             specified parameters.

           10)Requires DHCS, with stakeholder input, to establish a rate  







                                                                     SB 147  
                                                                    Page  4


             adjustment structure on a FQHC site-specific basis that  
             permits an aggregate adjustment to the wrap-cap when actual  
             utilization of services at a participating FQHC's site  
             exceeds or falls below expectations that were reflected  
             within the calculation of the rates.

           11)Allows DHCS, in consultation with FQHCs and health plans  
             interested in participating in the APM pilot project, to  
             modify the adjustment process or methodology to comply with  
             federal law and obtain federal approval of necessary  
             amendments to the Medi-Cal state plan.

           12)Permits a participating FQHC, a health plan or DHCS to  
             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.

           13)Allows a participating FQHC, with respect to one or more  
             sites of its choosing, to 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 DHCS.

           14)Allows a health plan to 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 DHCS if the risk corridor structure in this bill is  
             amended at any time while the pilot project is in effect.  
             Requires DHCS to place a provision in a plan's contract  
             giving the plan the ability to discontinue its participation  
             in the APM pilot project under this provision.

           15)Requires, within six months of the conclusion of pilot  
             project, an evaluation to be completed by an independent  
             entity, which is required to report its findings to DHCS and  
             the Legislature. Makes the evaluation be contingent on the  
             availability of non-state General Fund moneys for this  
             purpose. 

          Comments

          1)Author's statement. According to the author, "[T]he APM pilot  
            project established by this bill would require DHCS to  







                                                                     SB 147  
                                                                    Page  5


            establish a three-year health reform pilot project that would  
            dramatically alter the way FQHCs deliver primary care and are  
            reimbursed by Medi-Cal. In participating counties, this bill  
            would replace the existing per visit Medi-Cal payment  
            methodology with a capitated system through Medi-Cal managed  
            care plans using the APM option authorized under federal law.  
            The capitated payment would provide greater flexibility in  
            health care delivery for the FQHC by enabling the FQHC to  
            provide different types of health care services without having  
            to meet the per visit billing requirement to generate Medi-Cal  
            revenue. For example, an FQHC could use the capitation payment  
            to provide a patient with different services on the same day  
            (an FQHC cannot bill separately for a primary care visit and a  
            mental health care appointment that occur on the same day  
            under current DHCS policy), or to provide health care services  
            through different means (such as phone consultation and email  
            consultation) or through different providers types (such as  
            dieticians)."

          2)Current Medi-Cal Reimbursement to FQHCs. Federal Medicaid  
            payment to FQHCs are governed by state (Medi-Cal in  
            California) and federal law. In December 2000, Congress  
            required states to change their FQHC payment methodology from  
            a retrospective to a prospective payment system (PPS). Under  
            PPS, State Medicaid agencies are required to pay centers their  
            PPS per-visit rate (or an APM, discussed below) for each  
            face-to-face encounter between a Medicaid beneficiary and one  
            of the FQHC's billable providers for a covered service.

            For Medi-Cal managed care plan patients, DHCS is required to  
            reimburse an FQHC for the difference between its per-visit PPS  
            rate and the payment made by the plan. This payment is known  
            as a "wrap around" payment. The Medi-Cal managed care  
            wrap-around rate was established to comply with federal and  
            state regulation to reimburse a provider for the difference  
            between their PPS rate and their Medi-Cal managed care  
            reimbursement. This bill calls for a pilot program using an  
            APM where FQHCs would receive PMPM payments from the health  
            plan, and would no longer receive a "wrap around" payment from  
            DHCS. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No








                                                                     SB 147  
                                                                    Page  6


          According to the Senate Appropriations Committee:


           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).


           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 DHCS to capitated payments made to  
            managed care plans (who would then provide capitated payments  
            to centers), this 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.


          SUPPORT:   (Verified5/26/15)


          California Association of Public Hospitals and Health Systems  
                    (co-source)
          California Primary Care Association (co-source)
          L.A. Care Health Plan (co-source)
          AltaMed Health Services Corporation
          American Federation of State, County and Municipal Employees,  
                    AFL-CIO
          Arroyo Vista Family Health Center
          California Association of Physician Groups
          Clinica Monsenor Oscar A. Romero
          Community Clinic Association of Los Angeles County
          National Association of Social Workers - California Chapter
          Northeast Valley Health Corporation


          OPPOSITION:   (Verified5/28/15)









                                                                     SB 147  
                                                                    Page  7


          None received


          ARGUMENTS IN SUPPORT:     This bill is jointly sponsored by the  
          California Primary Care Association (CPCA), the California  
          Association of Public Hospitals and Health Systems (CAPHHS) and  
          L.A. Care Health Plan (LA Care). CPCA states the APM pilot  
          project established by this bill will enable FQHCs to deliver  
          care differently by converting the per visit rate FQHCs receive  
          today to a capitation payment. Under the proposal, the capitated  
          payment would afford the FQHC with greater flexibility in health  
          care delivery as they no longer will have to meet the per visit  
          billing requirements. For example, an FQHC could use the monthly  
          capitation payment to provide health care services in new ways,  
          such as phone consultation or answer patient questions via  
          email. They could also utilize a more diverse array of qualified  
          professionals, such as clinical pharmacists and dieticians.


          CAPHHS argues FQHCs have been working to find new, more  
          patient-centered and efficient ways to provide services, in  
          order to meet the needs of a growing Medi-Cal patient  
          population. However, the payment structure for FQHCs reimburses  
          these clinics through a federally mandated bundled PPS based on  
          face-to-face visits with a limited number of health  
          professionals. Recognizing the need to experiment with a payment  
          methodology that ultimately moves away from the volume based PPS  
          structure, this bill allows FQHCs the flexibility to further  
          invest in team-based care and alternative delivery models that  
          offer more appropriate and cost effective care. Under this pilot  
          program, FQHC providers could better integrate behavioral health  
          and primary care, utilize group visits, email and phone care  
          management, and team care the employs a greater array of  
          ancillary staff, such as community health workers and nurses.


          LA Care writes in support that a capitated payment would allow  
          greater flexibility in health care delivery by enabling FQHCs to  
          provide different types of services without having to meet the  
          current per visit billing requirement. For example, the wrap cap  
          payment could be used to provide a patient with different  
          services on the same day or to provide services through phone  
          consultations or communicate with patient on routine issues via  
          email. In addition, this bill allows FQHCs the ability to  







                                                                     SB 147  
                                                                    Page  8


          provide more services than currently provided by allowing them  
          to use additional provider types such as dieticians and social  
          workers.  LA Care concludes that the passage of this bill will  
          allow FQHCs to move toward achieving the Triple Aim goals  
          contained in the Affordable Care Act by testing new payment  
          methodologies and delivery reforms.


          Prepared by:Scott Bain / HEALTH / 
          5/30/15 17:08:14


                                   ****  END  ****