BILL ANALYSIS Ó
SB 147
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Date of Hearing: July 14, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
SB
147 (Ed Hernandez) - As Amended July 8, 2015
SENATE VOTE: 40-0
SUBJECT: Federally qualified health centers.
SUMMARY: Requires the Department of Health Care Services (DHCS)
to authorize a three-year payment reform pilot project for
federally qualified health centers (FQHCs). Specifically, this
bill:
Pilot Program Administration
1)Requires DHCS to authorize a three-year payment reform pilot
project for FQHCs using an alternative payment methodology
(APM). Requires implementation of the APM pilot project to
begin no sooner than July 1, 2016, subject to federal
approval.
2)Requires the APM pilot project to comply with federal APM
requirements. Directs DHCS to file a state plan amendment
(SPA), and seek any federal approvals necessary for the
implementation of this bill.
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3)Requires DHCS to notify every FQHC of the APM pilot project
and to invite any interested FQHC to notify DHCS that the FQHC
agrees to participate with respect to one or more of the
FQHC's sites. Requires the SPA, consistent with federal law,
to specify that DHCS and participating FQHCs agree to the APM.
4)Requires DHCS to develop a selection process for interested
FQHCs to follow. Requires the selection process be developed
in consultation with interested FQHCs and principal health
plans.
5)Authorizes DHCS to approve or deny and FQHC application and
allows DHCS to limit the number of FQHCs participating in the
pilot project.
6)Prohibits an FQHC site participating in the APM pilot project
from receiving traditional wrap-around payments for visits
within the APM scope of services it provides to its APM
enrollees.
7)Requires the APM to 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.
8)Requires payments to participating FQHCs for services provided
to patients not assigned for services under the APM pilot, and
persons not designated within an APM aid category, to continue
to be governed under the reimbursement provisions of current
law.
9)Allows a FQHC to discontinue its participation from the pilot
project with a 120 day notice. Provides a process for
principal health plans to discontinue participation, as
specified.
10)Allows DHCS to implement this pilot through specified means
without taking regulatory action, a provision which exempts
DHCS from the Administrative Procedures Act.
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11)Allows DHCS to enter into contracts that will be exempt from
specified provisions of the Public Contract Code and
Government Code.
12)Allows DHCS in consultation with interested FHQCs and
principal health plans to modify any methodology or process
specified in this bill to the extent necessary to comply with
federal laws or to obtain any necessary approval.
13)Conditions implementation of the bill on receiving federal
financial participation.
14)Provides that implementation of the APM pilot project in a
county shall not begin at an FQHC site until at least 90 days
after a Medi-Cal managed care (MCMC) plan has been notified in
writing by DHCS of the specific APM rate. Specifies the rate
in the notice shall be based on the rate submitted to the
Centers for Medicare and Medicaid Services (CMS) for approval.
15)Specifies that nothing in the bill is to be construed to
limit or eliminate services provided by FQHCs as covered
benefits in the Medi-Cal program.
Plan and Clinic Payments
16)Requires DHCS to determine the clinic specific per member per
month (PMPM) for each APM aid category taking into account
specified factors.
17)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, and provides DHCS
shall consider certain factors in determining the supplemental
capitation amount.
18)Requires DHCS to adjust the amounts paid to health plans and
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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 MEI and any
changes in the FQHC's scope of services.
19)Provides that implementation of the APM pilot project in a
county shall not begin at an FQHC site until at least 90 days,
but no more than 120 days after an MCMC plan has been notified
in writing by DHCS of the specific APM rate. Specifies the
rate in the notice shall be based on the rate submitted to CMS
for approval.
Risk Corridor, Rate Adjustment, and True Up in Pilot
20)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.
21)Establishes a statutory scheme for sharing risk between DHCS,
the principal health plan and the participating FQHC in the
event actual costs vary from estimated costs.
22)Requires DHCS, with stakeholder input, to establish a rate
adjustment structure on a FQHC site-specific basis that
permits an aggregate adjustment to payments 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.
23)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.
Evaluation of Pilot
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24)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. Requires the evaluation to:
a) 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;
b) 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
encounters between the participating FQHC and the patient;
and,
c) 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.
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)Authorizes, under federal law, state plans to provide for
payment to FQHCs in an amount which is determined under an
alternative payment methodology that:
a) Is agreed to by the state and the FQHC; and,
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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.
3)Requires plans to reimburse FQHCs in a manner that is not less
than the level and amount of payment that the plan would make
for the same scope of services if the services were furnished
by a provider that is not an FQHC.
4)Requires DHCS to administer a program through which FQHCs
contracting with managed care plans shall seek supplemental
reimbursement from DHCS for the difference between the payment
the FQHC received from the managed care plan and an interim
rate established by DHCS or the FQHC's prospective payment
rate.
5)Requires DHCS, within six months of the end of the FQHC's
fiscal year, to perform an annual reconciliation to reasonable
costs, and based on the reconciliation, make payments to, or
obtain payments from the FQHC.
6)Requires FQHCs to be reimbursed on a per-visit basis. Defines
a "visit" as a face-to-face encounter between an FQHC patient
and the following health care providers: a physician,
physician assistant, nurse practitioner, certified nurse
midwife, clinical psychologist, licensed clinical social
worker, visiting nurse, podiatrist, dentist, optometrist,
chiropractor, comprehensive perinatal services practitioner
providing comprehensive perinatal services, a four-hour day of
attendance at an Adult Day Health Care Center, and any other
provider identified in the state plan's definition of an FQHC
visit.
7)Requires FQHC per-visit rates to be increased by the Medicare
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Economic Index (MEI) applicable to primary care services in
the manner provided for in federal law.
8)Permits an FQHC to apply for an adjustment to its per-visit
rate based on a change in the scope of services provided by
the FQHC. Requires rate changes based on a change in the
scope of services provided by an FQHC to be evaluated in
accordance with Medicare reasonable cost principles.
9)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.
FISCAL EFFECT: According to the Senate Appropriations
Committee, this bill results in:
1)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).
2)One-time costs of $150,000 to $300,000 to prepare an
evaluation of the pilot project (private funds).
3)Unknown potential additional tax revenues to the state
(General Fund). The state imposes a tax on MCMC
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
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revenues and subsequent tax revenues. The size of this impact
will depend on the scale of the pilot project.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, the APM pilot
project established by this bill would require DHCS to
authorize a three-year health reform demonstration project
that would 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 MCMC 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), through different providers types
(such as dieticians), or outside the "four walls" of the FQHC.
2)BACKGROUND.
a) Background on FQHCs. In 1989, the U.S. Congress
established FQHCs as a new provider type. FQHCs are public
or tax-exempt entities which receive a direct grant from
the federal government under Section 330 of the Public
Health Service Act, or are determined by the federal
Department of Health and Human Services to meet the
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requirements for receiving such grants. Federal law
defines the services to be provided by FQHCs for Medicaid
purposes and included special payment provisions to ensure
that they would be reimbursed for 100% of their reasonable
costs associated with furnishing these services. One of
the legislative purposes in doing so was to ensure that
federal grant funds are not used to subsidize health center
or program services to Medicaid beneficiaries. State
Medicaid programs must pay for covered services provided by
FQHCs. There are over 820 FQHC locations (FQHCs may have
more than one clinic location) in California.
b) Current Medi-Cal Reimbursement to FQHCs. Federal
Medicaid payments 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).
This federal law change established (for existing FQHCs) a
per-visit baseline payment rate equal to 100% of the
center's average costs per visit incurred during 1999 and
2000 which were reasonable and related to the cost of
furnishing such services. States are required to pay FQHCs
a per-visit rate, which is equal to the baseline PPS
payment rate, increased each year by the MEI, and adjusted
to take into account any increase or decrease in the scope
of such services furnished by the FQHC during that fiscal
year. 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 MCMC 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 MCMC 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 MCMC reimbursement.
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FQHCs and Rural Health Clinics (RHCs) are both reimbursed
under the PPS system. The average ($178.14) and median
($157.24) PPS rate paid to an FQHC and RHC in 2014-15 is
considerably higher than the most common primary care visit
reimbursement rates in Medi-Cal, but it also includes
additional services not included in a primary care visit.
Because FQHCs are required to receive an MEI adjustment to
their rates under federal law, and because of their role in
providing primary care access to the Medi-Cal population,
FQHCs have been exempted from the Medi-Cal rate reductions.
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.
CMS has indicated a state may accept an FQHC's written
assertion that the amount paid under the APM results in
payment that at least equals the amount to which the FQHC
is entitled under the PPS. In 2010, approximately 21
states used an APM to pay some or all of their FQHCs,
according to a September 2011 report from the National
Association of Community Health Centers.
1)Prior DHCS proposals. In 2012-13, DHCS proposed, as part of
the Governor's budget, to change the Medi-Cal payment
methodology for FQHCs and RHCs under an APM. Under DHCS'
proposal, payments made to FQHCs and RHCs participating in
MCMC plan contracts would have changed from a cost and
volume-based payment to a fixed payment to provide a broad
range of services to its enrollees. A waiver of current
operating restrictions would allow FQHCs and RHCs to provide
group visits, telehealth, and telephonic disease management.
The waiver would have also allowed FQHCs to perform multiple
services on the same day. DHCS assumed an efficiency savings
of 10% and would have removed this amount from the funding
provided to MCMC plans. This proposal was rejected by the
Legislature.
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On April 25, 2014, DHCS released a proposed APM for a pilot
program at FQHCs located in urban areas. Under that pilot,
the payor of FQHC services would transition from DHCS to MCMC
plans. That pilot would ensure FQHCs are reimbursed at no
less than the PPS rate, as prescribed under federal
regulations, while incentivizing delivery system and practice
transformation at FQHCs through flexibilities available under
a full capitation payment structure. DHCS' objective for the
pilot is to transition the delivery of care at FQHCs from its
current volume-based system to one that better aligns the
financing and delivery of health services. The APM payment
structure has been the subject of multiple meetings between
the sponsors of this bill and DHCS.
2)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
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a payment methodology that ultimately moves away from the
volume based PPS structure, this bill would allow 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
supplemental payment or "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 would allow FQHCs the ability to 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
Patient Protection and Affordable Care Act by testing new
payment methodologies and delivery reforms.
3)RELATED LEGISLATION.
a) AB 690 (Wood) adds marriage and family therapists to the
list of providers for which FQHCs and rural health clinics
are able to bill under PPS for a face-to-face encounter.
AB 690 was held on the suspense file of the Assembly
Appropriations Committee.
b) AB 858 (Wood) is substantially similar to AB 690. AB
858 is currently on the suspense file of the Senate
Appropriations Committee.
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4)PREVIOUS LEGISLATION.
a) SB 1081 (Ed Hernandez), of 2014, would have required
DHCS to authorize a three-year alternative payment Medi-Cal
methodology pilot project for FQHCs under which
participating FQHCs would receive capitated monthly
payments for each MCMC enrollee assigned to the FQHC in
place of the wrap-around, fee-for-service per-visit
payments from DHCS. SB 1081 was held in the Senate
Appropriations Committee.
b) SB 1150 (Hueso and Correa), of 2014, would have required
Medi-Cal reimbursement to FQHCs and RHCs for two visits
taking place on the same day at a single location when the
patient suffers illness or injury requiring additional
diagnosis or treatment after the first visit, or when the
patient has a medical visit and another health visit with a
mental health provider or dental provider. SB 1150 was
held in the Senate Appropriations Committee.
c) AB 1445 (Chesbro), of 2009, was substantially similar to
SB 1150. AB 1445 was held in the Senate Appropriations
Committee.
d) SB 260 (Steinberg), of 2007, was also similar to SB
1150. SB 260 was vetoed by Governor Schwarzenegger. In
his veto message, Governor Schwarzenegger argued SB 260
will increase General Fund pressure at a time of continuing
budget challenges, and that allowing separate billing for
mental health services would lead to increased costs that
the state could not afford.
e) SB 36 (Chesbro), Chapter 527, Statutes of 2003,
established a statutory structure for Medi-Cal payments for
services provided by FQHCs and RHCs in compliance with
federal law, changing from fee-for-service to a per-visit
basis.
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REGISTERED SUPPORT / OPPOSITION:
Support
California Association of Public Hospitals and Health Systems
(cosponsor)
California Primary Care Association (cosponsor)
L.A. Care Health Plan (cosponsor)
AltaMed Health Services Corporation
American Federation of State, County, and Municipal Employees,
AFL-CIO
Asian Health Services
California Association of Physician Groups
Central California Alliance for Health
Clínica Monseñor Oscar A. Romero
Community Clinic Association of Los Angeles County
Council of Community Clinics
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Golden Valley Health Centers
La Maestra Community Health Centers
LifeLong Medical Care
National Association of Social Workers, California Chapter
Northeast Valley Health Corporation
Partnership Health Plan of California
Saban Community Clinic
St. John's Well Child &Family Center
Tiburcio Vásquez Health Center, Inc.
Opposition
None on file.
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Analysis Prepared by:Roger Dunstan / HEALTH / (916)
319-2097