BILL ANALYSIS Ó SB 147 Page 1 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. SB 147 Page 2 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. SB 147 Page 3 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 SB 147 Page 4 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 SB 147 Page 5 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, SB 147 Page 6 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 SB 147 Page 7 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 SB 147 Page 8 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 SB 147 Page 9 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. SB 147 Page 10 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. SB 147 Page 11 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 SB 147 Page 12 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. SB 147 Page 13 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. SB 147 Page 14 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 SB 147 Page 15 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. SB 147 Page 16 Analysis Prepared by:Roger Dunstan / HEALTH / (916) 319-2097