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