BILL ANALYSIS Ó
SB 147
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Date of Hearing: August 19, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 147
(Hernandez) - As Amended August 17, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
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, or clinics).
Specifically, this bill:
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1)Requires DHCS to authorize an alternative payment methodology
(APM) pilot for participating clinics by no sooner than July
1, 2015. Allows DHCS to limit participation in the pilot, as
specified.
2)Specifies participation in the APM pilot is voluntary for a
clinic and mandatory for a health plan that contracts with a
clinic.
3)Describes in detail the fiscal methodology to create a
capitated, per member per month (PMPM) payment, in place of a
clinic's existing per-visit "prospective payment system" (PPS)
rate.
4)Requires an independent evaluation be conducted, and that DHCS
report regularly to the Legislature on implementation.
5)Conditions implementation on federal approval, allows DHCS
flexibility to modify the program if necessary for federal
approval, and allows DHCS to implement without taking
regulatory action.
FISCAL EFFECT:
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 (GF/federal/potential private funds).
2)One-time costs of $150,000 to $300,000 to prepare an
evaluation of the pilot project (private funds). At least one
foundation has expressed an expectation in writing that they
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will continue to provide financial support to the state for
this APM effort, including for an evaluation and technical
assistance to clinics.
3)Although DHCS intends the pilot be cost-neutral, there is the
potential for unknown costs or savings for Medi-Cal health
care services provided by participating clinics. Because the
opportunity for both costs and savings exists, on balance,
there is not likely to be a significant net cost to changing
the payment methodology for participating clinics.
Implementation of an APM has the potential to change patterns
of health care services utilization and health care practice
at clinics. The bill outlines "risk corridors" that limit the
fiscal risk and benefit for clinics and plans. Certain
scenarios may result in the department making additional
payments, or retaining additional savings, from what is
projected. Since the projected costs based on the APM are
supposed to equate to what the department would pay using
traditional per-visit methodology, differences from this
projection mean additional costs or savings as compared to the
status quo. It is difficult or impossible to quantify these
effects. Over the long term, it is hopeful that the new
methodology would result in either cost savings from increased
efficiency, or, more likely based on how clinic's rates are
currently constructed, a higher level of service for the same
costs.
COMMENTS:
1)Purpose. This bill authorizes an alternative way to pay
clinics for care delivered to Medi-Cal beneficiaries.
Currently, clinics are paid per visit according to strict
rules on what constitutes a billable visit. According to the
author, moving from visit-based reimbursement to a model based
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on capitation- a fixed reimbursement amount per assigned
member, per month (PMPM) regardless of number of
visits-affords clinics the assurance of payment and the
flexibility to deliver care in the most appropriate
patient-centered manner.
2)Clinic Reimbursement. Because of their unique role in
providing health care to underserved communities and the
uninsured, policymakers have historically attempted to ensure
that community clinics remain financially viable. Federal law
requires federally funded health programs, including Medicaid
and Children's Health Insurance Program (CHIP), to pay clinics
using a special reimbursement structure commonly called a
prospective payment system (PPS). According to DHCS Form
3090, the Freestanding FQHC Cost Report Form, PPS rates are a
clinic-specific, per-visit rate, and are calculated by
dividing costs for Medi-Cal-reimbursable services by Medi-Cal
reimbursable visits. If clinics are paid by managed care plans
in amounts less than their PPS rates, there is a
reconciliation performed to ensure clinics get paid the full
PPS rate through a wrap-around payment paid by DCHS. For
Medi-Cal, current PPS rates vary from around $80 to over $650
per visit, depending on the mix of services provided at each
clinic. The median PPS rate is around $157.
This bill calls for a pilot program using an APM where clinics
would receive capitation, or PMPM, payments from the health
plan, and would no longer receive a wrap-around payment from
DHCS. The total capitation payments would approximate what
the clinic would have received based on the previous
methodology, but would depend on number of assigned members
instead of visits. This would allow the clinic to deliver
care using email, telehealth, different types of providers, or
other innovative means without fear of losing reimbursement.
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3)Staff Comments. An alternative payment methodology for clinics
based on capitation is consistent with state goals, as well as
private-sector efforts, to move away from volume-based payment
and toward incentivizing good health outcomes and high-quality
care. In that context, this bill is a step forward for payment
reform, and represents an effort with significant stakeholder
input. Comments on two narrow aspects of the bill are noted
below.
a) What will evaluation of the pilot tell us? Participation
by clinics is voluntary and limited to clinics with
sufficient financial and administrative capacity to
undertake payment reform. Piloting an APM methodology has
merit and will certainly allow some administrative issues
to be worked out before statewide implementation; however,
evaluating how an APM works in large, sophisticated, and
financially sound clinics will not necessarily indicate
whether the methodology will be viable in other,
less-resourced clinics. These clinics will likely need
significant technical assistance to achieve the goals of
the APM if it is rolled out more widely, even if the pilot
proves successful for clinics that are better-resourced.
The evaluation should take this into account when making
recommendations for a statewide APM rollout.
b) Technical drafting issues. As noted above, the bill
establishes risk corridors that limit the fiscal risk and
benefit. Specifically, Section 14138.16 describes the
risk-sharing mechanism between the department and the
plans. This section would benefit from greater specificity
and clarification of the intent. For example, it is
unclear whether the department has to reconcile and settle
up with plans based on their overall portfolio of
participating clinics, or on the basis of each
participating clinic for which excess costs or savings is
experienced. The author should consider further specifying
this.
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The section could also benefit from improved technical
clarity. For example, instead of, "The principal health
plan is fully responsible for all costs up to one-half of
one percent in excess of the APM supplemental capitation
amounts," it should read, "The principal health plan is
fully responsible for all costs in excess of total APM
supplemental capitation amount, up to a maximum of
one-half of one percent of the total APM supplemental
capitation amount."
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081