BILL ANALYSIS                                                                                                                                                                                                    

                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 435    
          |AUTHOR:        |Pan                                            |
          |VERSION:       |April 6, 2015                                  |
          |HEARING DATE:  |April 22, 2015 |               |               |
          |CONSULTANT:    |Vince Marchand                                 |
           SUBJECT  :  Medical home: health care delivery model

           SUMMARY  :  Requires the Secretary of the Health and Human Services Agency  
          to convene a working group to identify appropriate payment  
          methods to align incentives in support of patient centered  
          medical homes.
          Existing law permits the Department of Health Care Services  
          (DHCS) to establish a California Health Home Program to provide  
          health home services, as defined, to Medi-Cal beneficiaries and  
          Section 1115 waiver demonstration populations with chronic  
          conditions, and to develop a payment methodology, including  
          payment structures that may include tiered payment rates that  
          take into account the intensity of services necessary to  
          outreach to, engage, and serve the populations the department  
          identifies. Allows this this Health Home Program to be  
          implemented only if federal financial participation is  
          available, necessary federal approval is obtained, and no  
          additional General Fund moneys are used to fund the  
          administration or cost of services.

          This bill:
          1.Requires the Secretary of the Health and Human Services (HHS)  
            Agency to convene a working group of public payers, private  
            health insurance carriers, third-party purchasers, and health  
            care providers to identify appropriate payment methods to  
            align incentives in support of patient centered medical homes  

          2.Requires the working group convened pursuant to this bill to  
            consult with, and provide recommendations to, the Legislature  
            and relevant state agencies on all matters relating to the  
            implementation of a PCMH care model.


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          3.Requires the working group to have the authority to do all of  
            the following:

                  a.        Develop consensus on strategies for  
                    implementing the PCMH care model and service delivery  
                    change at the practice, community, and health care  
                    system level;
                  b.        Create alignment regarding payment, reporting,  
                    and infrastructure investments; 
                  c.        Design and compose pilot projects, including  
                    multipayor pilot projects;
                  d.        Utilize public and private purchasing power  
                    and enable competing payors to work collaboratively to  
                    establish common PCMH initiatives; and,
                  e.        Propose participation in relevant federally  
                    funded pilot and demonstration projects.

          4.Requires the state to use existing state resources and  
            available federal funds to implement this bill, and permits  
            the Secretary of HHS, if state or federal funds are not  
            available, to apply for and accept grants, or receive  
            donations and other financial support from public or private  

          EFFECT  :  This bill has not been analyzed by a fiscal committee.
           COMMENTS  :
          1.Author's statement.  According to the author, it is important  
            that our state supports care that is patient centered, cost  
            efficient, continuous, focused on prevention, and built on  
            sound, evidence-based medicine rather than episodic, illness  
            oriented care. PCMHs provide the needed team-based care that  
            has proven to decrease costs and improve health outcomes. No  
            one should have to navigate this complex health system alone  
            and PCMHs ensure that no one will. This bill will establish a  
            group that will make sure the best PCMH model is created for  
          2.Background on the PCMH model. According to a September 2012  
            brief prepared by the National Conference of State  
            Legislatures (NCSL), the PCMH model of care offers one method  
            of transforming the health care delivery system.  PCMHs can  
            reduce costs while improving quality and efficiency through an  
            innovative approach to delivering comprehensive  


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            patient-centered preventive and primary care. This model is  
            designed around patient needs and aims to improve access to  
            care (e.g. through extended office hours and increased  
            communication between providers and patients via email and  
            telephone), increase care coordination and enhance overall  
            quality, while simultaneously reducing costs. The PCMH relies  
            on a team of providers-such as physicians, nurses,  
            nutritionists, pharmacists, and social workers-to meet a  
            patient's health care needs. Studies have shown that the PCMH  
            model's attention to the whole-person and integration of all  
            aspects of health care offer potential to improve physical  
            health, behavioral health, access to community-based social  
            services and management of chronic conditions.

          NCSL notes that although general agreement exists about the  
            basic tenets of the PCMH, the model is still evolving.  Not  
            all PCMHs look alike or use the same strategies to reduce  
            costs, improve quality and coordinate care.  Accreditation  
            offers formal recognition and a stamp of approval to those  
            that successfully meet specific standards and requirements,  
            facilitating payment from both public and private payers.   
            PCMH accreditation is available from national accreditation  
            organizations, as well as a few states that have developed  
            their own standards.  Although certain health care providers  
            already embody many elements of the PCMH, many are seeking  
            formal recognition, due in part to the fact that medical  
            practices that participate in PCMH pilot programs often  
            qualify for enhanced reimbursement rates, or receive other  
            financial incentives for coordinating care.

          According to NCSL, as of April 2013, 43 states had policies  
            promoting the PCMH model for certain Medicaid or CHIP  
            beneficiaries. States have created pilot projects, reformed  
            payment structures, invested in health information technology,  
            restructured Medicaid provider systems, and included the PCMH  
            model in service delivery. 
          3.Affordable Care Act (ACA) and AB 361.  The ACA contained  
            several provisions to support and advance the PCMH model of  
            care.  One of these was entitled, "Establishing Community  
            Health Teams to Support the Patient-Centered Medical Home."  
            This is a grant program to help establish community-based  
            interdisciplinary, interprofessional teams to support primary  
            care practices, and requires grants to be used to establish  
            health teams to provide support services to primary care  


          SB 435 (Pan)                                        Page 4 of ?
            providers and provide capitated payments to primary care  
            providers. Under this program, PCMH is defined as a model of  
            care that includes the following: 1) personal physicians; 2)  
            whole person orientation; 3) coordinated and integrated care;  
            4) safe and high-quality care through evidence-informed  
            medicine, appropriate use of health information technology,  
            and continuous quality improvements; 5) expanded access to  
            care; and, 6) payment that recognizes added value from  
            additional components of patient-centered care.

          Another provision of the ACA, entitled "State Option to Provide  
            Health Homes for Enrollees with Chronic Conditions,"  
            established a waiver program to give states the option of  
            enrolling Medicaid beneficiaries with chronic conditions into  
            a health home. "Health home," for purposes of this program, is  
            defined as "a designated provider (including a provider that  
            operates in coordination with a team of health care  
            professionals) or a health team selected by an eligible  
            individual with chronic conditions to provide health home  
            services." This waiver program would provide a 90 percent  
            federal match for the first two years. States are permitted to  
            tier payments to reflect a team of health care professionals  
            operating with a designated provider, as well as the severity  
            or number of individual's with chronic conditions or the  
            specific capabilities of the designated provider and health  
            team. "Health home services" is defined as comprehensive and  
            timely high-quality services that are provided by a designated  
            provider or a team of health care professionals operating with  
            a designated provider and include: 1) comprehensive care  
            management; 2) care coordination and health promotion; 3)  
            comprehensive transitional care, including appropriate  
            follow-up, from inpatient to other settings; 4) patient and  
            family support; 5) referral to community and social support  
            services; and, 6) use of health information technology to link  

          In 2013, the Legislature passed AB 361 (Mitchell), Chapter 642,  
            Statutes of 2013, which permitted DHCS to submit a waiver  
            application under the above provision of the ACA to establish  
            a California Health Home Program to provide health home  
            services to Medi-Cal beneficiaries and Section 1115 waiver  
            demonstration populations with chronic conditions.  While the  
            bill required that no General Fund moneys be used, to  
            supplement the 90 percent federal match, The California  
            Endowment has offered to fund the remaining 10 percent of  


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            funds, up to $25 million per year, required for these  
            additional services for the two years of the federal match.  
            According to DHCS, through a complementary planning process,  
            the California State Innovation Model (CalSIM) initiative, it  
            has developed a recommendation to create "Health Homes for  
            Patients with Complex Needs" (HHPCN).  According to DHCS, in  
            collaboration with the CalSIM initiative and with respect to  
            the requirements of the ACA and AB 361, the state has  
            developed a set of policy goals that will guide the planning  
            and implementation of the HHPCN. DHCS intends to submit a  
            state plan amendment application in summer/fall of 2015, which  
            would provide federal regulatory authority for implementing  
            the HHPCN model for Medi-Cal beneficiaries.

          4.Anti-trust concerns. As described in the supporting arguments  
            later in this analysis, the sponsor of this bill states in  
            support that "state participation, especially as a convener,  
            enables competing payers to work collaboratively to establish  
            a common initiative without risking antitrust violations." In  
            July 2013, The Commonwealth Fund published an issue brief  
            entitled, "State Strategies to Avoid Antitrust Concerns in  
            Multipayer PCMH Initiatives." According to this issue brief,  
            convening multiple payers distributes the costs associated  
            with creating a PCMH and results in greater alignment around  
            payment, reporting, and infrastructure investments. However,  
            the issue brief notes that states that promote collaboration  
            among payers to reach agreement on common or aligned payments  
            for their PCMH initiatives risk antitrust liability for their  
            participating payers. The cooperation and collaboration to set  
            prices and payments among a group of otherwise competitive  
            payers would be seen as illegal restraint of trade under the  
            Sherman Act. According to this issue brief, immunity from  
            federal antitrust laws when convening multiple payers may be  
            available to states as well as private payers under the state  
            action doctrine, first articulated in Parker v. Brown in 1943.  
            The doctrine of Parker v. Brown may extend immunity to both  
            state actors and private entities if the policy in place meets  
            two criteria. First, the state must have clearly articulated a  
            policy to displace competition. This requires that the policy  
            both justifies the anticompetitive behavior and sufficiently  
            expresses that such behavior is both expected and endorsed.  
            Secondly, the state must have committed to active supervision  
            of activities by health care payers; simple authorization or  
            regulation of proceedings is not sufficient. The state must be  
            able to review potential anticompetitive acts such as setting  


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            prices and rates among payers. 
          5.Prior legislation. ACR 152 (Pan), Resolution Chapter 143,  
            Statutes of 2014, stated that the Legislature supports and  
            encourages the development and expansion of a California  
            health care delivery system that identifies PCMHs and is based  
            upon certain principles of coordination of patient care.

            AB 1208 (Pan), of 2013 proposed to establish the PCMH Act of  
            2013 and established a definition for a PCMH based upon  
            specified standards (similar to SB 393 from 2012). AB 1208 was  
            later amended on the Senate Floor to address a different  
            subject matter.
            AB 361 (Mitchell), Chapter 642, Statutes of 2013, permitted  
            DHCS to establish a California Health Home Program to provide  
            health home services to Medi-Cal beneficiaries and Section  
            1115 waiver demonstration populations with chronic conditions.  
             Implements this bill only if federal financial participation  
            is available and the federal Centers for Medicare and Medicaid  
            Services approve the state plan amendment.

            AB 2266 (Mitchell), of 2012, would have required DHCS to  
            establish a program to provide specified health home services,  
            with the intent of reducing avoidable hospitalization or use  
            of emergency medical services.  AB 2266 died on the Senate  
            Inactive File.

            SB 393 (Hernandez), would have enacted the PCMH Act of 2012  
            and established a definition for a PCMH based upon specified  
            standards.  SB 393 was vetoed by the Governor. In his veto  
            message, the Governor stated that he commended the author for  
            trying to improve the delivery of health care by encouraging  
            the greater use of "patient-centered medical homes" but  
            because the concept is still evolving, he thought more work  
            was needed before the definition was codified.

            AB 1542 (Jones), of 2010, would have defined a PCMH to mean,  
            in part, a health care delivery model in which a patient  
            establishes an ongoing relationship with a physician or other  
            licensed health care provider, working in a physician-directed  
            practice team to provide comprehensive, accessible, and  
            continuous evidence-based primary care and coordinate the  
            patient's health care needs across the health care system.  AB  
            1542 died on the Assembly Floor. 


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            SB 1738 (Steinberg), of 2008, would have required DHCS to  
            establish a three-year pilot program to provide intensive  
            multidisciplinary services to 2,500 Medi-Cal beneficiaries  
            identified as frequent users of health care.  SB 1738 was  
            vetoed by Governor Schwarzenegger.

          6.Support.  This bill is sponsored by the California Academy of  
            Family Physicians (CAFP), which states that this bill would  
            allow the Secretary of HHS to act as a "convener," waiving  
            specific anti-trust liability and bringing together public  
            payers, private health carriers, third-party purchasers, and  
            providers in order to identify appropriate payment methods to  
            align incentives to support the PCMH and improve care of  
            chronic illnesses. CAFP states that multi-payer projects have  
            been shown to support high-performing delivery systems by  
            aligning incentives and reporting requirements. Despite the  
            obvious benefits of alignment, CAFP states that stakeholders  
            struggle with a variety of challenges to achieve a more  
            streamlined system, given conflicting interests and payer  
            concerns regarding lost autonomy and competitive advantage.  
            According to CAFP, the state can play an important role to  
            help overcome these articles. Through its power to waive  
            specific anti-trust liability, the state can convene payers,  
            purchasers and providers to develop a consistent payment model  
            for chronic care management, common performance and outcome  
            measures, and align incentives to support the PCMH. According  
            to CAFP, state participation, especially as a convener,  
            enables competing payers to work collaboratively to establish  
            a common initiative without risking antitrust violations.

          Support:  California Academy of Family Physicians (sponsor)
          Oppose:   None received
                                      -- END --