BILL ANALYSIS                                                                                                                                                                                                    

          |SENATE RULES COMMITTEE            |                        SB 435|
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                                   THIRD READING 

          Bill No:  SB 435
          Author:   Pan (D)
          Amended:  6/2/15  
          Vote:     21  

           SENATE HEALTH COMMITTEE:  7-1, 4/22/15
           AYES:  Hernandez, Nguyen, Mitchell, Monning, Pan, Roth, Wolk
           NOES:  Nielsen
           NO VOTE RECORDED:  Hall

           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SUBJECT:   Medical home: health care delivery model

          SOURCE:    California Academy of Family Physicians

          DIGEST:  This bill 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:

          1)Permits the Department of Health Care Services (DHCS) to  
            establish a California Health Home Program to provide health  


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            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  
          2)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  

          This bill:

          1)Requires the Secretary of the Health and Human Services Agency  
            (HHS) 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.

          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)   Identify ways to create alignment regarding payment,  
               reporting, and infrastructure investments; 

             c)   Identify ways to utilize public and private purchasing  
               power and ways to enable competing payors to work  
               collaboratively to establish common PCMH initiatives; and

             d)   Propose participation in relevant federally funded pilot  
               and demonstration projects.


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          4)Requires the Secretary of HHS to convene the working group  
            only after he or she makes a determination that sufficient  
            nonstate funds have been received to pay for all costs of  
            implementing this bill.


          1)Author's statement.  According to the author, it is important  
            that California 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)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 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  

          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,  


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            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 Children's  
            Health Insurance Program 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  
            providers and provide capitated payments to primary care  
            providers. Under this program, PCMH is defined as a model of  
            care that includes the following: a) personal physicians; b)  
            whole person orientation; c) coordinated and integrated care;  
            d) safe and high-quality care through evidence-informed  
            medicine, appropriate use of health information technology,  
            and continuous quality improvements; e) expanded access to  
            care; and, f) 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  


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            services." This waiver program would provide a 90% 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: a) comprehensive care  
            management; b) care coordination and health promotion; c)  
            comprehensive transitional care, including appropriate  
            follow-up, from inpatient to other settings; d) patient and  
            family support; e) referral to community and social support  
            services; and, f) 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% federal match, The California Endowment has  
            offered to fund the remaining 10 percent of 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  


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            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  
            prices and rates among payers.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee, likely  
          one-time costs of $150,000 to $300,000 to provide staff support  
          and technical assistance to the workgroup (private funds).

          SUPPORT:   (Verified5/29/15)

          California Academy of Family Physicians (source)

          OPPOSITION:   (Verified5/29/15)


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          None received

          ARGUMENTS IN SUPPORT:      This bill is sponsored by the  
          California Academy of Family Physicians (CAFP), which states  
          that this bill allows 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.


          Prepared by:Vince Marchand / HEALTH / 
          6/2/15 14:42:40

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