BILL ANALYSIS                                                                                                                                                                                                    

                                                                     SB 435

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          Date of Hearing:  July 14, 2015

                            ASSEMBLY COMMITTEE ON HEALTH

                                  Rob Bonta, Chair

          435 (Pan) - As Amended July 7, 2015

          SENATE VOTE:  27-11

          SUBJECT:  Medical home: health care delivery model.

          SUMMARY:  Requires the Secretary of California Health and Human  
          Services Agency (HHSA) to convene a working group to identify  
          appropriate payment methods to align incentives in support of  
          patient centered medical homes (PCMHs).  Specifically, this  

          1)Requires the HHSA Secretary to convene a working group of  
            public payers, private health insurance carriers, third-party  
            purchasers, consumer representatives, and health care  
            providers to identify appropriate payment methods to align  
            incentives in support of PCMHs.

          2)Requires the working group to consult with, and provide  
            recommendations to, the Legislature and relevant state  
            agencies on all matters relating to the implementation of a  


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          3)Authorizes the working group 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 payers to work  
               collaboratively to establish common PCMH initiatives; and,

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

          4)Requires the Secretary to convene the working group only to  
            after he or she makes a determination that sufficient  
            non-state funds have been received to pay for all costs of  
            implementing the workgroup.

          5)Makes legislative findings and declarations regarding the  
            intent of the Legislature to exempt and immunize activities  
            undertaken in connection with PCMH from state and federal  
            antitrust laws.

          EXISTING LAW:  

          1)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  


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            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 it identifies.   

          2)Authorizes the Health Home Program to be implemented only if  
            federal participation is available, necessary federal approval  
            is obtained, and no additional General Fund moneys are used to  
            fund the administration or cost of services.

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, this bill, as amended April 6, 2015, results in  
          likely one-time costs of $150,000 to $300,000 to provide staff  
          support and technical assistance to the workgroup (private  


          1)PURPOSE OF THIS BILL.  According to the author, it is  
            important that the 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.  
             The author states that this bill will establish a group that  
            will make sure the best PCMH model is created for California.


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             a)   PCMHs.  One goal of the federal Patient Protection and  
               Affordable Care Act (ACA) is to strengthen the primary care  
               system by encouraging the adoption of PCMH models of care.   
               According to the federal Department of Health and Human  
               Services, the PCMH delivery model is designed to improve  
               quality of care through team-based coordination of care,  
               treating the many needs of the patient at once, increasing  
               access to care, and empowering the patient to be a partner  
               in their own care.  The central features of PCMHs include  
               enhanced patient access to a regular source of primary  
               care, continuous relationships with clinicians, increased  
               access to preventive services, and improved management of  
               chronic conditions.  One important aspect of the PCMH model  
               is funding for infrastructure investments.

               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  


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               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,  
               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. 

             b)   ACA and AB 361 (Mitchell), Chapter 642, Statutes of  
               2013.  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  


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               this program, PCMH is defined as a model of care that  
               includes the following:  i) personal physicians; ii) whole  
               person orientation; iii) coordinated and integrated care;  
               iv) safe and high-quality care through evidence-informed  
               medicine, appropriate use of health information technology,  
               and continuous quality improvements; v) expanded access to  
               care; and, vi) 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% 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:  i) comprehensive care  
               management; ii) care coordination and health promotion;  
               iii) comprehensive transitional care, including appropriate  
               follow-up, from inpatient to other settings; iv) patient  
               and family support; v) referral to community and social  
               support services; and, vi) use of health information  
               technology to link services.

             In 2013, the Legislature passed AB 361 which permitted DHCS  
               to submit a waiver application under the above provision of  
               the ACA to establish a California Health Home Program to  


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               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%  
               of funds, up to $25 million per year, required for these  
               additional services for the two years of the federal match.  
                According to DHCS, the state has developed a set of policy  
               goals that will guide the planning and implementation of AB  
               361.  DHCS intends to submit a state plan amendment  
               application to the federal Centers for Medicare and  
               Medicaid Services (CMS) which would provide federal  
               regulatory authority for implementing the health home model  
               for Medi-Cal beneficiaries.  
             c)   Anti-trust concerns.  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, a federal  
               antitrust law. 

          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, 317 U.S. 341 (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  


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          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. 
          3)SUPPORT.  The California Academy of Family Physicians (CAFP)  
            is the sponsor of this bill and states that, as a convener  
            under the bill, the HHSA Secretary will be able to bring  
            together public payers, private health carriers, third-party  
            purchasers, and providers to identify appropriate payment  
            methods and align incentives to support the PCMH model and  
            improve care of chronic illnesses.  CAFP states that  
            California's health care delivery system too often fails to  
            provide effective, coordinated care for patients, particularly  
            those with chronic illnesses.  Despite the obvious benefits of  
            alignment, stakeholders struggle with a variety of challenges  
            to achieve a more streamlined system:  consensus building is  
            difficult given conflicting interests and payer concerns  
            regarding lost autonomy and competitive advantage.  CAFP  
            states that the state can play an important role to help  
            overcome these obstacles, and through its power to waive  
            specific anti-trust liability, it can convene payers,  
            purchasers, and providers to identify a consistent payment  
            model for chronic care management, common performance and  
            outcome measures, and align incentives to support the PCMH.   
            CAFP argues that state participation, especially as a  
            convener, enables competing payers to work collaboratively to  
            establish a common initiative without risking antitrust  
            violations, and that only by coordinating payer efforts with  
            common goals and expectations, as well as creating reliable  
            financing streams, can true system reform occur.


             a)   ACR 152 (Pan), Resolution Chapter 143, Statutes of 2014,  


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               states 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.

             b)   AB 1208 (Pan) of 2013 proposed to establish the PCMH Act  
               of 2013 and would have 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.

             c)   AB 361 permits 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  
               CMS approves the state plan amendment.

             d)   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.

             e)   SB 393 (Ed Hernandez) would have enacted the PCMH Act of  
               2012 and would have 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.

             f)   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  


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               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 while on concurrence.

             g)   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.




          California Academy of Family Physicians (sponsor)

          Community Clinic Association of Los Angeles County

          Health Access California


          None on file.


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          Analysis Prepared by:Kelly Green / HEALTH / (916)