BILL ANALYSIS Ó SB 435 Page 1 SENATE THIRD READING SB 435 (Pan) As Amended July 7, 2015 Majority vote SENATE VOTE: 27-11 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Health |14-4 |Bonta, Maienschein, |Chávez, Lackey, | | | |Bonilla, Burke, Chiu, |Patterson, | | | |Gomez, Gonzalez, |Steinorth | | | |Roger Hernández, | | | | |Nazarian, | | | | |Ridley-Thomas, | | | | |Santiago, Thurmond, | | | | |Waldron, Wood | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |12-5 |Gomez, Bloom, Bonta, |Bigelow, Chang, | | | |Calderon, Nazarian, |Gallagher, Jones, | | | |Eggman, Eduardo |Wagner | | | |Garcia, Holden, | | | | |Quirk, Rendon, Weber, | | | | |Wood | | | | | | | SB 435 Page 2 | | | | | ------------------------------------------------------------------ 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 bill: 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 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. 3)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 PCMH. 4)Authorizes the working group to develop consensus on strategies for implementing the PCMH care model and service delivery change at the practice, community, and health care system level; identify ways to create alignment regarding payment, reporting, and infrastructure investments; identify ways to utilize public and private purchasing power and ways to enable competing payers to work collaboratively to establish common PCMH initiatives; and, propose participation in federally funded pilot and demonstration projects. SB 435 Page 3 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. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1) Costs of $20,000 to HHSA to convene a workgroup. 2)This bill includes intent to exempt from applicable antitrust laws, but does not do so. Specifically, it does not include a process by which the state can manage the requirements of immunity from federal antitrust laws under the State Action Doctrine. This liability poses General Fund risk. The California Department of Justice (DOJ) notes that in light of recent Supreme Court case law, it is likely that the antitrust immunity provisions contained in this bill would not comply with the State Action Doctrine. DOJ indicates enactment of this bill will expose the state to liability and damages for collaborations formed under the statute. DOJ costs as a result of these liabilities are impossible to predict but potentially significant. COMMENTS: 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 SB 435 Page 4 created for California. 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. According to the National Council of State Legislatures, 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. 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. 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 SB 435 Page 5 seen as illegal restraint of trade under the Sherman Act, a federal antitrust law. Immunity from federal antitrust laws when convening multiple payers may be available to states as well as private payers under the "state action doctrine," 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. 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 SB 435 Page 6 expectations, as well as creating reliable financing streams, can true system reform occur. There is no known opposition to this bill. Analysis Prepared by: Kelly Green / HEALTH / (916) 319-2097 FN: 0001666