BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                     SB 435

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          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                  |                    |
          |                |     |                      |                    |


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          |                |     |                      |                    |

          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 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  

          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.


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          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  

          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  


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          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  


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          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  

          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  


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          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: