BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: SB 447 --------------------------------------------------------------- |AUTHOR: |Allen | |---------------+-----------------------------------------------| |VERSION: |April 6, 2015 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |April 15, 2015 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Scott Bain | --------------------------------------------------------------- SUBJECT : Medi-Cal: clinics: drugs and supplies SUMMARY : Revises the Medi-Cal and Family PACT reimbursement formula for drugs and supplies dispensed by specified clinics by requiring the clinic dispensing fee to be the difference between the actual acquisition cost of a drug or supply and the Medi-Cal reimbursement rate, and removes the maximum dispensing fee caps in existing law. Existing law: 1.Establishes the Medi-Cal program, administered by the Department of Health Care Services (DHCS), under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid Program provisions. 2.Establishes the Family Planning Access and Treatment Program (Family PACT Program) to provide comprehensive clinical family planning services to individuals who meet specified income requirements. 3.Requires a community clinic, a free clinic or an intermittent clinic to be reimbursed for drugs and supplies covered under the Medi-Cal program and Family PACT Waiver Program from exceeding the net cost of these drugs or supplies when provided by retail pharmacies under the Medi-Cal program. 4.Defines "cost" for purposes of 3) above as: a. An amount equivalent to the sum of the actual acquisition cost of a drug or supply plus a clinic dispensing fee not to exceed $12 per billing unit as identified in either the Family PACT Policies, SB 447 (Allen) Page 2 of ? Procedures, and Billing Instructions Manual, or the Medi-Cal Inpatient/Outpatient Provider Manual governing outpatient clinic billing for drugs and supplies, as applicable; and, b. The actual acquisition cost for that drug plus a clinic dispensing fee, not to exceed $17 per prescription for a take-home drug that is dispensed for use by the patient within a specific timeframe of five or less days from the date medically indicated (effectively, emergency contraception). 5.Requires reimbursement to be at the lesser of the amount billed or the Medi-Cal reimbursement rate. Prohibits reimbursement from exceeding the net cost of these drugs or supplies when provided by retail pharmacies under the Medi-Cal program. 6.Allows federally qualified health centers (FQHCs) and rural health clinics (RHCs) that are community clinics, free clinics or intermittent clinics to bill and be reimbursed under the above-described provisions, upon electing to be reimbursed for pharmaceutical goods and services on a fee-for-service basis. This bill: 1.Revises the Medi-Cal and Family PACT reimbursement formula for drugs and supplies dispensed by specified clinics by requiring the clinic dispensing fee to be the difference between the actual acquisition cost of a drug or supply and the Medi-Cal reimbursement rate. 2.Deletes the $12 and $17 maximum dispensing fee caps in existing law. 3.Deletes a prohibition on reimbursement exceeding the net cost of these drugs or supplies when provided by retail pharmacies under the Medi-Cal program. 4.Requires the actual acquisition cost of drugs and supplies to be calculated not less than annually. 5.Limits the application of the above-described provisions of existing law providing reimbursement and a dispensing fee for physician-administered drugs and supplies in clinics to only those drugs that are subject to a rebate under the Section SB 447 (Allen) Page 3 of ? 340b provision of federal law (340b requires drug manufacturers to provide outpatient drugs to eligible health care organizations at reduced prices). 6.Clarifies that the authority of FQHCs and RHCs that are authorized to bill for a dispensing fee under the above-described provisions of existing law is for pharmaceutical goods and services dispensed through their dispensaries. FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. COMMENTS : 1.Author's statement. According to the author, California's 1,152 community health clinics offer a unique option for low-income patients to receive quality, affordable medical care. Clinics that dispense medication onsite provide the added benefit of a "one stop shop" that allows patients to leave their health care provider with mediation in hand. This convenience has led to improved access to health care and to better patient health outcomes. Current law enables these community clinics to receive a dispensing fee in addition to the purchasing cost of the medications they dispense to Medi-Cal and Family PACT patients. This enables and encourages clinics to dispense medication onsite. However, the current billing system the clinics must use is overly complex, and leads to numerous billing errors which require staff time at both the clinic and the state to resolve. These errors can take months to resolve and chronically deny the clinics Medi-Cal fees to which they are entitled. 2.Background. A physician-administered drug is any covered outpatient drug provided or administered to a Medi-Cal beneficiary and billed by a provider other than a pharmacy. AB 2151 (Jackson), Chapter 2051, Statutes of 2004, provided a dispensing fee through Medi-Cal and Family PACT for physician-administered drugs dispensed by a community clinic, a free clinic or an intermittent clinic. Prior to the enactment of AB 2151, Medi-Cal regulations prohibited a dispensing fee or mark-up for take-home drugs dispensed by a clinic. The reimbursement provisions of AB 2151 were modified the following year by SB 77 (Frommer), Chapter 503, Statutes of 2005. Drugs reimbursed under these provisions are typically birth control medication (oral contraception, emergency SB 447 (Allen) Page 4 of ? contraception and birth control patches and rings) and antibiotics. 3.Change in reimbursement made by bill. This bill redefines "cost" for purposes of the physician administered drugs and supplies in clinics affected by this bill. Under existing law, clinics bill at the lower of cost or the usual charge to the public. "Cost" is defined to include a maximum dispensing fee amount per unit of $12 (an example of a unit would be calendar month's supply). There is a separate maximum dispensing fee amount of $17 for emergency contraception. Under existing law, DHCS reimburses at the lower of the amount billed or the Medi-Cal reimbursement rate, except that reimbursement cannot exceed the net cost of these drugs or supplies when provided by retail pharmacies under the Medi-Cal program. The sponsor of this bill (Planned Parenthood Affiliates of California) indicates this bill deletes the reference to the retail pharmacy cap as DHCS has not implemented this cap. The acquisition cost can vary by the type of clinic purchasing (for example, some clinics may receive volume discounts from drug manufacturers). Dispensing fees vary by the type of drug or supply, but not by type of clinic. Under this bill, the clinic dispensing fee is the difference between the actual acquisition cost of a drug or supply and the Medi-Cal reimbursement rate. One example, provided by an affiliate clinic of the sponsor, of the change in reimbursement for two types of drugs dispensed by clinics and how the reimbursement would change under this bill is as follows: ---------------------------------------------------------------- | Type of | Medi-Cal | Current | Current | Amount | | Medication | rate on |reimbursemen|reimbursemen| billed and | | | file | t amount | t | reimbursed | | | | billed | | under SB | | | | (cost + | | 447 (the | | | | dispensing | | Medi-Cal | | | | fee) | | rate on | | | | | | file) | |------------+------------+------------+------------+------------| SB 447 (Allen) Page 5 of ? |Oral | $12 | $22 | $12 | $12 | |Contraceptiv| | | | | |e | | | | | |------------+------------+------------+------------+------------| |Emergency | $31 | $22.75 | $22.75 | $31 | |contraceptiv| | | | | |e | | | | | ---------------------------------------------------------------- 4.Prior legislation. AB 2340 (C. Garcia), of 2014, was gutted and amended last year in this committee with the contents of the introduced version of this bill, but was never heard. 5.Support. This bill is sponsored by Planned Parenthood Affiliates of California (PPAC), which argues it would streamline the process that community clinics use to bill and be reimbursed for medications that are dispensed onsite. PPAC states community clinics that dispense drugs offer a "one stop shop" that removes barriers to care, improving access and patient health outcomes, but the complicated system that denies clinics a dispensing fee undermines their ability to provide quality, low cost care to those who need it. PPAC states the actual acquisition cost of a drug and the Medi-Cal rate are reevaluated at least quarterly, and these shifting amounts, along with the "lesser of" standard in existing law for both billing and reimbursement, makes it nearly impossible for its clinics to budget, and it stringently limits the reimbursement received for medications dispensed. PPAC states this complexity has led to massive billing errors that require an inordinate amount of time by both its clinics and the state to resolve, and the reconciliation process is very complicated and often takes months to complete, leaving its clinics with millions of dollars in outstanding reimbursements. PPAC argues it is unconscionable that clinics be expected to shoulder the burden of delayed payments resulting from these errors, essentially subsidizing the state's promise of health care to low-income Medi-Cal enrollees. PPAC states that this bill will simplify the system by setting the dispensing fee at the difference between the acquisition cost and the Medi-Cal reimbursement rate, allowing clinics to bill and be reimbursed at one rate. PPAC concludes that this simplification will go a long way towards providing consistent and equitable reimbursement for the health care services clinics provide and reduce the administration burden clinics face when dispensing medication. SB 447 (Allen) Page 6 of ? SUPPORT AND OPPOSITION : Support: Planned Parenthood Affiliates of California (sponsor) California Family Health Council Community Action Fund of Planned Parenthood of Orange and San Bernardino Counties Planned Parenthood Action Fund of the Pacific Southwest Planned Parenthood Los Angeles Planned Parenthood Mar Monte Planned Parenthood Pasadena and San Gabriel Valley Oppose: None received -- END --