BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 610    
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          |AUTHOR:        |Pan                                            |
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          |VERSION:       |April 6, 2015                                  |
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          |HEARING DATE:  |April 22, 2015 |               |               |
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          |CONSULTANT:    |Scott Bain                                     |
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           SUBJECT  :  Medi-Cal:  federally qualified health centers and  
          rural health clinics:  managed care contracts

           SUMMARY  :  Establishes timeframes for the Department of Health Care  
          Services (DHCS) to review and finalize federally qualified  
          health center (FQHC) and rural health clinic (RHC)  
          Medi-Cal-related scope of service changes and reconciliation  
          changes, and requires DHCS to make payments within specified  
          timeframes if reconciliation payments are owed. Establishes  
          timeframes for DHCS to finalize rates for new FQHCs and RHCs.  
          Requires DHCS to update the provider master file within  
          specified timeframes with the rates for new FQHCs and RHCs and  
          when a scope of service change is complete. Requires DHCS to  
          correct erroneous payments at least quarterly, and to reprocess  
          past claims and ensure all claims are reimbursed at the  
          finalized new rate.
          
          Existing law:
          1.Establishes the Medi-Cal program as California's Medicaid  
            program, administered by the Department of Health Care  
            Services (DHCS), which provides comprehensive health care  
            coverage for low-income individuals. FQHC and RHC services are  
            covered benefits under the Medi-Cal program.

          2.Requires FQHCs and RHCs to be reimbursed on a per-visit basis.  
            Defines a "visit" as a face-to-face encounter between an FQHC  
            or RHC patient and specified health care providers.

          3.Permits an FQHC or RHC to apply for an adjustment to its  
            per-visit rate based on a change in the scope of services  
            provided by the FQHC or RHC. Requires rate changes based on a  
            change in the scope of services provided by an FQHC or RHC to  
            be evaluated in accordance with Medicare reasonable cost  







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            principles.

          4.Requires FQHCs and RHCs subcontracting with Medi-Cal managed  
            care plans to seek supplemental reimbursement from DHCS  
            through a per visit fee-for-service billing system (referred  
            to as the "wrap around" payment). Requires each FQHC and RHC  
            to submit to DHCS for approval a rate differential calculated  
            to reflect the amount necessary to reimburse the FQHC or RHC  
            for the difference between the payment the FQHC or RHC  
            received from the Medi-Cal managed care health plan and either  
            the interim rate established by DHCS based on the FQHC or  
            RHC's reasonable cost or the FQHC or RHC's prospective payment  
            rate. 

          5.Requires DHCS to adjust the computed rate differential as it  
            deems necessary to minimize the difference between the FQHC or  
            RHC's revenue from the Medi-Cal managed care plan and the  
            FQHC's or RHC's cost-based reimbursement or the FQHC's or  
            RHC's prospective payment rate.

          6.Requires DHCS, to the extent feasible, within six months of  
            the end of the FQHC or RHC's fiscal year, to perform an annual  
            reconciliation to reasonable cost, and make payments to, or  
            obtain a recovery from, the FQHC or RHC.

          7.Requires that an entity that first qualifies as an FQHC or  
            RHC, a newly licensed facility at a new location added to an  
            existing FQHC or RHC, and any entity that is an existing FQHC  
            or RHC that is relocated to a new site to have its  
            reimbursement rate established in accordance with one of the  
            following methods, as selected by the FQHC or RHC:

               a.     The rate may be calculated on a per-visit basis in  
                 an amount that is equal to the average of the per-visit  
                 rates of three comparable FQHCs or RHCs located in the  
                 same or adjacent area with a similar caseload; and,

               b.     In the absence of three comparable FQHCs or RHCs  
                 with a similar caseload, the rate may be calculated on a  
                 per-visit basis in an amount that is equal to the average  
                 of the per-visit rates of three comparable FQHCs or RHCs  
                 located in the same or an adjacent service area, or in a  
                 reasonably similar geographic area with respect to  
                 relevant social, health care, and economic  
                 characteristics.








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               c.     At a new entity's one-time election, DHCS is  
                 required to establish a reimbursement rate, calculated on  
                 a per-visit basis, that is equal to 100 percent of the  
                 projected allowable costs to the FQHC or RHC of  
                 furnishing FQHC or RHC services during the first 12  
                 months of operation as an FQHC or RHC. After the first  
                 12-month period, the projected per-visit rate is required  
                 to be increased by the Medicare Economic Index (MEI) then  
                 in effect. The projected allowable costs for the first 12  
                 months are required to be cost settled and the  
                 prospective payment reimbursement rate is required to be  
                 adjusted based on actual and allowable cost per visit.
          
          This bill:
           Reconciliation Changes
           1.Requires reconciliation to be based upon the reconciliation  
            filing submitted to DHCS by the FQHC or RHC. 

          2.Requires DHCS to perform an initial review of the  
            reconciliation filing within 30 days of receipt. 

          3.Requires DHCS to pay to the FQHC or RHC at least 80 percent of  
            the amount owed within 30 days of completion of the initial  
            review or in any event within 60 days of receipt of the  
            reconciliation filing, if DHCS determines during the initial  
            review that a payment is owed to the FQHC or RHC.  

          4.Requires DHCS to complete the final reconciliation review and  
            to pay to the FQHC or RHC the remaining amount owed within 15  
            months of the last date of the fiscal year for which DHCS is  
            conducting the review. 

           Scope of Service Changes
           5.Requires DHCS to conduct an initial review of a  
            scope-of-service rate change request within 30 days after  
            submission by an FQHC or RHC.

          6.Requires DHCS to notify the FQHC or RHC, no later than the  
            31st day after submission if DHCS determines that additional  
            information is necessary to finalize a new rate. Requires the  
            notification to state the reason or reasons the submitted  
            information is insufficient and to request submission of  
            supplemental information from the FQHC or RHC. 









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          7.Requires DHCS to finalize the FQHC's or RHC's rate within 90  
            days after receiving a submission that it determines to be  
            complete. Requires DHCS to update the provider master file  
            within 10 business days.
           

          Rates for New FQHCs and RHCs
           8.Requires DHCS to finalize a new rate within 90 days after the  
            submission of the actual cost report from the first full 12  
            months of operation. Requires DHCS to update the DHCS provider  
            master file within 10 business days of finalizing the rate.

          9.Requires DHCS to conduct an initial review of the three FQHCs  
            or RHCs for the purpose of determining comparability within 30  
            days of submission by the new entity. Requires DHCS to notify  
            the new entity no later than the 31st day after submission if  
            DHCS determines one or more of the submitted FQHCs or RHCs do  
            not meet the comparability threshold.

          10.Requires the notification to state the reason or reasons for  
            the finding of noncomparability and to request a supplemental  
            submission from the new entity. Requires the DHCS request to  
            clearly state whether the new entity must submit data from  
            one, two, or three FQHCs or RHCs to meet the comparability  
            threshold. Requires, once the new entity submits its  
            supplemental information, the initial review process described  
            in 9) above to apply.

          11.Requires DHCS to finalize the new entity's rate within 90  
            days after receiving a submission determined by DHCS to be  
            comparable. Requires DHCS to update the provider master file  
            within 10 business days.

           Erroneous Payment Corrections
          12.Requires DHCS to correct erroneous payments at least  
            quarterly, and to reprocess past claims and ensure all claims  
            are reimbursed at the finalized new rate determined if there  
            has been a scope of service change or if the FQHC or RHC is a  
            new entity.

           FISCAL  
          EFFECT  :  This bill has not been analyzed by a fiscal committee.

           COMMENTS  :
          1.Author's statement.  According to the author, with the growing  








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            Medi-Cal population and the implementation of the Affordable  
            Care Act, FQHCs and RHCs become an increasingly important  
            provider to maintain access to quality health care. Their  
            ability to provide quality care is currently being  
            jeopardized. A lack of timelines placed on DHCS has blocked  
            clinics from valuable funding that could enable them to better  
            treat their patients or increase services to more patients.  
            This legislation is needed because it will ensure access to  
            quality care by making sure clinics get their money in a  
            timely manner. This bill keeps DHCS efficient and accountable  
            for the payments it promised to our clinics.
          
          2.Background on FQHCs. In 1989, Congress established FQHCs as a  
            new provider type. FQHCs are public or tax-exempt entities  
            which receive a direct grant from the federal government under  
            Section 330 of the Public Health Service Act, or are  
            determined by the federal Department of Health and Human  
            Services to meet the requirements for receiving such grants.  
            Federal law defines the services to be provided by FQHCs for  
            Medicaid purposes and included special payment provisions to  
            ensure that they would be reimbursed for 100 percent of their  
            reasonable costs associated with furnishing these services.  
            One of the legislative purposes in doing so was to ensure that  
            federal grant funds are not used to subsidize health center or  
            program services to Medicaid beneficiaries. State Medicaid  
            programs must pay for covered services provided by FQHCs.  
            There are over 820 FQHC locations (FQHCs may have more than  
            one clinic location) in California. 
          
          3.Current Medi-Cal Reimbursement to FQHCs and RHCs. Federal  
            Medicaid payment to FQHCs and RHCs are governed by state  
            (Medi-Cal in California) and federal law. In December 2000,  
            Congress required states to change their FQHC payment  
            methodology from a retrospective to a prospective payment  
            system (PPS). This federal law change established (for  
            existing FQHCs) a per-visit baseline payment rate equal to 100  
            percent of the center's average costs per visit incurred  
            during 1999 and 2000 which were reasonable and related to the  
            cost of furnishing such services. States are required to pay  
            FQHCs and RHCs a per-visit rate, which is equal to the  
            baseline PPS payment rate, increased each year by the MEI, and  
            adjusted to take into account any increase or decrease in the  
            scope of such services furnished by the FQHC or RHC during  
            that fiscal year. An example of a scope of service change  
            would be the addition of a new service, such as dental  








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            services or technology or from relocating or remodeling an  
            FQHC or RHC. Under PPS, State Medicaid agencies are required  
            to pay centers their PPS per-visit rate for each face-to-face  
            encounter between a Medicaid beneficiary and one of the FQHC's  
            billable providers for a covered service.

            FQHCs and RHCs are both reimbursed under the PPS system. The  
            average ($178.14) and median ($157.24) PPS rate paid to an  
            FQHC and RHC in 2014-15 is considerably higher than the most  
            common primary care visit reimbursement rates in Medi-Cal, but  
            it also includes additional services not included in a primary  
            care visit. Because FQHCs are required to receive an MEI  
            adjustment to their rates under federal law, and because of  
            their role in providing primary care to the Medi-Cal  
            population, FQHCs have been exempted from the Medi-Cal rate  
            reductions.
            
          4.Annual reconciliation. For Medi-Cal managed care plan  
            patients, DHCS is required to reimburse an FQHC for the  
            difference between its per-visit PPS rate and the payment made  
            by the Medi-Cal managed care plan. This payment is known as a  
            "wrap around" payment. The Medi-Cal managed care wrap-around  
            rate was established to comply with federal and state  
            regulation to reimburse a FQHC or RHC for the difference  
            between their PPS rate and their Medi-Cal managed care  
            reimbursement. 

          Within six months after the end of FQHC or RHC's fiscal year,  
            DHCS is required, to the extent feasible, to perform an annual  
            reconciliation to reasonable cost and to either make payments  
            to or obtain a recovery from the FQHC or RHC. The annual  
            reconciliation is established to provide additional  
            reimbursement to FQHCs and RHCs for the difference between  
            their interim rate or PPS rate per visit and payments made by  
            the Medi-Cal managed care plans. The annual reconciliation  
            process was developed to ensure that the amounts paid for  
            Medi-Cal managed care visits are equal to the full PPS rate  
            that would apply to those visits. DHCS reconciles the wrap  
            around amounts paid, the PPS rate, and the amounts received  
            from the FQHC's and RHC's managed care plan. Clinics submit  
            their annual reconciliation at the end of their fiscal year.  
            DHCS indicates it has three years from the received date to  
            finalize the clinic's reconciliation. A DHCS auditor reviews  
            reconciliation when it is received to ensure forms are  
            complete, and a 60 percent tentative settlement is paid to the  








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            FQHC or RHC if the amount is due to the FQHC/RHC, at the  
            auditor's discretion.
          
          5.Support. This bill is sponsored by the California Primary Care  
            Association (CPCA), which argues the current lack of timelines  
            has resulted in DHCS taking years to finalize rates and settle  
            outstanding debts. CPCA states health centers are forced to  
            carry enormous debt for services rendered, sometimes up to a  
            million dollars. Considering health centers operate on thin  
            margins, often two percent or less, this significantly impacts  
            their bottom line and ability to effectively deliver services  
            to Medi-Cal beneficiaries. Opening private lines of credit to  
            carry the debt has become common even though the state does  
            not reimburse health centers for interest accrual on that  
            debt. CPCA states it takes DHCS approximately five years to  
            set a new reimbursement rate, and for annual reconciliation,  
            it currently takes approximately three years for FQHCs and  
            RHCs to receive final payment. CPCA argues the timelines will  
            provide health centers with reasonable clarity on  
            reimbursement rates and reconciliation, allowing them to  
            direct more focus and funding toward improving patient care  
            and services, rather than increasing cash reserves to  
            accommodate delays in reimbursement.
          
          6.Policy comments. 
                  a.        The timeframes contained in this bill  
                    establish new statutory timeframes and do not amend an  
                    existing law timeframe. In the case of reconciliation  
                    provisions, this bill requires a faster response and  
                    higher interim payment amounts than is current DHCS  
                    practice. For example, DHCS' reconciliation-related  
                    documents indicate it has  three years  from the  
                    received date to finalize a clinic's reconciliation,  
                    and it has a  60 percent  interim settlement, which can  
                    be subject to change at DHCS's discretion. 

                  Under this bill, DHCS has to complete the final  
                    reconciliation review and to pay to the FQHC or RHC  
                    the remaining amount owed within 15 months  of the last  
                    date of the fiscal year for which DHCS is conducting  
                    the review, and DHCS is required to pay at least  80  
                    percent  of the amount owed within 30 days of  
                    completion of the initial review or in any event  
                    within 60 days of receipt of the reconciliation  
                    filing, if DHCS determines during the initial review  








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                    that a payment is owed to the FQHC or RHC.  
                  
                  b.        This bill requires reconciliation to be based  
                    upon the reconciliation filing submitted to DHCS by  
                    the FQHC or RHC. As drafted, this language would seem  
                    to prevent DHCS from using other payment information  
                    (such as from health plans or DHCS data) in performing  
                    the payment reconciliation. The author has agreed to  
                    delete this provision with an author's amendment.
                  
           SUPPORT AND OPPOSITION  :
          Support:  California Primary Care Association (sponsor)
                    Asian Pacific Health Care Venture, Inc.
                    AltaMed Health Services Corporation
                    Association of California Healthcare Districts
                    California Academy of Family Physicians
                    Community Clinic Association of Los Angeles County
                    East Valley Community Health Center, Inc.
                    El Proyetco Del Barrio
                    St. John's Well Child & Family Center
                    Thirty-five individuals
          
          Oppose:   None received


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