BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: SB 610 --------------------------------------------------------------- |AUTHOR: |Pan | |---------------+-----------------------------------------------| |VERSION: |April 6, 2015 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |April 22, 2015 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Scott Bain | --------------------------------------------------------------- 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 SB 610 (Pan) Page 2 of ? 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. SB 610 (Pan) Page 3 of ? 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. SB 610 (Pan) Page 4 of ? 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 SB 610 (Pan) Page 5 of ? 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 SB 610 (Pan) Page 6 of ? 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 SB 610 (Pan) Page 7 of ? 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 SB 610 (Pan) Page 8 of ? 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 -- END --