BILL ANALYSIS                                                                                                                                                                                                    






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          |SENATE RULES COMMITTEE            |                        SB 610|
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                                   THIRD READING 


          Bill No:  SB 610
          Author:   Pan (D)
          Amended:  4/28/15  
          Vote:     21  

           SENATE HEALTH COMMITTEE:  8-0, 4/22/15
           AYES:  Hernandez, Nguyen, Mitchell, Monning, Nielsen, Pan,  
            Roth, Wolk
           NO VOTE RECORDED:  Hall

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/28/15
           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           SUBJECT:   Medi-Cal:  federally qualified health centers:   
                     rural health clinics: managed care contracts


          SOURCE:    California Primary Care Association


          DIGEST:  This bill 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. This bill  
          establishes timeframes for DHCS to finalize rates for new FQHCs  
          and RHCs. This bill 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. This  
          bill 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.








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          ANALYSIS:   


          Existing law:


          1)Establishes the Medi-Cal program as California's Medicaid  
            program, administered by 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  
            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.







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          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.

             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% 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:

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

          2)Requires DHCS to pay to the FQHC or RHC at least 80% of the  







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            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.  

          3)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.

          4)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.

          5)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. 

          6)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.

          7)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.

          8)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.

          9)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  







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            supplemental information, the initial review process described  
            in #8 above to apply.

          10)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.

          11)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.

          Comments

          1)Author's statement.  According to the author, with the growing  
            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 clinics.

          2)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). 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 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  







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            Medicaid beneficiary and one of the FQHC's billable providers  
            for a covered service.

          3)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% tentative settlement is paid to the FQHC  
            or RHC if the amount is due to the FQHC/RHC, at the auditor's  
            discretion.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:

          1)Increased administrative costs, likely in the millions, to  
            comply with the new or accelerated deadlines in this bill  
            (General Fund and federal funds). This bill requires DHCS to  
            complete its review of a proposed change in scope of service  
            or determine a final rate for a FQHC or RHC much faster than  







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            is current practice.

          2)Unknown changes in the timing of payments made to FQHCs or  
            RHCs due to changes in the processes and deadlines for making  
            reconciliation payments or correcting erroneous payments  
            (General Fund and federal funds). This bill creates new  
            timelines or accelerates existing timelines under which DHCS  
            must make certain payments to FQHCs and RHCs. By accelerating  
            payments to FQHCs and RHCs, the state will likely incur  
            Medi-Cal costs sooner than would otherwise occur. The Medi-Cal  
            program is budgeted on a cash basis (meaning that the state  
            budget reflects costs as payments are made). To the extent  
            that this bill results in payments being made earlier, to some  
            extent this bill will result in shifting of costs between  
            budget years. This bill is not anticipated to increase overall  
            Medi-Cal costs for payments to FQHCs or RHCs.


          SUPPORT:   (Verified5/27/15)


          California Primary Care Association (source)
          Asian Pacific Health Care Venture, Inc.
          AltaMed Health Services Corporation
          Association of California Healthcare Districts
          Bienvenidos Community Health Center
          California Academy of Family Physicians
          Community Clinic Association of Los Angeles County
          East Valley Community Health Center, Inc.
          El Proyetco Del Barrio
          Peach Tree Health
          St. John's Well Child & Family Center
          35 individuals


          OPPOSITION:   (Verified 5/27/15)


          None received


          ARGUMENTS IN 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  







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          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. CPAC states that, considering  
          health centers operate on thin margins, often 2% 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.


           

          Prepared by:Scott Bain / HEALTH / 
          5/30/15 16:45:59


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