BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                     SB 610

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          Date of Hearing:  June 30, 2015

                            ASSEMBLY COMMITTEE ON HEALTH

                                  Rob Bonta, Chair

          610 (Pan) - As Amended April 28, 2015

          SENATE VOTE:  39-0

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

          SUMMARY:  Establishes timelines for the Department of Health  
          Care Services (DHCS) to review and finalize specified rates and  
          complete annual reconciliations for federally qualified health  
          centers (FQHCs) and rural health clinics (RHCs).  Specifically,  
          this bill:  

          1)Within 30 days of receipt, requires DHCS to perform an initial  
            review of reconciliation filings.  Also requires DHCS, in the  
            same timeframe, to perform an initial review of annual  
            reimbursements that reconcile the difference between the  
            payment provided to the FQHC or RHC by a managed care health  
            plan and either the rate established by DHCS for the  
            reasonable costs of care or the clinic's prospective payment  
            rate (a per-visit baseline payment rate equal to 100% of the  
            center's average costs per visit).  

          2)If a payment is owed to the center or clinic, requires DHCS to  


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            pay the clinic or center at least 80% of the amount owed  
            within 30 days of completion of the review or within 60 days  
            of receipt of the reconciliation filing.

          3)Requires DHCS to complete the final reconciliation review and  
            pay the center or clinic any remaining balance within 15  
            months from the last date of the fiscal year for which DHCS  
            conducted 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, and to notify the entity no  
            later than 31 days after submission of the request if  
            additional information is necessary.

          5)Requires DHCS to finalize the scope-of-service rates for  
            existing FQHCs and RHCs within 90 days of receiving a complete  
            request, as specified, and to update the provider master file  
            within 10 business days.

          6)Requires DHCS to finalize the reimbursement rates for new  
            FQHCs and RHCs within 90 days of receiving a complete request,  
            as specified, and to update the provider master file within 10  
            business days.

          7)Requires DHCS to correct erroneous payments at least  
            quarterly, to reprocess past claims, and ensure all claims are  
            reimbursed at the most recently finalized rate.


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          8)Makes technical cleanup changes in to references to existing  
            federal law.


          EXISTING LAW:   

          1)Establishes the Medi-Cal Program under the direction of DHCS  
            to provide low-income qualifying individuals health care and a  
            uniform schedule of benefits, including services provided by  
            FQHCs and RHCs as defined in federal law.

          2)Defines an FQHC as a federally-approved entity that serves a  
            population that is medically underserved, or a special  
            medically underserved population comprised of migratory and  
            seasonal agricultural workers, the homeless, and residents of  
            public housing, by providing, either through the staff and  
            supporting resources of the center or through contracts or  
            cooperative arrangements.

          3)Defines an RHC as an FQHC located in a non-urbanized area  
            currently designated as a federally designated or certified  
            health care or provider shortage area.

          4)Requires local health plans that subcontract with FQHCs and  
            RHCs to provide reimbursement for services rendered at a level  
            not less than plans pay for similar services provided outside  
            of FQHCs and RHCs.


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          5)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).

          6)Requires DHCS, to the extent possible, to perform an annual  
            reconciliation of reasonable costs, and make payments to an  
            FQHC or RHC within six months of the end of an FQHC or RHC's  
            fiscal year.

          7)Requires DHCS to adjust the computed rate differential as it  
            deems necessary to minimize the difference between the FQHC's  
            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.

          8)Authorizes an FQHC or RHC to apply for an adjustment to its  
            per-visit rate based on a change in the scope of services  
            provided once per year, as specified.

          9)Requires newly established, licensed, or located FQHCs and  
            RHCs to have their reimbursement rates established as one of  
            the following options, as selected by the FQHC or RHC:

             a)   The rate may be calculated based on a per-visit basis in  
               an amount 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;


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             b)   In the absence of three comparable FQHCs or RHCs with a  
               similar caseload, the rate may be calculated as in a) using  
               three comparable FQHCs or RHCs located in the same or  
               adjacent service area, or in a reasonably similar  
               geographic area, with similar characteristics in the  
               patient population; or,

             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 for services provided in the first  
               12 months of operation.  After this period, the rate is  
               increased by the Medicare Economic Index (MEI) in effect at  
               that time.  The projected allowable costs for the first 12  
               months are required to be cost settled and the prospective  
               payment rate is required to be adjusted based on the actual  
               and allowable cost of the visit.

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, increased administrative costs, likely in the  
          millions, to comply with the new or accelerated deadlines in the  
          bill (General Fund (GF) and federal funds).  This bill would  
          require 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 is current practice.

          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 (GF 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,  


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          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.


          1)PURPOSE OF THIS BILL.  The author states that with the growing  
            Medi-Cal population and the implementation of the Patient  
            Protection and Affordable Care Act, FQHCs and RHCs have become  
            increasingly important to maintain access to quality health  
            care, and their ability to provide quality care is currently  
            being jeopardized.  The author contends FQHCs and RHCs are  
            being blocked from valuable funding that could enable them to  
            better treat patients and increase services to patients as a  
            result of a lack of timelines from DHCS for reimbursements.   
            The author states DHCS currently takes approximately five  
            years to finalize a new rate; during this time, clinics are  
            only reimbursed for 80% of what they are owed.  The author  
            further maintains DHCS currently takes approximately three  
            years to finalize reconciliation payments, which has resulted  
            in the state owing nearly 50 million dollars to the clinics,  
            according to a March 2015 survey cited by the author.  The  
            author states this bill is needed to ensure quality care by  
            making sure these clinics receive their money in a timely  
            manner.  The author concludes this bill will keep DHCS  
            efficient and accountable for the payments owed to FQHCs and  



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             a)   FQHCs and RHCs.  FQHCs are community-based, nonprofit or  
               public organizations that provide services to people who  
               lack access to other health care, including those without  
               insurance, residents of rural and underserved areas, and  
               some Medicaid patients.  These health care services are  
               available to all people, regardless of their ability to  
               pay.  FQHCs include community health centers, migrant  
               health centers, health care for the homeless health centers  
               and public housing primary care centers.  Most FQHCs  
               receive federal grant funding under Section 330 of the  
               Public Health Service Act.  RHCs are a subset of FQHCs  
               which provide primary health care services in medically  
               underserved areas, but differ from health centers in  
               several ways.  Because of provider scarcity in rural areas,  
               RHCs tend to employ mid-level providers such as nurse  
               practitioners or physician assistants.  Primary care  
               practices that can document their main purpose is to  
               provide primary care services in a rural area may qualify  
               to be an RHC.
             b)   Reimbursement Rates.  In 2001, federal law required  
               states to phase out cost-based, fee-for-service  
               reimbursement to FQHCs and instead to use an all-inclusive,  
               per-visit, prospective payment system (PPS).  For 2001,  
               each state was allowed to set the base rate using each  
               FQHC's reasonable costs to providing Medi-Cal-covered  
               services in 1999 and 2000, with subsequent years' payments  
               being adjusted annually using the MEI for primary care.   
               Currently, FQHCs and RHCs are paid per patient visit by the  
               Medi-Cal program, rather than by billing for each  
               individual service as is typically done by many other  
               clinics and providers.  This system is based on the average  
               of each health center's reasonable costs per patient visit;  
               thus, each health center has its own payment rate.  The  
               rate is adjusted annually for inflation and for any change  
               in scope of services provided.


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               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.

             c)   Annual Reconciliations.  DHCS provides additional  
               reimbursement to FQHCs and RHCs for the difference between  
               their PPS rate per visit and payments made by their managed  
               care plans and Medicare.  DHCS developed an annual  
               reconciliation process 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  
               amounts paid, the PPS rate, and the amounts received from  
               the FQHC's and RHC's managed care plan, Medicare, and third  
               party payers.  Each clinic is required to submit their  
               annual reconciliation at the end of their fiscal year.   
               According to DHCS, it has three years from the received  
               date to finalize the FQHC's or RHC's reconciliation.   
               During this process, the clinic will receive tentative  
               retroactive adjustment settlements based on the filed data  
               reported on the reconciliation request.  The 60% interim  
               settlement may be subjected to change at DHCS' discretion.
          3)SUPPORT.  The California Primary Care Association, the sponsor  
            of this bill, states it is currently taking DHCS years to  
            finalize rates and settle outstanding debts due to the lack of  
            current timelines.  The sponsor states health centers and  
            clinics are currently being forced to carry enormous debt for  
            services rendered that can cost a single health center over $1  
            million.  The sponsor contends that the establishment of  


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            timelines for DHCS will provide health centers with reasonable  
            clarity on reimbursement rates and reconciliation and allow  
            them to direct more focus and funding towards improving  
            patient care and services, rather than increasing cash  
            reserves to accommodate delays in reimbursement.
            Supporters of this bill state reimbursement delays addressed  
            in this bill are very common and can take up to four or five  
            years, causing serious cash flow challenges for FQHCs and  
            RHCs.  Supporters state this bill will ultimately improve the  
            level of care that can be provided by FQHCs and RHCs because  
            they will have more time to focus on patient care rather than  
            on debt management.

          4)RELATED LEGISLATION.  SB 147 (Ed Hernandez) requires DHCS to  
            authorize a three-year payment reform pilot project for FQHCs  
            using an alternative payment methodology (APM) authorized  
            under federal Medicaid law.  Requires an FQHC participating in  
            the pilot to receive a per member per month wrap-cap payment  
            for each of its APM enrollees from a Medi-Cal managed care  
            health plan, instead of the wrap around payment FQHCs  
            currently receive from DHCS.  SB 147 is currently pending in  
            the Assembly Health Committee.


             a)   AB 2051 (Gonzalez), Chapter 356, Statutes of 2014, among  
               other provisions, requires DHCS, within 30 calendar days of  
               receiving confirmation of certification as a Medi-Cal  
               provider for an applicant that is an affiliate primary care  
               clinic, to provide written notice to the applicant  
               informing the applicant that its Medi-Cal enrollment is  
             b)   SB 442 (Ducheny), Chapter 502, Statutes of 2010,  


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               streamlines administrative processes for community clinics  
               to apply for affiliate clinic licensure from the Department  
               of Public Health.

          6)CHAPTERING OUT.  As currently written, AB 690 (Wood) and AB  
            858 (Wood), both currently pending in the Senate  
            Appropriations Committee, amend the same code sections as this  
            bill.  Amendments should be taken to avoid chaptering out  
            conflicts, should all bills be enacted.

          7)POLICY COMMENTS.  The timeframes contained in this bill  
            establish new statutory timeframes.  For example, in the case  
            of reconciliation provisions, this bill requires a faster  
            initial response and higher interim payment amounts than is  
            current DHCS practice.  According to DHCS' initial rate  
            setting documents, DHCS indicates it has  three years  from the  
            received date to finalize a clinic's reconciliation, and it  
            pays a  60%  interim settlement, which is 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%  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.

            It is unclear how well DHCS will be able to adjust to the new,  
            aggressive timelines established under this bill.  If the  
            timelines are too stringent for DHCS, there may be unintended  
            consequences having DHCS set an inappropriate reimbursement  
            rate or of increased incorrect reconciliations, the latter of  
            which could mount administrative burden significantly.  The  
            Committee may wish to amend the timelines in this bill to  


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            better reflect DHCS' caseload capabilities.




          California Primary Care Association (sponsor)

          AIDS Project Los Angeles
          Alameda Health Consortium
          American Federation of State, County and Municipal Employees,  
          AltaMed (prior version)
          Asian Health Services
          Asian Pacific Health Care Venture, Inc. (prior version)
          Association of California Healthcare Districts
          Bartz-Altadonna Community Health Center
          Community Clinic Consortium
          Council of Community Clinics
          East Valley Community Health Center, Inc. (prior version)
          El Proyecto del Barrio, Inc. (prior version)
          Health and Life Organization, Inc.
          La Clínica
          La Maestra Community Health Centers
          LifeLong Medical Care


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          Northeast Valley Health Corporation
          Peach Tree Health (prior version)
          Saban Community Clinic
          St. John's Well Child & Family Center (prior version)
          Tiburcio Vásquez Health Center, Inc.
          White Memorial Community Health Center
          Several individuals


          None on file.

          Analysis Prepared by:An-Chi Tsou / HEALTH / (916)