BILL ANALYSIS Ó SB 610 Page 1 Date of Hearing: June 30, 2015 ASSEMBLY COMMITTEE ON HEALTH Rob Bonta, Chair SB 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 SB 610 Page 2 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. SB 610 Page 3 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. SB 610 Page 4 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; SB 610 Page 5 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, SB 610 Page 6 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. COMMENTS: 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 RHCs. 2)BACKGROUND. SB 610 Page 7 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. SB 610 Page 8 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 SB 610 Page 9 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. 5)PREVIOUS LEGISLATION. 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 approved. b) SB 442 (Ducheny), Chapter 502, Statutes of 2010, SB 610 Page 10 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 SB 610 Page 11 better reflect DHCS' caseload capabilities. REGISTERED SUPPORT / OPPOSITION: Support California Primary Care Association (sponsor) AIDS Project Los Angeles Alameda Health Consortium American Federation of State, County and Municipal Employees, AFL-CIO AltaMed (prior version) Asian Health Services Asian Pacific Health Care Venture, Inc. (prior version) Association of California Healthcare Districts Bartz-Altadonna Community Health Center Bienvenidos 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 SB 610 Page 12 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 Opposition None on file. Analysis Prepared by:An-Chi Tsou / HEALTH / (916) 319-2097