BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                     SB 610  

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          Date of Hearing:  August 19, 2015


                                 Jimmy Gomez, Chair

          SB 610  
          (Pan) - As Amended July 14, 2015

          |Policy       |Health                         |Vote:|18 - 0       |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill imposes new timelines and shortens existing timelines  
          for Medi-Cal payments to federally qualified health centers and  
          rural health centers (FQHCs and RHCs, or clinics).

          FISCAL EFFECT:


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          1)This bill could be implemented by increasing staff assigned to  
            audits and reconciliations, at a temporary cost in the range  
            of $2.5 million per year for two years (GF/federal).  The  
            current staffing level is able to meet the annual demand for  
            audits and reconciliations, and does not have a backlog  
            according to existing timelines.  However, as timelines are  
            shortened by this bill, a backlog will be created.  
            Accelerating this workload prospectively, as well as  
            processing past-year workload to catch up, will require more  
            administrative staff on a temporary basis.  The long-term  
            ongoing workload impact is unclear.   Conservatively,  
            provisions related to more frequent erroneous payment  
            corrections may have some ongoing costs, in the range of  
            $100,000 (GF/federal).

          2)Unknown changes in the timing of payments made to clinics due  
            to changes in the processes and deadlines for making  
            reconciliation payments or correcting erroneous payments  
            (GF/federal). The bill creates new timelines or accelerates  
            existing timelines under which DHCS must make certain payments  
            to clinics. By accelerating payments, the state will 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 the  
            bill results in payments being made earlier, to some extent  
            the bill will result in shifting of costs between budget  
            years. The bill is not anticipated to increase overall  
            Medi-Cal costs for payments to clinics.




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          1)Purpose. The purpose of this bill is to expedite payments to  
            clinics for Medi-Cal services rendered.  The author states  
            this bill is needed to ensure quality care by making sure  
            these clinics receive their money in a timely manner.  

          2)Clinic Reimbursement. Because of their unique role in  
            providing health care to underserved communities and the  
            uninsured, policymakers have historically attempted to ensure  
            that community clinics remain financially viable.  Federal law  
            requires federally funded health programs, including Medicaid  
            and Children's Health Insurance Program (CHIP), to pay clinics  
            using a special reimbursement structure commonly called a  
            prospective payment system (PPS).  According to DHCS Form  
            3090, the Freestanding FQHC Cost Report Form, PPS rates are a  
            clinic-specific, per-visit rate, and are calculated by  
            dividing costs for Medi-Cal-reimbursable services by Medi-Cal  
            reimbursable visits. If clinics are paid by managed care plans  
            in amounts less than their PPS rates, there is a  
            reconciliation performed to ensure clinics get paid the full  
            PPS rate through a wrap-around payment paid by DCHS. For  
            Medi-Cal, current PPS rates vary from around $80 to over $650  
            per visit, depending on the mix of services provided at each  
            clinic.  The median PPS rate is around $157. 

          3)Status Quo.  If a new clinic or new clinic site is to be  
            opened, the clinic must apply for a site-specific PPS rate.  
            DHCS currently takes approximately five years to finalize a  
            new rate; during this time, clinics are reimbursed for 60% of  
            what is projected they are owed.   For existing clinics,  
            annual reconciliation is performed to ensure clinics are paid  
            according to their PPS rates. DHCS currently takes  
            approximately three years to finalize reconciliation payments,  
            which has resulted in the state owing nearly $50 million to  
            the clinics, according to a March 2015 survey cited by the  


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            The chart below indicates the activities performed, their  
            purpose, the current timelines and amounts, and what this bill  

          |Activity     |Purpose              |Curre|       Proposed                             |
          |             |                     |nt   |                                            |
          |Annual       |Ensure clinic        |3 years     |18 months    |
          |Reconciliatio|receives PPS rate    |            |             |
          |n payment    |for all billable     |            |             |
          |calculation  |visits.              |            |             |
          |Payments     |Pay a clinic the     |60% interim |80% interim  |
          |reflecting   |balance owed,        |payment     |payment      |
          |reconciliatio|according to the     |while       |while        |
          |n            |reconciliation       |pending.    |pending.     |
          |             |calculation.         |            |             |
          |New rate     |Identify the PPS     |5 years     |12 months    |
          |calculation  |rate at which a new  |            |from         |
          |             |clinic will be       |            |submittal of |
          |             |reimbursed.          |            |initial year |
          |             |                     |            |of data      |
          |Payments     |Reimburse a new      |            |             |
          |reflecting   |clinic the according |            |             |
          |new rates    |to the calculated    |            |             |
          |             |PPS rate.            |            |             |
          |Comparability|Identify a new PPS   |Usually     |12 months;   |
          | requests    |rate based on        |around 4    |30 days to   |
          |             |comparability with   |months      |note         |
          |             |other clinics.       |            |findings of  |


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          |             |                     |            |non-comparabi|
          |             |                     |            |lity.        |
          |Scope of     |Calculate a new PPS  |90 days in  |90 days in   |
          |service rate |rate, based on a     |practice    |statute      |
          |change       |modified scope of    |            |             |
          |request      |services.            |            |             |
          |             |                     |            |             |

            Clinics indicate because of the long lag time in receiving  
            payment, in order to maintain operations, they are forced to  
            take lines of credit at high interest rates.   

          4)Comment. Payment timelines that stretch on for years, in a  
            sector as dynamic as delivery of health care services, appear  
            difficult for providers to manage.   It is unclear why audits  
            and reconciliations are processed so many years in arrears.   
            It seems to be in the state's interest to enhance stability to  
            clinics that serve so many of the state's Medi-Cal enrollees.   
            Even if the state moves to a different methodology for clinic  
            reimbursement, as is being considered on a pilot basis by SB  
            147 (HernŠndez), also being heard today, there will still be  
            years of annual reconciliations to perform.  The benefit  
            clinics would receive from greater certainty, and a reduction  
            in finance charges associated with lines of credit, should be  
            weighed against the temporary increase in state costs and  
            workload.  Accelerating these payments also has a budget  
            impact, but it is essentially paying off debt for costs  
            already incurred in past years.   

          Analysis Prepared by:Lisa Murawski / APPR. / (916)  


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