BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                     SB 610

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          610 (Pan)

          As Amended  September 4, 2015

          Majority vote

          SENATE VOTE:  39-0

          |Committee       |Votes|Ayes                   |Noes                 |
          |                |     |                       |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
          |Health          |18-0 |Bonta, Maienschein,    |                     |
          |                |     |Bonilla, Burke, Chiu,  |                     |
          |                |     |Gomez, Gonzalez, Roger |                     |
          |                |     |HernŠndez, Lackey,     |                     |
          |                |     |McCarty, Nazarian,     |                     |
          |                |     |Patterson,             |                     |
          |                |     |Ridley-Thomas,         |                     |
          |                |     |Rodriguez, Steinorth,  |                     |
          |                |     |Thurmond, Waldron,     |                     |
          |                |     |Wood                   |                     |
          |                |     |                       |                     |
          |Appropriations  |17-0 |Gomez, Bigelow, Bloom, |                     |
          |                |     |Bonta, Calderon,       |                     |
          |                |     |Chang, Nazarian,       |                     |
          |                |     |Eggman, Gallagher,     |                     |
          |                |     |                       |                     |


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          |                |     |                       |                     |
          |                |     |Eduardo Garcia,        |                     |
          |                |     |Holden, Jones, Quirk,  |                     |
          |                |     |Rendon, Wagner, Weber, |                     |
          |                |     |Wood                   |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |

          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)Requires, within 30 days of receipt, 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)Requires, if a payment is owed to the center or clinic, DHCS  
            to 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 18  
            months from the last date of the fiscal year for which DHCS  
            conducted the review.


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          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 one year 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 one year 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.

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

          9)Include provisions that address chaptering out conflicts with  
            AB 858 (Wood) of the current legislative session.

          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, 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 (General Fund  
          (GF)/federal funds).  The current staffing level is able to meet  
          the annual demand for audits and reconciliations, and does not  


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          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).

          The Assembly Appropriations Committee also states there are  
          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).  This  
          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 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 clinics. 

          COMMENTS:  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  


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          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.

          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 Medicare Economic Index (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.

          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.

          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  


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          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.

          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 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.

          There is no known opposition to this bill on file.


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          Analysis Prepared by:                                             
                          An-Chi Tsou / HEALTH / (916) 319-2097  FN: