BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        SB 610|
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                                UNFINISHED BUSINESS 

          Bill No:  SB 610
          Author:   Pan (D)
          Amended:  9/4/15  
          Vote:     21  

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

           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           SENATE FLOOR:  39-0, 6/1/15
           AYES:  Allen, Anderson, Bates, Beall, Berryhill, Block,  
            Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,  
            Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,  
            Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner,  
            Vidak, Wieckowski, Wolk
           NO VOTE RECORDED:  Stone

           ASSEMBLY FLOOR:  80-0, 9/10/15 - See last page for vote

           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  


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          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.

          Assembly Amendments allow DHCS additional time to finalize a  
          FQHC or RHC's rate and to pay to the FQHC or RHC specified  
          amounts owed.

          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  

           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  


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             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.

           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  


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               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  
             amount owed within 30 days after 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 18 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  
             one year 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 one year 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 after finalizing  
             the rate.


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           8) Requires DHCS to conduct an initial review of the three  
             FQHCs or RHCs for the purpose of determining comparability  
             within 30 days after 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  

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

           10)Requires DHCS to finalize the new entity's rate within one  
             year 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.

          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 bill 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.


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          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  
            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  

            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  


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            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  

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

          According to the Assembly Appropriations Committee:

          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). 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.


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          SUPPORT:   (Verified9/10/15)

          California Primary Care Association (source)
          AIDS Project Los Angeles
          Alameda Health Consortium
          American Federation of State, County and Municipal Employees,  
          Asian Health Services
          Asian Pacific Health Care Venture, Inc. 
          Association of California Healthcare Districts
          Bartz-Altadonna Community Health Center
          Community Clinic Consortium
          Council of Community Clinics
          East Valley Community Health Center, Inc. 
          El Proyecto del Barrio, Inc. 
          Health and Life Organization, Inc.
          La Clínica
          La Maestra Community Health Centers
          LifeLong Medical Care
          Northeast Valley Health Corporation
          Peach Tree Health 
          Saban Community Clinic
          St. John's Well Child & Family Center 
          Tiburcio Vásquez Health Center, Inc.
          Valley Community Healthcare

          White Memorial Community Health Center
          Several individuals

          OPPOSITION:   (Verified9/10/15)

          Department of Finance

          ARGUMENTS IN SUPPORT:     This bill is sponsored by the  


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          California Primary Care Association (CPCA), which argues the  
          current lack of timelines has resulted in DHCS taking years to  
          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.

          ARGUMENTS IN OPPOSITION:The Department of Finance (DOF) writes  
          in opposition that this bill as it is unnecessary and results in  
          ongoing General Fund costs that are not included in the 2015  
          Budget Act. DOF states that, unlike most other Medi-Cal  
          providers, FQHCs and RHCs are reimbursed their full costs  
          pursuant to federal law. DOF states this reimbursement  
          methodology is more time consuming than traditional Medi-Cal  
          reimbursement because of the time needed to calculate the wrap  
          payments which bring clinics to a reimbursement rate that covers  
          100 percent of their costs. Because these clinics receive  
          reimbursements based on their actual costs, which are generally  
          higher than many other providers, DOF states this bill is  
          unnecessary, and it is unclear whether these clinics have a  
          particular need for accelerated processing for reconciliations  
          and rate filings.

           ASSEMBLY FLOOR:  80-0, 9/10/15
           AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,  
            Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  


                                                                     SB 610  
                                                                    Page  10

            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,  
            Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,  
            Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

          Prepared by: Scott Bain / HEALTH / 
          9/10/15 23:28:02

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