BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  August 3, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 1300  
          (Hernandez) - As Amended June 30, 2016


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          Urgency:  Yes State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill establishes a quality assurance fee (QAF) on providers  
          of emergency medical transportation (EMT, or ambulance)  
          beginning on July 1, 2017, and uses the revenue to raise  
          reimbursement rates for ambulance providers.  Specifically, this  
          bill:


          1)Assesses a fee on EMT providers of 5.5% of total revenue, with  
            some adjustments for future years, and contains numerous  
            details about fee payment, recourse for nonpayment, federal  
            approval, administrative flexibility, and conditions required  








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            for implementation.  


          2)Allocates revenues to a newly created Medi-Cal Emergency  
            Medical Transport Fund and continually appropriates funding  
            for designated purposes.


          3)Specifies revenue must be used for the following, in priority  
            order: 


             a)   Up to $350,000 for Department of Health Care Services  
               (DHCS) staffing and administrative costs associated with  
               implementation (such revenue can be matched with federal  
               funds).


             b)   To pay for health care coverage in each fiscal year in  
               the amount of 10 percent of the projected QAF revenue for  
               that fiscal year. 


             c)   To make increased payments to EMT providers.  
               Specifically, it requires the fee-for-service payment  
               schedule governing reimbursement to EMT providers be  
               increased by an amount calculated as specified, for both  
               fee-for-service and managed care.


          1)Requires the department to adopt implementing regulations, and  
            allows non-regulatory guidance to be issued and active until  
            July 1, 2018. 


          2)Includes an urgency clause, in order to implement the QAF as  
            soon as federal approval is obtained. 










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          FISCAL EFFECT:


          1)One-time costs of $1.2 million and ongoing administrative  
            costs of $750,000 annually (Medi-Cal Emergency Medical  
            Transport Fund/GF/federal) for DHCS to develop regulations,  
            gain federal approval, make any necessary system changes,  
            oversee collection of the quality assurance fee, and make  
            increased payments. This bill provides that $350,000 per year  
            must be available to DHCS for administrative costs (the state  
            would be able to draw down additional federal funding to help  
            cover the administrative costs). To the extent that actual  
            administrative costs are higher, those costs would be  
            GF/federal.


          2)DHCS states it has been unable to independently verify data  
            provided by EMT providers.  However, based on such data, staff  
            assumes costs associated with fee collection and payment as  
            follows: 


             a)   Ongoing GF benefit of about $3 million per year through  
               reduced health care spending. This bill provides that 10%  
               of revenue collected (after setting aside administrative  
               funding) is available to the state for health care  
               coverage. Thus, this bill reduces the need for GF support  
               of the Medi-Cal program by an equal amount.


             b)   Additional payments of about $73 million per year for  
               Medi-Cal EMT services (Medi-Cal Emergency Medical Transport  
               Fund/ federal). The quality assurance fee is projected to  
               generate about $30 million per year in revenues (after  
               accounting for administration and state benefits). With  
               federal matching funds, about $73 million per year would be  
               paid in increased reimbursements to providers.










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          3)Unknown GF cost pressure, potentially in the millions  
            annually, to maintain higher ambulance transport rates if QAF  
            revenues are eliminated or changed.  See comment 7 (a), below.  



          COMMENTS:


          1)Purpose. According to the author, this bill increases Medi-Cal  
            EMT rates by levying a fee on three specific EMT reimbursement  
            codes. The resulting revenue would then be used to draw down  
            additional federal Medicaid funds to increase Medi-Cal  
            emergency transportation rates, without imposing a cost to the  
            state GF. In addition, 10% of revenue raised by the QAF would  
            offset GF costs for state-funded health care coverage.  The  
            author argues inadequate Medi-Cal reimbursement for ambulance  
            transport is a longstanding issue and places a strain on the  
            state's emergency medical services (EMS) system.  Unlike other  
            Medi-Cal providers, ambulance providers cannot "opt out" or  
            otherwise limit their participation in the Medi-Cal program  
            based on low Medi-Cal reimbursement levels.


          2)Background. Federal law authorizes states to fund a portion of  
            Medicaid (Medi-Cal in California) through provider fees that  
            meet federal requirements.  The fee revenue collected by  
            states is matched through federal financial participation  
            (FFP) and used to increase provider payments, either through  
            supplemental payments or through increased rates. With certain  
            exceptions, state QAF must be broad-based, uniform, and cannot  
            hold a group of providers harmless with respect to fees paid  
            and payments received. In California, QAF mechanisms have been  
            used to fund Medi-Cal managed care, skilled nursing facilities  
            (SNF, nursing homes), intermediate care facilities for the  
            developmentally disabled (ICF-DDs), and hospitals.  


          3)EMT Costs Versus Medi-Cal Payments. Ambulance payment rates in  








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            Medi-Cal are poor even compared to Medi-Cal's generally low  
            fee-for-service payment rates, which are generally about 50%  
            of Medicare levels across all types of services.   A 2012 GAO  
            study found the median cost per ambulance transport was $429  
            nationally, whereas the average Medi-Cal payment is $106  
            before minor add-ons that slightly increase reimbursement.      
            


          4)Recent Payment Reduction. Pursuant to AB 97 (Committee on  
            Budget), Chapter 3, Statutes of 2011, Medi-Cal provider rates  
            were reduced by 10% for dates of services on and after June 1,  
            2011, subject to federal approval, and federal financial  
            participation.  This rate reduction was blocked by court  
            action for some providers. It took effect for ambulance  
            providers in September 2013, but without retroactive  
            recoupment.


          5)Prior Legislation.


             a)   AB 2577 (Cooley and Pan) of 2014 authorized governmental  
               entities to make intergovernmental transfers as the  
               non-federal share of expenditures for ground EMT services  
               for purposes of drawing down federal Medicaid matching  
               funds. AB 2577 was vetoed by the Governor, who cited  
               administrative capacity issues and committed to continue  
               work on a funding mechanism.


             b)   SB 1374 (Hernandez) of 2013 and AB 1257 (Gray) of 2015  
               increased payment rates for ground EMT services.  Both were  
               held on the suspense files of their respective house's  
               Appropriations Committees. 


             c)   AB 678 (Pan), Chapter 397, Statutes of 2011, establishes  
               a supplemental payment program for governmental entity  








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               providers of Medi-Cal EMT services, based on certified  
               public expenditures using state or local governmental  
               entities' funds as the required federal match.  


          6)Support and Opposition.  Ambulance providers support this  
            bill. DHCS has expressed opposition, noting the mechanism to  
            increase payments is a rate increase, which puts the GF at  
            risk of maintaining augmented rates, notwithstanding any  
            subsequent changed circumstances affecting the amount of QAF  
            revenues DHCS may collect. 


          7)Staff Comments. 


               a)     Increased Rates versus Supplemental Payments.  As  
                 noted, there are two main ways to increase reimbursement:  
                 providing higher reimbursement rates or providing  
                 supplemental payments without adjusting the base rate.    
                 DHCS notes that once higher reimbursement rates are  
                 approved by the federal government, they may prove  
                 difficult to modify or eliminate based on changing  
                 circumstances.  For instance, if the QAF mechanism were  
                 eliminated, or a situation emerged in which the QAF  
                 revenue no longer covered the increased costs of the  
                 higher rates, the GF would likely shoulder the burden of  
                 paying for the rate increase.  Supplemental payments  
                 appear easier to modify or eliminate.


               b)     Administrative Costs. DHCS notes the $350,000 limit  
                 on revenue for administrative costs may not cover the  
                 necessary staffing, contract, and other costs the  
                 department may incur to implement the bill. To ensure GF  
                 neutrality, this bill should be amended to allow for  
                 complete administrative cost recovery from the collected  
                 revenues.  









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          Analysis Prepared by:Lisa Murawski / APPR. / (916)  
          319-2081