BILL ANALYSIS Ó
SB 1365
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SENATE THIRD READING
SB
1365 (Hernandez)
As Amended June 16, 2016
Majority vote
SENATE VOTE: 26-11
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Health |18-0 |Wood, Maienschein, | |
| | |Bonilla, Burke, | |
| | |Campos, Chiu, Gomez, | |
| | |Roger Hernández, | |
| | |Lackey, Nazarian, | |
| | |Olsen, Patterson, | |
| | |Ridley-Thomas, | |
| | |Rodriguez, Santiago, | |
| | |Steinorth, McCarty, | |
| | |Waldron | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |20-0 |Gonzalez, Bigelow, | |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, Eduardo | |
SB 1365
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| | |Garcia, Holden, | |
| | |Jones, Obernolte, | |
| | |Quirk, Santiago, | |
| | |Wagner, Weber, Wood, | |
| | |Chau | |
| | | | |
| | | | |
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SUMMARY: Requires a general acute care hospital to notify each
patient scheduled for a service in a hospital-based outpatient
clinic when that service is available in another location that
is not hospital-based.
FISCAL EFFECT: According to the Assembly Appropriations
Committee any costs to the California Department of Public
Health to enforce this requirement are minor and absorbable
(Licensing and Certification Fund).
COMMENTS: According to the author, this bill is intended to
notify patients when a hospital is scheduling them to receive
services in an outpatient setting, that is not on the hospital
campus, which charges a hospital facility fee. The author
states that in many of these instances, these
hospital-affiliated clinics are simply providing primary care
services that could easily be performed in a physician's office.
The author notes that patients often have no idea that the
clinic where they are receiving care is part of a hospital,
since it is miles away from the actual hospital campus, and are
therefore getting care in a more expensive setting. The author
also notes this has two significant consequences: 1) consumers
may have higher out-of-pocket costs, particularly those patients
served by a Preferred Provider Organization; and, 2) health
insurance premiums will be driven up as a result of patients
unwittingly, and unnecessarily, receiving care in more expensive
settings. With the passage of the Patient Protection and
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Affordable Care Act, we are now requiring everyone to purchase
health insurance and it is incumbent upon policymakers to
contain costs to keep insurance rates as affordable as possible.
The author concludes this bill will at least make sure that
patients are aware that they may face higher costs at these
types of facilities, and gives them an option to seek care at a
less expensive alternative location.
Facility fees. Medicare rules have historically established the
payment structure that is used throughout the insurance
industry. Under Medicare's payment policies, when a service is
provided in a physician's office, Medicare makes a single
payment to the physician at Medicare's physician fee schedule
"non-facility rate." When the service is provided in a hospital
outpatient department (HOPD), however, Medicare makes two
payments: one payment at the physician fee schedule "facility
rate" and a second payment to the hospital at the hospital
outpatient prospective payment system rate, often referred to as
the facility fee. While the facility rate payment for physician
services at an HOPD is a little lower compared to the
non-facility rate paid at a doctor's office, when the two
separate charges for services at an HOPD are combined, the total
charge is higher for the same service. The argument for the
higher payment rates for services in HOPDs is that these higher
reimbursements are necessary to compensate for the additional
costs associated with maintaining a hospital - costs such as
maintaining an emergency room, more extensive equipment, and
increased staffing. However, this facility fee can be added to
bills even when the service is provided in a setting up to 35
miles away from the actual hospital, if the outpatient setting
is on the hospital's license. In many of these cases, the
hospital's outpatient clinics look nearly indistinguishable from
a physician practice that is not associated with a hospital (and
are not permitted to charge a facility fee). This has created a
situation in which patients go to what they believe is simply a
medical doctor's office, but are billed a much higher fee than
expected.
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GAO report and Medicare's new "site neutral" payment reform.
The United States Government Accountability Office (GAO) issued
a report in December 2015 titled "Increasing Hospital-Physician
Consolidation Highlights Need for Payment Reform." According to
this GAO report, Medicare expenditures for HOPD services have
grown rapidly, and there have been questions raised about the
extent to which this growth in spending can be attributed to
services that were previously performed in physician offices
shifting to HOPDs. The GAO report stated that "regardless of
what has driven hospitals and physicians to vertically
consolidate, paying substantially more for the same service when
performed in an HOPD rather than a physician office provides an
incentive to shift services."
Corporate Practice of Medicine. Across the nation, the push for
"site neutral" payment reform has been driven, in large part, by
an escalation in hospital-physician consolidation, with
hospitals acquiring physician practices, and then increasing
charges due to the ability to charge HOPD rates. In California,
however, this is mitigated by the ban on the corporate practice
of medicine, which prevents corporations from practicing
medicine, including the employment of physicians. However,
there are a number of exceptions to the ban on hospital
employment of physicians, established over the years through
both statutory exemptions as well as case law. All teaching
hospital systems are allowed to employ physicians, which
includes the five University of California medical schools, as
well as the three private medical schools at Stanford
University, Loma Linda University, and the University of
Southern California. Additionally, all 12 county-owned hospital
systems are allowed to employ physicians. Other exemptions from
the ban include nonprofit community clinics, health maintenance
organizations, state agencies, and certain charitable
institutions.
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Analysis Prepared by:
Lara Flynn / HEALTH / (916) 319-2097 FN:
0003875