BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1365|
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UNFINISHED BUSINESS
Bill No: SB 1365
Author: Hernandez (D), et al.
Amended: 8/18/16
Vote: 21
SENATE HEALTH COMMITTEE: 5-1, 4/20/16
AYES: Hernandez, Hall, Mitchell, Monning, Pan
NOES: Nguyen
NO VOTE RECORDED: Nielsen, Roth, Wolk
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SENATE FLOOR: 26-11, 6/2/16
AYES: Allen, Beall, Block, De León, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Pan, Pavley, Wieckowski, Wolk
NOES: Anderson, Bates, Berryhill, Cannella, Fuller, Gaines,
Moorlach, Morrell, Nguyen, Nielsen, Vidak
NO VOTE RECORDED: Roth, Runner, Stone
ASSEMBLY FLOOR: 80-0, 8/24/16 - See last page for vote
SUBJECT: Hospitals
SOURCE: California Teamsters Public Affairs Council
DIGEST: This bill requires a general acute care hospital to
notify patients scheduled for a service in a hospital-based
outpatient clinic, as defined, when that service is available at
other locations that may cost less.
Assembly Amendments exempt Kaiser Permanente hospitals from the
provisions of this bill, and make other technical and clarifying
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changes.
ANALYSIS:
Existing federal law:
1)Defines "department of a provider" as a facility or
organization that is either created by, or acquired by, a
hospital for the purpose of furnishing health care services of
the same type as those furnished by the main hospital.
2)Defines "campus" of a hospital as the physical area
immediately adjacent to the hospital's main buildings, other
areas and structures that are not strictly contiguous to the
main buildings but are located within 250 yards of the main
buildings, and any other areas determined on an individual
case basis by the Centers for Medicare and Medicaid Services
to be part of the hospital's campus.
Existing state law:
1)Licenses and regulates health facilities through the
Department of Public Health (DPH), including general acute
care hospitals, acute psychiatric hospitals, and special
hospitals.
2)Permits DPH to issue a consolidated license to a general acute
care hospital that includes more than one physical plant
maintained and operated on separate premises, under certain
conditions, including that the physical plants maintained and
operated under the consolidated license are located not more
than 15 miles apart, unless one or more of the physical plants
is located in a rural area or only provides outpatient
services, among other specified exceptions.
3)Requires a general acute care hospital and an acute
psychiatric hospital, if supplies or services are provided on
an outpatient basis by an ancillary health services provider
which is not on the same site as, or is not on a site which is
within a 400-yard radius of the boundaries of, the general
acute care hospital, to disclose in writing to the customers
if they have a significant beneficial interest in the
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ancillary health service provider, and that they may choose to
have another ancillary health service provider provide any
supplies or services ordered by a member of the medical staff
of the hospital. "Ancillary health services provider" is
defined, for these purposes, as including, but not limited to,
providers of pharmaceutical, laboratory, optometry,
prosthetic, or orthopedic supplies or services, among others.
This bill:
1)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 location. Requires the notice to be in
substantially the following form:
The location where you are being scheduled to receive services
is a hospital-based clinic, and, therefore, may have higher
costs. The same service may be available at another location
within out health system that is not hospital-based, which may
cost less. Check with the [insert name of office] at [insert
telephone number] for another location within out health
system, or check with your health insurance company, for more
information about other locations that may cost less.
2)Defines "hospital-based outpatient clinic," for purposes of
this bill, as a department of a provider, as defined in
specified provisions of federal regulations, that is not
located on the campus of that provider.
3)Exempts from the provisions of this bill hospitals that are
operated by a nonprofit corporation under common control with
a licensed nonprofit health care service plan that exclusively
contracts with no more than two medical groups in the state to
provide and arrange for medical services for the enrollees of
the health care service plan, so long as the cost-sharing
design does not vary based on whether the care is provided in
a hospital-based clinic or a medical office building. (This
exemption describes hospitals operated by Kaiser Permanente.)
Comments
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1)Author's statement. 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, that charges a hospital facility fee. 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. Worse, 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 at a more expensive
setting. This has two significant consequences: 1) consumers
may have higher out-of-pocket costs, particularly those
patients served by a PPO; and, 2) health insurance premiums
will be driven up as a result of patients unwittingly, and
unnecessarily, receiving care at more expensive settings. With
the passage of the Affordable Care Act, we are now requiring
everyone to purchase health insurance. It is incumbent upon
policymakers to contain costs to keep insurance rates as
affordable as possible. This bill will at least makes 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.
2)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 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 payed 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
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extensive equipment, increased staffing, etc. 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 doctors office, but are billed a much higher fee
than expected.
3)GAO report and Medicare's new "site neutral" payment reform.
The United States Government Accountability Office (GAO)
issued a report in December of 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." The GAO concluded that in order to prevent a shift
toward HOPDs from increasing costs, Congress should consider
equalizing payment rates between settings for evaluation and
management offices visits.
Even prior to the publication of the GAO report, Congress
included a Medicare "site neutral" payment reform provision as
part of the budget deal approved in October of 2015. Beginning
on January 1, 2017, Medicare will no longer pay a facility fee
to HOPDs that are located more than 250 yards from the main
campus of the hospital. However, this new law grandfathered in
all existing HOPDs, and only applies to new outpatient
departments going forward. The hospital industry is seeking
to allow locations in the planning or construction phase to be
grandfathered in as well.
FISCAL EFFECT: Appropriation: No Fiscal
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Com.:YesLocal: Yes
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).
SUPPORT: (Verified8/24/16)
California Teamsters Public Affairs Council (source)
Alliance for Site Neutral Payment Reform
America's Health Insurance Plans
California Labor Federation
Consumer Federation of California
Health Access
SEIU California
US Oncology Network
OPPOSITION: (Verified8/24/16)
None received
ARGUMENTS IN SUPPORT: This bill is sponsored by the California
Teamsters Public Affairs Council (Teamsters), which states that
increasingly, hospitals that own outpatient clinics providing
routine treatment are charging consumers exorbitant "facility
fees" as if they were being treated in an acute care facility.
The Teamsters state that this is fundamentally unfair to health
care consumers who seek treatment in outpatient facilities
precisely because they are supposed to be less expensive than
hospitals. America's Health Insurance Plans (AHIP) states in
support that this bill directly addresses one of the
cost-drivers that is occurring under provider consolidation.
According to AHIP, when a hospital purchases a physician
practice and re-categorizes it under the hospital organization,
nothing has changed for the physician's office, yet they are now
allowed to bill under a differed code, because it is now
considered an "outpatient facility" for billing purposes. AHIP
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states that when a change of ownership is all that allows for
physician offices to bill for higher reimbursement, without any
corresponding change in service, the patient pays more through
either higher copayments or higher premiums. Health Access
California states in support that charging for hospital services
when care is provided outside a hospital appears to misrepresent
the level of care provided and the costs associated with that
care. The California Labor Federation (CLF) states in support
that the shift toward outpatient care has meant that more
patients are receiving care outside of acute care hospitals.
However, CLF states that the facility fee has followed patients
out of hospitals and into outpatient care, which is designed to
be less expensive and intensive than inpatient care. CLF states
that patients who go to their doctor's office for a minor
procedure find themselves on the hook for unexpected facility
fees simply because the physician's office is owned by a
hospital. The Alliance for Site Neutral Payment Reform states
that it believes payment policies that support higher
reimbursement in the HOPD setting encourages the acquisition of
office-based physician practices, which results in higher costs
to patients, payers and employers.
ASSEMBLY FLOOR: 80-0, 8/24/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, 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, 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, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
Prepared by:Vince Marchand / HEALTH / (916) 651-4111
8/29/16 9:39:42
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