BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 366
A
AUTHOR: Ruskin
B
AMENDED: June 30, 2009
HEARING DATE: July 15, 2009
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CONSULTANT:
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Dunstan/cjt
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SUBJECT
Medi-Cal: inpatient hospital services contracts: orthopedic
implantation
SUMMARY
This bill requires the California Medical Assistance
Commission (CMAC) to consider, when negotiating contracts
for inpatient care or developing specifications for
competitive bidding, specialization in orthopedic
implantation relating to cancers of the bone, in addition
to the factors already required.
CHANGES TO EXISTING LAW
Existing law:
Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), which provides
comprehensive health care coverage for low-income
individuals and their families; pregnant women; elderly,
blind, or disabled persons; nursing home residents; and
refugees who meet specified eligibility criteria.
Requires the governor to designate a person in his or her
office to act as a special negotiator to negotiate rates,
terms, and conditions for contracts with hospitals for
inpatient services to be rendered to Medi-Cal program
Continued---
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beneficiaries.
Permits the special negotiator to call for bids, in lieu of
negotiations, and requires the special negotiator to
consider, when contracting, the total funds appropriated
for inpatient hospital services.
Requires the negotiator to take into account specified
factors in negotiating contracts or in drawing
specifications for competitive bidding.
Requires CMAC to assume the duties and powers of the
special negotiator.
This bill:
Requires CMAC to consider, when negotiating contracts for
inpatient care or developing specifications for competitive
bidding, specialization in orthopedic implantation relating
to cancers of the bone, in addition to the factors already
required.
FISCAL IMPACT
This version of the bill has not been analyzed by a fiscal
committee.
BACKGROUND AND DISCUSSION
According to the author, the bill was prompted by refusals
by CMAC to negotiate higher rates or carve-outs for these
implants, which can cost up to $30,000. The author argues
that the cost of these implants, even when replacements are
considered, are largely equivalent to the costs of external
prostheses (which must be replaced much more often) over
time.
This bill is sponsored by the City of Hope, which states
that, for contracting hospitals, Medi-Cal will reimburse
facilities for certain specialized treatments and
procedures at a separate negotiated price. The sponsor
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argues these services are negotiated separately because of
their high costs. Orthopedic implants, however, are not
reimbursed separately, nor are the costs of these expensive
implants being considered in the development of rates.
City of Hope states that under-payment, or lack of payment,
for procedures and treatments have resulted in limited
treatment options for Medi-Cal recipients, and cites
published medical journal literature on lack of timely
access for children with Medi-Cal needing orthopedic care.
City of Hope argues that existing state reimbursement
policy fails to reflect medical advances that have
succeeded in allowing patients with bone cancer to avoid
amputation. The sponsor argues, decades ago amputation was
the only option and Medi-Cal paid for prosthetic limbs
which cost an average of $9,000 for above-the-knee pieces
and had to be replaced every year in children up to age 15,
but surgeons are now able to spare the limbs of
approximately 90 percent of patients with malignant bone
tumors. The sponsor states these advances save the state
money in the long-run and improve the lives of Medi-Cal
beneficiaries afflicted with this devastating disease.
City of Hope also argues that, because Medi-Cal patients
needing these procedures normally have no other treatment
options, and because not reimbursing these charges at
higher rates can prevent Medi-Cal from meeting federal
requirements to enlist enough providers so that services to
Medi-Cal recipients to the same extent as those services
are available to the general population. City of Hope
argues this bill is necessary if the state plans to enlist
enough providers to meet that federal standard so that
critical services to Medi-Cal recipients are available to
the same extent as those available to the general
population.
Background
Since 1983, through what is known as the Selective Provider
Contracting Program (SPCP), CMAC has been the state agency
responsible for negotiating contracts with hospitals on
behalf of the state for inpatient services under the
fee-for-service Medi-Cal Program. Through CMAC, the state
selectively contracts on a competitive basis with hospitals
for fee-for-service inpatient services provided to Medi-Cal
beneficiaries. According to CMAC, the competitive
contracting model has resulted in savings to the state
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General Fund of over $600 million this fiscal year. CMAC
has negotiated a rate on behalf of the state with 179
hospitals as of December 1, 2008.
Existing law requires CMAC, in negotiating contracts or in
drawing specifications for competitive bidding, to take
into account an enumerated list of factors. This list
includes beneficiary access, utilization controls, the
ability to render quality services efficiently and
economically and the capacity to provide a given tertiary
service, such as specialized children's services, on a
regional basis. Additionally, CMAC is required to give
special consideration to the reimbursement issues faced by
hospitals caring for Medi-Cal beneficiaries who are
receiving treatment for acquired immunodeficiency syndrome
(AIDS).
CMAC indicates it has the statutory discretion and
flexibility to address unique circumstances at contracted
hospitals, whether through rate negotiations, supplemental
funds, or in selected situations, through contract terms
that can, for example, "carve out" certain high-cost
inpatient items (such as implants, prostheses, or blood
factor) to be paid separately from the per diem rate.
Related bills
AB 1462 (Feur) requires the California Medical Assistance
Commission (CMAC) to include reimbursement for the costs of
graduate medical education, in addition to the factors
already required, when negotiating contracts for inpatient
care or developing specifications for competitive bidding.
This bill is in the Senate Appropriations Committee.
Prior legislation
AB 249 (Papan) of 1999 would have would have required CMAC
to take into consideration medical education programs for
physicians, nurses, or allied health professionals in
negotiating Medi-Cal inpatient contracts with hospitals or
in drawing specifications for competitive bidding. AB 249
was vetoed by Governor Davis.
Arguments in support
The California Children's Hospital Associations (CCHA)
argues that Medi-Cal and the California Children's Services
programs reimburse facilities for only certain specialized
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treatments and procedures at a separate negotiated price.
Orthopedic implants are not reimbursed separately or at the
full cost. CCHA argues, as a result, children's hospitals
absorb most of the cost associated with the implant, which
on average cost $25,000 per implant. CCHA states its
hospitals currently provides an orthopedic implant when
medically necessary and/or if it is in the best interest of
the child, regardless of reimbursement, and its member
hospitals want to continue to do so, but it is important
that the state's reimbursement system recognize and reward
providers that do what is best for the patient.
PRIOR ACTIONS
Assembly Floor: 77-0
Assembly Appropriations:13-3
Assembly Health: 17-0
COMMENTS
1. CMAC has authority to consider orthopedic implantation
under existing law.
The law names certain factors that CMAC must consider,
but states the list is not exhaustive. CMAC reports they
have the authority already to consider other factors.
However, in negotiations the supporting hospitals have
not been successful in gaining increased reimbursement
for this specialization. This bill can be seen as an
effort to make CMAC pay more attention to this issue.
POSITIONS
Support: City of Hope (sponsor)
American Cancer Society
California Children's Hospital Association
California Hospital Association
Disability Rights California
Oppose: None received
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