BILL ANALYSIS
AB 613
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Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 613 (Beall) - As Amended: April 14, 2009
SUBJECT : Medi-Cal: treatment authorization requests.
SUMMARY : Requires the Department of Health Care Services (DHCS)
to take a number of steps to improve and streamline the
treatment authorization request (TAR) process in Medi-Cal,
including performing a cost-benefit analysis for each procedure
requiring a TAR, developing an alternative to the requirement
that a patient obtain a TAR for each individual day of a
patient's hospital stay, and making publicly available the rules
and criteria for determining medical necessity. Additionally,
this bill shortens the processing timeframe for specified
services to be authorized by DHCS. Specifically, this bill :
1)Requires DHCS to pursue additional means to improve and
streamline the treatment authorization request process in all
of the following ways:
a) Perform a cost-benefit analysis for each procedure
requiring a TAR, and reduce the number of TARs so that a
TAR is only required for services with documented
overutilization or a high level of fraudulent activity;
b) Develop alternative approaches for fraud and abuse
detection, through targeted analysis of utilization
baselines for each drug or service, that identify potential
anomalies;
c) Develop an alternative to the requirement that a patient
obtain a TAR for each individual day of his or her stay in
the hospital and consider adopting a single TAR for the
entire length of a patient's hospital stay;
d) Make publicly available the rules and criteria for
determining medical necessity; and,
e) Work with licensed health care providers that are
affected by the TAR process in developing processes to
improve efficiency and access to care through a more
streamlined and relevant TAR process.
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2)Repeals legislative intent language that any identified
improvements in the TAR process be cost-beneficial to the
state and to the Medi-Cal Program as a whole.
3)Shortens the TAR processing time from an average of five
working days to an average of two working days when a proposed
treatment meets objective medical criteria, and is not
contraindicated.
4)Shortens the time for a decision on medical necessity to be
made from an average of five working days to an average of two
working days when a TAR is not subject to objective medical
criteria.
5)Requires DHCS to adopt, by commonly accepted medical practice
parameters, emergency regulations with a list of elective
services that the director of DHCS determines can be
nonurgent.
6)Shortens the time period for elective services that DHCS
determines are nonurgent; authorization for these services can
be deferred for a period of up to 15 days, instead of a period
of up to 90 days in existing law.
7)Shortens the time period in which authorization through the
TAR process for a nonurgent service must be granted or
deferred from within an average of ten working days to within
an average of five working days.
EXISTING LAW :
1)Establishes the Medi-Cal program, administered by DHCS, and
under which health care services are provided to qualified
low-income persons.
2)Establishes a schedule of benefits under the Medi-Cal Program,
which includes inpatient hospital services, subject to
utilization controls.
3)Limits the utilization controls that can be applied by DHCS to
Medi-Cal services to the following:
a) Prior authorization, which is approval by a DHCS
consultant of a specified service in advance of the
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rendering of that service based upon a determination of
medical necessity. Prior authorization includes
authorization for multiple services which are requested and
granted on the basis of an extended treatment plan where
there is a need for continuity in the treatment of a
chronic or extended condition;
b) Post-service prepayment audit, which is review for
medical necessity and program coverage after service was
rendered but before payment is made. DHCS is authorized to
withhold or reduce payment if the service rendered was not
a covered benefit, deemed medically unnecessary or
inappropriate;
c) Post-service postpayment audit, which is review for
medical necessity and program coverage after service was
rendered and the claim paid. DHCS may take appropriate
steps to recover payments made if subsequent investigation
uncovers evidence that the claim should not have been paid;
d) Limitation on number of services, which means certain
services may be restricted as to number within a specified
time frame; and,
e) Review of services pursuant to Professional Standards
Review Organization agreements entered into with DHCS.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . The author argues this bill improves
the efficiency of the TAR process to improve access to health
care for Medi-Cal beneficiaries. The author states more than
three million TARS are processed annually, with a significant
percentage modified, deferred, or denied. As a result of the
delay in TAR processing, Medi-Cal providers may place
themselves at financial risk and Medi-Cal beneficiaries may be
placed at medical risk. The author states most health care
organizations use the National Committee on Quality Assurance
standard of a two day turnaround for prior authorization, and
the author states, in comparison, processing time at Medi-Cal
field offices averages between nine to twelve business days,
excluding processing. The author cites a California
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HealthCare Foundation (CHCF) report that suggested the state
should seek to modernize the TAR process to improve access,
increase efficiency, and reduce waste. The author states the
TAR program has not been modified to incorporate suggestions
for improvement in the report, and this bill seeks to ensure
that those who are eligible for Medi-Cal services receive
services and to reduce the uncompensated care burden on
hospitals.
2)CALIFORNIA HEALTHCARE FOUNDATION REPORT . A July 2003 report
by Outlook Associations, Inc. published by CHCF entitled
"Medi-Cal Treatment Authorizations and Claims Processing:
Improving Efficiency and Access to Care" states most prior
authorization programs ascribe to three key objectives: a)
Review medical necessity and quality to ensure that patients
receive appropriate medical care in a timely manner and that
patients do not receive inappropriate treatment; b) Ensure
cost control by allowing treatment at and directing treatment
to facilities with previously contracted/approved rates, and
by disallowing the overutilization of services; and, c) Detect
fraud by monitoring providers requesting an unusual quantity
of services and patients receiving unusual services or an
unusual quantity of services.
The findings in the report indicate the TAR program does not
achieve the three objectives of a typical TAR program because
many TARs are submitted after the service has been delivered,
which places Medi-Cal patients at risk since they may be
receiving unnecessary procedures or inappropriate care. The
report also stated that Medi-Cal does not perform routine
cost-benefit analyses to identify whether a particular service
warrants a TAR, and fraud is better detected through reviewing
claims to identify fraud before payments are made, thereby
enabling the elimination of prior authorization for the
specific purpose of detecting fraud. The report made a number
of recommendations, including that DHCS:
a) Perform a cost-benefit analysis for each TAR and reduce
the number of TARs required;
b) Consider a change in the six prescription drug limit for
each beneficiary (prescribed drugs are generally limited to
no more than six per month unless a TAR is approved);
c) Develop standard turnaround times and a standard set of
adjudication guidelines, or use a standard computer program
for all adjudicated TAR services;
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d) Improve analytic capacity for meaningful policy
development; and,
e) Accelerate e-TAR implementation.
In response to the CHCF report, the health budget trailer bill
of 2004-05 (SB 1103 (Committee on Budget), Chapter 228,
Statutes of 2004) authorizes the director of DHCS to apply
prior authorization by designing a sampling methodology that
will result in a generally acceptable audit standard for
approval of a TAR or a class of TARs. Additionally, DHCS was
required to pursue additional means to improve and streamline
the treatment authorization request process including, where
applicable, those identified by independent analyses such as
the July 2003 report by CHCF entitled "Medi-Cal Treatment
Authorizations and Claims Processing: Improving Efficiency
and Access to Care," and those identified by Medi-Cal
providers. In response to the trailer bill language
authorizing DHCS to implement a sampling methodology, DHCS
added an "auto adjudication" feature that it believed would
enable DHCS to manage TAR workload more efficiently by
selecting TAR services with high approval rates and low fiscal
impact. Auto adjudication was implemented in July 2005.
3)BACKGROUND ON TARS . Under existing law, the director of DHCS
is required to determine which of the utilization controls
(prior authorization, post-service pre-payment or post-service
payment audit, or limits on the number of services) are
applied to any specific service or group of services which are
subject to utilization controls. DHCS indicates there can be
a variety of factors that determine whether a service would
require a TAR , including potential for abuse or fraud , cost to
the Medi-Cal Program , frequency and duration of the service ,
and the cost or volume of the service or drug.
DHCS has 23 physicians, 175 nurse evaluators, and 58
pharmaceutical consultants that adjudicate TARs. There are
also approximately 80 managers, supervisors, analytic, and
other staff that support the process, all of whom are staff.
In addition, there are approximately 268 Electronic Data
Systems contract staff involved in the TAR process. Medical
TARs are adjudicated in the five Medi-Cal Field Offices in San
Diego, Los Angeles, San Bernardino, San Francisco, and
Sacramento. Pharmacy TARs are adjudicated in the Southern and
Northern Pharmacy Sections, located in Los Angeles and
Stockton (with a satellite office in Sacramento).
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When a service is subject to a TAR, DHCS takes one of four
actions: a) Approve (original request is approved); b) Modify
(original request is modified for a variety of factors, such
as dates of service or quantity); c) Deny (request is denied);
or d) Defer (request is returned to the provider requesting
medical justification). In 2008, there were 1.3 million
medical TARS, adjudicated as follows:
Medical TARs
-----------------------------------------
| Total |Approved|Modifie|Denied|Deferre|
|Adjudicat| | d | | d |
| ed | | | | |
|---------+--------+-------+------+-------|
|1,339,198|982,384 |119,003|63,660|174,151|
| | (73%) | | | |
| | | (9%) | (5%) |(13%) |
-----------------------------------------
This bill would require DHCS to develop an alternative to the
requirement that a patient obtain a TAR for each individual
day of his or her stay in the hospital, and consider adopting
a single TAR for the entire length of a patient's hospital
stay. DHCS indicates TARs are not required for each
individual day of a hospital stay, and a TAR for an acute
hospital stay can be approved for up to 30 days. In addition,
DHCS indicates some TARs can be approved for more than 30
days, such as TARs for care in skilled nursing facilities,
which can be approved for two years.
This bill would also require DHCS to make publicly available
the rules and criteria for determining medical necessity.
DHCS indicates the criteria for determining medical necessity
are described broadly in Title 22 of the California Code of
Regulations, and detailed in the Manual of Criteria for
Medi-Cal Authorization and the Medi-Cal Provider Manuals,
which are public documents available online.
4)TAR PROCESSING TIMEFRAMES . This bill shortens the TAR
processing time from an average of five working days to an
average of two working days when a proposed treatment meets
objective medical criteria and is not contraindicated, or when
a TAR is not subject to objective medical criteria. In 2008,
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DHCS indicates the average length of time for medical TAR
authorization (turnaround time) was approximately eleven
working days. More current data from January 2009, indicates
an average turnaround time of approximately eight days. DHCS
indicates the processing time can vary depending on the
complexity and difficulty of the TAR. DHCS indicates it
strives to adjudicate TARs as efficiently as possible, and in
some instances it meets the designated timeframes, while at
other times it does not. DHCS states some TARs can be very
complex and require staff to review numerous documents in the
patient's medical record to determine if the proposed
treatment is medically necessary and render a decision (such
as TARs for extended hospital stays), while other TARs, such
as those for hearing aids, can be adjudicated more quickly.
DHCS indicates another factor that can delay TAR adjudication
timelines are vacancies in staff positions that adjudicate
TARs.
This bill also shortens the time period that elective services
DHCS determines are nonurgent can be deferred from a period of
up to 15 days, instead of a period of up to 90 days in
existing law. DHCS indicates a 90-day period applies to
deferred TARs, if DHCS defers (returns) a TAR to a provider
when there is not enough information or documentation to
adjudicate the TAR. The provider has 90 days to return the
TAR to DHCS with the additional information or documentation.
DHCS indicates it does not hold providers to this firm
timeline, and will adjudicate deferred TARs that are
resubmitted after 90 days.
Finally, this bill shortens the time period in which
authorization for a nonurgent service must be granted from an
average of ten working days to an average of five working days
when a proposed service is on the list of elective services
that the director determines can be considered nonurgent.
DHCS indicates it does not have data on the average
authorization time for TARS for elective services.
5)SUPPORT . Supporters of this bill include hospitals and health
care providers who argue the TAR process is inefficient,
delays care, and costs providers millions of dollars in
inappropriate denials and delayed payments. Hospitals and
health care providers argue the TAR process takes too much
time and effort on the part of the provider and medical
personnel, delays proper care for the patient, and discourages
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physician participation in Medi-Cal. Supporters state the
field offices that process the TARS are backlogged and there
are inconsistent determinations of what is "medical
necessity."
6)POLICY QUESTION .
a) This bill requires DHCS to perform a cost-benefit
analysis for each procedure requiring a TAR, and reduce the
number of TARs so that a TAR is only required for services
with documented overutilization or a high level of
fraudulent activity . Should DHCS' ability to require a TAR
be limited to circumstances where there is a "high level"
of fraudulent activity?
b) Existing law requires DHCS to pursue additional means to
improve and streamline the TAR process including, where
applicable, those identified by independent analyses such
as the CHCF report on TARs, and those identified by
Medi-Cal providers. Existing law states legislative intent
that any identified improvements in the TAR process be
cost-beneficial to the state and to the Medi-Cal Program as
a whole. This bill would repeal this provision. Given the
state's fiscal circumstances, can the existing intent
language be retained but modified?
REGISTERED SUPPORT / OPPOSITION :
Support
California Hospital Association (sponsor)
Alhambra Hospital Medical Center
American Federation of State, County and Municipal Employees,
AFL-CIO
Arroyo Grande, French and Marian Medical Centers
Bakersfield Memorial Hospital
Bautista Rural Medical Clinics, Inc.
California Academy of Family Physicians
California Ambulance Association
California Children's Hospital Association
California Council of Community Mental Health Agencies
California Healthcare Institute
California Medical Association
California Physical Therapy Association
California Psychiatric Association
Catholic Healthcare West
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Centinela Hospital Medical Center
Community Hospital of Long Beach
Garfield Medical Center
Glendale Adventist Medical Center
Guanzon Medical Office, Inc.
Henry Mayo Newhall Memorial Hospital
Hollywood Presbyterian Medical Center
Marian Medical Center
Medical Oncology Association of Southern California, Inc.
Mental Health Association in California
Mercy Hospital of Folsom
Mercy Medical Center Merced
Mercy San Juan Medical Center
Methodist Hospital of Sacramento
Methodist Hospital of Southern California
Mercy Hospital of Folsom
Mission Community Hospital
Olympia Medical Center
Pacific Alliance Medical Center
Pacifica Hospital of the Valley
Polyclinic Medical Center, Inc.
Pomona Valley Hospital Medical Center
Presbyterian Intercommunity Hospital
Providence Little Company of Mary Medical Center - Torrance
San Joaquin Cardiology Medical Group, Inc.
Sequoia Hospital
St. Bernardine Medical Center
St. Elizabeth Community Hospital
St. Joseph's Behavioral Health Center
St. Joseph's Medical Center
St. Mary Medical Center
St. Mary's Medical Center
St. Vincent Medical Center
White Memorial Medical Center
Whittier Hospital Medical Center
Opposition
None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097
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