BILL ANALYSIS
AB 2389
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 2389 (Gaines) - As Amended: April 8, 2010
SUBJECT : Health care coverage: provider contracts.
SUMMARY : Prohibits a contract between a health facility and a
health care service plan or health insurer (collectively
carriers) from containing a provision that restricts the ability
of the carrier to furnish information on the cost of procedures
or health care quality information to carrier enrollees.
Specifically, this bill :
1)Prohibits a contract, issued, amended, renewed, or delivered
on or after January 1, 2011, between a carrier and a health
facility to provide inpatient hospital services or ambulatory
care services to subscribers and enrollees of the carrier,
from containing a provision that restricts the ability of the
carrier to furnish information to subscribers or enrollees
concerning the cost of procedures at the facility or the
quality of services provided by the facility.
2)Requires any contractual provision inconsistent with 1) above
to be void and unenforceable.
3)Prohibits specified fines and penalties, established in
existing law, from applying to the provisions in this bill.
EXISTING LAW :
1)Licenses and regulates health facilities through the
Department of Public Health.
2)Regulates health care service plans under the Knox-Keene
Health Care Service Plan Act of 1975 through the Department of
Managed Health Care (DMHC) and regulates health insurers under
the Insurance Code through the California Department of
Insurance.
3)Establishes the Office of the Patient Advocate (OPA) within
DMHC, and requires the OPA to prepare and make available a
quality of care report card that includes a rating of health
care service plans.
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4)Requires hospitals to make a written or electronic copy of its
charge description master (CDM-a list of prices for services)
available, either by posting an electronic copy on the
hospital's Web site, or by making a written or electronic copy
available at the hospital.
5)Requires hospitals to submit their average charges for 25
common outpatient procedures, as specified, annually to Office
of Statewide Health Planning and Development (OSHPD) who is
required to publish this information on its Web site.
Requires OSHPD to publish and update on its Web site, a list
of the 25 inpatient procedures most commonly performed in
California hospitals, along with each hospital's average
charges for those procedures.
6)Requires OSHPD to publish risk-adjusted outcome reports for
medical, surgical, and obstetric conditions or procedures, as
specified.
7)Requires hospitals, upon request, to provide to a person who
has no health coverage, a written estimate of the amount the
hospital will charge for the health care services, procedures,
and supplies that are reasonably expected to be provided to
the person by the hospital, as well as information about its
financial assistance and charity care policies, as specified.
FISCAL EFFECT : None
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill will
ensure consumers have the quality and cost information that
they need to make purchasing decisions about health products
and services. While the majority of hospitals in this state
already allow this information to be shared, the author argues
that some hospitals are turning to "gag clauses" in contracts
with carriers that preclude carriers from sharing cost and
quality information about hospitals with enrollees and
subscribers of the carrier. The author maintains that
consumers are increasingly being required to pay more
attention to the cost of their care when they have a greater
responsibility for paying for it because of deductibles and
other cost sharing arrangements, particularly for a preferred
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provider organization (PPO) product where the consumer pays
20% or more of their total health care bill. The author
asserts that this bill will ensure that carriers are not
restricted in their ability to provide cost and quality
information to their members.
2)BACKGROUND . Government, carriers, and employers have
increased their interest in price transparency in an effort to
improve health care outcomes and slow the growth rate of
health care expenditures. The idea behind price transparency
is to make comparative information on the prices charged by
health care providers for specific services available to
consumers. One of the goals of transparency is to encourage
consumers and others who make decisions on their behalf
(employers, carriers, and referring practitioners) to consider
price and quality in deciding among providers and services.
Increasingly, consumers are being forced to pay more attention
to the cost of their care when they have a greater
responsibility for paying for it with carrier deductibles, an
initial portion of a claim, such as the first $500, paid for
by the patient before insurance coverage begins. Since 2000,
according to the California Healthcare Foundation (CHCF),
California workers have experienced increases in deductibles
for PPO coverage. CHCF reports the percentage of workers with
single PPO coverage with a deductible less than $500 was 85%
in 2000. In 2007, that percentage had decreased to 72%. The
percentage of single workers with a PPO deductible of
$500-$999 increased from 9% in 2000 to 21% in 2007.
Additionally, 9% of Californians with individual or
employment-based coverage from a state-licensed health carrier
are in high deductible products (health carriers with a
deductible in excess of $1,050).
Existing law does not prohibit or prevent carriers from
furnishing information on the cost of procedures, and at least
one carrier provides its enrollees with information so they
can evaluate cost and quality. However, contractual
agreements between carriers and providers can prevent this
information from being released, particularly when a large
provider has market power. For example, the San Francisco
Business Times reported in March 2008 that California Public
Employees' Retirement System (CalPERS) (which purchases health
coverage for over one million Californians) and one of its
contracting carriers were unable to replicate a 2004 cost
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study because one health system and the contracting carrier
had contractual clauses that precluded them from releasing
cost information.
According to a 2008 CHCF fact sheet entitled, "Making Health
Care Costs More Transparent to Consumers: A Summary for
Policymakers," in order for price information to be useful to
consumers it must be "actionable" for consumers and have the
following characteristics: it enables comparison among
different providers and different treatment options; it is
clearly written and formatted and customized for the user's
language preference and comprehension level; it covers all
costs associated with a given episode of care, including
diagnostic tests, prescription drugs, hospital days, and
physician fees before, during, and after hospitalization; and,
it is linked to information on quality.
3)TRANSPARENCY INITIATIVES . Hospital-specific quality-related
information is currently available through both state and
national organizations. In April 2005, the Centers for
Medicare and Medicaid Services (CMS) launched "Hospital
Compare," the first government-sponsored hospital quality
score card. Health Grades, a national health care ratings
organization, publishes risk-adjusted mortality and
complication rates for hospitals using Medicare data. The
Hospital Care Quality Information from the Consumer
Perspective, also administered by CMS, provides a standardized
survey instrument and data collection methodology for
measuring patients' perspectives on hospital care. The
American Hospital Association, the federation of American
Hospitals and the Association of American Medical Colleges
launched the Hospital Quality Alliance (HQA) as a national,
public-private collaboration to encourage hospitals to
voluntarily collect and report hospital quality performance
information. The HQA effort is intended to make important
information about hospital performance accessible to the
public and to inform efforts to improve quality.
At the state level, OSHPD publishes risk-adjusted outcome
reports detailing each individual hospital's mortality rates
associated with treatment of acute myocardial infarction and
coronary artery bypass graft surgeries. The "Hospital
Compare" project, a partnership involving the CHCF, the
University of California at San Francisco Institute for Health
Policy Studies, and the California Hospitals Assessment and
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Reporting Taskforce, provides ratings for clinical care,
patient safety, and patient experience for the 216 hospitals
in California that have chosen to participate in the project.
In addition, several carriers provide comparative pricing and
quality information on hospitals, by geographic region.
4)SUPPORT . Aetna, sponsors of this bill, states that the cost
of healthcare continues to grow at a rate faster than both
general inflation and wages, making health insurance
increasingly difficult for individuals to afford and for
employers to offer in the workplace. According to Aetna, the
development and disclosure of health care quality and cost
measurements gives consumers the health care information they
need to seek out hospitals and other health care providers
with a proven track record for high quality care and
efficiency. According to the America's Health Insurance
Plans, this bill presents a valuable opportunity for
California consumers to gain a greater understanding of the
quality and costs of health care, while also creating a
transparent, fair and systematic standard for tracking health
care quality data. The California Retailers Association and
Safeway state that if this bill is not passed, consumers and
employers risk losing access both to cost information and to
provider performance measurements at a time when cost
efficiency and quality improvement are of paramount importance
to improving the health care system.
5)OPPOSE UNLESS AMENDED . The California Hospital Association
(CHA) supports health care cost and quality transparency, but
maintains that such efforts must be meaningful and useful for
insured Californians. CHA cites the 2008 CHCF fact sheet that
states that the evidence to date suggests that the public does
not benefit from hasty, perfunctory gestures at transparency
and that price transparency is not without its downsides, so
it must be done thoughtfully. CHA suggests that this bill
should be amended to require that information concerning the
cost of procedures be based on episodes of care, as defined by
the National Quality Forum, and all of the expenses associated
with an episode of care be bundled or combined to prevent the
disclosure of any single expense. CHA would also prefer that
the cost information be consistent with professionally
recognized standards of clinical practice so that the
information provided is based on identical treatment options
among the facilities being compared. CHA would like the cost
and quality information to be linked so that the information
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is useful and "actionable" for consumers. In order to ensure
that the information provided to consumers is accurate, CHA
recommends that the carrier provide an opportunity to validate
both the cost and quality information with an appeals process
to make corrections and settle disputes over the data. In
cases where agreement cannot be reached, upon request of the
health facility, CHA would like the carrier to be required to
prominently display that the health facility does not agree
that the information is correct and the reasons for the
disagreement. And, lastly, CHA recommends that the bill
include a provision prohibiting the disclosure by a carrier of
any negotiated capitation rates or other prepaid arrangements
and requests that the carrier and the health facility agree on
the methodology to allocate capitation payments for an episode
of care.
6)PREVIOUS LEGISLATION .
a) SB 1300 (Corbett) of 2008 would have prohibited a
contract between a health care provider and a health plan
from containing a provision that restricts the ability of
the health plan to furnish information on the cost of
procedures or health care quality information to plan
enrollees. SB 1300 died on the Senate Floor.
b) AB 1 X1 (Nunez) and AB 8 (Nunez), both introduced in
2007, would have established a committee (or commission in
the case of AB 8) to develop a plan to improve and expand
public reporting of health care safety, quality, and cost
information, as specified. AB 1 X1 would additionally have
required OSHPD, beginning January 1, 2010, to publish
risk-adjusted outcome reports for percutaneous coronary
interventions (for example, angioplasty and stents)
conducted in hospitals, and to compare risk-adjusted
outcomes by hospital and physician. AB 8 would have
required its commission to publicly report certain patient
safety and quality indicators, and health care associated
infection rates, for each acute care hospital licensed in
California. AB 8 was vetoed by Governor Schwarzenegger and
AB 1 X1 failed passage in the Senate Health Committee.
c) AB 2967 (Lieber) of 2007, would have established a
Health Care Cost and Quality Transparency Committee to
develop and recommend to the Secretary of the Health and
Human Services Agency a health care cost and quality
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transparency plan, and would have made the Secretary
responsible for the timely implementation of the
transparency plan. AB 2967 died in the Senate
Appropriations Committee on the inactive file.
d) AB 1296 (Torrico), Chapter 698, Statutes of 2007,
requires a health plan or contractor offering health
benefits to CalPERS members and annuitants to disclose to
CalPERS the cost, utilization, actual claim payments, and
contract allowance amounts for health care services
rendered by participating hospitals to each member and
annuitant. Requires this information to be deemed
confidential information.
e) AB 1627 (Frommer), Chapter 582, Statutes of 2003,
requires hospitals to make available to the public their
charge description masters and to file them with OSHPD;
requires hospitals to compile and make available lists of
charges for commonly performed procedures and authorizes
OSHPD to compile a list of the 10 most common Medicare
"diagnosis related groups," a system to group similar
hospital cases, and the average charges.
f) AB 1045 (Frommer), Chapter 532, Statutes of 2005,
requires each hospital to submit to OSHPD its average
charges for 25 common outpatient procedures and requires
OSHPD to post the information on its Web site, requires
OSHPD to publish and update on its Web site a list of the
25 most commonly performed inpatient procedures in
California hospitals along with each hospital's average
charges for those procedures, and requires hospitals, upon
request, to provide a person without health coverage a
written estimate of the amount the hospital will charge for
services, procedures, and supplies that are expected to be
provided to the person by the hospital, as specified.
REGISTERED SUPPORT / OPPOSITION :
Support
Aetna (sponsors)
America's Health Insurance Plans
California Association of Health Plans
California Association of Health Underwriters
California Retailers Association
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Safeway
Opposition Unless Amended
California Hospital Association
Analysis Prepared by : Tanya Robinson-Taylor / HEALTH / (916)
319-2097