BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 2389
A
AUTHOR: Gaines
B
AMENDED: June 16, 2010
HEARING DATE: June 23, 2010
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CONSULTANT:
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Chan-Sawin/
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SUBJECT
Health care coverage: provider contracts
SUMMARY
Prohibits a contract by, or on behalf of, a licensed health
care facility, as defined, and a health care service plan
(health plan) or health insurer from containing a provision
that restricts the ability of the health plan or insurer to
furnish information to enrollees and insured on the cost
range of procedures, or quality of services, performed by
the facility, as specified. Provides an appeals process
for quality of care data, as specified.
CHANGES TO EXISTING LAW
Existing law:
Provides for the regulation of health plans and insurers by
the Department of Managed Health Care (DMHC) and the
California Department of Insurance (CDI), respectively.
Requires hospitals to make a written or electronic copy of
its charge description master (a list of prices for
services) available, either by posting an electronic copy
on the hospital's website, or by making a written or
Continued---
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electronic copy available at the hospital.
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 website.
Requires OSHPD to publish and update on its website, a
list of the 25 inpatient procedures most commonly performed
in California hospitals, along with each hospital's average
charges for those procedures.
This bill:
Prohibits a contract issued, amended, renewed, or delivered
on or after January 1, 2011, by or on behalf of a health
plan or insurer and a licensed health care facility, that
provide inpatient hospital services or ambulatory care
services, from containing a provision that restricts the
ability of the plan or insurer to furnish information to
subscribers or enrollees concerning the cost range of
procedures, or the quality of services, performed by
facility.
Requires that information on the cost range of procedures,
as specified, be displayed as an episode of care, unless an
episode of care is not applicable.
Prohibits a health plan from disclosing negotiated
capitation rates or other prepaid arrangements in the
information furnished to enrollees or subscribers.
Specifies that, if a health plan includes the allocated
capitation payment for an episode of care in the cost
information provided to subscribers and enrollees, the plan
and the facility shall consult on an appropriate and
reasonable methodology for doing so.
Requires a health plan or insurer, which provides
subscribers and enrollees with quality measurements of
facilities based on quality of care data developed and
compiled by the plan or insurer, to meet all of the
following requirements:
1. The information provided must be based on
nationally recognized evidence-based or consensus
based clinical recommendations or guidelines.
Requires the plan or insurer to use measures endorsed
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by the National Quality Forum, or other entities whose
work in the area of quality performance is generally
accepted by the health care industry.
2. The plan or insurer must utilize appropriate risk
adjustment factors to account for different
characteristics of the population, as specified.
3. The data used for the cost profile or quality
rating must be updated at appropriate intervals, but
no less than annually.
4. The health plan or insurer must link quality
measurements and cost range of procedures for
comparison purposes, when appropriate.
Requires health plans and insures, who provide subscribers
and enrollees with quality measurements of facilities based
on quality of care data developed and compiled by the plan
or insurer, to provide the following to the affected
facility:
1. A minimum 45 days written notice to review the
information.
2. The criteria used to develop and evaluate quality
measurements, and reasonable access to these criteria,
which must be sufficiently detailed and reasonably
understandable to allow the facility to verify the
data against its own records.
3. An explanation of the facility's right to correct
errors and seek review of the data used to measure the
quality of services provided at the facility.
4. A reasonable, prompt, and transparent appeals
process. Specifies that, if a facility makes an
appeal prior to the expiration of the 45-day time
period, the health plan or insurer shall make no
changes to its current information about the facility
until the appeal is completed.
Requires a health plan or insurer that provides such cost
or quality information to also disclose to its subscribers
and enrollees the following:
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1. Where the facility's quality measurements can be
found.
2. A disclaimer that the facility's quality
measurement provided is only a guide to choosing a
facility, that enrollees or subscribers should confer
with their existing facility before making decisions,
and that these measures contain an element of error
and should not be the sole basis for selecting a
facility.
3. Information explaining the facility's quality
measurement process, including the basis upon which
quality is measured and any limitations of the data
used.
4. Reasonable details on the factors and criteria used
to measure quality, including whether severity cost
adjustments have been utilized.
5. Information on how an enrollee or subscriber may
register a complaint or provide feedback about the
quality measurement system.
Makes any contractual provision that is inconsistent with
this bill void and unenforceable.
Defines "licensed hospital," consistent with existing law,
as an institution, place, building, or agency that
maintains and operates organized facilities for one or more
persons for the diagnosis, care, and treatment of human
illnesses to which persons may be admitted for overnight
stay, including any institution classified under
regulations issued by the State Department of Health
Services [now Department of Public Health (DPH)] as a
general or specialized hospital, as a maternity hospital,
or as a tuberculosis hospital, but does not include a
sanitarium, rest home, a nursing or convalescent home, a
maternity home, or an institution for treating alcoholics.
Defines "licensed health care facility" as any institution
or health facility, other than long-term health care
facility as defined in existing law, licensed by DPH to
deliver or furnish health care services.
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Defines "health care facility" as a licensed hospital or
any other licensed health care facility owned by a
licensed hospital.
Prohibits specified fines and penalties, established in
existing law, from applying to the provisions in this bill.
FISCAL IMPACT
This bill is keyed non-fiscal.
BACKGROUND AND DISCUSSION
According to the author, consumers are increasingly being
required to pay more attention to the cost of their care,
due to increasing deductibles and other cost sharing
arrangements. Often, consumers do not have the tools
themselves to make informed decisions based on cost and
quality of care because hospitals have prevented price and
quality information from being disclosed. Information and
tools are needed to help consumers make better, more
informed decisions on their care, particularly for those
consumers in a preferred provider organization (PPO)
product where the consumer pays 20 percent or more of their
total health care bill. The author contends that employers
have also increased their interest in price transparency,
in an effort to improve health care outcomes and slow the
growth rate of health care expenditures.
While the majority of hospitals in California already allow
this information to be shared, the author argues that some
hospitals are turning to "gag clauses" in contracts with
health plans and insurers that preclude the plan or insurer
from sharing cost and quality information about hospitals
with their enrollees. 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.
Quality measurement and price transparency
Price transparency encourages consumers and their
representatives to use price and quality information in
their health care decisions. Governments, employers, and
insurers are increasingly interested in price transparency,
in an effort to improve outcomes and slow the rate of
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health care expenditures. The concept behind price
transparency is to make comparative information on the
prices charged by health care providers for specific
services publicly available. The intent is to encourage
consumers, and others who make decisions on their behalf
(e.g., employers, health plans, referring practitioners),
to consider price alongside quality in deciding among
health care providers and services, ultimately to foster a
more value-driven health care delivery system.
According to a 2007 National Quality Forum report, price
transparency is not simply "pulling back the curtain" on
health care industry financial data, much of which might
not be useful for the typical consumer. To make price
information "actionable," it needs to be not only accurate
and reliable, but also specifically tailored to the
perspectives and needs of a particular audience.
The report points out that "relevant" information might be
different for each audience. Their different definitions of
"price" might include the following:
Retail Prices - list prices for services that are
charged by providers to patients who are not covered
by insurance or otherwise eligible for discounts.
Negotiated Prices - the price a provider agrees to
charge patients covered by a specific health plan. In
general, health plans and insurers with greater
purchasing power have greater leverage to negotiate
discounts.
Patient out-of-pocket payments (i.e., coinsurance,
deductibles, and exclusions) - the share the patient
is responsible for paying. This is the "price tag" of
most interest to patients and their families.
Health plans and insurers, under current law, are allowed
to establish economic profiles of providers and provider
groups. Efforts are underway nationally and in California
to also establish quality rating systems of individual
providers and provider groups.
Health plan quality and cost comparison tools
Aetna's DocFind section of its members-only website
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includes estimated health plan expenditures for each of 55
conditions in 15 categories (e.g., heart disease,
orthopedic conditions). Users choose a level of severity
for their condition (e.g., high severity indicates "care
requires a hospital stay"), and a zip code. For a
"high-severity" condition, the site reports the estimated
health plan expenditures for hospital, doctor, pharmacy,
and medical test services delivered by in-network providers
within the designated zip code, and explain the potential
for higher expenditures out of network and lower
expenditures if tests and procedures are performed in an
outpatient setting rather than in a hospital.
Cost estimates are based on a 12-month episode of care
using in-network providers. Estimates represent average
allowed payments from Aetna's claims data for its
commercial population. The reported expenditures do not
specify any deductible or coinsurance amounts that would be
the members' responsibility, nor are they provider
specific. The site also provides similar information for 28
"surgical and scope procedures" in 12 categories (e.g.,
breast conditions, head, neck). For these procedures both
an in-network and an out-of-network cost estimate are
provided, and the site indicates whether the estimate is
based on care in a hospital or outpatient setting. These
are all-inclusive "visit" expenditures (facility, surgeon,
and anesthesiologist bills plus tests, drugs, and supplies)
from time of admission to the facility until time of
discharge. A great deal of developmental effort is under
way to determine how to best define episodes of care for
common chronic conditions and to risk-adjust data to
account for differences in patient severity.
Other health plans and insurers are also developing similar
consumer tools, such as United Healthcare's Estimate Your
Treatment Cost web-based tool for subscribers and
enrollees. It is also likely that more health plans and
insurers will develop websites that personalize
price-shopping information for subscribers. By identifying
a subscriber when he or she logs in, a plan's website can
take into account the patient's benefits, exclusions,
remaining deductible, and other information and calculate
his or her out-of-pocket expenditures for an episode of
illness. This information, when combined with
provider-specific quality-of care measures, helps patients
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choose providers wisely.
Antitrust and cost inflation issues
As noted in a February 2008 California HealthCare
Foundation (CHCF) report, there are two major issues
related to price transparency involving health care
providers: 1) fears regarding antitrust violations, and 2)
the possibility of inadvertently contributing to a rise in
prices.
Providers may be concerned about exposure to federal
antitrust actions if they publicize negotiated prices.
However, in 1996, the Department of Justice and the Federal
Trade Commission established an antitrust "safety zone"
with several conditions, including a condition that pricing
be at least three months old.
Economists have found that, when a market is highly
concentrated and there is little competition, cost
transparency can lead to higher, not lower prices.
However, the CHCF report notes that, if prices are bundled
based on episodes of care, the information is not only more
useful, but less likely to lead to cost inflation.
Hospital quality rating 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), 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
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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 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
health plans and insurers provide comparative pricing and
quality information on hospitals, by geographic region.
Hospital rating and federal health care reform
The recently enacted federal health care reform act, the
Patient Protection and Affordable Care Act (PPACA),
contains significant and sweeping changes to the health
care and health insurance industry in the United States.
Among these changes are a number of provisions relating to
performance measurement and quality improvement, including:
1. Identifying gaps and developing missing quality
measures;
2. Promoting standardization of quality measures,
including convening a multi-stakeholder process to
develop a list of quality measures for use in public
reporting or payment;
3. Providing grants for the collection and aggregation
of data on quality and resource use measures for
public reporting;
4. Developing a core set of quality measures and
requiring the reporting of those requirements for
state Medicaid programs; and,
5. Requiring public reporting of physician performance
for physicians, including outcomes, patient experience
and other important indicators.
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Until federal regulations come out, it's unclear how PPACA
will impact hospital rating.
Arguments in support
Aetna, the sponsor of this bill, states that the cost of
health care 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 Association of Health Plans concurs, stating
that price and quality are two important factors that
patients should consider when purchasing health care
coverage and choosing where to receive health care
services. The California Association of Health
Underwriters also writes that this is an important measure
to support increasing transparency for health care costs.
Blue Shield of California writes in support of AB 2389,
stating that consumers routinely receive quality and cost
information on the vast majority of goods and services they
purchase, and that health care services should be no
different. Blue Shield also points out that hospitals
represent one of the biggest cost drivers in the system,
and cites a recent Sacramento Bee article that found that
Sutter Medical Center received $420 million in payments for
medical services from health plans in 2008-09 - 127 percent
more than it spent to provide those services.
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. The California Grocers
Association concurs and further points out that it is
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important to ensure that consumers have all information
available to make informed purchasing decisions regarding
their health care.
Arguments in opposition
The California Hospital Association (CHA) opposes this bill
on the basis that the bill allows public displays of
confidential contract information, without any protections
to ensure that information is meaningful, accurate and
reliable. Moreover, CHA believes that cost and quality
information should be required to be linked so that the
information is useful and "actionable" for consumers. CHA
believes that public disclosure of confidential information
related to negotiated contract rates could hurt
competition, raising issues of antitrust. CHA also asserts
that hospitals report that health plans frequently post
false information on their website regarding hospital costs
and quality. If hospitals are prohibited from addressing
this common problem contractually, insurers should be
required to provide hospitals the opportunity to validate
both cost and quality information with an appeals process
to make corrections and settle disputes over the data.
Sharp HealthCare writes in opposition, stating that
insurers should not be allowed to misrepresent that a
hospital is "high cost" when costs are higher because that
hospital treats the sickest and neediest patients. Some
hospitals, such as academic teaching hospitals, may see a
larger number of higher acuity cases, compared to other
facilities. Insurers should normalize cost data to
account for such differences in severity and complexity of
cases in order to achieve "apples-to-apples" comparisons.
Sharp HealthCare also points out that the bill, as
currently written, could exclude services reimbursed via
hospital capitation from its analysis. Such exclusion of
services misrepresents the overall and true cost to the
payer, by eliminating many of the lower cost cases, and
overstating the hospital's overall level of reimbursement.
Related bills
SB 196 (Corbett) of 2009, as introduced, 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. Substantively changed to another subject
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area before the first policy hearing.
AB 2533 (Fuentes) of 2009 requires plans and insurers to
annually submit their policies and procedures regarding
economic profiling and quality rating of physicians,
providers (including hospitals), medical groups, or
individual practice associations to DMHC and CDI,
respectively. Set for hearing in the Senate Health
Committee on June 30, 2010.
Prior legislation
SB 1300 (Corbett) of 2008 was substantively similar to SB
196 (Corbett) of 2009. Failed passage on the Senate Floor.
ABX1 1 (Nunez) of 2007 would have established a committee
to develop a plan to improve and expand public reporting of
health care safety, quality, and cost information, as
specified. ABX1 1 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. Vetoed by the Governor.
AB 8 (Nunez) of 2007 would have established a commission to
develop a plan similar to ABX1 1 (Nunez) of 2007. It would
have required its commission to publicly report certain
patient safety and quality indicators, and associated
infection rates, for each acute care hospital licensed in
California. Failed passage in the Senate Health Committee.
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
transparency plan, and would have made the Secretary
responsible for the timely implementation of the
transparency plan. Failed passage in the Senate
Appropriations Committee.
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 services rendered by participating
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hospitals to each member and annuitant. Requires this
information to be deemed confidential information.
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. Also
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.
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 website. Also requires OSHPD to
publish, and update online, a list of the 25 most commonly
performed inpatient procedures in California hospitals,
along with each hospital's average charges for those
procedures. 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.
PRIOR ACTIONS
Assembly Health: 17-0
Assembly Floor: 61-0
COMMENTS
1.Should hospitals have the ability to make appeals related
to their cost profile? The bill allows hospitals to review
quality of care data, and to appeal inaccurate data, as it
relates to the hospital's quality rating. It does not,
however, allow hospitals to make corrections related to the
claims data used to determine cost-ranges for specific
procedures. Claims data is used to determine both cost
ranges for procedures, and quality measurement of providers
and facilities. The sponsor argues that, since hospitals
are responsible for submitting their own claims data, there
is no reason for past claims, which have been validated and
paid, to contain errors with regard to cost of services.
Hospitals assert that claims data is limited, and may not
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capture certain issues, such as a hospital being purchased
since the claims data was collected. The author may wish
to take amendments that allow hospitals to make such
corrections.
2.Hospitals could file grievances with DMHC and CDI
concerning plan and insurer practices. Existing law
provides for a provider appeals process. This process
would be available to hospitals if they believe plans and
insurers are not complying with the provisions of this
bill.
3.Multiple overlapping definitions of facilities and entities
covered by the bill. The definitions specified in the bill
are unclear and overlap with other definitions in existing
law. The author may wish to strike existing definitions
and replace with the following clarifying amendment:
For the purposes of this section, "licensed hospital"
has the same meaning as defined in Section 1250 (a),
(b) and (f) of the Health and Safety Code.
4.Suggested technical amendments:
(a) On page 3, line 21, delete "entities whose
work in the" and delete lines 22 and 23, and
replace with:
entities nationally recognized for quality or
performance review.
(b) On page 3, line 30, replace "at appropriate
intervals, but not" with:
regularly, and no
(c) On page 4, strike lines 12-13, and insert:
plan shall not update or provide to enrollees new
information based on the data related to the
facility's appeal, beyond the prior information
provided until the appeal is completed.
(d) On page 4, line 20, after "facility" insert
"cost ranges and"
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(e) On page 4, strike out lines 32-33 and insert:
or provide feedback on the quality measurement
system or cost information provided by the plan.
(f) On page 4, line 35, replace "contractural"
with "contractual"
(g) On page 5, line 36, delete "entities whose
work in the" and delete lines 22 and 23, and
replace with:
entities nationally recognized for quality or
performance review.
(h) On page 6, line 5, replace "at appropriate
intervals, but not" with:
regularly, and no
(i) On page 6, strike lines 26-27, and insert:
not update or provide to insureds new information
based on the data related to the facility's appeal,
beyond the prior information provided until the
appeal is completed.
(j) On page 6, line 35, after "facility" insert
"cost ranges and"
(aa) On page 7, strike out lines 8-9 and insert:
or provide feedback on the quality measurement
system or cost information provided by the plan.
(bb) On page 7, line 11, replace "contractural"
with "contractual"
POSITIONS
Support: Aetna (sponsor)
100 Black Men of Los Angeles, Inc.
America's Health Insurance Plans
Association of California Life & Health Insurance
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Companies
Blue Shield of California
California Association of Health Plans
California Association of Health Underwriters
California Grocers Association
California Retailers Association
Safeway
Oppose: California Hospital Association
Sharp HealthCare
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