BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 196
S
AUTHOR: Corbett
B
AMENDED: As Introduced
HEARING DATE: April 1, 2009
1
CONSULTANT:
9
Park/cjt
6
SUBJECT
Health care coverage: provider contracts
SUMMARY
Prohibits a contract between a health care provider and a
health care service plan or health insurer from containing
a provision that restricts the ability of the health plan
or health insurer to furnish information on the cost of
procedures or health care quality information to its
enrollees or insureds. Requires health plans and health
insurers to meet specified requirements when providing
health care quality information it has compiled. Exempts
dental plans contracts and policies from these provisions.
CHANGES TO EXISTING LAW
Existing law:
Existing law provides for the licensure and regulation of
health care facilities by the Department of Public Health.
Existing law also provides for the licensure of health care
professionals by various licensing boards. Existing law
provides for the licensure and regulation of health care
service plans (health plans) by the Department of Managed
Health Care (DMHC) and health insurers by the California
Department of Insurance (CDI).
Continued---
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 2
Existing law 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.
Existing law requires each hospital 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.
Existing law also requires hospitals to submit a copy of
their CDM to the Office of Statewide Health Planning and
Development (OSHPD) and allows OSHPD to post this
information on the agency's web site.
Existing law requires hospitals to submit their average
charges for 25 common outpatient procedures, as specified,
annually to OSHPD, which is required to publish this
information on its web site. Existing law also 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. Existing law further
requires OSHPD to publish risk-adjusted outcome reports for
medical, surgical, and obstetric conditions or procedures,
as specified.
Existing law requires hospitals to provide to a person who
has no health coverage, upon request, 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.
This bill:
This bill would prohibit a contract between a health care
provider 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 health carrier enrollees or insureds.
If a carrier proposes to disclose health care quality
information that the carrier has compiled, the bill would
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 3
require the carrier to satisfy the following requirements:
The carrier must base the quality information on
nationally recognized evidence-based or consensus-based
clinical recommendations or guidelines, and, when
available, use measures endorsed by the National Quality
Forum or other entities whose work in the area of quality
performance is generally accepted in the health care
industry.
The carrier must utilize risk adjustment factors, with
appropriate and transparent statistical techniques, to
account for differences in the use of health care
resources among individual health care providers.
The carrier must update the information at appropriate
intervals.
The carrier must, prior to furnishing the information to
its enrollees or insureds, involve health care providers
in the development of the information and provide to any
affected health care provider: 1) a minimum of 45 days
written notice to review the information; 2) the criteria
used in the development and evaluation of quality
measurements, and 3) an explanation to the provider that
he or she has the right to correct errors and seek review
of the data and that he or she may submit any additional
information for consideration.
The carrier must ensure that criteria used in the
development of quality measurements is sufficiently
detailed and reasonably understandable to allow the
provider to verify the data against his or her records.
The carrier must provide a reasonable, prompt, and
transparent appeal process, and make no changes to its
current information about the provider until the appeal
is completed, if a provider makes a timely appeal.
The bill would prohibit a health care service plan or
health care provider from disclosing negotiated capitation
rates or other prepaid arrangements to subscribers or
enrollees of the plan.
The bill would require carriers, to the extent possible, to
display inpatient facility treatment costs that are
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 4
associated with a given episode of care, including, but not
limited to, diagnostic tests, prescription drugs, hospital
days, and physician fees.
The bill would exclude specialized health care service
plans covering dental benefits and dental insurers from
these provisions. The bill would provide that any
contractual provision inconsistent with these provisions is
void and unenforceable.
The bill would define, for the purposes of meeting these
provisions, "information on the cost of procedures" to mean
information that an enrollee or insured of a carrier may
use to make comparisons among individual health care
providers or health care facilities concerning the cost to
the enrollee or insured of health care treatment options.
The bill would define "health care provider" to mean any
professional person, medical group, independent practice
association, organization, health facility, other than a
long-term health care facility, as defined, or other person
or institution licensed or authorized by the state to
deliver or furnish health care services.
FISCAL IMPACT
According to an Assembly Appropriations Committee analysis
of a similar measure, (SB 1300-Corbett of 2007-08), these
provisions would result in an absorbable additional
workload to the DMHC and CDI to monitor the contract clause
prohibition established by this bill as a part of routine
contract review.
BACKGROUND AND DISCUSSION
Author's statement
The author asserts that, when deciding what products and
services to buy, most consumers base their decisions on
price and quality, and that health care should be no
different. The author believes that, given the personal
nature of health care, it's more important for consumers to
have information on health care services, than any other
services or products. The author states that this measure
is needed to ensure that health insurers are not restricted
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 5
in providing cost and quality information to consumers.
Price transparency
Government, health carriers, and employers have increased
their interest in price transparency in an effort to 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, health
carriers, and referring practitioners) to consider price
and quality in deciding among providers and services.
According to a February 2008 issue brief published by the
California HealthCare Foundation (CHCF), consumers are
paying more attention to the cost of their health care
because they have greater responsibility for paying for it.
Since 2000, California workers have experienced increases
in deductibles for PPO coverage. The percentage of single
workers with a PPO deductible of $500-$999 increased from 9
percent in 2000 to 21 percent in 2007. Overall, 9 percent
of Californians with individual or employment-based
coverage from a state-licensed health plan or health
insurer are in high deductible products (carriers with a
deductible in excess of $1,050). In addition to higher
deductibles, the use of health savings accounts and
increasing rates of uninsured are also driving the need for
greater price transparency.
CHCF's 2008 issue brief indicates that price information
that is useful or actionable for consumers must enable
comparisons among different providers and different
treatment options; be clearly written and formatted and
customized for the user's language preference and
comprehension level; cover all the costs associated with a
given episode of care (such as treatment for a heart
condition), including diagnostic tests, prescription drugs,
hospital days, and physician fees before, during, and after
hospitalization; and be linked to quality information. CHCF
advises that information should also be tailored to the
financial liability that consumers bear for their health
care, whether it is information that focuses on copays,
deductibles, and exclusions for the insured, or how to
negotiate assistance for the uninsured. CHCF notes that
higher prices should not be mistaken for higher quality,
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 6
and a strategy for considering both quality and price
starts with information on quality.
Existing law does not prohibit or prevent health carriers
from furnishing information on the cost of procedures, and
at least one health plan provides its enrollees with
information so they can evaluate cost and quality. However,
contractual agreements between health carriers and
providers can prevent this information from being released,
particularly when a large provider has market power.
Quality transparency
Despite spending more on health care per capita than any
other industrialized country in the world, Americans have
only a 50 percent chance of receiving appropriate
evidence-based care, according to RAND. Additionally, the
U.S. health care system has the highest proportion of
deaths that could have been prevented by proper medical
care among industrialized nations.
According to testimony provided by CHCF in a recent
informational hearing on transparency in health care held
by the Assembly Health Committee, quality transparency is
important for several audiences. For hospitals and other
providers, displaying reliable quality data for individual
providers, and showing how these results compare to state
and national peers, helps focus their quality improvement
efforts and gauge their own success. For health plans and
other health care purchasers, quality information helps to
determine where to send their employees or enrollees and to
determine whether costs are justified. For consumers,
quality information is needed to make choices when they are
available, although historically consumers have not
utilized quality information that is currently available
online.
Several quality measures and initiatives for health plans
and providers exist at the national and state levels,
including: the Healthcare Effectiveness Data and
Information Set (HEDIS), developed by the National
Committee for Quality Assurance, and used by health plans
to measure quality of care at the physician and medical
group level; the California Health Policy and Data Advisory
Commission, which advises OSHPD and the California Health
and Human Services Agency on the collection and
dissemination of useful and appropriate health care quality
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 7
and costs data; the OPA, which issues an annual quality of
care report card on health plans and medical groups; the
California Hospital Assessment and Reporting Taskforce,
which has developed a statewide hospital performance
reporting system using a multi-stakeholder collaborative
process and which released its first report card of
hospitals in March 2007; and the California Cooperative
Healthcare Reporting Initiative, a collaborative of health
care purchasers, plans and providers, convened in 1993 by
the Pacific Business Group on Health to help consumers and
purchasers make informed health care purchasing decisions.
California Cooperative Healthcare Reporting Initiative
(CCHRI)
Nine health plans, including Aetna, Anthem Blue Cross, Blue
Shield, CIGNA, Health Net, Kaiser Permanente Northern
California, Kaiser Permanente Southern California,
PacifiCare, and Western Health Advantage, which represent
more than 90 percent of the commercial covered lives in
California, participate in CCHRI data collection projects.
Purchasers representing nearly three million California
employees, retirees and their families, and physician
organizations including more than 150 medical groups and
independent physician associations, as well as California
Association of Physician Groups, California Hospital
Association, California Medical Association, and Permanente
Medical Groups, also participate.
CCHRI's mission is to collect and report standardized,
reliable health plan and provider performance data; promote
the use of accurate and comparable quality measures; and
create efficiency in data collection that reduces burden
and cost to all participants. In 2007, CCHRI produced
physician-level clinical measures based on aggregated data
from the three largest PPO plans and Medicare.
Commercial health plan initiatives on price transparency
According to a 2007 National Quality Forum issue brief on
price transparency, Aetna provides members with estimated
health plan expenditures for each of 55 conditions in 15
categories (e.g., heart disease, orthopedic conditions) on
its web site. Users choose a level of severity for their
condition and a ZIP code, and receive estimated health plan
expenditures for hospital, doctor, pharmacy, and medical
test services delivered by in-network providers within the
designated area. Aetna's system also explains the
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 8
potential for higher expenditures if services are provided
by out-of-network providers and lower expenditures if tests
and procedures are performed in an outpatient setting
rather than in a hospital. According to the same brief,
UnitedHealthcare also provides estimates of treatment costs
for members on its web site according to a member's plan
design and the amount of the member's deductible expended
to date. Members can select one of 15 clinical categories
(such as "bones and joints") or select from longer lists of
common diseases, surgeries, and procedures (86 options),
office visits and tests, or drugs.
Governor's executive order
In March 2007, Governor Schwarzenegger issued an executive
order announcing key actions that the state would pursue to
advance the adoption of health information technology,
strengthen transparency of quality and pricing information,
and promote quality and efficiency of health care services.
One of the key actions of the order was to strengthen the
ability of OSHPD to collect, integrate and distribute data
on health outcomes, costs, utilization, and pricing for use
by purchasers, health plans, consumers, and providers, to
help inform and drive decision making, with pricing
information developed with thoughtful consideration and
using stakeholder participation and research.
Prior legislation
SB 1300 (Corbett, 2008) would have prohibited a contract
between a health care provider and a health care service
plan or health insurer (collectively health carriers) from
containing a provision that restricts the ability of the
health carrier to furnish information on the cost of
procedures or health care quality information to health
carrier enrollees. Failed on concurrence on the Senate
Floor.
ABX1 1 (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. 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. AB 8 would have
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 9
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
ABX1 1 failed passage in the Senate Health Committee.
AB 2967 (Lieber, 2008) 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 made the Secretary responsible for the timely
implementation of the transparency plan. Died on the Senate
inactive file.
AB 1296 (Torrico), Chapter 698, Statutes of 2007, requires
a health plan or contractor offering health benefits to
PERS members and annuitants to disclose to PERS 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.
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.
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.
Arguments in support
Supporters, such as the Association of California Life and
Health Insurance Companies, California Association of
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 10
Health Plans, and California School Employees Association,
believe that this measure encourages consumers to be more
involved in decisions surrounding their health care,
empowers them to make well-informed choices, and ultimately
keeps the cost of health care down.
The National Federation of Independent Business (NFIB)
states that only about 40 percent of small businesses can
afford to provide health care coverage for their employees,
leaving almost two-thirds of small businesses at a
competitive disadvantage to large employers in attracting
qualified employees. NFIB writes that this measure will
potentially reduce rising premiums and provide more
affordable coverage options for many uninsured
Californians.
The California Association of Health Underwriters (CAHU)
writes that transparency is one of the critical elements of
successful health care reform. CAHU states that the
information barriers removed by this bill will help
consumers find products that better fit their needs.
Health Access California believes that the lack of accurate
information about pricing is a problem for consumers and
policymakers, and benefits medical groups, hospitals, and
drug companies. Health Access states that current law
requiring disclosure of "charges" are the equivalent of
sticker price, which bears little relationship to the
prices paid by commercial insurers and government programs.
Health Access believes that public disclosure of the cost
of a procedure would help consumers accurately compare the
value of the care they receive.
Arguments in opposition
Taking an oppose unless amended position, the California
Medical Association (CMA) writes that it supports the goal
of providing information to patients to assist in health
care decisions, but believes the process established by
this measure is flawed. CMA contends that this bill allows
HMOs and insurers to unilaterally decide what constitutes
quality healthcare information. CMA highlights the
experience of the California Cooperative Healthcare
Reporting Initiative (CCHRI), a project that CMA is
currently participating in, as evidence of the challenges
in providing fair and accurate information.
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 11
CMA states that, in the first attempts at quality reporting
by the CCHRI, physicians found that insurance claims data
is often inaccurate. CMA reports that physicians were
credited with treating patients they never saw and not
credited with patients they did see. CMA further reports
that physicians were criticized for not performing invasive
procedures that the insurers' data called for, when the
procedure actually was performed by other members of the
same physician group, and that physicians were downgraded
for not duplicating care that was performed by the another
physician. CMA states that inaccuracies in information will
disadvantage patients, such as when a patient may think he
or she is choosing to receive care from the preeminent
provider in the area, only to find that the physician
rarely performs the needed care, or when inaccurate
risk-adjustment causes patients to discount a physician
that takes the most complicated and difficult cases because
more adverse outcomes are reported.
Also taking an oppose unless amended position, the
California Hospital Association writes that it supports
health care cost and quality transparency that is
meaningful and useful for insured Californians, but
recommends numerous amendments to the measure, including:
legislative intent that addresses antitrust issues;
preserving the ability to negotiate confidentiality clauses
that accommodate the disclosure of cost and quality
information as contemplated by the bill; provisions that
allow providers to inform enrollees or insureds of
available discounts and to extend such discounts at the
provider's discretion; a process for providers to validate
cost information that the carrier wishes to disseminate,
similar to the process the bill establishes for validation
of quality measures; require the linking of information on
cost of procedures to information about health care
quality; requiring risk adjustment factors used by carriers
in the reporting of cost and quality information to be
mutually agreed upon; displaying providers responses
alongside quality of care data; prohibiting the
dissemination of information under appeal under any
circumstance; prohibiting carriers from disclosing
negotiated fee-for-service rates, similar to the
prohibition on disclosure of capitation rates; limiting the
number of procedures for which information can be disclosed
to the 25 most common inpatient and 25 most common
outpatient procedures; limiting information on the cost of
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 12
procedures to those that are performed by a provider more
than 50 times a year; basing information on cost of
procedures on episodes of care that prevent the disclosure
of any single expense, and that are specific to a plan or
policy benefit level; requiring DMHC and CDI to develop a
uniform format for dissemination of information and
requiring approval by the carrier's applicable regulator
prior to dissemination; revised definitions; required
disclaimers; and other related changes.
COMMENTS
1.Refinements to the bill's provisions are necessary. Given
the extensive work on quality and price transparency that
is being undertaken at the state level, the author may
wish to consult with various parties to refine several
provisions of the bill, including any appropriate
requests for amendments. Examples of such refinements
might include: What is considered timely appeal and what
are appropriate intervals for updating price and quality
information? What is considered "involvement" on the part
of health care providers that the bill requires health
plans to engage in, and does this involvement extend to
the development of the appeal process? How should
information that some plans already provide be treated in
context of the bill's requirements? Staff recommends that
the author continue to work with interested parties to
refine the process for health plan dissemination of cost
and quality information, and resolve and clarify
remaining questions.
2.Treatment costs by episode of care. The author indicates
that the language on page 3, lines 24-32, and page 5,
lines 5-13, regarding the display of treatment costs
based on an episode of care should apply to outpatient
treatment costs as well as inpatient facility treatment
costs. Staff recommends the following amendment to
conform the language with the intent:
Page 3, lines 24-32:
(1) "Information on the cost of procedures" means
information that an enrollee or subscriber of a health
care service plan may use to make comparisons among
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 13
individual health care providers or health care
facilities concerning the cost to the enrollee or
subscriber of health care treatment options.
Information on the cost of procedures shall be
displayed as an episode of care, unless an episode of
care is not applicable, and shall include, but not be
limited to, applicable diagnostic tests, prescription
drugs, hospital days, and physician fees that are
associated with a typical procedure or illness. A
health care service plan shall, to the extent
possible, display inpatient facility treatment costs
that are associated with a given episode of care,
including, but not limited to, diagnostic tests,
prescription drugs, hospital days, and physician fees.
Page 5, lines 5-13:
(1) "Information on the cost of procedures" means
information that a policyholder or insured of a health
insurer may use to make comparisons among individual
health care providers or health care facilities
concerning the cost to the policyholder or insured of
health care treatment options. Information on the cost
of procedures shall be displayed as an episode of
care, unless an episode of care is not applicable, and
shall include, but not be limited to, applicable
diagnostic tests, prescription drugs, hospital days,
and physician fees that are associated with a typical
procedure or illness. A health insurer shall, to the
extent possible, display inpatient facility treatment
costs that are associated with a given episode of
care, including, but not limited to, diagnostic tests,
prescription drugs, hospital days, and physician fees.
POSITIONS
Support: Aetna
American Federation of State, County and Municipal
Employees, AFL-CIO
STAFF ANALYSIS OF SENATE BILL SB 196 (Corbett)Page 14
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Association of Health Underwriters
California School Employees Association
California Teachers Association
Health Access California
National Federation of Independent Business
Oppose: California Hospital Association (unless amended)
California Medical Association (unless
amended)
-- END --