BILL ANALYSIS
SB 364
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Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 364 (Florez) - As Amended: June 30, 2010
Policy Committee: Health Vote:17-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Legislature to create the Joint Task
Force on Hospital Conversion and Patient Care (task force) and
conditions the task force analytical work on the identification
of sufficient financial resources. This bill requires the task
force to evaluate substantive health policy and finance issues
related to health reform and the governance of medical
foundations. Specifically, this bill requires submission of a
study within 12 months of the task force being established to
address the following issues:
1)The governance structure of medical foundations relative to
pending landscape changes related to federal health reform and
the corporate status of health care entities.
2)Information on models of care that produce cost-effective
outcomes as well as the impact of federal statutory changes on
physicians and hospitals.
3)Current oversight of corporate conversions, the fiscal
consequences of conversions on the state, and access issues
for financially vulnerable communities.
4)Additional oversight mechanisms consistent with federal health
care reform to ensure responsible corporate conversions of
health care entities.
FISCAL EFFECT
1)One-time GF costs of $200,000 to evaluate substantive issues
related to governance, federal health reform, models of care,
cost-efficacy, oversight, and conversions. Studies of similar
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scope in recent years have ranged from $200,000 to $500,000.
2)Although the bill contains language about alternate funding
sources such as private funds or federal funds, no such
support has been identified at this time. If too many months
pass prior to gathering financial support to evaluate the
substantive analytical issues, the work product of the task
force may be outdated before it is finalized. Timing of the
research issues and applicability of findings will depend on
federal guidance related to integrated care models and
alternate financing mechanisms.
COMMENTS
1)Rationale . This bill requires substantial analysis and
evaluation of key issues related to integrated medical
practices that have formed or wish to form a medical
foundation. According to the author, there are a growing
number of California hospitals considering the formation of a
medical foundation. For example, the Hospital Association of
Southern California has been exploring the formation of a
single medical foundation to contract with physician groups,
operate clinics, and centralize billing and electronic
records. The author is concerned about the interaction between
health facilities profits and efficiencies and public benefits
that may be lost during such transactions or transitions. This
bill increases the amount of information available about
models of medical and governance integration.
2)Medical foundations allow hospitals and physicians to partner
to develop an integrated health care delivery system with
501(c)(3) tax-exempt status. For example, medical foundations
combine medical functions and patient medical records, improve
research through alignment with physician practice, reduce
overhead through economies of scale, and provide more
effective recruitment of providers. There are currently
several medical foundations in California, including those
affiliated with Children's Hospital Oakland, Catholic
Healthcare West, and Sutter Health.
3)Accountable Care Organizations . Federal health reform, the
Patient Protection and Affordable Care Act (PL-111-148),
creates a significant focus on accountable care organizations,
a new model of health system integration linked to payment
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reforms. Under the current law Medicare fee-for-service
system, providers are paid more the more treatment they
provide and hospitals earn more by increasing admissions. With
accountable care organizations, doctors and hospitals would
get paid based on holding down costs while maintaining
quality. Federal policy makers envision a system in which
doctors have a financial incentive to limit unnecessary tests
and encourage patients to exercise more and eat better. In
addition, payment mechanisms would be realigned to provide
hospitals incentives to keep patients out of the hospital.
4)Concerns . The California Hospital Association (CHA) is opposed
to this bill. CHA indicates current law provides ample
oversight of conversions related to the formation of medical
foundations. In addition, CHA has provided the author feedback
on narrowing study requirements to address various options for
clinical integration of health care delivery related to
opportunities in federal health reform.
5)Related Legislation . AB 3101 (Isenberg), Chapter 1105,
Statutes of 1996 provides the Attorney General with specific
oversight tools regarding the sale or other disposition of
assets, or transfer of control of assets, between nonprofit
health facilities and for-profit entities.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081