BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 1236
S
AUTHOR: Alquist
B
AMENDED: As Introduced
HEARING DATE: April 14, 2010
1
CONSULTANT:
2
Dunstan/cjt
3 6
SUBJECT
Medi-Cal: utilization controls
SUMMARY
Eliminates the requirement that the designated public
hospital in Santa Clara County comply with the requirements
for the state's Treatment Authorization Requests (TARs) for
inpatient hospitalization as long as the county is
providing the match for federal Medicaid reimbursement.
CHANGES TO EXISTING LAW
Existing federal law:
Establishes the Medicaid program to provide comprehensive
health benefits to low-income persons.
Existing state law:
Establishes the Medi-Cal program as California's Medicaid
program, administered by the Department of Health Care
Services (DHCS), which provides comprehensive health care
coverage for certain low-income individuals and their
families; pregnant women; elderly, blind, or disabled
persons; nursing home residents; and refugees who meet
specified eligibility criteria. Establishes a schedule of
benefits under the Medi-Cal Program, which includes
inpatient hospital services, subject to utilization
controls.
Continued---
STAFF ANALYSIS OF SENATE BILL 1236 (Alquist)Page 2
Requires health care providers to file TARs with DHCS to
obtain authorization for various inpatient and outpatient
services to Medi-Cal beneficiaries. Authorizes, in Alameda
County, that a county-hospital based utilization review
committee, rather than DHCS staff, to authorize
reimbursement for Medi-Cal services.
This bill:
Establishes a program where state utilization controls
shall not be required for inpatient hospitalization at
designated public hospitals in Santa Clara County. Limits
this program only to those instances where the non-federal
share of expenditures for Medi-Cal shall be funds from the
County of Santa Clara and are certified as public
expenditures. Provides that this section shall become
inoperative on the date the Director of Health Care
Services executes a declaration specifying that the
nonfederal share of expenditures for inpatient
hospitalization are not comprised of funds from the County
of Santa Clara.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
The author states that the intent of SB 1236 is to allow Santa
Clara Valley Medical Center (SCVMC), the hospital owned and
operated by the County of Santa Clara, to self-certify Medi-Cal
TARs. According to the author, self-certification would allow
for more timely reimbursement to the county, eliminate work for
the state, and reduce costs for the state associated with
staffing TAR reviews at SCVMC. The author argues that the
county has struggled to cope with the delays in TAR review for
years, but that the situation has grown much more dire as - like
the state - the county has struggled with several years of
budget reductions and an increasingly serious cash-flow problem.
The author also argues that since the county is using their own
funds as the source of federal match, they have every incentive
to treat patients appropriately and economically, without
needing the state TAR process. The author also points out that,
since the state no longer uses the General Fund to pay these
STAFF ANALYSIS OF SENATE BILL 1236 (Alquist)Page 3
hospitals, there is no fiscal risk for the state. The author
argues that since the bill would change the state's role in TAR
review for a large Medi-Cal provider, SB 1236 would actually
free DHCS staff to either conduct TAR reviews elsewhere or
perform other health care related duties.
Treatment authorization requests
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.
A July 2003 report by Outlook Associations, Inc. published
by the California Health Care Foundation entitled "Medi-Cal
Treatment Authorizations and Claims Processing: Improving
Efficiency and Access to Care" states most prior
authorization programs ascribe to three key objectives:
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;
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,
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
STAFF ANALYSIS OF SENATE BILL 1236 (Alquist)Page 4
before payments are made, thereby enabling the elimination
of prior authorization for the specific purpose of
detecting fraud.
The report also found that for services that require prior
authorizations, Medi-Cal takes either the same amount of
time or longer than other organizations to pay its
providers as measured from the date of service. The report
also noted that as a result of delays in TAR evaluations,
Medi-Cal providers may place themselves at financial risk
and Medi-Cal beneficiaries may be placed at medical risk,
thereby compounding the issue of access to medical care.
Background
The Santa Clara Valley Health and Hospital System provides
the majority of Medi-Cal inpatient services for Santa Clara
County residents enrolled in Medi-Cal. In 2008, SCVMC
provided 71,695 Medi-Cal inpatient days, which is 56.2
percent of the total number provided by the 11 hospitals in
the County. Medi-Cal accounts for approximately 46 percent
of the total payments received by SCVMC each month - with
total monthly payments in the $38 million range, of that
Medi-Cal inpatient accounts are approximately 20 percent of
the total monthly payment received.
Under current law, to receive federal reimbursement for
Medi-Cal services provided at the hospital, SCVMC submits
TARs to DHCS to obtain authorization for medical services.
With DHCS's approval, services are then authorized for
federal reimbursement. Before submitting a TAR for
reimbursement, a State Review Nurse must come on site,
review documents and medical records, authorize the TAR and
enter it in to the state system. As a result, the county
incurs some delay before they can receive their federal
reimbursement. The TARs are approved retroactively, so
patient health and safety is not compromised by the delay.
The TAR process dates back to a period when the General
Fund was sued to pay public hospitals. That is no longer
the case as the framework for paying public hospitals for
Medi-Cal has changed markedly in the last several years.
SB 1100 authored by Senators Ducheny and Perata, (Chapter
560, Statutes of 2005), established this new statutory
framework for implementing the current hospital waiver.
Under the waiver, federal funds are matched by certified
public expenditures (CPEs) for health care services
STAFF ANALYSIS OF SENATE BILL 1236 (Alquist)Page 5
provided in public hospitals and county clinics. CPEs are
local expenditures for providing health care to Medi-Cal
recipients and the uninsured. Twenty-two designated public
hospitals use CPEs to claim federal funds under Medi-Cal.
Because of this significant change for designated public
hospitals, no state General fund money is used for payments
to the county.
The existing exemption for Alameda County did result in
fewer TARs being denied and resulting higher Medi-Cal
costs. These higher medical costs were the basis for
Governor Davis' veto of a similar bill, AB 436, which would
have extended the exemption to Santa Clara County.
However, the Alameda County experience occurred before the
new hospital waiver. Hence, the General Fund was being
used to pay public hospitals, not local funds, an
arrangement that provided an incentive to approve more
TARs.
Prior legislation
AB 436 (Lieber) of 2003 would have allowed Santa Clara
Valley Medical Center to self-certify TARs. This bill was
vetoed by the Governor.
Arguments in support
According to Santa Clara County, the bill's sponsor, the
delay in TAR review and subsequent authorization creates a
significant billing back-log. They note that due to the
State's budget situation, and compounded by staff
furloughs, the number of days that state Review Nurses are
on site at SCVMC has dropped dramatically- from more than
ten days per month to four days per month, aggravating the
delay. They report that the delay in TAR-approval causes a
significant cash flow problem noting, that over the past
four months there have been anywhere from 279 to 426
admissions pending review, creating a delay in payment to
the county of $4 to $7 million. The county argues that
they would approve TARs through a hospital-based
utilization review committee and that process would be
subject to a retrospective audit conducted by the state to
ensure the appropriateness of all claims.
The California Children's Hospital Association supports the
bill because they see it freeing up state resources that
could be used at other hospitals, including children's
hospitals. They argue that this move could result in
STAFF ANALYSIS OF SENATE BILL 1236 (Alquist)Page 6
improved access to care for Medi-Cal beneficiaries. By
redirecting the state resources, other hospitals could gain
TAR approval and submit claims in a more timely manner,
reducing waiting time for Medi-Cal beneficiaries.
POSITIONS
Support: County of Santa Clara (sponsor)
California Children's Hospital Association
Oppose: None received
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