BILL ANALYSIS
SB 1236
Page 1
Date of Hearing: June 15, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 1236 (Alquist) - As Amended: June 10, 2010
SENATE VOTE : 35-0
SUBJECT : Medi-Cal: utilization controls.
SUMMARY : Creates a program where Treatment Authorization
Requests (TARs) shall not be required for inpatient
hospitalization of Medi-Cal beneficiaries at designated public
hospitals. Specifically, this bill :
1)Establishes a program in where state utilization controls
shall not be required for inpatient hospital services provided
by designated public hospitals, with participation being
optional for each hospital. Requires the Department of Health
Care Services (DHCS) to consult with designated public
hospitals in the development of the program.
2)Limits the program only to payments for Medi-Cal inpatient
claims where the non-federal share of expenditures are those
incurred by the designated public hospital or governmental
entity with which it is affiliated or are otherwise funded
with public funds transferred to the state from the designated
public hospital or local entity.
3)Provides that the program become inoperative if the Director
of DHCS executes a declaration specifying that the nonfederal
share of expenditures for inpatient hospitalization in
designated public hospitals is not comprised of funds paid and
certified by designated public hospitals in accordance with
applicable state and federal requirements or the program will
otherwise result in increased costs to the General Fund.
4)Requires DHCS to seek any necessary federal approvals,
including waivers and state plan amendments, for implementing
the above-described program, as specified.
EXISTING LAW :
1)Establishes the Medi-Cal Program as California's Medicaid
program, administered by DHCS, which provides comprehensive
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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.
2)Requires health care providers to file TARs with DHCS to
obtain authorization for various inpatient and outpatient
services to Medi-Cal beneficiaries.
3)Establishes a pilot project that allows DHCS to perform prior
authorization through a random sampling methodology in place
of individual approval.
FISCAL EFFECT : According to the Senate Appropriations
Committee, this bill would have potential increased federal fund
expenditures potentially in the hundreds of thousands to low
millions annually per hospital and could result in additional
workload to DHCS in the low hundreds of thousands of dollars to
fund additional one-time staff in fiscal year 2010-11. Funding
shared approximately 50% General Fund, 50% Federal Funds.
General Fund portion would be fully offset by public hospital
funds.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, the intent of
this bill 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
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pay these 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, this bill
would actually free DHCS staff to either conduct TAR reviews
elsewhere or perform other health care related duties.
2)BACKGROUND . Prior to the implementation of the current
Medi-Cal Section 1115 hospital financing waiver, the
nonfederal share of public hospital inpatient fee for service
costs were paid by General Funds. Under the waiver and the
implementing legislation, SB 1100 (Perata and Ducheny),
Chapter 560, Statutes of 2005, no General Funds are currently
used to reimburse public hospitals for services rendered to
Medi-Cal enrollees on a fee-for-service basis. The designated
public hospitals use certified public expenditures (CPEs),
which are made up of local funds, to match federal funds.
Public hospitals that treat Medi-Cal enrollees enrolled in
Medi-Cal Managed Care are reimbursed through Medi-Cal managed
care plans through a separate process.
The SCVMC 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% of the total number provided by the 11 hospitals in the
County. Medi-Cal accounts for approximately 46% 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% of the total monthly payment
received.
3)TAR PROCESS : Medi-Cal providers are required to obtain a TAR
for specific procedures before reimbursement can be approved.
Originally intended as prior authorization, the TAR process
has become a retroactive payment approval process. Generally,
providers mail or fax TARs to a specific field office or they
are submitted electronically and routed to the appropriate
field office.
Due to the high volume at SCVMC, instead of individual
submission, a state Review Nurse comes on site, reviews the
documents and medical records, authorizes the TAR and enters
it electronically in to the state system. According to the
sponsor, 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
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more than ten days per month to four days per month,
aggravating the delay. As a result, the hospital 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.
4)TAR REFORM . The Medi-Cal TAR system has been the subject of
critical review. According to a 2003 Medi-Cal Policy
Institute (MPI) Report, "Medi-Cal Treatment Authorization and
Claims Processing: Improving Efficiency and Access to Care,"
Outlook Associates, Inc., the Medi-Cal TAR system does not
meet the standards of most other systems. It requires
submission of a form, usually by mail, and turnaround time is
up to two weeks, as compared to two days in other systems.
The 2003 MPI Report also states that it has become more of a
retroactive payment approval process for services that have
been already rendered than the review of medical necessity and
quality that was originally intended and is typical in other
systems. At that time, the 2003 MPI Report noted that
hospital TARs were of a particular concern. The system of a
"per diem" evaluation as compared to a "per discharge" used by
other systems leads to lengthier and inconsistent
adjudications. The 2003 MPI Report also noted that most
payers were moving to other types of systems to accomplish the
goals of a TAR system which are reviewing medical necessity,
ensuring cost control and detecting fraud.
The California State Auditor recently issued a Report as well,
"Department of Health Care Services: It Needs to Streamline
Medi-Cal Treatment Authorizations and Respond to Authorization
Requests Within Legal Time Limits," May 2010, Report 2009-112,
(BSA May 2010 Report). The BSA MAY 2010 Report concludes that
DHCS is missing opportunities to streamline the provision of
Medi-Cal services and improve its level of service. The BSA
May 2010 Report states that DHCS manually adjudicates all
medical TARs even though it only denied a relatively small
portion of these TARs in almost half of the instances in
fiscal years 2007-08 and 2008-09. According to the BSA May
2010 Report, DHCS data does indicate that the TAR process as a
whole saves substantially more money in claims it avoids
having to pay to Medi-Cal providers than it costs to
administer. However, the BSA May 2010 Report concludes that
despite compelling reasons for DHCS to perform a cost-benefit
analysis of the segment of its TAR process associated with
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service categories with low denial rates, low service costs,
or high administrative costs it has not done so. According to
the BSA May 2010 Report, hospital days compromised almost 10%
of all TARs and had a denial rate of less than 4%.
5)MEDI-CAL SUPERIOR SYSTEMS WAIVER . The Health Budget Trailer
Bill of 2004, SB 1103 ( Committee on Budget), Chapter 228,
Statutes of 2004, authorizes DHCS to apply a sampling
methodology based on industry standards, to pursue additional
means to improve and streamline the TAR process and
specifically referenced the 2003 MPI Report. As a result, The
Medi-Cal Superior Systems Waiver (SSW) was established to
determine if an alternate approach best meets the state's
needs. California requested approval from the federal Centers
for Medicare & Medicaid Services (CMS) to conduct a pilot
project in selected public hospitals to test a utilization
review methodology that uses InterQual, a proprietary set of
standardized criteria for determining medical necessity.
The SSW was approved by CMS in December 2008 and its term ends
in December 2010. DHCS implemented the pilot project in early
2009. Two County hospitals currently participate, Alameda
County Medical Center and San Joaquin General Hospital.
According to DHCS, these hospitals use InterQual instead of
submitting TARs. They submit claims to Medi-Cal based on the
services authorized via InterQual. DHCS staff conducts site
visits to review charts from a sample of patients from each
hospital to compare the hospitals' utilization patterns (acute
in-patient days approved/denied, etc.) when InterQual and
Medi-Cal criteria are used. DHCS will be evaluating the data
to determine if it is successful and could be expanded to
facilities in other parts of the state.
This bill would permit the alteration of the utilization control
methods at up to 19 of the 22 designated public hospitals.
The SSW is up for its biennial renewal in December 2010, at
which time DHCS would renew the waiver as per usual and would
also, pursuant to this bill, apply to the federal government
to add any of the 19 designated public hospitals that apply to
the pilot project.
6)SUPPORT . According to Santa Clara County, the delay in TAR
review and subsequent authorization creates a significant
billing back-log and cash flow problem. For example, over a
recent four month period, there were anywhere from 279 to 426
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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 improved access to care
for Medi-Cal beneficiaries.
The California State Association of Counties points out in
support that the only General Fund expenditure involved in the
current process is the costly and time-consuming review of
TARs. This bill would eliminate this state review, freeing up
state time and resources.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Public Hospitals and Health Systems
California Children's Hospital Association
California Medical Association
California State Association of Counties
County of San Bernardino
County of Santa Clara
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097