BILL ANALYSIS
SB 1236
Page 1
Date of Hearing: June 30, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1236 (Alquist) - As Amended: June 10, 2010
Policy Committee: Health Vote:18-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the California Department of Health Care
Services (DHCS) to establish an alternative to the use of
designated public hospital inpatient Treatment Authorization
Requests (TARs). TARs are the route by which providers receive
authorization for specified treatments and services provided on
behalf of Medi-Cal patients. Specifically, this bill:
1)Requires DHCS to consult with designated public hospitals in
the development of the alternative to TARs. Provides hospitals
with the option of participating in the program established by
this bill.
2)Authorizes DHCS to utilize other processes, including a pilot
project, to meet the needs of a particular designated public
hospital.
3)Requires DHCS to pursue a federal state plan amendment or a
waiver to ensure receipt of federal funding support for
alternatives established by this bill.
4)Requires the alternative TARs process established by this bill
to become inoperative if it results in increased GF costs or
public hospitals use funds other than public funds to draw
down federal financial participation.
FISCAL EFFECT
1)Annual costs to DHCS in the range of $200,000 (50% GF/50%
federal) to consult with public hospitals, establish an
alternative to TARs processes, acquire appropriate federal
approvals, and continue oversight of Medi-Cal payments to
designated public hospitals choosing to participate in the
alternative process established by this bill. A prior version
SB 1236
Page 2
of this bill contained a mechanism by which local funds would
pay the GF portion of the DHCS workload. This bill no longer
contains that funding mechanism.
2)An unknown impact on inpatient Medi-Cal reimbursements paid to
public hospitals to the extent the newly established processes
result in fewer denials for inpatients services than currently
determined by DHCS TARs processes. According to general DHCS
data, approximately 7% of public hospital inpatient TARs were
denied in a recent year. These denials were associated with
spending in the range of $45 million (50% local certified
public expenditure/50% federal) across the 21 designated
public hospitals.
COMMENTS
1)Rationale . This bill is sponsored by the Santa Clara Valley
Medical Center (SCVMC) to improve the TARs process for
inpatient hospital services. The author and sponsor indicate
the TARs process is burdensome and can lead to substantial
delays. Such delays and complications are of particular
concern for public hospitals that rely on Medi-Cal for a
substantial portion of hospital income. The author and sponsor
understand the need for some authorization mechanism, but wish
to find a more streamlined approach to reduce hospital burdens
while balancing the need for oversight. The author and sponsor
justify separate treatment for this group of hospitals because
these inpatient costs are 50% local (certified public
expenditures) and 50% federal Medicaid funds, in contrast to
other hospitals which rely on state general fund for 50% of
inpatient reimbursements.
2)Background . The Medi-Cal TARs Process is California's method
of utilization review. Some version of utilization review is
required by federal Medicaid law. The TARs process is designed
to control costs by ensuring Medi-Cal beneficiaries receive
medically necessary services using the least costly
alternative. Medically necessary services are defined as
services that are reasonable and necessary to protect life,
prevent significant illness or disability, or to alleviate
severe pain. Certain medical procedures, services, and
equipment require authorization before the provider can submit
a claim for payment. TARs are submitted by paper or
electronically to field offices located throughout the state.
Doctors, nurses, and pharmacists, then manually review TARs
for medical necessity and to determine whether the requested
services or drugs are covered by Medi-Cal.
SB 1236
Page 3
3)Pilot Underway in Two Counties . A pilot project addressing an
alternative TAR process is currently underway in two counties
with designated public hospitals. Alameda County Medical
Center and San Joaquin General Hospital use InterQual instead
of submitting TARs. InterQual is a proprietary clinical
decision support tool by McKesson Health Solutions. DHCS staff
then 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
indicates if this pilot program is determined to be
successful, it may be expanded to other parts of the state.
Final results of the pilot program are not yet available.
4)Recent Audit . In May of 2010 the Bureau of State Audits
released a report about the need to streamline Medi-Cal TARs
and to complete TARs processes within statutory timelines. The
audit concluded that special attention needs to be paid to
considering removing TARs for services with low costs and low
rates of denials. Although inpatient hospital services were
not a particular focus of the audit, the report may provide
further specificity to the approach proposed in this bill.
5)Related Legislation . AB 613 (Beall) in 2009 required DHCS to
improve and streamline the TAR process by expediting
processing timelines, conducting TARs cost-benefit analyses,
and reducing the number of TARs required. AB 613 was held on
the Suspense File of this committee.
AB 436 (Lieber) in 2003 authorized Santa Clara Valley Medical
Center to self-certify TARs. The bill was vetoed due concerns
about DHCS staffing costs and concerns about increased costs
associated with a reduced levels of TARs denials.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081