BILL ANALYSIS �
SB 359
Page 1
SENATE THIRD READING
SB 359 (Ed Hernandez)
As Amended August 24, 2012
Majority vote
SENATE VOTE : 38-0
HEALTH 14-0 APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Monning, Logue, Atkins, |Ayes:|Fuentes, Harkey, |
| |Bonilla, Eng, Garrick, | |Blumenfield, Bradford, |
| |Gordon, Hayashi, Roger | |Charles Calderon, Campos, |
| |Hern�ndez, Mansoor, | |Davis, Donnelly, Gatto, |
| |Mitchell, Nestande, Pan, | |Hall, Hill, Lara, |
| |Williams | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
| | | | |
-----------------------------------------------------------------
SUMMARY : Authorizes health care service plans (health plans) to
adjust payment to specified hospitals for prestabilization
emergency services and care when a hospital exceeds an
out-of-network emergency utilization rate of 50% or greater.
Specifically, this bill :
1)Authorizes a health plan, or its contracting medical provider,
that is obligated to reimburse providers for emergency
services and care provided to its enrollees prior to
stabilization, as specified, to adjust its reimbursement to
hospitals in accordance with 3) below.
2)Requires a hospital with an out-of-network emergency
utilization rate of 50% or greater to notify payers at the
time the hospital submits bills, statements, or other demands
for payment for emergency services and care provided to a
patient prior to stabilization, as specified, that the
hospital's out-of-network emergency utilization rate is 50% or
greater and therefore its billed charges for emergency
services may be subject to adjustment, as specified in 3)
below.
3)Requires the adjustment to be such that the hospital's total
expected payment from a payer for emergency services and care
prior to stabilization shall be 60% of the payer's average
in-network payments for similar emergency services and care
SB 359
Page 2
prior to stabilization. Authorizes a payer that receives the
notification made by a hospital to adjust the reimbursement to
the hospital pursuant to this bill.
4)Establishes the "out-of-network emergency utilization rate" as
the percentage of all emergency department encounters at a
hospital during the course of the reporting period that are
out-of-network for local, privately insured patients.
Requires this rate to be calculated by dividing a hospital's
total number of major emergency department encounters during
the rate reporting period that involved local, privately
insured patients for whom the emergency services and care
provided were out-of-network, by the hospital's total number
of major emergency department encounters that involved local,
privately insured patients.
5)Defines "rate reporting period" as a three-year period,
provided that if the most recent calendar year ended within
the previous 90 days, then data for the three-year period used
to calculate the out-of-network emergency utilization rate
shall be taken from the three calendar years preceding the
most recently completed calendar year.
6)Provides that if a contract, including a contract with a
health insurer, health care service plan, or other health care
coverage provider, governs the adjustment of the total billed
charges for prestabilization emergency services and care
provided to a patient by the hospital, the contract shall
control.
7)Exempts designated public hospitals, as specified, and a
hospital owned and operated by an entity that is a city,
county, a city and county, the State of California, the
University of California, a local health or hospital
authority, a health care district, any other political
subdivision of the state, any combination of political
subdivisions of the state organized pursuant to a joint powers
agreement, or a new hospital, as specified, from the
provisions of this bill. Exempts a rural general acute care
hospitals, small and rural hospitals, as defined, a general
acute care hospital that is located within both of the
following: a county with a population of 1,500,000 or less
according to the 2010 federal census, and a medically
underserved population, medically underserved area, or a
health professions shortage area, as designated by the federal
government.
SB 359
Page 3
8)Exempts a hospital that is part of a health system in which,
as of January 1, 2013, at least 50% of the hospitals are rural
general acute care hospitals, as defined, or small and rural
hospitals, as defined, provided that the health system
includes at least five hospitals that are either rural general
acute care hospitals or small and rural hospitals. For the
purposes of this provision, hospitals that are part of the
same health system if they are owned, operated, or
substantially controlled by the same person or other legal
entity or entities, and hospitals are considered separate
hospitals if they are located at least one mile apart and each
has at least 30 beds, regardless of whether the hospitals
operate under the same license.
9)Sunsets this bill on January 1, 2017, unless another statute
extends or deletes that date.
EXISTING LAW :
1)Requires in federal law, under provisions of the federal
Emergency Medical Treatment and Active Labor Act (EMTALA),
hospital emergency departments to provide emergency screening
and stabilization services without regard to the patient's
insurance status or ability to pay. EMTALA requires hospitals
to maintain an on-call roster of specialists in a manner that
best meets the needs of its patients.
2)Regulates health plans under the Knox-Keene Health Care
Service Plan Act of 1975 through the Department of Managed
Health Care.
3)Requires a health plan, or its contracting medical providers,
to reimburse providers for emergency services and care
provided to its enrollees, until the care results in
stabilization of the enrollee, except as specified. As long
as federal or state law requires that emergency services and
care be provided without first questioning the patient's
ability to pay, a health plan shall not require a provider to
obtain authorization prior to the provision of emergency
services and care necessary to stabilize the enrollee's
emergency medical condition.
4)Prohibits payment for emergency services and care from being
denied only if the health plan, or its contracting medical
SB 359
Page 4
providers, reasonably determines that the emergency services
and care were never performed; provided that a health plan, or
its contracting medical providers, may deny reimbursement to a
provider for a medical screening examination in cases when the
plan enrollee did not require emergency services and care and
the enrollee reasonably should have known that an emergency
did not exist.
5)Requires in state law, licensed hospitals which maintain and
operate an emergency department, to provide emergency care and
services to any person requesting emergency services or care,
or for whom emergency services or care is requested, for any
life-threatening or serious injury or illness, including a
psychiatric emergency medical condition.
6)Prohibits a hospital from conditioning the provision of
emergency services required pursuant to 5) above, on the
person's ethnicity, citizenship, age, preexisting medical
condition, insurance status, economic status, ability to pay,
or other specified characteristics. Requires a hospital to
render emergency care and services without first questioning
the patient's ability to pay.
7)Requires a health plan that is contacted by a hospital, as
specified to, within 30 minutes of the time the hospital makes
the initial telephone call requesting information, either
authorize post stabilization care or inform the hospital that
it will arrange for the prompt transfer of the enrollee to
another hospital. Requires a health plan that is contacted by
a hospital to reimburse the hospital for poststabilization
care rendered to the enrollee if any of the following occurs:
a) The health care service plan authorizes the hospital to
provide poststabilization care;
b) The health care service plan does not respond to the
hospital's initial contact or does not make a decision
regarding whether to authorize poststabilization care or to
promptly transfer the enrollee within the specified
timeframe; or,
c) There is an unreasonable delay in the transfer of the
enrollee, and the noncontracting physician and surgeon
determines that the enrollee requires poststabilization
care.
SB 359
Page 5
8)Requires, pursuant to regulations associated with the claims
settlement process, for contracted providers without a written
contract and non-contracted providers, except as specified:
the payment of the reasonable and customary value for the
health care services rendered based upon statistically
credible information that is updated at least annually and
takes into consideration:
a) The provider's training, qualifications, and length of
time in practice;
b) The nature of the services provided;
c) The fees usually charged by the provider;
d) Prevailing provider rates charged in the general
geographic area in which the services were rendered;
e) Other aspects of the economics of the medical provider's
practice that are relevant; and,
f) Any unusual circumstances in the case.
FISCAL EFFECT : Unknown. This bill has not been analyzed by a
fiscal committee.
COMMENTS : According to the author, this bill responds to issues
raised at a February 24, 2012, Joint Hearing of the Senate and
Assembly Health Committees on hospital reimbursement mechanisms.
This bill is aimed at a troubling business practice, employed
by a very small number of hospitals, whereby a hospital will
cancel insurance contracts, and use the emergency room as a
source of revenue by charging outrageous prices for
"out-of-network" patients. This bill is intended to remove the
economic incentive behind this business practice so that this
trend does not spread. This bill addresses this issue by only
requiring health plans to pay 60% of their average in-network
contract rate when their patient is in a hospital with a very
high percentage of out-of-network patients. Public hospitals,
as well as all rural hospitals, are exempted from the bill, and
the entire bill sunsets in four years. Testimony received at
the hearing made clear that Prime hospitals are exploiting this
reimbursement structure for non-contracted emergency care in
SB 359
Page 6
order to maximize billed charges.
Beginning in October of 2010, the Center for Investigative
Reporting's California Watch began publishing a series of
articles on Prime's billing practices. The first article
focused on unusually high rates of patients diagnosed with
septicemia, an infection of the blood, which has a high
reimbursement rate from Medicare compared to other infections.
Subsequent articles raised questions about high rates of a rare
malnutrition disorder known as Kwashiorkor among Prime's
Medicare patients, again raising concern of possible Medicare
fraud. An article published on July 23, 2011, by California
Watch, looked at an increase in emergency room admission rates
at Prime hospitals, again focusing on Medicare, but this time
also describing a conflict regarding emergency room admissions
with Kaiser Permanente. In the article, California Watch
described an allegation from Kaiser that Prime had failed to
provide Kaiser an opportunity to care for Kaiser patients after
an emergency situation had stabilized. According to the
article, "Kaiser accused Prime of using improper medical
criteria to 'capture' its patients, treating them without
authorization and performing unneeded tests to create hefty
bills." In the same article, California Watch describes
Heritage Provider Network, another managed care plan, as making
similar allegations against Prime. According to the article,
"Heritage claims Prime is engaging in racketeering when it
'mislabels' Heritage members as too sick to be transferred back
to the managed care network." The claims of both Kaiser and
Heritage are part of lawsuits between the health plans and
Prime. Prime has denied the allegations.
According to the California Hospital Association, its opposition
has been removed because of amendments that limit the scope of
the bill and ensure that health plans do not have an incentive
to cancel or non-renew hospital contracts in order to game the
provisions of this bill.
This bill is similar to SB 1285 (Ed Hernandez) of this year,
which was held in the Assembly Appropriations Committee.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097
SB 359
Page 7
FN: 0005663