BILL ANALYSIS �
SB 359
Page 1
Date of Hearing: August 28, 2012
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 359 (Ed Hernandez) - As Amended: August 24, 2012
SENATE VOTE : Not relevant.
SUBJECT : Hospital billing: emergency services and care.
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
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
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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 the "average in-network payments" as the average
amount of payments made pursuant to a contract during the
preceding calendar year to hospitals in California that offer
a comparable range of services and, if applicable, education
and research programs, by a health plan or health insurer for
reimbursement of care provided by the hospital or hospitals at
a negotiated rate, provided that payments made by the plan or
insurer during the preceding calendar year for in-system care
shall not be included in the calculation of average.
6)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.
7)Defines "emergency department encounter" as the patient having
been registered in the emergency department for a period of
five hours or longer. An emergency department encounter does
not include an encounter that results from the receipt of
patient transfers pursuant to the transfer requirements of the
federal Emergency Medical Treatment and Active Labor Act
(EMTALA) from another hospital that is not affiliated with, or
owned, operated, or substantially controlled by, the same
person or persons or other legal entity or entities as the
hospital receiving the transfer.
8)Defines a "local" patient as a patient whose residence meets
both of the following:
a) Is in the same county as the hospital at which the
patient receives services and care or is in a county
adjacent to the county where the hospital at which the
patient receives services and care is located; and,
b) Has a five-digit ZIP Code that is the same as the
five-digit ZIP Code associated with the residences of
patients involved in at least 50 emergency department
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encounters during the most recently completed calendar
year.
9)Defines "privately insured patient" as a patient for whom the
primary payer is a health insurer, health plan, or an employer
plan sponsor, and is not Medicare, Medi-Cal, the Healthy
Families Program, the Federal Temporary High Risk Pool, the
Major Risk Medical Insurance Program, or any other government
program of health benefits or managed care product provided
pursuant to any government program of health benefits.
Excludes treatment for an injury that is compensable for
purposes of workers' compensation.
10)Provides that if a contract, including a contract with a
health insurer, health 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.
11)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
hospital, 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 1.5 million 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.
12)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
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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.
13)Prohibits, for the purposes of this bill, the following from
being considered a government program of health benefits:
a) A health plan, qualified health plan, or health
insurance policy or product offered through the California
Health Benefit Exchange; or,
b) An employer-sponsored health benefit plan or contract
providing health benefits or contract providing health
benefits or coverage for state, local, or other government
employees, retirees, or their family members, including,
but not limited to, a health benefit plan or contract
entered into with the Board of Administration of the Public
Employees' Retirement System (CalPERS) pursuant to the
Public Employees' Medical and Hospital Care Act.
14)Provides that the adjustment required by this bill does not
apply if existing law, including the Hospital Fair Pricing Act
of 2006, requires a hospital to limit expected payment for
prestabilization emergency services and care provided to a
patient to an amount less than the hospital's total billed
charges, as adjusted by this bill.
15)Sunsets the provisions of this bill on January 1, 2017,
unless another statute extends or deletes that date.
EXISTING LAW :
1)Requires in federal law, under provisions of 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,
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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
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 plan authorizes the hospital to provide
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poststabilization care;
b) The health 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.
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 : This bill, as amended has not been analyzed by a
fiscal committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill
responds to issues raised at a February 24, 2012, Joint
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Hearing of the Senate and Assembly Health Committees on
hospital reimbursement mechanisms. The author states that
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 doesn't 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 order to maximize billed
charges.
This bill was substantially amended on August 24, 2012 to
address hospital billing and emergency services and care. The
author intends to propose additional amendments: a) to
establish a floor of 150% of the payment the hospital could
expect to receive from Medicare for providing similar
emergency services and care prior to stabilization, and, b) to
revise the definition of emergency department encounter to
include when the patient has been admitted as an inpatient
following registration and a stay of any length in the
emergency department.
2)BACKGROUND . 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
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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.
The investigative report by California Watch demonstrates a
troubling practice among some health care providers which can
have significant implications for California's health care
markets and more importantly California consumers. The
practice of variation in care based on payer source has been
the subject of health policy research and more is being
uncovered about trends in California that may be of concern.
3)SUPPORT . According to SEIU California, this bill would
discourage a particular hospital business practice that drives
up the cost of healthcare and takes advantage of consumers
when they are at their most vulnerable. SEIU states that this
bill would limit the amount hospitals can charge for treating
out-of-network emergency patients and these new limits would
apply to hospitals that are out-of-network for a majority of
their privately-insured emergency room patients-thereby
improving incentives for hospitals to be in-network. SEIU
believes this bill would reduce costs and improve access to
care for thousands of Californians. SEIU indicates that a
different approach to this same problem has been thoroughly
reviewed by the Legislature over the course of this past year
as SB 1285 (Ed Hernandez).
4)NEUTRAL . The California Hospital Association indicates that
the association's 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
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bill.
5)OPPOSITION . The Private Essential Access Community Hospitals
(PEACH) remains very concerned about the negative impact this
bill could have on access to emergency room care in community
safety net hospitals that depend on non-contracted rates to
offset their high volumes of uninsured and underfunded
Medi-Cal and Medicare patients. According to PEACH, by
creating default rates significantly below the average
commercial rate for emergency room services, this bill would
undermine the ability of hospitals to negotiate reasonable
rates and create a disincentive for a health plan to negotiate
a contract with hospitals. PEACH believes this bill would
further threaten the viability of these hospitals and could
force them to make difficult decisions about continuing to
provide specific services-including whether they can keep
their emergency departments open. PEACH also believes this
bill could reduce access to care in emergency rooms across the
state-especially in community safety net hospitals that serve
the most vulnerable communities-at a critical time when
hospitals are striving to transform their systems of care in
preparation for full health reform implementation.
6)RELATED LEGISLATION . This bill is similar to SB 1285 (Ed
Hernandez) of this year, which was held in the Assembly
Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
SEIU California
Opposition
Private Essential Access Community Hospitals
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097