BILL ANALYSIS �
SB 728
Page 1
Date of Hearing: July 3, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 728 (Negrete McLeod) - As Amended: June 25, 2012
SENATE VOTE : Not relevant.
SUBJECT : Medi-Cal: durable medical equipment reimbursement.
SUMMARY : Revises a provision related to determining the maximum
allowable reimbursement rate for durable medical equipment (DME)
in the Medi-Cal program to use the manufacturer's suggested
retail price (MSRP) as documented by a catalogue showing the
price on or prior to the date of service (further reduced by a
specified percentage) instead of the current requirement that it
be determined by using a catalogue showing the price on June 1,
2006 as the base.
EXISTING LAW :
1)Establishes the Medi-Cal program administered by the
Department of Health Care Services (DHCS), under which
qualified low-income individuals receive health care services.
2)Establishes a schedule of benefits and services in the
Medi-Cal program, including DME.
3)Prohibits, through Medi-Cal regulation:
a) A provider from charging for any service or any article
more than would have been charged for the same service or
article to other purchasers of comparable services or
articles under comparable circumstances (this regulation is
referred to as the Medi-Cal "Best Price" regulation); and,
b) A provider from billing or submitting a claim for
reimbursement for rendering health care services to a
Medi-Cal beneficiary in any amount greater or higher than
the usual fee charged by the provider to the general public
for the same service.
4)Requires DHCS to establish maximum allowable rates for DME and
provides that if there is no specified rate that it be the
lesser of:
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a) Usual charges made to the general public or the net
purchase price plus a mark-up, as specified by regulation;
b) A negotiated contract price based on the guaranteed
acquisition cost;
c) Actual acquisition cost plus a markup;
d) The manufacturer's suggested retail purchase price on
June 1, 2006, and documented by a printed catalogue or a
hard copy of an electronic catalogue page showing the price
on that date, reduced by a percentage discount as
specified; or,
e) A price established through targeted product-specific
cost containment provisions developed with providers.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
necessary to update a statute that has become a hardship for
provider compliance by requiring submission of outdated
manufacturer catalogue pages. The author points out that the
current system of reimbursing DME that has no maximum
allowable amount is based on a "lesser of" methodology. One
of the "lesser of" benchmarks is to establish an amount and
then apply a discount. It is based on the MSRP and is
required to be documented via submission of the catalogue
page. Current statute requires that the catalogue be from
June 1, 2006 or earlier. According to the author, this has
become difficult for providers to do since the old catalogues
contain equipment where configurations of equipment might have
changed. The author also argues that it is unfair because the
MSRP for the item is now at least six years old. The author
argues that since one of the other statutory benchmarks for
determining the "lesser of" methodology uses a review of the
provider invoice, plus a mark-up, there are built in
protections to assure appropriate reimbursement. According
the author, both the provider community and DHCS agree that
this change is necessary.
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2)MEDI-CAL REIMBURSEMENT . DHCS has implemented a variety of
mechanisms to ensure that the fee-for-service Medi-Cal program
is paying the lowest possible prices for covered medical
supplies and services. In many cases DHCS contracts with a
particular provider or manufacturer and in those cases, goods
and services from a non-contracting provider will not be
reimbursed. For DME products not available through a
contracted manufacturer, DHCS establishes a maximum allowable
reimbursement rate. For many of these services there are
standardized Health Care Common Procedural Coding System
(HCPCS) codes which are used to set standardized reimbursement
rates. For other DME products, such as specialized
wheelchairs, if there is no maximum allowable reimbursement
rate, reimbursement is individual to each service and is
referred to as "By Report". In these cases, the amount is
determined by using the lesser of five options. AB 1807
(Committee on Budget), Chapter 74, Statutes of 2006, a Health
Budget Trailer Bill revised one of these options. Until 2006,
one option was 80% of MSRP. AB 1807 instead required it to be
based on the MSRP on June 1, 2006, minus 20% and as documented
by a printed catalogue or a hard copy of an electronic
catalogue page showing the price on that date. AB 1807 also
applied a 15% discount for wheelchairs under certain
circumstances instead of 20%.
According to the sponsor, California Association of Medical
Products Suppliers (CAMPS), at the time this option was added,
DHCS was concerned that it might provide an opportunity for an
unscrupulous manufacturer to utilize a sham catalogue to
inflate their MSRP. DHCS and CAMPS agreed that insertion of a
catalogue date, i.e. one that already occurred, would prohibit
creation of any new catalogue to artificially inflate the MSRP
and avoid the effect of the discount. However according the
CAMPS, they stated at the time that this fixed date would need
to be updated to avoid being stuck in a time warp where MSRP
changes would not be recognized.
3)SUPPORT . CAMPS, in support, states that over the years, they
have requested that this catalogue date be eliminated because
of the difficulty in finding and utilizing old catalogues and
the inequity of basing MSRP on outdated pricing. CAMPS also
states in support that it is now 2012 and the statute
continues to require submission of a six-year-old manufacturer
catalogue page. According to CAMPS, this bill will have
limited impact because with the creation and adoption of
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additional HCPCS codes, a decreasing amount of items are
reimbursed this way. ATG Rehab, also in support, writes that
this bill will enable providers to use current manufacturer's
catalogue information when submitting a claim to Medi-Cal for
a wheelchair that has no specific HCPCS code. However, these
supporters argue, there is a particular problem for various
wheelchair accessories and parts, which fall into broader
generic or miscellaneous codes and need to be separately
billed. According to CAMPS and ATG Rehab the pricing among
various manufacturers is not consistent and these are usually
not interchangeable parts and accessories. Thus, they are not
conducive to lumping into one miscellaneous code that can be
equitably priced. Supporters argue that removing this
catalogue date for these remaining services will resolve both
the difficulty of provider compliance and the inherent
inequity of this past date not being reflective of current
manufacturer MSRP.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Medical Products Suppliers (Sponsor)
ATG Rehab
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097