BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 728
AUTHOR: Negrete McLeod
AMENDED: June 25, 2012
HEARING DATE: August 22, 2012
CONSULTANT: Bain
PURSUANT TO SENATE RULE 29.10
SUBJECT : Medi-Cal: durable medical equipment reimbursement.
SUMMARY : Revises a provision related to the maximum allowable
reimbursement rate for durable medical equipment (DME) in the
Medi-Cal program for DME with no specified maximum allowable
rate by allowing the manufacturer's suggested retail price
(MSRP) to be documented by a catalog showing the price on or
prior to the date of service, instead of the MSRP on June 1,
2006, under existing law.
Existing law:
1.Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), under which health
care services are provided to qualified low-income persons.
DME is a covered benefit under the Medi-Cal program, subject
to utilization controls.
2.Requires DHCS to establish a list of covered services and
maximum allowable reimbursement rates for DME, and requires
the list to be published in provider manuals.
3.Requires Medi-Cal reimbursement for all DME utilizing codes
with no specified maximum allowable rate to be the "lesser of"
the following:
a. The amount billed under regulation as either the usual
charge made to the general public, or the new purchase
price of the item plus no more than a 100 percent markup;
b. The guaranteed acquisition cost negotiated by means of
the contracting process provided in existing law plus a
percentage markup to be established by DHCS;
c. The actual acquisition cost plus a markup to be
established by DHCS;
d. The MSRP on June 1, 2006, documented by a printed
catalog or a hard copy of an electronic catalog page
showing the price, reduced by a percentage discount not to
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exceed 20 percent, or not to exceed 15 percent for
wheelchairs and wheelchair accessories if the provider
employs or contracts with a qualified rehabilitation
professional; or
e. A price established through targeted product-specific
cost containment provisions developed with providers.
This bill: Revises a Medi-Cal provision related to the maximum
allowable reimbursement rate for DME in the Medi-Cal program for
DME with no specified maximum allowable rate to allow the MSRP
to be documented by a catalog showing the price on or prior to
the date of service, instead of the MSRP on June 1, 2006.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1.Likely minor increased Medi-Cal costs for the small number of
fee-for-service claims reimbursed with the methodology changed
by this bill.
2.Potential increased costs related to usage of updated catalogs
are unknown, but are likely to be under $150,000 annually (50
percent General Fund, 50 percent federal funds), given the
small number of reimbursement claims to which this bill
applies and the shrinking proportion of Medi-Cal enrollees in
the fee-for-service delivery system.
3.Potential minor administrative cost savings to DHCS related to
the use of updated catalogs.
PRIOR VOTES :
Assembly Health: 14- 0
Assembly Appropriations:17- 0
Assembly Floor: 79- 0
COMMENTS :
1.Author's statement. This bill is necessary because it is
difficult for providers to comply with Medi-Cal claiming
requirements because current law requires submission of
outdated manufacturer catalog pages. The author points out
that the current system of reimbursing certain DME that lacks
a benchmark reimbursement rate is based on a "lesser of"
methodology. One of the "lesser of" benchmarks is the MSRP,
and a discount is then applied. Current law requires that the
MSRP be documented by a catalog from June 1, 2006, or earlier.
This has become difficult for providers to do since the old
catalogs contain equipment where configurations of equipment
might have changed. This practice is unfair because the MSRP
for the item is now at least six years old. Since one of the
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other statutory benchmarks for determining the "lesser of"
methodology uses a review of the provider invoice plus a
markup, there are built in protections to ensure appropriate
reimbursement.
2.Medi-Cal DME. DME is defined through regulation as equipment
prescribed by a licensed practitioner to meet the medical
equipment needs of a patient that (a) can withstand repeated
use; (b) is used to serve a medical purpose; (c) is not useful
to an individual in the absence of an illness, injury,
functional impairment, or congenital anomaly; and (d) is
appropriate for use in or out of the patient's home.
This bill deals with the reimbursement rate for DME products
where there is no maximum allowable reimbursement rate. In
these instances, reimbursement is individual to each service,
and is the lessor of five amounts in statute. Reimbursement
under this method is referred to as "By Report."
DHCS indicates that total DME fee-for-service spending is
approximately $105 million total funds, and that less than 2
percent of the total reimbursement for DME is subject to the
"lesser of" methodology. DHCS indicates it does not anticipate
a General Fund impact as a result of removing the 2006 catalog
page as Medi-Cal has other statutory benchmarks for
determining the "lesser of" methodology, including a review of
the provider invoice plus a markup.
3.Support. This bill is sponsored by the California Association
of Medical Products Suppliers (CAMPS), whose members are
providers of DME, such as wheelchairs, hospital beds, and home
oxygen therapy equipment. CAMPS states this bill makes a minor
change to exiting law to update Medi-Cal claims submission for
a small category of DME where there is no specific code.
In 2004, a "lesser of" methodology for the reimbursement of DME
under Medi-Cal was created and provided DHCS with the ability
to utilize different reimbursement formulas for unlisted DME
equipment. One of the "lessor of" methodologies uses MSRP
minus a discount of either 15 or 20 percent as one of the
methodologies. CAMPS indicates DHCS was concerned that when
this option was added that this might provide an opportunity
for an unscrupulous manufacturer to utilize a sham catalog to
inflate their MSRP. DHCS and CAMPS agreed that insertion of a
catalog date (originally August 1, 2004, a date that had
already occurred) would prohibit creation of any new catalog
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to artificially inflate the MSRP and avoid the effect of the
discount. CAMPS indicates it argued 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. That
date was modified later to be August 1, 2006 but has not been
changed since.
CAMPS met with DHCS and requested that this catalog date be
eliminated because of the difficulty in finding and utilizing
six-year old catalogs and the inequity of basing MSRP on
outdated pricing. Providers routinely submit an invoice from
the manufacturer as well and the reimbursement methodology
also includes invoice plus a markup of 67 percent as part of
the "lesser of" calculation. If the older MSRP is less than it
is now, it would reduce DME reimbursement unfairly. CAMPS
states this bill simply eliminates a date for the catalog,
thus allowing a DME provider to submit a current catalog page.
4.Opposition. The Department of Finance (DOF) opposes this bill,
arguing that this bill would significantly increase General
Fund expenditures and that this bill is unnecessary as it
would increase reimbursements to DME providers in the Medi-Cal
program. DOF states that DHCS is not aware of any access
problems for DME services in the Medi-Cal program or other
policy rationale that would justify an increase in rates.
5.Prior legislation. AB 1807 (Committee on Budget), Chapter 74,
Statutes of 2006, the health budget trailer bill of 2006,
revised the current DME reimbursement. Until 2006, one DME
reimbursement option was 80 percent of MSRP. AB 1807 requires
it to be based on the MSRP on June 1, 2006, minus 20 percent
and as documented by a printed catalog or a hard copy of an
electronic catalog page showing the price on that date. AB
1807 also applies a 15 percent discount instead of 20 percent
for wheelchairs under certain circumstances.
6.Previous version of this bill. As passed by this Senate, this
bill was authored by Senator Hernandez and would have required
the California Health Benefit Exchange Board, to the extent
required by federal law, to work with the Office of Statewide
Health Planning and Development, the Department of Insurance,
and the Department of Managed Health Care to develop a risk
adjustment system for products sold in the Exchange and
outside of the Exchange, as specified.
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SUPPORT AND OPPOSITION :
Support: California Association of Medical Product Suppliers
(sponsor)
ATG Rehab
Oppose: Department of Finance
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