BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 1285 (Hernandez) - Hospital billing: emergency services
          
          Amended: March 26, 2012         Policy Vote: Health 5-3
          Urgency: No                     Mandate: Yes
          Hearing Date: May 7, 2012       Consultant: Brendan McCarthy
          
          This bill does not meet the criteria for referral to the 
          Suspense File.
          
          
          Bill Summary: SB 1285 requires hospitals with out-of-network 
          emergency department utilization greater than 50 percent to 
          adjust their charges to out-of-network health plans for 
          emergency services to the greater of 1) amounts paid by Medicare 
          or 2) a good faith and reasonable estimate of actual costs.

          Fiscal Impact: Likely minor impacts on the use of the Department 
          of Managed Health Care's process for settling claims disputes 
          between hospitals and health plans (Managed Care Fund).

          Background: Under current law, when a client of a health plan 
          needs emergency medical services from a hospital that does not 
          have a contract with the health plan, the hospital is required 
          to provide emergency medical services necessary to stabilize the 
          patient, and then contact the health plan. The health plan is 
          required to pay emergency care provided. Payments to hospitals 
          by health plans are required to reflect "reasonable and 
          customary" value for the services.

          Upon receiving payment for a claim, if a hospital feels that 
          payment from a health plan is not "reasonable and customary" for 
          the services provided, it can elect to enter into a voluntary 
          arbitration process set up by the Department of Managed Health 
          Care, or it may take legal action.

          Proposed Law: SB 1285 would create new standard for billing 
          non-contracted health plans for emergency services provided to 
          patients, if a hospital has an out-of-network emergency 
          utilization rate greater than 50 percent. Under that scenario, 
          the hospital would be required to adjust its total billed 
          charges for emergency care to non-contracted health plans, such 
          that the total expected payment does not exceed the greater of 








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          either 1) the payment that would be received from Medicare or 2) 
          a "good faith and reasonable estimate" of the actual cost of 
          providing care.

          The new standard does not apply to services covered by worker's 
          compensation, Medi-Cal, or Medicare. This new standard does not 
          apply if there is a contract in place between the hospital and a 
          health plan.

          Staff Comments: Under the bill, hospitals that provide emergency 
          treatment to a large number of patients covered by 
          non-contracted health plans would likely see a reduction in 
          payments from those non-contracted health plans. This is because 
          Medicare rates are typically lower than the rates agreed to in 
          contracts between hospitals and health plans. Additionally, a 
          "good faith and reasonable estimate" of actual costs for 
          providing care is likely to be less than the rates that 
          hospitals are typically paid for care (given the complexity of 
          hospital finance and the typical cross-subsidization of 
          different patients treated by hospitals).

          Because the bill is likely to reduce payments to certain 
          hospitals, the Department of Managed Health Care may see an 
          increase in the use of its claims settlement process. 
          Determining whether a hospital meets the criteria in this bill 
          may increase the costs of administering the settlement process 
          in those cases.

          On the other hand, lower levels of payment that may occur under 
          this bill would likely disincentivize hospitals from attempting 
          to use the claims settlement process to increase payments from 
          non-contracted health plans.  The net impact on usage of the 
          claims settlement process will depend on the number of hospitals 
          that actually meet the criteria of the bill. Overall, the impact 
          is likely to be minor.

          The only mandates imposed on local governments by the bill 
          relate to misdemeanor penalties and are thus non-reimbursable 
          under the California Constitution.

          Proposed Author Amendments: The proposed author's amendments 
          clarify that a "privately insured patient" as defined in the 
          bill does not include patients that receive coverage from 
          Medi-Cal, Medicare, or other government programs.








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