BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1285|
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THIRD READING
Bill No: SB 1285
Author: Hernandez (D)
Amended: 5/9/12
Vote: 21
SENATE HEALTH COMMITTEE : 5-3, 4/25/12
AYES: Hernandez, Alquist, De Le�n, DeSaulnier, Rubio
NOES: Harman, Anderson, Blakeslee
NO VOTE RECORDED: Wolk
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/7/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
SUBJECT : Hospital billing: emergency services and care
SOURCE : Author
DIGEST : This bill requires hospitals with an
out-of-network emergency utilization rate of greater than
50 percent to adjust charges for out-of-network emergency
care so that expected reimbursement does not exceed the
greater of (1) the amount the hospital could reasonably
expect Medicare to pay for the care or (2) a good faith and
reasonable estimate of the actual cost of providing the
necessary pre-stabilization care.
ANALYSIS : Existing law:
1.Requires hospital emergency departments, under the
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federal Emergency Medical Treatment and Active Labor Act
(EMTALA) and state law, to provide emergency screening
and stabilization services without regard to the
patient's insurance status or ability to pay.
2.Requires a health plan to reimburse providers for
emergency services and care provided to its enrollees
until the care results in stabilization of the enrollee.
3.Prohibits a health plan from engaging in an unfair
payment pattern and defines in regulation, for purposes
of this law, what constitutes appropriate reimbursement
of a claim. For noncontracted providers, regulations
require the payment of the reasonable and customary value
for the health care services, based upon statistically
credible information that takes into consideration
certain specified items, including the fees usually
charged by the provider.
4.Permits a noncontracted provider to dispute the
appropriateness of a plan's computation of the reasonable
and customary value and requires the plan to respond to
the dispute through the plan's mandated provider dispute
resolution process.
This bill:
1. Requires a hospital with an out-of-network emergency
utilization rate, as defined, of 50 percent or greater
to adjust its total billed charges for emergency
services and care provided to a patient prior to
stabilization, as specified.
2. Requires the adjustment to its billed charges to be
such that the hospital's total expected payment does not
exceed the amount of payment the hospital reasonably
could expect to receive from Medicare for providing the
same care, or if the Medicare amount is less than the
actual cost to the hospital, the adjustment shall not
exceed a good faith and reasonable estimate of the
actual cost of providing the care.
3. Excludes charges billed by an emergency physician from
the adjustment to the hospital's total billed charges.
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4. Requires, if a contract with a health plan or health
insurer governs the payment for the care provided, the
contract to control the payment and the adjustment
required by this bill shall not be applied.
5. Excludes from the provisions of this bill medical care
provided to a patient that is compensable for purposes
of workers' compensation.
6. Excludes from the provisions of this bill medical care
provided to a patient for whom Medicare, Medi-Cal, or
any other government program of health benefits,
excluding public employee benefit plans, is the primary
payer for those services and care.
7. Requires, if federal law requires a payment from a
health plan or health insurer in an amount greater than
would be called for under the provisions of this bill,
the hospital to adjust its charges so that the total
expected payment is the minimum amount that will comply
with applicable federal law.
8. Prohibits this bill from requiring a hospital to modify
its uniform schedule of charges or published rates or
precluding the recognition of a hospital's established
charge schedule or published rates for purposes of
applying any payment limit, interim payment amount, or
other payment calculation based upon a hospital's rates
or chargers under the Medi-Cal program, the Medicare
Program, workers' compensation, or other federal, state,
or local public program of health benefits.
9. Requires a hospital to provide reimbursement for any
amount actually paid in excess of the amount due under
the provisions of this bill, including interest, as
specified, unless the amount due is less than $5.
10.Clarifies 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.
11.Defines, for purposes of this bill, the following
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terms:
"Hospital" means a general acute care hospital or a
special hospital, as defined, that has an emergency
department licensed by the California Department of
Public Health.
"Local patient" is a patient whose residence is in
the same county as the hospital at which the patient
receives services and care, or whose residence is in
an adjacent county.
"Major emergency department encounter" means a
patient encounter in a hospital emergency department
for which the hospital's total billed charges for all
in-patient and out-patient services and care provided,
excluding charges billed by an emergency physician,
are greater than $2,000, which is required to be
adjusted each year for medical inflation, as
specified.
"Privately insured patient" is a patient for whom
the primary payer is a health insurer or health care
service plan.
"Out-of-network" refers to care provided to a
patient by a hospital that has not contracted with the
patient's health care service plan or health insurer
for reimbursement at a negotiated rate with respect to
the care provided.
"Out-of-network emergency utilization rate" means
the percentage of all major emergency department
encounters at a hospital during the course of a
calendar year 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 most
recently completed calendar year that involved local,
privately insured patients for whom the services and
care were out-of-network, by the hospital's total
number of major emergency department encounters in the
same calendar year of local, privately insured
patients.
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Background
Out-of-network emergency reimbursement . Under federal
EMTALA and state law, hospitals are required to provide
appropriate screening examinations to determine whether
emergency medical conditions exist, regardless of patients'
ability to pay. When emergency medical needs are
identified, hospitals are required to provide care until
the patient is stabilized.
If the patient's health plan has a contract with the
hospital that provided the emergency care, billing is
relatively straightforward. However, if there is no
contract, the amount billed by the hospital may be more
than the health plan believes is reasonable. Often, there
is simply a lapse between contracts with the hospital and
the health plan, and the bill may be held up just until a
new contract is negotiated. If that is not the case,
disputes over the amount the health plan is required to pay
are resolved by applying what is referred to as the Gould
Criteria.
AB 1455 and the "Gould Criteria ." AB 1455 (Scott), Chapter
827, Statutes of 2000, established requirements for prompt
payment of provider claims by health plans, including a
prohibition on health plans engaging in an unfair payment
pattern. In regulations implementing this law, the
Department of Managed Health Care (DMHC) defined what
constituted appropriate reimbursement of a claim. In the
case of providers with a written contract, the regulations
require reimbursement at the agreed upon contract rate.
For noncontracted providers, however, the regulations
adopted what is known as the "Gould Criteria" (from Gould
v. Workers' Compensation Appeals Board, 1992), which
requires:
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:
The provider's training, qualifications, and length of
time in practice;
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The nature of the services provided;
The fees usually charged by the provider;
Prevailing provider rates charged in the general
geographic area in which the services were rendered;
Other aspects of the economics of the medical provider's
practice that are relevant; and
Any unusual circumstances in the case.
Emergency rooms as a source of revenue ? Beginning in
October of 2010, the Center for Investigative Reporting's
California Watch began publishing a series of articles on
Prime Healthcare Services (Prime), which operates 14
hospitals, primarily in Southern California. 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 give them 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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, "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)."
SUPPORT : (Verified 5/8/12)
Congress of California Seniors
SEIU California
OPPOSITION : (Verified 5/8/12)
California Hospital Association
Community Medical Centers
United Hospital Association
ARGUMENTS IN SUPPORT : This bill is supported by SEIU
California (SEIU), which states that when a medical
emergency strikes, we rush to the nearest hospital -
whether it's in our insurance network or not. Federal and
state laws protect us: hospitals are required to stabilize
emergency patients, and health insurers are required to pay
for emergency care whether it is in network or not.
However, SEIU states that a small number of unscrupulous
hospital owners are taking advantage of these laws by
making a business out of canceling insurance contracts, so
they can collect exorbitant reimbursements for
out-of-network emergency room patients. SEIU states that
Ontario-based Prime Healthcare is a case study on why this
bill is necessary, arguing that Prime refuses to contract
with most managed care organizations and even refuses to
coordinate with the HMO physicians that have access to
members' medical records when HMO members turn up at
Prime-operated hospitals. According to SEIU, in legal
filings, managed care organizations such as Kaiser allege
that Prime racks up unnecessary charges in the emergency
room to reap even bigger profits. SEIU states that this
bill would discourage Prime and its imitators from
employing these predatory practices, which will reduce
costs and improve access to care for thousands of
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Californians.
ARGUMENTS IN OPPOSITION : This bill is opposed by the
California Hospital Association (CHA), the United Hospital
Association, and Community Medical Centers, all of whom
make similar arguments. These organizations are all
opposed to SB 1285 because (1) rate setting reduces access
to emergency hospital services, (2) a default rate is
complex and imposes conflicting legal standards, (3) a
default rate eliminates the incentive for health plans to
contract, and (4) hospitals and health plans are
effectively implementing existing law regarding
noncontracted reimbursement for emergency services and rate
setting is not necessary.
According to CHA, not every hospital is able to obtain a
contract with every health plan, and one of the most common
reasons hospitals are noncontracted is because they have
been unable to negotiate a fair contract with health plans.
CHA states that a major reason that hospitals downsize,
close departments or limit services is because they have
inadequate managed care contracts with health plans. CHA
notes that it is especially difficult for these hospitals
to negotiate adequate managed care contracts when they are
located in geographic regions that are dominated by only a
few large health plans. CHA states that this bill harms
those communities in which the local hospital is unable to
obtain contracts with certain health plans. CHA argues
that a statutory default rate interferes with the
contracting process and that health plans lose the
incentive to negotiate because they have the default rate
to fall back on. CHA states that this bill adds unnecessary
complexity to an already complex system. Finally, CHA
asserts that most disagreements between hospitals and
health plans are resolved internally or through formal
processes such as mediation and arbitration and that when
necessary, the appropriate forum to resolve disputes
remains with the courts.
CTW:nl 5/8/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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