BILL ANALYSIS �
SB 1285
Page 1
Date of Hearing: July 3, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 1285 (Ed Hernandez) - As Amended: June 26, 2012
SENATE VOTE : 21-15
SUBJECT : Hospital billing: emergency services and care.
SUMMARY : Establishes an emergency services billing rate of 150%
of Medicare for prestabilization emergency services and care
when a hospital exceeds an out-of-network emergency utilization
rate of 50%. Specifically, this bill :
1)Requires a health plan, or its contracting medical providers,
that is obligated to reimburse providers for emergency
services and care provided to its enrollees prior to
stabilization, as specified, to reimburse hospitals in
accordance with 6) below.
2)Establishes the "out-of-network emergency utilization rate" as
the percentage of all major emergency department encounters at
a hospital during the course of the two most recent calendar
years 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 two most recently completed calendar
years 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 in the same two calendar years of local, privately
insured patients; provided that if the calendar year ended
within the previous 90 days, data for the two calendar years
preceding the most recently completed calendar year shall be
used.
3)Provides that "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.
4)Defines a "local" patient as a patient whose residence is in
the same county as the hospital at which the patient receives
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services and care, or who resides in a county adjacent to the
county where the hospital at which the patient receives
services and care is located.
5)Defines "privately insured patient" as a patient for whom the
primary payer is a health insurer, health care service 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.
6)Prohibits, for the purposes of this bill, the following from
being considered a government program of health benefits:
a) A health care service 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.
7)Requires a hospital with an out-of-network emergency
utilization rate of 50% or greater to adjust its total billed
charges for emergency services and care provided to a patient
prior to stabilization, so that the hospital's total expected
payment shall not exceed 150% of the amount of payment the
hospital reasonably could expect to receive from Medicare for
providing prestabilization emergency services and care if the
services and care were subject to Medicare.
8)Provides that if a contract, including a contract with a
health insurer, health care service plan, or other health care
coverage provider, governs the adjustment of the total billed
charges for the prestabilization emergency services and care
provided to a patient by the hospital, the contract shall
control.
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9)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.
10)Exempts designated public hospitals, as specified, and a
hospital owned or 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, 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.
EXISTING LAW :
1)Requires in federal law, under provisions of the federal
Emergency Medical Treatment and Active Labor Act (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 (DMHC).
3)Requires a health plan, or its contracting medical providers,
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
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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 care service plan authorizes the hospital to
provide poststabilization care;
b) The health care service 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:
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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 : According to the Senate Appropriations Committee
analysis, likely minor impacts on the use of the DMHC's process
for setting claims disputes between hospitals and health plans
(Managed Care Fund).
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, there has been
a growing concern that a handful of hospitals are exploiting
the reimbursement mechanism for out-of-network emergency care,
to the detriment of patient care. At a Joint Hearing of the
Senate and Assembly Health Committees held in Los Angeles on
February 24, 2012, a number of witnesses expressed concern
with a hospital chain operated by Prime Healthcare Services
(Prime). The committees heard testimony that the Prime chain
of hospitals operate largely without insurance contracts, and
seek to bill full charges whenever a patient goes to one of
their facilities. Several witnesses described Prime as
pursuing a strategy of maximizing the treatments, and then
billing for those treatments, provided to patients before they
are deemed "stabilized" and then discharged or transferred.
Current law, under EMTALA requires hospitals to provide
emergency care to anyone who comes into an emergency room,
regardless of their ability to pay. Accordingly, current law
requires health plans to pay a noncontracting hospital the
"reasonable and customary value" for that emergency care
provided to their enrollees. But both of these requirements
generally stop as soon as the patient has been stabilized. In
the case of an out-of-network health plan enrollee, once he or
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she has been stabilized, the noncontracting hospital is
prohibited from charging the patient's health plan for
post-stabilization care without first getting authorization
from the health plan.
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. There are any number of legitimate reasons why any
given health plan may not have a contract with any given
hospital. This is the purpose behind the "reasonable and
customary" billing mechanism for non-contracted emergency
services. However, this billing mechanism should not be used
to facilitate a business strategy of not entering into
contracts with insurers. The author states that this bill
would improve incentives for being an in-network hospital by
limiting the amount hospitals can charge for out-of-network
emergency care if a majority of their emergency care is
out-of-network for local, privately-insured patients.
2)CALIFORNIA WATCH ARTICLES . 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 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
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sick to be transferred back to the managed care network." The
claims of both Kaiser and Heritage are included in lawsuits
between the health plans and Prime. Prime has denied the
allegations.
3)EMTALA . EMTALA governs when and how a patient may be: a)
refused treatment; or b) transferred from one hospital to
another when he or she is in an unstable medical condition.
EMTALA applies to "participating hospitals" -- i.e., to
hospitals which have entered into "provider agreements" under
which they will accept payment from the federal Department of
Health and Human Services, Centers for Medicare and Medicaid
Services under the Medicare program for services provided to
beneficiaries of that program. In practical terms, this means
that it applies to virtually all hospitals in the U.S., with
the exception of the Shriners' Hospital for Crippled Children
and many military hospitals. The provisions of EMTALA apply
to all patients, and not just to Medicare patients. Under
EMTALA, any patient who "comes to the emergency department"
requesting "examination or treatment for a medical condition"
must be provided with "an appropriate medical screening
examination" to determine if he is suffering from an
"emergency medical condition." If there is a medical
emergency, then the hospital is obligated to either provide
the patient with treatment until the patient's condition is
stable, or to transfer him to another hospital in conformance
with the statute's directives. A transfer to another facility
before the patient has become stable can only take place if it
is an "appropriate transfer." A transfer after the patient
has become stable is permitted and is not restricted by EMTALA
in any way. EMTALA's restrictions apply only to transfers
before the patient has become stable, either on his or her own
or as a result of medical treatment. EMTALA also provides
that a pre-authorization requirement imposed by a managed care
organization or a health insurer may not be allowed to prevent
or delay the performance of a medical screening evaluation or
the institution of necessary stabilizing treatment once it is
determined that an emergency medical condition exists.
4)SUPPORT . According to the Service Employees International
Union (SEIU), a small number of unscrupulous hospital owners
are taking advantage of federal and state laws that require
hospitals to stabilize emergency patients and health insurers
to pay for out-of-network care by making a business out of
cancelling insurance contracts and collecting exorbitant
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reimbursements for out-of-network emergency room patients.
SEIU asserts that Ontario-based Prime Healthcare is a case
study on why this law is necessary as testimony at a Joint
Hearing of the California Senate and Assembly Health
Committees in February brought this to light. SEIU states
that in legal filings, managed care organizations like Kaiser
allege that Prime racks up unnecessary charges in the
emergency room to reap even bigger profits. The CalPERS Board
of Administration believes this bill would protect both
CalPERS health plans and members enrolled in PPO plans from
unreasonable medical costs. The California Labor Federation
contends that this bill will improve incentives for hospitals
to be in-network, reduce costs and improve access to care for
thousands of Californians. The California Association of
Physician Groups (CAPG) indicates that this bill does not
create a slippery slope toward government-regulated price
fixing; it does provide some clear and rational parameters to
guide hospitals toward more collaborative reimbursement
models. CAPG believes this bill will benefit payers and
patients in the years to come.
5)OPPOSITION . The California Hospital Association (CHA) and
many other hospitals argue that hospitals and health plans are
often not able to negotiate contracts because there may not be
enough health plan members in the region or because the health
plan has a strategy focusing on narrow networks. One of the
most common reasons is a fair contract cannot be negotiated.
A major reason that hospitals downsize, close departments, or
limit services is because they have inadequate managed care
contracts. The managed care market has consolidated from 23
major plans in 1990 to five today. Opponents believe that
rate setting will reduce access to emergency hospitals
services, that the default rate is complex and imposes
conflicting legal standards, eliminates the incentive for
health plans to contract, creates loopholes for health plans
to manipulate reimbursement, this bill imposes huge
administrative costs on all hospitals, and that procedures are
already in place to resolve disputes. The District Hospital
Leadership Forum opposes this bill because it will increase
costs for district hospitals. District hospitals, with
publicly elected Boards of Directors, are local governments
responsible for providing for the healthcare needs of their
communities. In aggregate, these hospitals are operating in
the red (-2.4%) and almost three fourths are located in rural
California which already presents numerous challenges. Some
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district hospitals do not have contracts because they serve
communities with few insured residents or they are unable to
negotiate adequate managed care contracts because the region
is dominated by one or two plans.
6)PREVIOUS LEGISLATION .
a) AB 1455 (Scott), Chapter 827, Statutes of 2000, revises
the dispute resolution process for payment claims for
medical services between providers and health plans.
b) AB 1628 (Frommer), Chapter 583, Statutes of 2004,
requires a hospital to contact an enrollee's health plan to
obtain the enrollee's medical record information before
admitting the enrollee for poststabilization care as an
inpatient following emergency services in a noncontracting
hospital, under certain circumstances, and prohibits a
hospital from billing the enrollee if it fails to do so.
c) AB 774 (Chan), Chapter 755, Statutes of 2006,
establishes the Hospital Fair Pricing Act, which requires
hospitals to maintain an understandable written policy
regarding discounted payments and charity care for a
self-pay patient with high medical costs who has a family
income that does not exceed 350% of the federal poverty
level or approximately $35,000 per individual.
d) AB 1203 (Salas), Chapter 603, Statutes of 2008,
establishes uniform requirements governing communications
between health plans and non-contracting hospitals related
to post-stabilization care following an emergency, and
prohibits a non-contracting hospital from billing a patient
who is a health plan enrollee for post-stabilization
services, except as specified.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Physician Groups
California Labor Federation
California Public Employees' Board of Administration
Congress of California Seniors
SEIU California
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Opposition
10-20 Club
Adventist Health
Alvarado Hospital Medical Center
Association of California Healthcare Districts
California Hospital Association
Centinela Hospital Medical Center
Community Hospital of the Monterey Peninsula
Community Medical Centers
Dignity Health
District Hospital Leadership Forum
Encino Hospital Medical Center
Garden Grove Hospital and Medical Center
Hospital Corporation of America
Huntington Beach Hospital
Inglewood/Airport Area Chamber of Commerce
La Palma Intercommunity Hospital
Paradise Valley Hospital
Sharp HealthCare
Shasta Regional Medical Center
Sherman Oaks Hospital
United Hospital Association
West Anaheim Medical Center
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097