BILL ANALYSIS Ó
AB 1558
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Date of Hearing: April 29, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 1558 (Roger Hernández) - As Introduced: January 28, 2014
SUBJECT : California Health Data Organization.
SUMMARY : Creates the California Health Data Organization (CHDO)
within the University of California (UC) to organize data
provided by health plans and insurers (carriers) on a Website to
allow consumers to compare the prices paid for procedures, as
specified. Specifically, this bill :
1)Requests UC to establish CHDO. Creates various requirements
for CHDO, including:
a) Establish a carrier claims database, as specified;
b) Collect and organize carrier data into the following
categories: i) charges and total amounts paid by carriers
and patients, including charge amount, paid amount, prepaid
amount, copayment, coinsurance, deductible, and allowed
amount; ii) type of health care service, including
ambulatory and inpatient physician services reported by
procedure codes, as specified; and iii) information
relating to risk adjustment, including other diagnoses,
length of stay, and discharge;
c) Disseminate the information collected to the public
through an easily searchable Website that allows for the
comparison of prices paid by carriers per procedure;
d) Acquire staff with experience in statewide
individual-level data collection; management and analysis
of complex patient-level data; compliance with requirements
under the federal Health Information Portability and
Accountability Act of 1996 (HIPAA); and communication of
information to the public via a user-friendly web
interface;
e) Investigate how to combine price information with
quality information, either within the database or by
linkage to other searchable databases;
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f) Investigate the most efficient way of presenting
information to the public, including reporting on price
information for the average severity of the condition or
for different tiers of severity; and,
g) Coordinate efforts with the health care coverage market
and provide information to the public using the geographic
areas used by carriers.
2)Prohibits the data made available to the public from
containing any individually identifiable information.
3)Authorizes CHDO to contract with a qualified, nongovernmental,
independent third party to obtain a commercially available
claims dataset until CHDO collects its first set of data
directly from carriers.
4)Authorizes CHDO to receive and accept gifts, grants, or
donations from federal, state, and local government agencies,
individuals, associations, private foundations, and
corporation, in compliance with conflict-of-interest
provisions adopted at a public meeting.
5)Authorizes CHDO to charge a reasonable fee to each person or
entity requesting access to data stored in the database, not
to exceed the actual costs of providing that access.
6)Requests UC to seek federal and private funding to cover
planning, implementation, and administration costs.
Authorizes CHDO to explore alternative sources of funding, to
the extent permitted by law, to ensure the sustainability of
CHDO.
7)Requires CHDO to use the data collected to produce annual
reports on the cost of specific ambulatory care procedures and
services and inpatient physician services aggregated within
geographic market areas in this state, as determined by CHDO,
so as not to identify individual physicians.
8)Requires carriers, as specified, to provide a copy of
explanations of benefits (EOB) or explanations of review, as
specified, to the CHDO.
EXISTING LAW :
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1)Regulates health plans under the Knox-Keene Health Care
Service Plan Act of 1975 through the Department of Managed
Health Care and regulates health insurers under the Insurance
Code through the California Department of Insurance (CDI).
2)Prohibits contracts between carriers and a licensed hospital
or health care facility owned by a licensed hospital from
containing any provision that restricts the ability of the
carrier from furnishing information to enrollees or insureds
concerning the cost range of procedures or the quality of
services. Provides hospitals at least 20 days in advance to
review the methodology and data, requires risk adjustment
factors for quality data, and requires an opportunity for a
hospital to provide a link on the carrier's Website where the
hospital's response to the data can be accessed.
3)Makes Medicare data, under federal law, available for the
evaluation of the performance of providers of services and
suppliers, to qualified entities, defined as a public or
private entity that is qualified as determined by the
Secretary of the federal Department of Health and Human
Services (HHS), to use claims data to evaluate the performance
of providers of services and suppliers on measures of quality,
efficiency, effectiveness, and resource use, and agrees to
meet specified requirements and other requirements as the HHS
Secretary may specify, such as ensuring security of data.
4)Prohibits a health plan from releasing any information to an
employer that would directly or indirectly indicate to the
employer that an employee is receiving or has received
services from a health care provider covered by the plan
unless authorized to do so by the employee.
5)Establishes under federal law, HIPAA, which among various
provisions, mandates industry-wide standards for health care
information on electronic billing and other processes; and
requires the protection and confidential handling of protected
health information.
6)Under HIPAA, provides protections for individually
identifiable health information held by covered entities and
their business associates and gives patients an array of
rights with respect to that information. Permits, under
HIPAA, the disclosure of certain health information as needed
for patient care and certain other purposes, including: public
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health activities, research, prevention of a serious threat to
health or safety, law enforcement purposes, and judicial and
administrative proceedings. Covered entities under the HIPAA
Privacy Rule are health care providers, health plans, and
health care clearinghouses.
7)Under the Confidentiality of Medical Information Act,
prohibits providers of healthcare, health care service plans,
their contractors, and any business organized for the purpose
of maintaining medical information, from using medical
information for any purpose other than providing health care
services, except as expressly authorized by the patient or as
otherwise required or authorized by law.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author of this bill,
consumer prices for health care are less transparent than
prices in almost every other market. The necessity of medical
procedures combined with the lack of transparency creates a
challenging decision problem for consumers. The author
asserts that this bill creates a price catalog that will help
lower the cost paid for medical services by identifying the
discounts that ranging from 10% to 90% which have been
assessed for medical services. The author states that
existing law, which mandates the reporting of provider charges
only, has lower value for consumers than paid amounts, and
there is no mechanism to disseminate the information to the
public.
2)BACKGROUND . The Office of the Actuary in the Centers for
Medicare and Medicaid Services annually produces projections
of health care spending for categories within the National
Health Expenditure Accounts, which track health spending by
source of funds (for example, private health insurance,
Medicare, Medicaid), by type of service (hospital, physician,
prescription drugs, etc.), and by sponsor or payer
(businesses, households, governments). Among the findings for
National Health Expenditures in 2012-22 is a projection that
average annual growth in health spending will be 6.2% per year
for 2015 through 2022, largely as a result of the continued
implementation of the coverage expansions under the Patient
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Protection and Affordable Care Act (ACA), faster projected
economic growth, and the aging of the population. Health
spending is projected to be 19.9 percent of gross domestic
product (or GDP) by 2022. Per capita out of pocket spending
is projected to be $1,016 in 2014, rising to $1,341 in 2022.
Out of pocket spending is projected to make up 10.5% of the
$3.1 trillion in national health expenditures in 2014,
decreasing as a percentage of total expenditures to 9.1% by
2022.
In 2011, the Government Accountability Office (GAO) published
a report entitled "Health Care Price Transparency: Meaningful
Price Information Is Difficult for Consumers to Obtain Prior
to Receiving Care." The report found that several health care
and legal factors may make it difficult for consumers to
obtain price information for the health care services they
receive, particularly estimates of what their complete costs
will be. The health care factors include the difficulty of
predicting health care services in advance, billing from
multiple providers, and the variety of insurance benefit
structures. For example, when GAO contacted physicians'
offices to obtain information on the price of a diabetes
screening, several representatives said the patient needs to
be seen by a physician before the physician could determine
which screening tests the patient would need. According to
provider association officials, consumers may have difficulty
obtaining complete cost estimates from providers because
providers have to know the status of insured consumers' cost
sharing under health benefit plans, such as how much consumers
have spent towards their deductible at any given time.
Pricing transparency means different things to different
people. A 2008 issue brief published by the National Quality
Forum (NQF) set out three different types of pricing
transparency, and their relevance for various parties in the
health care arena. Consumers (patients and their families),
purchasers (employers and health plans), and providers
(physicians, hospitals and other facilities) all are potential
audiences for price transparency, but relevant information
might be different for each audience. Pricing information
might be retail prices (list prices for services that are
charged by providers to patients who are not covered by
insurance or otherwise eligible for discounts); negotiated
prices (the price a provider agrees to charge for patients
covered by a specific health plan) and patient out-of-pocket
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payments (i.e., coinsurance, deductibles, and exclusions - the
share of the health plan's negotiated price that a patient is
responsible for paying). The NQF issue brief suggests this is
the price tag of most interest to patients and their families.
3)ALL-PAYER CLAIMS DATABASES , or APCDs, are large-scale
databases that systematically collect medical claims, pharmacy
claims, dental claims (typically, but not always), and
eligibility and provider files from private and public payers.
In January 2014, the Robert Wood Johnson Foundation published
a pair of papers (one written by APCD Council, and one by
Freedman Healthcare) with the intent to guide states in
crafting all-payer claims database policies. The papers lay
out various possible benefits of APCDs: filling critical
information gaps for state agencies, supporting health care
and payment reform initiatives, and creating transparency for
consumers, purchasers, and state agencies. APCDs have been
established in Maine, Kansas, Maryland, Massachusetts, New
Hampshire, Minnesota, Tennessee, Utah, and Vermont. Most of
these states have chosen to house their APCDs at a state
agency (either an existing agency or a newly created entity);
one state (Colorado) has its APCD run by a nonprofit
organization. The papers emphasize the importance of engaging
key stakeholders early and often, including payers, health
care providers, employers, state agencies, and consumers. The
papers note that for most states, legislation creating an APCD
usually articulates broad reporting goals which are further
refined in rules or regulations for data collection or data
use.
4)EXISTING TRANSPARENCY INITIATIVES .
a) OSHPD Hospital Chargemaster Program. AB 1045 (Frommer),
Chapter 532, Statutes of 2005, and AB 1627 (Frommer),
Chapter 582, Statutes of 2003, known as the Payers' Bill of
Rights) require all licensed general acute care hospitals,
psychiatric acute hospitals, and special hospitals in
California to make certain pricing information available to
the public and to submit this information annually to the
Office of Statewide Health Planning and Development
(OSHPD). A hospital charge description master, also known
as a chargemaster, is a file that contains the prices of
all services, goods, and procedures and is used to generate
a patient's bill. The Payers' Bill of Rights requires each
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hospital to submit a copy of its chargemaster, a list of
average charges for 25 common outpatient procedures, and
the estimated percentage change in gross revenue due to
price changes each July 1. These chargemaster files are
posted on OSHPD's website.
In 2007, the Congressional Research Service (CRS) issued a
report entitled "Does Price Transparency Improve Market
Efficiency? Implications of Empirical Evidence in Other
Markets for the Health Sector." The report investigated
the question of whether better price information might
allow patients, either directly or through their
physicians, to obtain better value for health care services
and subsequently change their behavior. The CRS report
examines pricing information released as a result of AB
1045 and AB 1627 and finds that California hospitals that
had increased average daily charges for normal vaginal
birth over the study period, on average, did not lose
patients. Indeed, there was a slight positive correlation
between changes in normal vaginal birth charges and the
percentage change in discharges over the study period,
rather than the negative correlation that would be expected
if the availability of prices was influencing patient
behavior by making patients more price-sensitive.
The report notes that several explanations are possible for
this lack of a relationship between changes in average
charges and changes in hospital volume. Differences in
perceived quality or care or amenity levels may matter more
than price for many patients, especially if insurance
coverage insulates them from prices (insurers and patients
paid hospitals about 38% of the "sticker price" charges
found in chargemasters in 2004). Alternatively, patients
may care about prices, but might be unable, unwilling, or
disinclined to examine online price data, which is not
presented in a user friendly way: for each hospital, data
is typically available in the form of a spreadsheet that
lists the prices for thousands of procedures. Moreover,
the chargemasters are currently not required to be provided
in a standardized format, making it impossible to generate
an aggregate statewide chargemaster that could serve as a
baseline for comparison. Finally, the report posits that
changes in prices might correlate to offsetting changes in
quality or amenity levels. Nonetheless, the report
concludes that this preliminary evidence suggests that the
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California price transparency initiative so far has had
little observable effect where it might have been expected
to have the greatest effect.
b) California Healthcare Performance Initiative (CHPI).
CHPI claims to be building the most robust healthcare
database in the State of California. It combines data on
the healthcare experiences of more than 12 million people
from health plans and Medicare to evaluate the quality and
efficiency of medical services. CHPI's current activities
build upon six years of performance measurement conducted
through the California Physician Performance Initiative
(CPPI).
CHPI claims to administer the only Multi-Payer Claims
Database (MPCD) currently in operation in California, which
consists of claims voluntarily reported by Anthem Blue
Cross, Blue Shield of California, United Healthcare, and
the Medicare fee-for-service program. These data provide
information on services provided by hospitals, emergency
departments, ambulatory surgery centers, ancillary
providers, pharmacies, and physicians. CHPI was designated
as a qualified entity (QE) in the Medicare data sharing
program in February 2013. The QE certification program was
created under the ACA to allow public reporting of
physician-level quality measurements based on Medicare
claims data combined with other payers' data. States and
data organizations may apply for QE certification, which is
the only avenue for public reporting of Medicare quality
data at the provider level. CHPI indicates it has received
Medicare fee-for-service claims representing over 5 million
California beneficiaries, and is in the process of
integrating these claims with its private health plan
claims data.
According to a September 13, 2010 California Healthline
article, the California Medical Association (CMA) filed a
class-action lawsuit in 2010 claiming that Blue Shield of
California created an online physician rating program that
could harm doctors and their patients by promoting
inaccurate information. The article states that Blue
Shield worked with the Pacific Business Group on Health to
evaluate the doctors using data collected by the CPPI,
which is CHPI's predecessor. The CMA sought a court order
to stop the program and inform state residents about
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problems with the data. The case was dismissed by an
Alameda County court.
c) California Department of Insurance grant. The ACA has
made available $250 million through the Health Insurance
Premium Review Grants Program over five years to fund
states' review of proposed health insurance premium
increases. As part of the grant program, the ACA also
provides funding to establish data centers to enhance
health pricing transparency. These data centers are
designed to allow consumers and businesses to better
understand the comparative price of procedures in a given
region or for a specific hospital, insurer, or provider.
This data can then be used to drive decision-making,
ideally rewarding cost-effective provision of care. In
addition, medical claims data can be used to better
understand cost drivers, evaluate quality improvement
initiatives, and better understand utilization of services.
In September 2013, CDI received a grant under this program
for $5.2 million. Under the terms of the grant, CDI will
use these funds to contract with an academic institution or
other nonprofit organization to establish a database of
medical claims data. The dataset will incorporate claims
data from private issuers, public payers, and potentially,
self-funded plans. These data will be analyzed to
determine average prices for common medical procedures and
geographic differences in medical pricing. The funds will
also be used to design a consumer-friendly website that
presents health pricing and quality information in an
integrated manner.
5)SUPPORT . The California Pan-Ethnic Health Network, in
support, writes that many people who are newly eligible for
subsidized health coverage through the ACA are unfamiliar with
health plan billing practices, and that this bill will lead to
greater transparency for consumers, an important features for
consumers who are faced with decisions about when and how to
access critical services under their new health insurance
coverage. Health Access California, in support, writes that
while this bill fails to capture the important and growing
capitated segment of the market, a claims database would be
useful in analyzing the prices of a substantial share of the
California market. The Teamsters, in support, state that they
support transparency of health care costs as one step in
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helping to control those costs.
6)SUPPORT IN CONCEPT . Children Now, with a position of "support
in concept," requests language in the bill to explicitly
describe how dental plans will contribute data to CHDO.
Children Now asserts the state currently lacks the
infrastructure to collect and provide coordinated data about
dental health care services, and argues this bill could be
helpful in providing this missing information.
7)SUPPORT IF AMENDED . McKesson Health Solutions, with a
position of "support if amended," argues that this bill could
inadvertently result in disclosure of intellectual property.
McKesson notes that it sells a product that helps payers and
providers collaborate using criteria designed to help
determine medical necessity of proposed care. McKesson argues
that this bill could lead to the disclosure of these criteria
in their entirety to competitors or individuals or entities
interested in influencing the criteria. McKesson, therefore,
requests an amendment to require information disclosed under
this bill to be de-identified, and for proprietary information
to be considered confidential and exempt from open records law
or subpoena. McKesson also requests an amendment to require
data made available to the public to be aggregated at a high
level to conceal any proprietary information.
8)CONCERNS . The California Hospital Association (CHA) writes
that it supports health care cost and quality transparency,
but suggests that this bill could contribute to an increase in
health care costs. CHA believes this bill should allow for
stakeholder involvement in determining how data will be
collected, who will collect the data, which data elements will
be collected and how the data will be displayed. CHA further
argues that this bill should include safeguards for providers
to ensure quality and accuracy.
CHA also notes that the UC system includes multiple medical
centers and schools of medicine and expresses a concern that
creating CHDO under UC poses a potential conflict of interest.
CHA further argues that the establishment of CHDO will
require considerable resources and questions whether the
expected benefits would justify this expense. Finally, CHA
notes the payments that hospitals receive from commercial
insurance companies are based on confidentially negotiated
contracts and expresses a concern that making those rates
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publically available may have negative implications, including
effecting competitive pricing that benefits the consumer.
9)OPPOSE UNLESS AMENDED . The California Optometric Association,
with a position of "oppose unless amended," argues that, as
written, this bill does not provide any means to ensure that
fair play is enforced in the reporting of prices so consumers
are given accurate information, and requests that this bill be
amended to add a mechanism for providers to correct outdated
or incorrect information.
10)RELATED LEGISLATION .
a) SB 1182 (Leno) requires carriers to receive regulators'
approval for large group plan contract or policy rate
increases that exceed 5% of the prior year's rate; requires
carriers to annually provide de-identified claims data at
no charge to a large group purchaser, upon request; and
creates additional new disclosure requirements for
carriers. SB 1182 is pending in the Senate Health
Committee.
b) SB 1322 (Ed Hernandez) requires the Governor to convene
the California Health Care Quality Improvement and Cost
Containment Commission to research and recommend
appropriate and timely strategies for promoting
high-quality care and containing health care costs. SB
1322 is pending in the Senate Health Committee.
c) SB 1340 (Ed Hernandez) makes a number of changes to
existing law that prohibits contracts between health plans
or insurers and hospitals from restricting sharing of cost
or quality information by carriers, including increasing
from 20 to 30 days the amount of time a hospital has to
review the methodology and data developed and compiled by
the health plan or insurer. SB 1340 is pending on the
Senate Floor.
11)PREVIOUS LEGISLATION .
a) SB 751 (Gaines and Ed Hernandez), Chapter 244, Statutes
of 2011, prohibits contracts between carriers and hospitals
from containing any provision that restricts the ability of
the carrier from furnishing information to enrollees or
insureds concerning cost range of procedures or the quality
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of services.
b) AB 2389 (Gaines) of 2009 would have prohibited a
contract between a health facility and a carrier from
containing a provision that restricts the ability of the
carrier to furnish information on the cost of procedures or
health care quality information to carrier enrollees. AB
2389 died in the Assembly on Concurrence.
c) AB 2967 (Lieber) of 2008 would have established a Health
Care Cost and Quality Transparency Committee to develop and
recommend to the Secretary of the Health and Human Services
Agency a health care cost and quality transparency plan,
and would have made the Secretary responsible for the
timely implementation of the transparency plan. AB 2967
died on the Senate Inactive File.
d) SB 1300 (Corbett) of 2008 would have prohibited a
contract between a health care provider and a health plan
from containing a provision that restricts the ability of
the health plan to furnish information on the cost of
procedures or health care quality information to plan
enrollees. SB 1300 died on the Senate Floor.
e) AB 1296 (Torrico), Chapter 698, Statutes of 2007,
requires a health plan or contractor offering health
benefits to California Public Employees' Retirement System
(CalPERS) members and annuitants to disclose to CalPERS the
cost, utilization, actual claim payments, and contract
allowance amounts for health care services rendered by
participating hospitals to each member and annuitant.
f) AB 1 X1 (Nuñez) of 2007, among many other provisions
relating to health care reform, contained nearly identical
language as that contained in AB 2967. AB1 X1 failed
passage in the Senate Health Committee.
12)POLICY COMMENTS .
a) Because UC operates hospitals, one of the key types of
health care providers whose claims data will be made public
under this bill, there may be a conflict involved in
allowing UC to receive, process, and present to the public
information about pricing by their competitors.
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b) CHDO receives claims data under this bill through the
required submission of EOBs by carriers. However, not all
carriers utilize EOBs: they are generally for PPO-type
plans that have negotiated rates with a network of
providers. Services for many individuals enrolled in
commercial health plans in California are in HMO-type
products which typically do not use EOBs. As currently
drafted, no information will be gathered about services
provided to these individuals.
c) This bill requires CHDO to provide information relating
to risk adjustment, including other diagnoses, length of
stay, and discharge. However, this bill only requires
carriers to provide EOBs to CHDO, and EOBs do not contain
the type of information (e.g. patient discharge abstracts)
that would be suitable to perform risk adjustment.
d) Because UC is a constitutionally autonomous institution,
the Legislature's powers over UC are limited. This is
reflected in language in this bill which requests, rather
than requires, that UC establish the CHDO. However, this
bill is inconsistent in that a number of provisions require
specific actions by CHDO.
e) This bill requires an annual report to be generated that
does not identify individual physicians. But it is not
clear whether the consumer-friendly website developed by
CHDO should allow for comparisons between individual
physicians.
f) This bill authorizes CHDO to receive and accept gifts,
grants, or donations in compliance with
conflict-of-interest provisions adopted by the board at a
public meeting. However, there is no board created by this
bill.
g) This bill contains references to the California Health
Data Organization and the Health Care Data Organization.
It should be amended to make these terms consistent.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
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AFL-CIO
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Labor Federation
California Pan-Ethnic Health Network
California Teachers Association
California Teamsters Public Affairs Council
Congress of California Seniors
Engineers and Scientists of California, IFPTE Local 20, AFL-CIO
Health Access California
International Longshore and Warehouse Union
National Multiple Sclerosis Society
Professional and Technical Engineers, IFPTE Local 20, AFL-CIO
Service Employees International Union, California State Council
UNITE-HERE, AFL-CIO
University of California Student Association
Utility Workers Union of America, Local 132, AFL-CIO
Opposition
California Optometric Association (unless amended)
Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097