BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1081
AUTHOR: Hernandez
INTRODUCED: February 19, 2014
HEARING DATE: April 30, 2014
CONSULTANT: Bain
SUBJECT : Federally qualified health centers.
SUMMARY : Requires the Department of Health Care Services to
authorize a three-year alternative payment Medi-Cal methodology
pilot project for federally qualified health centers (FQHCs)
under which participating FQHCs would receive capitated monthly
payments for each Medi-Cal managed care enrollee assigned to the
FQHC in place of the wrap-around, fee-for-service per-visit
payments from DHCS.
Existing law:
1.Establishes the Medi-Cal program as California's Medicaid
program, administered by the Department of Health Care
Services (DHCS), which provides comprehensive health care
coverage for low-income individuals. FQHC and Rural Health
Clinic (RHC) services are covered benefits under the Medi-Cal
program.
2.Requires FQHCs and RHCs to be reimbursed on a per-visit basis.
Defines a "visit" as a face-to-face encounter between an FQHC
or RHC patient and the following health care providers: a
physician, physician assistant, nurse practitioner, certified
nurse midwife, clinical psychologist, licensed clinical social
worker, visiting nurse, podiatrist, dentist, optometrist,
chiropractor, comprehensive perinatal services practitioner
providing comprehensive perinatal services, a four-hour day of
attendance at an Adult Day Health Care Center; and, any other
provider identified in the state plan's definition of an FQHC
or RHC visit.
3.Requires FQHC and RHC per-visit rates to be increased by the
Medicare Economic Index (MEI) applicable to primary care
services in the manner provided for in federal law.
4.Permits FQHC or RHC to apply for an adjustment to its
per-visit rate based on a change in the scope of services
provided by the FQHC or RHC. Requires rate changes based on a
Continued---
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change in the scope of services provided by an FQHC or RHC to
be evaluated in accordance with Medicare reasonable cost
principles.
This bill:
1.Requires, notwithstanding any other provision of law, DHCS to
authorize a three-year alternative payment methodology (APM)
pilot project for FQHCs. Requires the APM to be implemented in
any county and FQHC willing to participate.
2.Requires, under the APM pilot project, participating FQHCs to
receive capitated monthly payments for each Medi-Cal managed
care enrollee assigned to the FQHC in place of the
wrap-around, fee-for-service per-visit payments from DHCS.
3.Requires the APM to include all necessary protections and
safeguards for both the FQHCs and the health plans to ensure
that neither are financially harmed by the implementation of
the APM, which includes both rates and number of enrollees
assigned.
4.Requires an evaluation of the pilot project to be conducted by
an independent entity that takes into consideration payment
adequacy, delivery system transformation, and quality measures
within six months after the APM pilot project's completion.
Requires the independent entity to report its findings to DHCS
and the Legislature. Requires an evaluation to be completed
only if there are non-state General Fund moneys available for
this purpose.
5.Requires DHCS to seek any federal approvals necessary for the
implementation of this bill.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, the APM pilot
project established by this bill would require DHCS to
authorize a three-year health reform demonstration project
that would dramatically alter the way FQHCs deliver primary
care and are reimbursed by Medi-Cal. In participating
counties, this bill would replace the existing per visit
Medi-Cal payment methodology with a capitated system through
Medi-Cal managed care plans using the alternative payment
methodology (APM) option authorized under federal law. The
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capitated payment would provide greater flexibility in health
care delivery for the FQHC by enabling the FQHC to provide
different types of health care services without having to meet
the per visit billing requirement to generate Medi-Cal
revenue. For example, an FQHC could use the capitation payment
to provide a patient with different services on the same day
(an FQHC cannot bill separately for a primary care visit and a
mental health care appointment that occur on the same day
under current DHCS policy), or to provide health care services
through different means (such as phone consultation and email
consultation) or through different providers types (such as
dieticians).
2.Background on FQHCs and RHCs. In 1989, Congress established
FQHCs as a new provider type. FQHCs are public or tax-exempt
entities which receive a direct grant from the federal
government under Section 330 of the Public Health Service Act,
or are determined by the federal Department of Health and
Human Services to meet the requirements for receiving such
grants. Federal law defines the services to be provided by
FQHCs for Medicaid purposes and included special payment
provisions to ensure that they would be reimbursed for 100
percent of their reasonable costs associated with furnishing
these services. One of the legislative purposes in doing so
was to ensure that federal grant funds are not used to
subsidize health center or program services to Medicaid
beneficiaries. State Medicaid programs must pay for covered
services provided by FQHCs. There are over 820 FQHC locations
(FQHCs may have more than one clinic location) in California.
3.Medi-Cal Reimbursement to FQHCs. Federal Medicaid payment to
FQHCs are governed by state (Medi-Cal in California) and
federal law. From 1989 until 2000, the FQHC Medicaid payment
system was based on per-visit payment rates and retroactive
adjustments. Each FQHC received a provisional per-visit rate
premised on the prior year's rate and an annual
reconciliation. After the year ended, the cost reports for
that year were reconciled, and the level of overall payments
was adjusted retroactively as necessary.
In December 2000, Congress required states to change their FQHC
payment methodology from a retrospective to a prospective
payment system (known as PPS). This federal law change
established (for existing FQHCs) a per-visit baseline payment
rate equal to 100 percent of the center's average costs per
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visit incurred during 1999 and 2000 which were reasonable and
related to the cost of furnishing such services. States are
required to pay FQHCs a per-visit rate, which is equal to the
baseline PPS payment rate, increased each year by the MEI, and
adjusted to take into account any increase or decrease in the
scope of such services furnished by the FQHC during that
fiscal year. Under PPS, State Medicaid agencies are required
to pay centers their PPS per-visit rate (or an APM, discussed
below) for each face-to-face encounter between a Medicaid
beneficiary and one of the FQHC's billable providers for a
covered service.
For Medi-Cal managed care plan patients, DHCS is required to
reimburse an FQHC or RHC for the difference between its
per-visit PPS rate and the payment made by the plan. This
payment is known as a "wrap around" payment. The Medi-Cal
managed care wrap-around rate was established to comply with
federal and state regulation to reimburse a provider for the
difference between their PPS rate and their Medi-Cal managed
care reimbursement.
The average PPS rate paid to an FQHC ($182) is considerably
higher than the most common primary care visit reimbursement
rates in Medi-Cal, but it also includes additional services
not included in a primary care visit. Because FQHCs are
required to receive an MEI adjustment to their rates under
federal law, and because of their role in providing primary
care access to the Medi-Cal population, FQHCs have been
exempted from the Medi-Cal rate reductions.
4.Alternative Payment Methodology. This bill calls for a pilot
program using an APM. Federal law permits Medicaid programs to
provide payment under an APM that meets both of the following:
a. Is agreed to by the State and the FQHC or RHC; and,
b. Results in payment to the FQHC or RHC of an amount
which is at least equal to the amount otherwise required
to be paid to the center or clinic under the federal PPS
statute.
CMS has indicated a State may accept an FQHC's or RHC 's
written assertion that the amount paid under the APM results
in payment that at least equals the amount to which the FQHC
or RHC is entitled under the PPS. In 2010, approximately 21
states used an APM to pay some or all of their FQHCs,
according to a September 2011 report from the National
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Association of Community Health Centers.
5.Recent DHCS proposal. On April 25, 2014, DHCS released a
proposed APM for a pilot program at FQHCs located in urban
areas. Under the pilot, the payor of FQHC services would
transition from DHCS to Medi-Cal managed care plans. The pilot
would ensure FQHCs are reimbursed at no less than the PPS
rate, as prescribed under federal regulations, while
incentivizing delivery system and practice transformation at
FQHCs through flexibilities available under a full capitation
payment structure. DHCS' objective for the pilot is to
transition the delivery of care at FQHCs from its current
volume-based system to one that better aligns the financing
and delivery of health services.
Under the pilot, health plans would make a monthly capitated
payment per member assigned to the FQHC. This FQHC specific
per member per month (PMPM) capitation payment would be
calculated to be equivalent to the amount the FQHC would have
received under the visit-based PPS methodology. In developing
the additional plan payments, DHCS would determine two
separate capitation amounts: the base capitation and the
supplemental wrap cap. The first component (the base
capitation) would be the amount that the plan already pays the
FQHC under a capitated arrangement comparable to reimbursement
for non-FQHC providers. The second component is the actuarial
equivalent of the traditional wrap-around component of FQHC
payments (referred to as a supplemental wrap cap PMPM). This
wrap cap PMPM would be the difference between the base
capitation and the FQHC's PPS-equivalent PMPM. DHCS would
include a new rate component for the supplemental wrap cap
paid to the plan based on number of assigned members. To
receive the supplemental wrap cap PMPM, the plan would report
to DHCS on a monthly basis the number of members assigned to
each pilot FQHC. DHCS would then provide the additional PMPM
amount for each of those members assigned to pilot FQHCs. DHCS
argues that, because the supplemental wrap payment a plan
receives is based on assigned members in pilot FQHCs each
month, any potential risk to FQHCs associated with diversion
of members to or away from the pilot FQHCs is mitigated, as
plans have no financial incentive to divert members to
non-FQHC providers.
Each participating FQHC will have an established FQHC-specific
PPS-equivalent PMPM calculated based on the number of assigned
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members and average historical visits. The wrap cap for each
member in a selected category of aid would be the difference
between the plan's "traditional" capitation payment to FQHCs
and the FQHC-specific PMPM. The plan would pay each pilot FQHC
one single prospective capitation payment that consists of the
base capitation and supplemental wrap cap component associated
with each FQHC.
Because of the federal requirements regarding APMs, there is a
need to include the potential for reconciliation to PPS. Under
the DHCS proposal, any of the 3 entities involved (an FQHC, a
health plan, or DHCS) could request that a reconciliation be
performed. DHCS states the circumstances under which such a
reconciliation could be requested would be determined through
stakeholder discussions. In the event of a need for
reconciliation, the health plans would be the responsible
entity for reconciliation of payments with FQHCs.
To ensure protections for health plans serving as risk-bearing
entities, a risk corridor structure (calculated once annually)
would be implemented for the duration of the pilot to mitigate
the financial impact of volatility in the supplemental wrap
capitation PMPM. The risk corridor would be calculated by DHCS
for the supplemental wrap capitation PMPM component of payment
to plans and structured symmetrically with a small upside and
downside band. For example, plans would be responsible for
costs/profit up to 0.5 percent of the capitated wrap payment
and DHCS and the plan would share 50/50 in cost/profits for
another small band, and finally any costs/profits beyond that
second band would be borne fully by DHCS.
6.Related legislation. SB 1150 (Hueso and Correa) requires
Medi-Cal reimbursement to FQHCs and RHCs for two visits taking
place on the same day at a single location when the patient
suffers illness or injury requiring additional diagnosis or
treatment after the first visit, or when the patient has a
medical visit and another health visit with a mental health
provider or dental provider. SB 1150 is currently scheduled
for hearing in the Senate Appropriations Committee on April
28, 2014.
7.Prior legislation. AB 1445 (Chesbro) of 2009-10 was
substantially similar to SB 1150. AB 1445 was held on the
Senate Appropriations suspense file.
SB 260 (Steinberg) of 2007 was also similar to SB 1150. SB 260
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was vetoed by Governor Schwarzenegger. In his veto message,
Governor Schwarzenegger argued the bill will increase General
Fund pressure at a time of continuing budget challenges, and
that allowing separate billing for mental health services
would lead to increased costs that the state could not afford.
SB 36 (Chesbro), Chapter 527, Statutes of 2003, established a
statutory structure for Medi-Cal payments for services
provided by FQHCs and RHCs in compliance with federal law,
changing from fee-for-service to a per-visit basis.
8.Governor's Budget proposal in 2012-13. DHCS proposed, as part
of last year's budget, to change the Medi-Cal payment
methodology for FQHCs and RHCs under an APM. Under DHCS'
proposal, payments made to FQHCs and RHCs participating in
Medi-Cal managed care plan contracts would have changed from a
cost and volume-based payment to a fixed payment to provide a
broad range of services to its enrollees. A waiver of current
operating restrictions would allow FQHCs and RHCs to provide
group visits, telehealth, and telephonic disease management.
The waiver would have also allowed FQHCs to perform multiple
services on the same day. DHCS assumed an efficiency savings
of ten percent and would have removed this amount from the
funding provided to Medi-Cal managed care plans. This proposal
was rejected by the Legislature.
9.Support. This bill is jointly sponsored by the California
Primary Care Association (CPCA) and the California Association
of Public Hospitals and Health Systems (CAPHHS). CAPHHS argues
FQHCs have been working to find new, more patient-centered and
efficient ways to provide services, in order to meet the needs
of a growing Medi-Cal patient population. However, the payment
structure for FQHCs reimburses these clinics through a
federally mandated bundled PPS based on face-to-face visits
with a limited number of health professionals. Recognizing the
need to experiment with a payment methodology that ultimately
moves away from the volume based PPS structure, this bill
would allow FQHCs the flexibility to further invest in
team-based care and alternative delivery models that offer
more appropriate and cost effective care. Under this pilot
program, FQHC providers could better integrate behavioral
health and primary care, utilize group visits, email and phone
care management, and team care the employs a greater array of
ancillary staff like community health workers and nurses.
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CPCA states this bill would replace the current payment
methodology with a capitated system that would specify a
monthly capitated rate per patient as an APM, rather than
tying payment to patient visits. CPCA argues capitation
creates incentives for value-based, rather than volume-based,
health care delivery system, it would provide FQHCs the
flexibility to adopt the team-based, patient-centered health
home model that can bundle more services, utilize a greater
variety of providers and technological resources, and
effectuate better patient outcomes.
10.Health plan concerns. The California Association of Health
Plans (CAHP) writes expressing multiple concerns with this
bill. CAHP argues the complexity of a new payment mechanism
should be delayed until July 1, 2016 at the earliest; that the
APM described by CPCA is complex and cost prohibitive; that
there is a need for a clear understanding and disclosure of
the APM rate-setting process used by DHCS; that language is
needed to clearly delineate plans' ability to use medical
management in the same fashion as they would for other
providers; that FQHCs participating in the pilot should be
required to adhere to and report on specific quality protocols
already required for non-FQHC providers; and that the bill
include "poison pill" language that would eliminate the pilot
and revert responsibility for PPS payments back to DHCS if it
is unable to meet its obligation to complete rebasing of the
rates every six months.
11.Policy issues:
a. Details of pilot program lacking. This bill requires
DHCS to authorize a pilot program, but the bill language
does not describe the details of the pilot program, detail
the number of FQHC locations, the counties in which the
pilot would take place, or the reportable quality and
access measures needed to measure results from the APM
payment methodology pilot.
b. Fiscal incentives in current payment methodology. FQHCs
need face-to-face visits with Medi-Cal beneficiaries in
order to generate revenue. The current FQHC payment
methodology incentivizes cost and volume as FQHCs rates are
based on their cost and revenue is generated by additional
fee-for-service visits, irrespective of the quality of care
or the complexity of the services delivered. This payment
methodology has been described as placing health care
providers working in FQHCs on the "15-minute treadmill" as
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face-to-face fee-for-service visits in the FQHCs with
Medicaid enrollees generate revenue. This payment
methodology does not reimburse for "in-between" care, such
as phone and email-based follow-up care, care coordination
or care outside the four walls of the FQHC. A different
payment methodology than the per-visit payment methodology
could enable FQHCs to focus efforts on higher-risk and
higher-needs patients through traditionally unreimbursed
activities.
c. How is financial risk handled in the pilot program?
FQHCs are currently reimbursed by Medi-Cal managed care
plans on either a fee-for-service or capitated basis. The
state makes a wrap-around payment based on the difference
between the plan rate paid to the FQHC and the FQHC's PPS
rate. In discussions on this bill, one of the issues is
whether Medi-Cal managed care plans would assume risk for
the full payment to the FQHC (in effect, eliminating the
DHCS wrap around payment) and what entity has payment
responsibility if an FQHC's utilization or scope of service
changes over the course of a year.
In the FQHC PPS statute, Congress explicitly allows states to
use an APM so long as it "results in payment to the center
or clinic of an amount which is at least equal to the
amounts otherwise required to be paid to the center or
clinic" under PPS, and the FQHC agrees to it. In the
previous year proposal by DHCS that was rejected by the
Legislature, DHCS proposed implementing an APM that waived
this federal payment provision.
Under the pilot program in this bill, if the wrap around
payment is made entirely by the Medi-Cal managed care plan,
the plans want to be reimbursed by DHCS for this additional
cost on a timely basis, and they also want the FQHC to be
subject to the same utilization and payment provisions as
other plan-contracting providers. However, the provision
for reconciliation and the requirement that the APM result
in payment that is at least equal to amount required under
PPS are federal requirements, and the FQHCs do not want to
waive this federal payment protection. In addition, FQHCs
are concerned that if plans are at risk for the entire
Medi-Cal payment amount (without a wrap-around payment from
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DHCS), they will shift utilization away from the FQHC to
other plan-contracting providers.
SUPPORT AND OPPOSITION :
Support: California Association of Public Hospitals and Health
Systems (co-sponsor)
California Primary Care Association (co-sponsor)
California Association of Marriage and Family
Therapists
California Family Health Council
California Psychological Association
California State Association of Counties
Community Clinic Consortium
Contra Costa County Board of Supervisors
East Valley Community Health Center
Family Health Care Network
San Mateo County Board of Supervisors
San Ysidro Health Center
Tiburcio Vasquez Health Center
Oppose: None received
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