BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de Le�n, Chair


          SB 1081 (Hernandez) - Federally qualified health centers.
          
          Amended: As introduced.         Policy Vote: Health 5-1
          Urgency: No                     Mandate: No
          Hearing Date: May 19, 2014      Consultant: Brendan McCarthy
          
          This bill meets the criteria for referral to the Suspense File.
          
          
          Bill Summary: SB 1081 would require the Department of Health  
          Care Services to authorize a three-year pilot project, under  
          which federally qualified health centers would receive capitated  
          monthly payments from Medi-Cal managed care plans in lieu of  
          wrap-around payments from Medi-Cal for individual visits.

          Fiscal Impact: 
              Likely costs of $450,000 per year for one to two years to  
              develop the pilot project and apply for federal approval of  
              the pilot project (General Fund and federal funds).

              One-time costs of $150,000 to $300,000 to prepare an  
              evaluation of the pilot project (private funds).

              Unknown potential additional tax revenues to the state  
              (General Fund). The state imposes a 3.9 percent tax on  
              managed care organizations. To the extent that payments for  
              services provided in federally qualified health centers  
              shift from direct payments from the Department of Health  
              Care Services to capitated payments made to managed care  
              plans (who would then provide capitated payments to  
              centers), the bill will increase managed care plan revenues  
              and subsequent tax revenues.

          Background: Under current law, the Medi-Cal program provides  
          health care coverage for certain low income and disabled  
          individuals.

          In the Medi-Cal fee-for-service system, federally qualified  
          health centers are paid a per-visit payment known as the  
          prospective payment system (PPS). The PPS rate is based on a  
          baseline rate that reflects a federally qualified health  
          center's costs to provide services in 1999-2000, adjusted for  








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          inflation. When Medi-Cal beneficiaries in the managed care  
          system receive care from a federally qualified health center,  
          the managed care plan makes a per-visit payment to the center.  
          Because the rates paid by managed care plans are significantly  
          below the PPS rate, the state makes a supplemental "wrap-around"  
          payment to the federally qualified health center to bring the  
          total payment up to the PPS rate.

          In the 2012-13 Governor's Budget Proposal, the administration  
          proposed a new method to make payments to federally qualified  
          health centers, based on a capitated payment structure. The  
          proposal would have also given greater flexibility to federally  
          qualified health centers to provide services in new ways. The  
          Legislature rejected that proposal.

          The Department recently released a proposal to create a pilot  
          project for alternative payments to federally qualified health  
          centers in urban areas. Under that proposal, capitated payments  
          would be made to participating federally qualified health  
          centers in lieu of wrap-around payments.

          Proposed Law: SB 1081 would require the Department of Health  
          Care Services to authorize a three-year pilot project, under  
          which federally qualified health centers would receive capitated  
          monthly payments from Medi-Cal managed care plans in lieu of  
          wrap-around payments from Medi-Cal for individual visits.

          Specific provisions of the bill would:
              Require the Department of Health Care Services to develop  
              an alternate payment methodology pilot project for federally  
              qualified health centers;
              Require the pilot to be implemented in any county and any  
              federally qualified health center willing to participate;
              Require any participating federally qualified health center  
              to receive capitated monthly payments from Medi-Cal managed  
              care plans for each enrollee assigned to the federally  
              qualified health center, in lieu of wrap-around payments  
              from the Department;
              Require the pilot to include financial protections for both  
              the participating federally qualified health centers and  
              managed care plans;
              Require an evaluation of the pilot, to be funded with  
              non-state funds;
              Require the Department to seek all necessary federal  








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              approvals.

          Related Legislation: SB 1150 (Hueso and Correa) would require  
          the Medi-Cal program to reimburse federally qualified health  
          centers and rural health clinics for two visits by a Medi-Cal  
          beneficiary taking place on the same day, under certain  
          circumstances. That bill is on this committee's Suspense File.