Date of Hearing: May 16, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 770

Author:(Eduardo Garcia) – As Amended Ver:April 23, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill alters a number of provisions related to community clinic billing in Medi-Cal. Specifically, this bill:

1. Requires the Department of Health Care Services (DHCS) to change how the department handles recalculations of the Prospective Payment System (PPS) rate for a change in the scope of services of a Federally Qualified Health Center or Rural Health Center (clinic).
2. Removes “reasonable” from “Medicare reasonable cost principles” citations in current law.
3. Allows for Medi-Cal reimbursement for services rendered outside the four walls of the clinic.
4. Changes the definition of incentive payments and how they are to be treated in regards to calculating reconciliation payments.
5. Adds a requirement for DHCS to incorporate clinic training into existing auditor training opportunities.
6. Makes other minor changes.

FISCAL EFFECT:

1. This bill would result in higher clinic payment rates and substantially more visits billed to Medi-Cal. Given the breadth and depth of the various impacts, the fiscal impact is indeterminate; however, DHCS estimates it could have a GF cost of in the hundreds of millions of dollars annually.
2. Indeterminate costs for systems changes (GF/federal).
3. Administrative staff costs in the millions to recalculate rates (GF/federal).

COMMENTS:

1. Purpose. Clinics have complained of DHCS “legislating by audit,” or audit staff interpreting the law to disallow certain costs in calculation of clinic rates and to exclude certain services from reimbursement. FQHCs claim their practices are consistent with previous practices and in full compliance with the federal law. This bill seeks to ensure all reasonable costs are accounted for in calculation of a clinic’s rate and ensure DHCS staff are trained on applicable laws and regulation, as well as program history.
2. Clinic Reimbursement. There are about 1,000 federally qualified health centers (FQHCs) and rural health centers (RHCs) in California. Because of their unique role in providing health care to underserved communities and the uninsured, policymakers have historically attempted to ensure community clinics remain financially viable. Federal law requires federally funded health programs, including Medicaid and Children's Health Insurance Program (CHIP), to pay clinics using a special reimbursement structure commonly called a prospective payment system (PPS). A PPS rate is a clinic-specific per-visit rate and is calculated by dividing costs for Medi-Cal-reimbursable services by Medi-Cal reimbursable visits. A PPS rate is also adjusted by a growth rate to account for inflation. In addition, a clinic can request a recalculation of its PPS rate based on a change in its scope of services. All clinics must provide at least a defined scope of primary care and mental health services, but may provide additional services as well.

If any clinic is paid by managed care plans in an amount less than its PPS rates, there is a reconciliation performed to ensure clinics get paid the full PPS rate through a wrap-around payment paid by DCHS. For Medi-Cal, current PPS rates vary from around $80 to over $650 per visit, depending on the mix of services provided at each clinic.

This bill makes a number of changes related to the calculation of PPS rates and clinic reimbursement, addressing issues that have been sources of significant discussion between the clinics and the audits and investigations branch of DHCS that oversees clinic financing.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: April 9, 2019

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 770

Author:(Eduardo Garcia) – As Introduced Ver:February 19, 2019

SUBJECT: Medi-Cal: federally qualified health clinics: rural health clinics.

SUMMARY: Requires the methodology of the adjusted per-visit rate for Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) to exclude a per-visit payment limitation, provider productivity standard, or any other method that applies cost limitations in the calculation of the per-visit rate that are not based on the reasonable cost of the FQHC or RHC as determined under applicable federal reasonable cost principles. Requires, to the extent required under federal law, the FQHC and RHC adjusted per-visit rate to include direct costs, administrative costs, and costs related to FQHC and RHC services rendered outside of the respective facility, consistent with guidance issued by the federal Centers for Medicare and Medicaid Services (CMS) and the federal Health Resources and Services Administration (HRSA). Requires FQHC and RHC services rendered to a Medi-Cal beneficiary at premises such as a temporary shelter, a beneficiary’s residence, a location of another provider, or any location other than the clinic location to be billed by the FQHC or RHC and reimbursed at the contracted rate when specified conditions apply. Requires Medi-Cal managed care (MCMC) incentive payments to be excluded from the wrap around payment calculation when FQHC or RHC services are partially reimbursed by a MCMC plan. Specifically, this bill:

1. Requires FQHC and RHC rate changes based on a change in the scope of services provided by an FQHC or RHC to also be evaluated in accordance with federal reasonable cost reimbursement principles, as set forth in federal regulations which set forth standards and requirements for the audit of non-federal entities expending federal awards (known as the “Uniform Guidance”), in addition to the Medicare reasonable cost principles in existing law. Requires, to the extent there is a conflict between the federal reasonable cost principles, the terms of the Uniform Guidance to control.
2. Requires, to the extent required under federal law, the FQHC and RHC adjusted per-visit rate to include direct costs, administrative costs, and costs related to FQHC and RHC services rendered outside of the respective facility, consistent with guidance issued by the CMS and HRSA.
   
3. Requires FQHC and RHC services rendered to a Medi-Cal beneficiary at premises such as a temporary shelter, a beneficiary’s residence, a location of another provider, or any location other than the location identified on the primary care clinic license or in the provider master file, to be billed by the FQHC or RHC, and reimbursed at the contracted rate when either of the following apply:
   
   1. The location where the services are provided is approved by the HRSA as part of the FQHC’s or RHC’s application for its grant under Section 330 of the Public Health Service Act (PHSA); or,
      
   2. The services are provided at a location requiring payment under federal Medicaid law.
4. Requires the methodology of the FQHC and RHC adjusted per-visit rate to exclude a per- visit payment limitation and provider productivity standard or any other method that applies cost limitations in the calculation of the per-visit rate that are not based on the reasonable cost of the FQHC or RHC as determined under applicable federal reasonable cost principles. 
5. Requires MCMC plan financial incentive payments to be excluded from the wrap around payment calculation when FQHC or RHC services are partially reimbursed by a MCMC plan. Defines “financial incentive payments” to include, but are not limited to, monetary payments to the FQHCs or RHCs by a third-party payor for superior contract performance, such as improving health outcomes, reducing the overall cost of care, or increasing the quality of care. 
   
6. Requires the Department of Health Care Services (DHCS), in the case of services furnished by an FQHC or RHC pursuant to a contract between the FQHC or RHC and the MCMC plan, to reimburse the FQHC or RHC in accordance with a specified provision of federal Medicaid law establishing requirements for supplemental payments to FQHCs and RHCs up to the Prospective Payment System (PPS) rate.
7. Includes within the definition of a “change in scope of service,” subject to the criteria in 4) in existing law below, the following:
   
   1. A change related to a MCMC plan contracting that either directly or indirectly impacts an FQHC or RHC; 
      
   2. An increase in service intensity attributable to adult patients being served;
      
   3. The adoption, implementation, or upgrade of a certified electronic health record (EHR) system, at the FQHC or RHC; and,
      
   4. Any HRSA-approved changes in the scope of a project to include FQHC and RHC specifically referring to services rendered outside of the respective FQHC or RHC facility. 
      
8. Requires DHCS, in considering a scope of service change, to also consider an increase in administrative costs attributable to an increase or decrease in the scope of services.
   
9. Lengthens the time frame in which FQHCs and RHCs are allowed to submit requests for scope of service changes once per fiscal year to any time following the beginning of the fiscal year, instead of only within 90 days following the beginning of the FQHC’s or RHC’s fiscal year.
   
10. Lengthens the timeframe in which FQHCs or RHCs are allowed to submit requests for a scope of service change related to Drug Medi-Cal and specialty mental health services to any time during the FQHC’s or RHC’s fiscal year, instead of only within 90 days following the beginning of the FQHC or RHC fiscal year.
    
11. Lengthens the timeframe in which FQHCs or RHCs that add a new licensed location to its existing primary care license can elect to have the reimbursement rate established, to at any time during the FQHC or RHC’s first full fiscal year, instead of within 90 after the FQHC’s or RHC’s first full fiscal year.
12. Lengthens the time in which an FQHC or RHC is required to submit a scope of service rate change request, to any time in the fiscal year, instead of from within 90 days of the beginning of the FQHC or RHC fiscal year, when the FQHC or RHC experienced a decrease in the scope of services in the prior fiscal year that the FQHC or RHC either knew or should have known would have resulted in a significantly lower per-visit rate.
13. Lengthens the time frame for when an FQHC or RHC that discontinues providing onsite pharmacy or dental services is required to submit a scope of service rate change request to any time during the following fiscal year that the FQHC or RHC discontinued providing the services, instead of from within 90 days of the beginning of the following fiscal year.
14. Requires DHCS to ensure that DHCS staff conducting audits of FQHCs and RHCs receive appropriate training on FQHC and RHC program policies and procedures within the Medi-Cal program, including the federal and state legislative history on statutory and regulatory provisions governing the program, and the grant parameters set forth under Section 330 of the federal PHSA.
    
15. Requires this training to be incorporated into existing training opportunities available under DHCS’ current budget for the purpose of improving the quality and integrity of DHCS’ audit process related to the FQHC and RHC provider. Prohibits this provision from being construed to increase DHCS obligations.
    
16. Permits an FQHC or RHC to elect to file an appeal, a grievance, or complaint concerning ratesetting, a scope of service change, and settlement of cost report audits by filing a writ of mandate in Superior Court, without having to go through the DHCS administrative appeals process for the review of a grievance or complaint.

EXISTING LAW:

1. Establishes the Medi-Cal program as California’s Medicaid program, administered by DHCS, which provides comprehensive health care coverage for low-income individuals. FQHC and RHC services are required services 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 specified health care providers. Medi-Cal payments to FQHCs and RHCs are made under what is known as the PPS.
   
3. Prohibits, under federal Medicaid law, a State Medicaid Plan from containing a provision that prevents a FQHC from entering into contractual relationships with private practice dental providers in the provision of FQHC services.
   
4. Permits an 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. Defines a “change in the scope of service,” subject to specified conditions, to include, among other things, the following:
   
5. A change in service due to amended regulatory requirements or rules;
   
6. An increase in service intensity attributable to changes in the types of patients served, including, but not limited to, populations with HIV or AIDS, or other chronic diseases, or homeless, elderly, migrant, or other special populations;
   
7. Changes in operating costs attributable to capital expenditures associated with a modification of the scope of any of the FQHC and RHC services as referenced in federal law, including new or expanded service facilities, regulatory compliance, or changes in technology or medical practices at the FQHC/RHC; and,
   
8. Any changes in the scope of a project approved by HRSA.
   
9. Prohibits a change in costs from, in and of itself, being considered a scope of service change unless all of the following apply:
   
10. The increase or decrease in cost is attributable to an increase or decrease in the scope of services;
    
11. The cost is allowable under Medicare reasonable cost principles, or its successor;
    
12. The change in the scope of services is a change in the type, intensity, duration, or amount of services, or any combination thereof; and,
    
13. The net change in the FQHC’s or RHC’s rate equals or exceeds 1.75% for the affected FQHC or RHC site.

1. Requires rate changes based on a change in the scope of services provided by an FQHC or RHC to be evaluated in accordance with Medicare reasonable cost principles, as set forth in specified provisions of the Code of Federal Regulations or its successor.
   
2. Permits an FQHC or RHC to submit requests for scope of service changes once per fiscal year, only within 90 days following the beginning of the FQHC’s or RHC’s fiscal year.
   
3. Requires an FQHC or RHC to submit a scope of service rate change request within 90 days of the beginning of any FQHC or RHC fiscal year, if, during the FQHC’s or RHC’s prior fiscal year, the FQHC or RHC experienced a decrease in the scope of services provided that the FQHC or RHC either knew or should have known would have resulted in a significantly lower per-visit rate.
   
4. Requires, if FQHC or RHC services are partially reimbursed by a third-party payer (such as a managed care entity), DHCS to reimburse an FQHC or RHC for the difference between its per-visit PPS rate and receipts from other plans or programs on a contract-by-contract basis and not in the aggregate. Requires managed care financial incentive payments that are required by federal law to be excluded from this calculation.
5. Requires DHCS to administer a program to ensure that total payments to FQHCs and RHCs operating as managed care subcontractors comply with federal law. Requires FQHCs and RHCs subcontracting with MCMC plans to seek supplemental reimbursement from DHCS through a per visit fee-for-service billing system whereby the FQHC and RHC submits to DHCS for approval a rate differential calculated to reflect the amount necessary to reimburse the FQHC or RHC for the difference between the payment the center received from the MCMC plan and either the interim rate established by DHCS based on the center’s or clinic’s reasonable cost or the center’s PPS rate. These payments are referred to as the “wrap around” payment.
   
6. Requires DHCS to perform, to the extent feasible, within six months of the end of the FQHC or RHC’s fiscal year, an annual reconciliation to reasonable cost, and to make payments to, or obtain a recovery from, the FQHC or RHC.
7. Requires the DHCS Director, by regulation to adopt such procedures as are necessary for the review of a grievance or complaint concerning the processing or payment of money alleged by a provider of services to be payable by reason of any of the Medi-Cal related provisions of law.
8. Permits a provider, after complying with these administrative appeals procedures in 12) above, if the provider is not satisfied with the director's decision on his or her claim, to file a petition for writ of mandate, not later than one year from the date of the director’s decision. Requires this provision to be the exclusive remedy available to the provider of services for moneys alleged to be payable by Medi-Cal.
9. Limits, pursuant to state regulation, Medi-Cal coverage of specified services, including podiatry, acupuncture, occupational therapy, speech pathology, audiological services, and specified hospital outpatient clinic services involving these providers, to a maximum of two services from among those services in any one calendar month.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, over the last decade, DHCS has been making many interpretations that undermine the "reasonable cost" standard established by federal Medicaid law for more than 20 years. These actions have been taken in the context of annual audits by DHCS. Several of these decisions blatantly contradict the intent, spirit, and case law that have been applied for “reasonable costs.” In essence, DHCS has been legislating by audits and this has caused financial problems for FQHCs to provide access to care. This is the critical priority Congress has placed on FQHCs since 1989-90 when FQHCs where created. Furthermore, the DHCS practice of legislating by audits is in violation of federal law. It will create a situation that Congress has consistently worked to avoid: utilization of their federal grant monies under Sections 329, 330, 340, and 340A of the PHSA to subsidize low Medicaid payments. What DHCS has been doing is excluding many of the reasonable costs incurred by FQHCs who have expended these funds consistent with previous practices and full compliance with the federal law of what constitutes reasonable costs.
2. BACKGROUND ON FQHC and RHC. FQHCs and RHCs are federally designated clinics that provide primary care (and some provide dental and behavioral health services), and are a core component of the Medi-Cal program. There are approximately 1,040 FQHCs and approximately 283 RHCs in California. The number of FQHCs has grown significantly. In 2006, there were 476 FQHC service sites, which grew to 1,007 in 2015. In 2019, DHCS projects there will be 20.6 million FQHC and RHC visits, an increase from 18.4 million in 2017.
   
   Medi-Cal reimbursement to FQHCs and RHCs is governed by state and federal law. Medicaid payment rules for FQHCs differ from those for other providers. FQHCs and RHCs are reimbursed by Medi-Cal on a per-visit rate which is known as the PPS. Under PPS, payments to FQHCs and RHCs must be reasonable and related to the cost of furnishing services, be calculated on a per visit basis, and be increased by the percentage increase in the Medicare Economic Index for primary care services, and adjusted to take into account any increase or decrease in the scope of services furnished by the center or clinic during that fiscal year. The Congressional purpose in establishing FQHC and RHC payment provisions in federal law was to ensure federal Section 330 grant funds intended for the uninsured and special needs populations were not used to backfill low Medicare and Medicaid reimbursement rates.
   
   The list of providers who are billable by an FQHC and RHC is in statute. Each FQHC and RHC has a specific PPS Medi-Cal rate for each face-to-face encounter, irrespective of the reason or intensity of the visit. For MCMC plan patients, DHCS reimburses FQHCs and RHCs 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 MCMC wrap-around rate was established to reimburse FQHCs and RHCs for the difference between their PPS rate and their MCMC reimbursement rate.
3. SERVICES OUTSIDE THE “FOUR WALLS” OF THE CENTER. The ability of FQHCs and RHCs to provide services outside the four walls of the health center and bill their PPS rate has been a long-standing issue. Federal Medicaid law prohibits a State Medicaid Plan from containing a provision that prevents a FQHC from entering into contractual relationships with a private practice dental providers in the provision of FQHC services. A 1991 regional memo from the predecessor agency to the CMS indicated a change in federal law (Section 4704 of Omnibus Budget Reconciliation Act of 1990) amended the meaning of FQHC services, from services furnished to an “outpatient” of the FQHC to instead be services furnished to an individual as a “patient” of an FQHC. The regional memo indicated it was interpreting this new wording as a clear intention on the part of Congress that States should reimburse for FQHC services provided off-site using the FQHC methodology (which was then 100% of reasonable costs), as long as the service provided under arrangement with the FQHC (e.g., the FQHC sends the physician off-site).
   
   In 2008, SB 1427 (Chesbro) would have allowed an FQHC to bill the Medi-Cal program for FQHC services delivered in locations other than the FQHC’s site or sites by a provider who is an employee or a contracted member of the staff of the FQHC if specified requirements were met, including that the FQHC services are provided in the offsite location, rather than at the FQHC’s site or sites, for health or medical reasons. SB 1427 was vetoed by then-Governor Schwarzenegger. In his veto message, the Governor stated SB 1427 would unintentionally create a loophole that may compromise program integrity and expose the State to more than a billion dollars in costs. He directed DHCS to work with stakeholders and the Legislature on statutory changes to provide FQHCs flexibility to bill for services provided outside the site, while maintaining appropriate controls to protect program integrity, and ensuring health centers will continue operating within licensing laws and regulations.

In March 2018, DHCS submitted State Plan Amendment 18-003 (SPA 18-003) adding marriage and family therapists (MFTs) as a new billable provider. That SPA replaced a previous SPA that included a limited ability for health centers to bill outside the four walls that health center representatives objected to. At the end of 2018, DHCS proposed allowing billing outside the four walls for “established patients” (effectively homebound patients) of the health center with an exception from the established patient requirement if the patient was homeless, a migrant farmworker or met other criteria. CMS reportedly indicated to DHCS they did not want this level of detail in the proposed SPA.

1. Managed care incentive payments. This bill excludes MCMC incentive payments from the wrap around payment calculation when FQHC or RHC services are partially reimbursed by a plan in response to a recent court decision. Financial incentive payments are defined in this bill to include, but are not limited to, monetary payments to the FQHCs or RHCs for superior contract performance, such as improving health outcomes, reducing overall cost of care, or increasing the quality of care. 
   
   As stated previously, for MCMC plan patients, DHCS is required to reimburse an FQHC and a RHC for the difference between its per-visit PPS rate and the payment made by the MCMC plan. This payment is known as a “wrap around” payment. For example, if an FQHC had a PPS rate of $150, and the health plan paid the FQHC a rate of $60 for a visit, the wrap around payment from DHCS would be $90. The MCMC wrap-around rate was established to comply with state and federal requirements for reimbursement to an FQHC or RHC for the difference between their PPS rate and their MCMC reimbursement.
   An April 2018 Sacramento Superior Court decision ruling in County of San Mateo v. Director of the California Department of Health Care Services adversely impacted the wrap around payment amounts paid to FQHCs receiving quality incentive payments from plans. Health Plan of San Mateo (HPSM is the county organized health system plan for Medi-Cal beneficiaries) had a “pay for performance” (P4P) program, in which the plan made additional payments to its providers for certain activities, such as offering extended office hours, billing correctly, performing annual teen well-visits and women’s health exams, performing initial health assessments and other activities. One of the HPSM’s providers was San Mateo Medical Center (Center), a public hospital and an FQHC. If the Center completed any of these additional activities, it received a payment based on either a flat dollar amount or a percentage of the Center’s capitation payment. When a DHCS auditor performed the PPS reconciliation review, the auditor included the P4P payments in the amount the Center received from HPSM, which resulted in a substantially lower wrap around payment from DHCS than the Center had calculated it would receive.
   
   An initial Administrative Law Judge proposed decision granted San Mateo County’s appeal that the that P4P payments should not have been included in to wrap around payment calculation. However, DHCS rejected the proposed decision, and on January 2017, issued a final decision denying the appeal via an alternative decision by the Chief Administrative Law Judge, finding that the P4P payments did not fit the definition of “financial incentives” for purposes of excluding the payments from the calculation of the wrap around payments. On appeal, a Sacramento Superior Court denied San Mateo County’s request for a writ of administrative mandate, finding that the P4P payments do not qualify as a financial incentive.
   
   The effect of this ruling and the distinction between quality incentive payments and financial incentives is to dis-incentivize FQHC and RHC participation in quality incentive programs because any additional funds the Center might receive from a plan for meeting quality-related performance targets will be reduced through the reconciliation process.

Following the San Mateo County decision and in response to inquiries from health centers, in June 2018, DHCS informed a health center representative that the direction given to DHCS’ Audits and Investigations branch has been to pause on disallowing quality payments or pay-for-performance payments from the annual reconciliations, until DHCS could finalize its policy.

1. PER VISIT PAYMENT LIMITATION AND Provider productivity standards. This bill requires the methodology of the adjusted per-visit rate paid to FQHCs and RHCs to exclude a per visit payment limitation or a provider productivity standard. The language in this provision was modeled on a provision of the Patient Protection and Affordable Care Act in which Congress directed CMS to cease using productivity standards and other official cost caps or limitations for Medicare PPS. This bill would prohibit similar limitations in Medi-Cal. Medi-Cal regulation currently places a monthly visit limit on certain services rendered by particular providers to adult beneficiaries to no more than two a month under what is known as the Medi-Service Reservation limitation (for example, a patient can receive a service from a podiatrist and a physical therapist each month but not a third visit in that same month from either of those two providers, or an additional provider subject to the limitation, such as an occupational therapist).
   
   Current state law does not authorize or require DHCS to establish, or require FQHCs and RHCs to meet, a provider productivity standard. Clinic representatives indicate that several years ago DHCS began applying a productivity standard to FQHC rate setting using a minimum productivity standard for physicians and mid-level providers of an average of 4,200 visits and 2,100 visits, respectively each year. However, CMS subsequently updated its guidance to state that FQHCs are not subject to provider productivity standards (effective February 1, 2016). Clinic representatives indicate DHCS began applying this federal productivity standard to FQHCs even though FQHCs are not subject to the standards federally, and in the absence of a California state law or regulation authorizing DHCS to apply the proposed standard, or any other, standard.
   

In March 2018, DHCS submitted SPA 18-003 adding MFTs as a new billable provider. As part of that SPA, DHCS also included several other FQHC-related provisions unrelated to the specifics of the MFT legislation, including a provider productivity standard. The provider productivity in SPA 18-003 was lower than the prior productivity standard, as it set the standard at 3,200 visits per full-time equivalent physician and 2,600 visits per mid-level providers, with an exemption request process.

Clinics raised several objections to the proposed standard, including: a) it artificially reduces the FQHC per visit rate if the FQHC falls below the provider productivity standard and undermines the federal requirement that FQHC’s per visit rates be based on 100% of the FQHCs’ costs that are reasonable and related to furnishing of FQHC services; b) the lack of authority in state law or the SPA for such a standard; c) the provider productivity standard used by DHCS was not publicly available and was reportedly based on a study of statewide averages (an average, by definition, would result in some providers receiving less than their costs); d) that Congress has prohibited the use of a provider productivity standard in Medicare FQHC payment calculation, and this standard then should not be used in Medicaid; and, e) the waiver process in the proposed SPA is unworkable because it requires minute-by-minute record keeping to distinguish between patient care and non-patient administrative activities.

In June 2018, CMS wrote to DHCS stating that DHCS may apply a productivity standard that is no more restrictive than the Medicare standard in place when PPS was established, and DHCS would provide CMS with Medicare documentation dating to the establishment of the PPS methodology defining productive, administrative and non-productive time. CMS advised DHCS that if it was unable to find guidance regarding productivity standards and specifically productive versus non-productive time dating to when PPS was established, then DHCS should strike the proposed standard. CMS stated that the removal of this SPA language does not preclude the state from implementing this proposed language through its administrative process (for example, through a provider bulletin). SPA 18-003 is pending with CMS.

1. FQHC/RHC change in scope of service. Federal Medicaid law requires FQHC rates to be adjusted to take into account any increase or decrease in the scope of services furnished by the center or clinic during a particular fiscal year. This bill makes changes to existing state law provisions on when FQHCs and RHCs can apply for an adjustment to their per visit rate based on a change in the scope of service, primarily in response to another provision of SPA 18-003 and DHCS administrative decisions that restrict what are considered FQHC and RHC costs. For example, in addition to the provider productivity and MFT provisions, SPA 18-003 also contains a provision that would prohibit, once the cost of an EHR and/or electronic dental records system is included in an FQHC’s or RHC’s per visit rate, the FQHC or RHC from applying for an adjustment to its per-visit rate solely due to a subsequent acquisition or upgrade of the electronic medical and/or dental records system. This bill contains language seeking to prevent this limitation from occurring by allowing FQHCs to submit a change in the scope of service to allow for the adoption, implementation, or upgrade of a certified EHR system.
   
2. Appeals of rate-setting, scope of service changes and cost reports. This bill permits an FQHC or RHC to elect to file an appeal a grievance or complaint concerning rate-setting, a scope of service change, and settlement of cost report audits by filing a writ of mandate in Superior Court, without having to go through DHCS administrative appeals processes for the review of a grievance or complaint. Under current law, a provider must go through a DHCS administrative process, and if the provider is not satisfied with the DHCS Director's decision on the claim, the provider can file a petition for writ of mandate. According to proponents, the current administrative hearing process is not objective, and Administrative Law Judges overwhelmingly rule in favor of the state.
3. Change to reasonable cost principles. Existing law requires DHCS to evaluate rate changes based on a change in the scope of services provided by an FQHC or RHC in accordance with Medicare reasonable cost principles. This bill would add language that rate changes would be evaluated in accordance with the existing Medicare reasonable cost principles and federal reasonable cost reimbursement principles set forth in what is known as the “Uniform Guidance.” The Uniform Guidance was intended to create uniformity in federal programs, and according to bill proponents, were issued later, and are clearer, easies to understand and provide a comprehensive discussion of both principles and specific items of cost compared to the Medicare reasonable cost reimbursement principles. This change is also intended to enable FQHCs to operate under a common set of cost principles for all their grant programs.
4. SUPPORT. California Health+Advocates (CH+A) writes this bill seeks to address a myriad of issues which are not new to community health centers, including adjustments to per-visit rates, scope of services changes, and timeframes for adjustment requests, incentive payments, appeals processes, and DHCS training. CH+A writes that it supports the requirement for appropriate training for DHCS’ Audits and Investigations unit on FQHC and RHC program policies and procedures within the Medi-Cal Program as it believes it will ensure better engagement between DHCS and health centers and consistent application of policies across the board. CH+A also writes it is supportive of the provision that more fully supports health center investments in EHRs by providing the opportunity for health centers to adjust their rates upon implementation of technology advancements.
   Martha’s Village & Kitchen Inc. (MVKI) writes in support that over the last decade, DHCS has been making many interpretation that undermine the “reasonable cost” standard established by federal law. MVKI writes that DHCS has been legislating through annual audits in finding unallowable costs that blatantly contradict the intent, spirit and case law of the reasonable cost standard, including not allowing all costs for updating or changing EHRs, and not allowing administrative costs at each clinic site.
5. RELATED LEGISLATION. AB 769 (Smith) would add licensed professional clinical counselors (LPCCs) to the list of health care professionals that qualify for a face-to-face encounter with a patient at FQHCs and RHCs for purposes of a per-visit Medi-Cal payment under PPS. AB 769 is pending in the Assembly Health Committee.

AB 1494 (Aguiar-Curry) requires telehealth, telephonic, and services outside a clinic’s premises to be Medi-Cal reimbursable when provided by an enrolled community clinic during and within 90 days the conclusion of a state of emergency. Permits an extension beyond 90 calendar days after the conclusion of the emergency if necessary for the health and safety of the public. AB 1494 also permits DHCS to allow other enrolled FFS Medi-Cal providers, clinics or facilities to provide these services. AB 1494 additionally requires DHCS to establish a stakeholder process to assist DHCS in developing guidance for enrolled community clinics and other enrolled FFS Medi-Cal providers, clinics, or facilities in order to facilitate reimbursement for services provided during a declared state of emergency, whether those services are provided at a health facility, a shelter, the Medi-Cal beneficiary’s home, or any other location within the boundaries of the emergency proclamation for the state of emergency. AB 1494 is pending in the Assembly Health Committee.

SB 66 (Atkins) would require Medi-Cal reimbursement for a maximum of two visits taking place on the same day at a single location of an FQHC and RHC to be reimbursed when the patient has a medical visit and a mental health visit or a dental visit on the same day. SB 66 would codify the existing requirement that acupuncture visits are Medi-Cal reimbursable to FQHCs and RHCs on a per-visit basis. SB 66 is in the Senate Appropriations Committee.

1. PREVIOUS LEGISLATION. AB 770 (Eduardo Garcia) of 2018 was substantially similar to this bill. That bill was held on the Senate Appropriations Committee suspense file.
   
   AB 1591 (Berman) of 2017 would have added LPCC to the list of health care professionals that qualify for a face-to-face encounter with a patient at FQHC and RHCs for purposes of a per-visit Medi-Cal payment under PPS. AB 1591 was vetoed by the Governor, who stated that DHCS is developing a new payment model for these clinics that will eliminate the need to add specific providers to an approved list, thus making AB 1591 unnecessary.

SB 1125 (Atkins) of 2018 would have required Medi-Cal reimbursement for a maximum of two visits taking place on the same day at a single location of an FQHC and RHC to be reimbursed when the patient has a medical visit and a mental health visit or a dental visit on the same day; and would have made this change continent upon an appropriation in the annual Budget Act. SB 1125 was vetoed by Governor Brown with five other bills in the same veto message, who indicated that each of those bills require significant, ongoing general fund commitments, and he believed these bills should be considered as part of the budget process.


SB 456 (Pan) of 2017 would have required compensation paid to a FQHC or RHC for services that follow the patient (as defined) to be supplemental to, and separate from, the FQHC or RHC’s PPS rate and not subject to a reconciliation or to any reduction. SB 456 was held on the Assembly Appropriations Committee suspense file.

AB 2428 (Gonzalez Fletcher), Chapter 762, Statutes of 2018, allows a FQHC or RHC that adds an additional physical plant to its primary care license to elect to have the Medi-Cal reimbursement rate for each new plant be billed at and reimbursed at the same rate as the FQHC or RHC.

AB 2576 (Aguiar-Curry), Chapter 716, Statutes of 2018, permits specified clinics to furnish a dangerous drug or dangerous device in reasonable quantities without a prescription during a federal, state, or local emergency, to further the health and safety of the public.

SB 323 (Mitchell), Chapter 540, Statutes of 2017, authorizes FQHCs and RHCs to provide Drug Medi-Cal services pursuant to the terms of a mutually agreed upon contract entered into between the FQHC or RHC and the county or county designee, or DHCS, as specified, and would set forth the reimbursement requirements for these services. Authorizes an FQHC or RHC to provide specialty mental health services to Medi-Cal beneficiaries as part of a mental health plan’s provider network pursuant to the terms of a mutually agreed upon contract entered into between the FQHC or RHC and one or more mental health plans. Prohibits the costs associated with providing Drug Medi-Cal services or specialty mental health services from being included in the FQHC’s or RHC’s per-visit PPS rate, and would require the costs associated with providing Drug Medi-Cal services or specialty mental health services to be adjusted out of the FQHC’s or RHC’s clinic base PPS rate as a scope of service change if the costs associated with providing Drug Medi-Cal services or specialty mental health services are within the FQHC’s or RHC’s clinic base PPS rate, as specified.

SB 147 (Hernandez), Chapter 760, Statutes of 2014, required DHCS to authorize a three-year payment reform pilot project for FQHCs using an alternative payment methodology (APM) authorized under federal Medicaid law. SB 147 also requires an FQHC participating in the pilot to receive a per member per month payment for each of its APM enrollees from a MCMC health plan, instead of the wrap around payment FQHCs currently receive from DHCS. SB 147 did not receive federal approval and DHCS announced in February 2018 it was no longer moving forward with implementation for the foreseeable future.

1. AMENDMENTS. Following a discussion between the Committee staff, the principal health center proponent of this bill, and the author’s office, the provisions prohibiting a per-visit limitation and the provisions authorizing FQHCs and RHCs to bypass the DHCS administrative appeals process will be deleted from this bill. In addition, the language authorizing services outside the four walls of the FQHC or RHC will be limited in the case of contract providers (health care providers who contract with the FQHC to provide services outside the four walls of the FQHC) to contract providers who maintain an office and are actively seeing patients in the same county as, or a county adjacent to the physical location of the billing FQHC or RHC, and who are providing services to patients of the FQHC or RHC who have been seen on the premises of the FQHC or RHC in the previous three years. In addition, the author is proposing to delete references to the use of the Uniform Guidance in evaluating rate changes based on a change in scope of service (meaning Medicare reasonable cost principles required under existing law would continue to be used).
2. OUTSTANDING ISSUE. An issue still being discussed is the prohibition in this bill on applying a provider productivity to the adjusted per-visit rate paid to FQHCs and RHCs. As indicated in Comment 5) above, the provider productivity standard affects how the PPS per visit rate is calculated. The PPS rate is determined by taking the number of patient visits provided by an FQHC billable provider (visits) divided by costs, which results in the PPS rate. For example, $700,000 in FQHC costs divided by 3,200 FQHC visits = $218.75 PPS rate for the FQHC (because the number of visits meets the proposed DHCS standard). If an FQHC had 3,000 physician visits, for purposes of calculating its PPS rate, that clinic would be below DHCS proposed standard of 3,200 for physicians (the proposed provider productivity standard is 3,200 for physicians and 2,600 visits for mid-level providers). In calculating the PPS rate, the state would calculate the FQHC’s rate using the higher of the provider productivity standard (3,200 visits) or the clinic’s actual visits. Because the clinic had 3,000 visits, DHCS would calculate the FQHC’s PPS rate using the higher number of 3,200 visits in its productivity standard. This would reduce the FQHC’s per visit PPS rate from $233.33 to $218.75.
   

REGISTERED SUPPORT / OPPOSITION:

Support

California Health+Advocates

Martha’s Village & Kitchen Inc.

Opposition

None on file.

Analysis Prepared by: Scott Bain / HEALTH / (916) 319-2097