Bill Text: CA AB616 | 2023-2024 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Medical Group Financial Transparency Act.
Spectrum: Partisan Bill (Democrat 11-0)
Status: (Vetoed) 2024-01-30 - Consideration of Governor's veto stricken from file. [AB616 Detail]
Download: California-2023-AB616-Amended.html
Bill Title: Medical Group Financial Transparency Act.
Spectrum: Partisan Bill (Democrat 11-0)
Status: (Vetoed) 2024-01-30 - Consideration of Governor's veto stricken from file. [AB616 Detail]
Download: California-2023-AB616-Amended.html
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Amended
IN
Senate
July 06, 2023 |
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Amended
IN
Assembly
March 28, 2023 |
CALIFORNIA LEGISLATURE—
2023–2024 REGULAR SESSION
Assembly Bill
No. 616
| Introduced by Assembly Member Rodriguez (Coauthors: Assembly Members Addis, Mike Fong, Kalra, McKinnor, Ortega, Santiago, and Schiavo) (Coauthors: Senators Smallwood-Cuevas, Stern, and Wiener) |
February 09, 2023 |
An act to amend Sections 1375.4 and 127501.4 of the Health and Safety Code, relating to health care.
LEGISLATIVE COUNSEL'S DIGEST
AB 616, as amended, Rodriguez.
Medical Group Financial Transparency Act.
Existing law establishes the Office of Health Care Affordability within the Department of Health Care Access and Information to analyze the health care market for cost trends and drivers of spending, develop data-informed policies for lowering health care costs for consumers and purchasers, and create a state strategy for controlling the cost of health care. Existing law requires the office to collect data and other information it deems necessary from health care entities to carry out the functions of the office, and requires the office to require providers and physician organizations to submit audited financial reports or comprehensive financial statements, as specified. Existing law requires those reports and statements to be kept confidential, and specifies that they are not required to be disclosed under the California Public Records Act.
Existing law requires the office to obtain information about health care service plans from the Department of Managed Health Care. Existing law requires a contract between a health care service plan and a risk-bearing organization to include provisions concerning the risk-bearing organization’s administrative and financial capacity. Existing law requires the director of the Department of Managed Health Care to adopt regulations regarding, among other things, periodic reports from a health care service plan that include information concerning the risk-bearing organizations and the type and amount of financial risk they have assumed.
Existing law establishes, within the office, the Health Care Affordability Board, composed of 8 members, appointed as prescribed.
This bill, the Medical Group Financial Transparency Act, would authorize the disclosure of audited financial reports and
comprehensive financial statements of providers and physician organizations collected by the Office of Health Care Affordability and financial and other records of risk-bearing organizations made available to the Department of Managed Health Care. This bill would authorize the board, members of the board, the office, the department, and the employees, contractors, and advisors of the office and the department to use confidential audited financial reports and comprehensive financial statements only as necessary to carry out functions of the office. The bill would also require certain physician organizations, as specified, to produce or disclose audited financial reports and comprehensive financial statements to the office, subject to these provisions. The bill would require the audited financial reports and comprehensive financial statements produced or disclosed to the office to be made available to the public, by the office, as specified. The bill would also make related findings and
declarations.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
This act shall be known, and may be cited, as the Medical Group Financial Transparency Act.SEC. 2.
The Legislature finds and declares all of the following:(a) To advance health care cost transparency, the Department of Health Care Access and Information (HCAI) collects financial information from California hospitals, skilled nursing facilities, and clinics. HCAI leverages this financial information to create publicly available data products that are useful in assessing the financial status and service volume of providers.
(b) Financial data made public by HCAI and the Department of Managed Health Care (DMHC) have been used to study many policy questions, including the financial impact of
COVID-19 on California hospitals, the relationship between hospital financial
performance and patient care outcomes, and the impact on nursing home financial performance and resident well-being when a skilled nursing facility is acquired by a private equity firm. These analyses have informed public policy decisions related to health care equity, access, and affordability.
(c) Going forward, HCAI will collect similar financial information from certain physician organizations, including physician organizations that are part of fully integrated delivery systems. However, unlike the similar financial information collected from other types of providers, HCAI is statutorily prevented from publicly disclosing the financial information it will collect from physician organizations.
(d) DMHC has a long-standing program to collect financial information from
health care service plans and risk-bearing organizations, which are physician organizations that take on
delegated risk for health care service plan enrollees.
(e) DMHC makes broad information about the financial standing of health care service plans available publicly, but only publicly discloses an extremely limited subset of financial solvency indicators for risk-bearing organizations.
(f) More than 25 percent of the money spent on health care services in California is spent on physician and clinical services. From 1980 through 2019, spending in California on physician and clinical services increased by an average of more than 7 percent each year from $7,200,000,000 in 1980 to more than $101,000,000,000 in 2019.
(g) There is insufficient data available publicly to show how much of that money went to provide
services to patients and how much was held as profit by physician organizations or distributed to shareholders and investors.
(h) It is in the interest of the state and of purchasers and consumers of health care services to have a more complete understanding of the financial standing of physician organizations in California. That information would advance efforts to reduce unnecessary health care spending, thereby making high-quality health care more affordable.
(i) The Healthy California for All Commission, the California Health Benefit Exchange, and the State Department of Health Care Services have all used publicly available provider and health plan financial data to inform their work. However, equivalent information about medical group finances was not included in those
analyses.
(j) As physician organizations are already statutorily required to report this financial information to DMHC or HCAI, releasing the information publicly will not create a new reporting burden for physician organizations.
(k) As financial information reported by physician organizations is aggregated at the corporate level, there is no data for individual patients contained in the financial information reported to DMHC and HCAI.
SEC. 3.
Section 1375.4 of the Health and Safety Code is amended to read:1375.4.
(a) Every contract between a health care service plan and a risk-bearing organization that is issued, amended, renewed, or delivered in this state on or after July 1, 2000, shall include provisions concerning the following, as to the risk-bearing organization’s administrative and financial capacity, which shall be effective as of January 1, 2001:(1) A requirement that the risk-bearing organization furnish financial information to the health care service plan or the plan’s designated agent and meet any other financial requirements that assist the health care service plan in maintaining the financial viability of its arrangements for the provision of health care services in a
manner that does not adversely affect the integrity of the contract negotiation process.
(2) A requirement that the health care service plan disclose information to the risk-bearing organization that enables the risk-bearing organization to be informed regarding the financial risk assumed under the contract.
(3) A requirement that the health care service plans provide payments of all risk arrangements, excluding capitation, within 180 days after close of the fiscal year.
(b) In accordance with subdivision (a) of Section 1344, the director shall adopt regulations on or before June 30, 2000, to implement this section which shall, at a minimum, provide for the following:
(1) (A) A process for reviewing or grading risk-bearing organizations based on the following criteria:
(i) The risk-bearing organization meets criterion 1 if it reimburses, contests, or denies claims for health care services it has provided, arranged, or for which it is otherwise financially responsible in accordance with the timeframes and other requirements described in Section 1371 and in accordance with any other applicable state and federal laws and regulations.
(ii) The risk-bearing organization meets criterion 2 if it estimates its liability for incurred but not reported claims pursuant to a method that has not been held objectionable by the director, records the estimate at least quarterly as an accrual in its books and records, and appropriately
reflects this accrual in its financial statements.
(iii) The risk-bearing organization meets criterion 3 if it maintains at all times a positive tangible net equity, as defined in subdivision (e) of Section 1300.76 of Title 28 of the California Code of Regulations.
(iv) The risk-bearing organization meets criterion 4 if it maintains at all times a positive level of working capital (excess of current assets over current liabilities).
(B) A risk-bearing organization may reduce its liabilities for purposes of calculating tangible net equity, pursuant to clause (iii) of subparagraph (A), and working capital, pursuant to clause (iv) of subparagraph (A), by the amount of any liabilities the payment of which is guaranteed by a
sponsoring organization pursuant to a qualified guarantee. A sponsoring organization is one that has a tangible net equity of a level to be established by the director that is in excess of all amounts that it has guaranteed to any person or entity. A qualified guarantee is one that meets all of the following:
(i) It is approved by a board resolution of the sponsoring organization.
(ii) The sponsoring organization agrees to submit audited annual financial statements to the plan within 120 days of the end of the sponsoring organization’s fiscal year.
(iii) The guarantee is unconditional except for a maximum monetary limit.
(iv) The guarantee is not limited in
duration with respect to liabilities arising during the term of the guarantee.
(v) The guarantee provides for six months advance notice to the plan prior to its cancellation.
(2) The information required from risk-bearing organizations to assist in reviewing or grading these risk-bearing organizations, including balance sheets, claims reports, and designated annual, quarterly, or monthly financial statements prepared in accordance with generally accepted accounting principles, to be used in a manner, and to the extent necessary, provided to a single external party as approved by the director to the extent that it does not adversely affect the integrity of the contract negotiation process between the health care service plan and the risk-bearing organizations.
(3) Audits to be conducted in accordance with generally accepted auditing standards and in a manner that avoids duplication of review of the risk-bearing organization.
(4) A process for corrective action plans, as mutually agreed upon by the health care service plan and the risk-bearing organization and as approved by the director, for cases where the review or grading indicates deficiencies that need to be corrected by the risk-bearing organization, and contingency plans to ensure the delivery of health care services if the corrective action fails. The corrective action plan shall be approved by the director and standardized, to the extent possible, to meet the needs of the director and all health care service plans contracting with the risk-bearing organization. If the health
care service plan and the risk-bearing organization are unable to determine a mutually agreeable corrective action plan, the director shall determine the corrective action plan.
(5) The disclosure of information by health care service plans to the risk-bearing organization that enables the risk-bearing organization to be informed regarding the risk assumed under the contract, including:
(A) Enrollee information monthly.
(B) Risk arrangement information, information pertaining to any pharmacy risk assumed under the contract, information regarding incentive payments, and information on income and expenses assigned to the risk-bearing organization quarterly.
(6) Periodic reports from each health care service plan to the director that include information concerning the risk-bearing organizations and the type and amount of financial risk assumed by them, and, if deemed necessary and appropriate by the director, a registration process for the risk-bearing organizations.
(7) The confidentiality of financial and other records to be produced, disclosed, or otherwise made available, unless as otherwise determined by the director.
(c) The failure by a health care service plan to comply with the contractual requirements pursuant to this section shall constitute grounds for disciplinary action. The director shall, as appropriate, within 60 days after receipt of documented violation from a risk-bearing organization, investigate and take
enforcement action against a health care service plan that fails to comply with these requirements and shall periodically evaluate contracts between health care service plans and risk-bearing organizations to determine if any audit, evaluation, or enforcement actions should be undertaken by the department.
(d) The Financial Solvency Standards Board established in Section 1347.15 shall study and report to the director on or before January 1, 2001, regarding all of the following:
(1) The feasibility of requiring that there be in force insurance coverage commensurate with the financial risk assumed by the risk-bearing organization to protect against financial losses.
(2) The appropriateness of different risk-bearing
arrangements between health care service plans and risk-bearing organizations.
(3) The appropriateness of the four criteria specified in paragraph (1) of subdivision (b).
(e) This section shall not apply to specialized health care service plans.
(f) Notwithstanding any other law, financial and other records of risk-bearing organizations to be produced, disclosed, or otherwise made available to the department pursuant to this section shall be open to public inspection disclosure using a process equivalent to the process for disclosing health care
service plan financial and administrative information described in Section 1382. Sections 1341.5 and 1384. This shall not be construed to require the public disclosure of individual plan specific rates.
(g) For purposes of this section, “provider organization” means a medical group, independent practice association, or other entity that delivers, furnishes, or otherwise arranges for or provides health care services, but does not include an individual or a plan.
(h) (1) For purposes of this section, a “risk-bearing organization” means a professional medical corporation, other form of corporation controlled by
physicians and surgeons, a medical partnership, a medical foundation exempt from licensure pursuant to subdivision (l) of Section 1206, or another lawfully organized group of physicians that delivers, furnishes, or otherwise arranges for or provides health care services, but does not include an individual or a health care service plan, and that does all of the following:
(A) Contracts directly with a health care service plan or arranges for health care services for the health care service plan’s enrollees.
(B) Receives compensation for those services on any capitated or fixed periodic payment basis.
(C) Is responsible for the processing and payment of claims made by providers for services rendered by those providers
on behalf of a health care service plan that are covered under the capitation or fixed periodic payment made by the plan to the risk-bearing organization. Nothing in this subparagraph in any way limits, alters, or abrogates any responsibility of a health care service plan under existing law.
(2) Notwithstanding paragraph (1), risk-bearing organizations shall not be deemed to include a provider organization that meets either of the following requirements:
(A) The health care service plan files with the department consolidated financial statements that include the provider organization.
(B) The health care service plan is the only health care service plan with which the provider organization contracts for arranging or
providing health care services and, during the previous and current fiscal years, the provider organization’s maximum potential expenses for providing or arranging for health care services did not exceed 115 percent of its maximum potential revenue for providing or arranging for those services.
(i) For purposes of this section, “claims” include, but are not limited to, contractual obligations to pay capitation or payments on a managed hospital payment basis.
SEC. 4.
Section 127501.4 of the Health and Safety Code is amended to read:127501.4.
(a) (1) Notwithstanding any other state or local law, the office shall collect data and other information it determines necessary from health care entities, except exempted providers, to carry out the functions of the office. To the extent consistent with federal law and to the greatest extent possible, the office may use existing and emerging public and private data sources to minimize administrative burdens and duplicative reporting, including data or information from federal agencies as well as state agencies. The office may request data and information from, or enter into a data sharing agreement with, the State Department of Health Care Services, Covered California, the Department of Managed Health Care, the Department of Insurance, the Labor and Workforce Development Agency, the Business, Consumer Services, and Housing Agency, and other relevant state agencies that monitor compliance of plans and providers with access standards, including timely access, language access, geographic access, and other access standards as provided by law and regulation. The office may also enter into a data sharing agreement with these state agencies that collect payer and provider financial data or other data or information about the health care workforce.(2) In furtherance of this chapter, and with the intent to reduce administrative burdens, the office shall coordinate with the State Department of Health Care Services on data and other information necessary to report all of the following:
(A) Total
health care expenditures and per capita total health care expenditures for Medi-Cal services.
(B) Medical loss ratios required under applicable state and federal laws.
(C) Quality and equity measures to assess performance for the Medi-Cal program or other programs administered by the State Department of Health Care Services.
(3) (A) The office shall obtain from the Department of Managed Health Care and the Department of Insurance information about health care services plans, as defined in subdivision (b) of Section 1345, and insurers offering policies of health insurance, as defined in subdivision (b) of Section 106 of the Insurance Code. The information shall be for coverage in the individual, small
group, and large group markets for both grandfathered and
nongrandfathered products. The information shall include, but not be limited to, all of the following:
(i) Information on premiums, cost sharing, benefits, and other information required under Article 6.2 (commencing with Section 1385.01) of Chapter 2.2 of Division 2 of this code and Article 4.5 (commencing with Section 10181) of Chapter 1 of Part 2 of Division 2 of the Insurance Code.
(ii) Trend factors by benefit category, such as inpatient hospitalization and physician services, including price, utilization, and cost as a percentage of Medicare, as required by Section 1385.045 of this code and Section 10181.45 of the Insurance Code.
(iii) Medical loss ratio for each health care service plan or health insurer
under applicable state and federal laws.
(iv) Cost containment and quality improvement efforts reported consistent with Sections 1385.03 and 1385.045 of this code and Sections 10181.3 and 10181.45 of the Insurance Code.
(v) Prescription drug costs consistent with Section 1367.243 and Article 6.1 (commencing with Section 1385.001) of Chapter 2.2 of Division 2 of this code and Section 10123.205 of the Insurance Code.
(vi) Information regarding health equity and quality required under Article 11.9 (commencing with Section 1399.870) of Chapter 2.2 of Division 2, including data and results.
(B) The Department of Managed Health Care and the Department of Insurance shall
provide the above information in the initial submission of data to the office for the five years prior to 2023, to the extent that information is available, and annually
thereafter.
(b) The office shall establish requirements for payers and fully integrated delivery systems to submit data and other information necessary to do all of the following:
(1) Measure total health care expenditures and per capita total health care expenditures.
(2) Determine whether health care entities met health care cost targets.
(3) Identify the annual change in health care costs of health care entities.
(4) Approve and monitor implementation of performance improvement plans.
(5) Assess performance on
quality and equity measures.
(c) The office shall, in a manner prescribed by the office, establish requirements for providers to submit data in support of this section as necessary to carry out the functions of the office.
(d) (1) For the purpose of the baseline health care spending report published pursuant to subdivision (a) of Section 127501.6, payers and fully integrated delivery systems shall submit data on total health care expenditures for the 2022 and 2023 calendar years on or before September 1, 2024. Enforcement shall not be implemented pursuant to this baseline report, except any enforcement actions necessary to ensure compliance with the deadline for submitting data.
(2) For the first
annual report, published pursuant to subdivision (b) of Section 127501.6, payers and fully integrated delivery systems shall submit data on total health care expenditures for the 2024 and 2025 calendar years based on a reporting schedule established by the office. For subsequent annual reports, payers and fully integrated delivery systems shall submit data for the relevant calendar years according to the reporting schedule established by the office.
(e) (1) The office shall require health care entities to submit data and other information as necessary to fulfill its functions and measure total health care expenditures and per capita total health care expenditures by sectors.
(2) For the calculation of total health care expenditures and per capita total health
care expenditures by sectors, the office shall use the Health Care Payments Data Program, established pursuant to Chapter 8.5 (commencing with Section 127671), to the greatest extent possible, to minimize reporting burdens for health care entities, and may also use data from federal agencies.
(f) The office shall require payers, fully integrated delivery systems, hospitals, and physician organizations to report data and other information, as necessary, for the single set of standard quality measures pursuant to Section 127503.
(g) (1) The office shall require payers, fully integrated delivery systems, restricted health care service plans, and limited health care service plans, as defined in Section 1300.49 of Title 28 of the California Code of Regulations, to
submit data and other information to measure the adoption of alternative payment models pursuant to Section 127504.
(2) The office shall establish requirements for payers, fully integrated delivery systems, restricted health care service plans, and limited health care service plans, as defined in Section 1300.49 of Title 28 of the California Code of Regulations, to report data and other information, including, but not limited to, the types of payment models, adoption by line of business, the number of members covered by alternative payment models, the percent of budget dedicated to alternative payments, or cost and quality performance measures tied to those payment models.
(h) (1) The office shall require payers, fully integrated delivery systems,
restricted health care service plans, and limited health care service plans, as defined in Section 1300.49 of Title 28 of the California Code of Regulations, to submit data and other information to measure the percentage of total health care expenditures allocated to primary care and behavioral health pursuant to Section 127505.
(2) For the calculation of total health care expenditures allocated to primary care and behavioral health, the office shall do all of the following:
(A) Use the Health Care Payments Data Program, established pursuant to Chapter 8.5 (commencing with Section 127671), to the greatest extent possible, to minimize reporting burdens for health care entities.
(B) Determine the categories of health care
professionals who should be considered primary care and behavioral health providers and consider existing state and national approaches, as appropriate.
(C) Determine specific procedure codes that should be considered primary care and behavioral health services and consider existing state and national approaches, as appropriate.
(D) Determine the categories of payments to primary care or behavioral health care providers and practices, including non-claims-based payments, such as alternative payment models, that should be included when determining the total amount spent on primary care and behavioral health.
(i) (1) With consideration to minimizing reporting burdens and expenses, the office shall
require providers and any physician organizations that are part of a fully integrated delivery system to submit audited financial reports, similar to those required in paragraphs (a) to (e), inclusive, of Section 128735. This paragraph does not apply to exempted providers.
(2) For physician organizations defined in paragraph (5) of subdivision (p) of Section 127500, and providers that do not routinely prepare audited financial reports, the office shall require a comprehensive financial statement that includes details regarding annual costs, annual receipts, realized capital gains and losses, and accumulated surplus and accumulated reserves using the standard accounting method routinely used by the physician organization or provider. The comprehensive financial statement shall be supported by sworn written declarations by the chief financial officer,
chief executive officer, or other officer who has financial management and oversight responsibilities for the physician organization or provider, certifying that the financial statement is complete, true, and correct in all material matters to the best of their knowledge, and that the provider does not routinely prepare audited financial reports. This paragraph does not apply to exempted providers and physician organizations that are part of a fully integrated delivery system.
(3) (A) The board, members of the board, the office, the department, and the employees, contractors, and advisors of the office and the department shall keep the audited financial reports and comprehensive financial statements
confidential, and shall use the confidential information and documents only as necessary for the function of the office.
(B) Notwithstanding subparagraph (A), audited financial reports or comprehensive financial statements produced, disclosed, or otherwise made available pursuant to this subdivision by physician organizations comprised of 50 or more physicians and physician organizations that are part of a fully integrated delivery system shall be made open to public inspection shall be publicly disclosed by the office using a process equivalent to the process for public disclosure of health facility information submitted pursuant to subdivisions (a) to
(e), inclusive, of Section 128735. This shall not be construed to require the public disclosure of individual plan specific rates.
(C) Notwithstanding subparagraph (A), audited financial reports produced, disclosed, or otherwise made available pursuant to this subdivision by physician organizations that are part of a fully integrated delivery system shall be publicly disclosed by the office using a process equivalent to the process for public disclosure of health facility information submitted pursuant to subdivisions (a) to (e), inclusive, of Section 128735.
(D) The information
collected according to this subdivision encompasses standard financial disclosures such as balance sheets, statements of changes in equity, income statements, statements of cash flows, revenues by payer, expenses by natural classification, cost allocation statistics and calculations, annual costs and receipts, realized capital gains and losses, and accumulated surplus and accumulated reserves as calculated using standard accounting methods and shall be disclosed in the same manner as the equivalent data is disclosed pursuant to subdivisions (a) to (e), inclusive, of Section 128735.
(4) This subdivision does not apply to providers that are already
required to report under Section 128735 or risk-bearing organizations (RBOs) that are required to file quarterly and annual financial statements under Section 1375.4 of this code and Section 1300.75.4.2 of Title 28 of the California Code of Regulations.
(j) (1) Consistent with subdivision (a), the office shall obtain data from existing state and federal data sources and from regulated entities to effectively monitor impacts to health care workforce stability and training needs.
(2) In order for an adjustment to cost targets to be made under paragraph (7) of subdivision (d) of Section 127502, a provider, a fully integrated delivery system, or other associated party shall produce actual or projected nonsupervisory employee organized labor costs,
including increased expenditures related to compensation, and any other supporting information to validate the adjustment, as may be requested by the office pertaining to the actual or projected organized labor costs.
(3) The office may collect all of the following types of data and make it accessible to the public:
(A) Overall trends in the health care workforce, including, but not limited to, statewide and regional workforce supply, unemployment and wage data, trends and projections of wages and compensation, projections of workforce supply by region and specialty, training needs, and other future trends in the health care workforce.
(B) The number and classification of workers in internship, clinical placements,
apprenticeships, and other training programs sponsored by an employer.
(C) The percentage of employees employed through a registry or casual employment.
(D) The number of workers at health care entities that were retrained through established public training programs.
(E) Investments by health care entities in private training and retraining programs.
(F) The number of workers subject to relocation, termination, or mass layoff as described in Chapter 4 (commencing with Section 1400) of Part 4 of Division 2 of the Labor Code.
(4) The office may request additional data from health care entities if
it finds that the data is needed to effectively monitor impacts to health care workforce stability and training needs.
(5) The office may annually request from health care entities that are in compliance with the cost target, a summary of best practices used for improving health care affordability, if any.
(k) In furtherance of this section, the office shall promulgate regulations to collect data and other information it determines necessary from health care entities, except exempted providers, to carry out the functions of the office. The regulations may include, but are not limited to, detailed reporting schedules, technical specifications, and other resources to ensure the submission of accurate data in a standardized format within the specified timeframes. Prior to adopting
regulations and approving the reporting schedules, technical specifications, and other resources, the office shall engage relevant stakeholders, hold a public meeting to solicit input, and provide a response to input received.
