BILL ANALYSIS
AB 2220
Page 1
ASSEMBLY THIRD READING
AB 2220 (Jones)
As Amended May 23, 2008
Majority vote
HEALTH 12-5 APPROPRIATIONS 12-5
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|Ayes:|Dymally, Berg, De La |Ayes:|Leno, Caballero, Davis, |
| |Torre, De Leon, | |DeSaulnier, Eng, Huffman, |
| |Hancock, Hayashi, | |Berg, Krekorian, Lieu, |
| |Hernandez, Jones, Lieber, | |Ma, Nava, Solorio |
| |Ma, Salas, Leno | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Nakanishi, Emmerson, |Nays:|Walters, Emmerson, La |
| |Gaines, Huff, | |Malfa, Nakanishi, Sharon |
| | Strickland | |Runner |
| | | | |
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SUMMARY : Authorizes either party in contract negotiations
between a hospital-based physician or hospital-based physician
group (hospital-based physician), and a health plan or the
health plan's contracting payer (payer), to submit any
impediments to reaching acceptable contract terms to an
arbitrator to be resolved by binding arbitration, as specified.
Specifically, this bill :
1)Authorizes either party in contract negotiations between a
hospital-based physician and a payer to submit any impediments
to reaching acceptable contract terms to an arbitrator to be
resolved by binding arbitration if, as a result of a contract
between a hospital and a payer, a hospital-based physician
provides services to the payer's enrollees who represent more
than 5% of the patients treated by the hospital-based
physician.
2)Requires the hospital-based physician and the payer to
contribute equally to the costs of the binding arbitration
conducted pursuant to #1) above.
3)Requires arbitration conducted pursuant to this bill to use,
whenever possible, final offer arbitration, and the arbitrator
chosen to be agreeable to both the physician and the payer, be
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impartial and have competence in the resolution of the same or
similar matters.
EXISTING LAW :
1)Requires, under the Knox-Keene Health Care Service Plan Act of
1975 (Knox-Keene), contracts between providers and health
plans to be in writing and prohibits, except for applicable
copayments and deductibles, a provider from invoicing or
balance billing a plan's enrollee for the difference between
the provider's billed charges and the reimbursement paid by
the plan or the plan's capitated provider for any covered
benefit.
2)Prohibits a provider, in the event that a contract has not
been reduced to writing, or does not contain the prohibition
above, from collecting or attempting to collect from the
subscriber or enrollee sums owed by the plan. Prohibits a
contracting provider, agent, trustee, or assignee from taking
action at law against a subscriber or enrollee to collect sums
owed by the plan.
3)Establishes, pursuant to regulations, requirements health
plans must implement in their claims settlement practice,
including the meaning of "reimbursement of a claim," such that
providers with a contract receive the contract rate. Claims
for contracted providers without a written contract and
non-contracted providers require payment of the reasonable and
customary value for the health care services rendered based
upon statistically credible information that is updated at
least annually and takes into consideration:
a) The provider's training, qualifications, and length of
time in practice;
b) The nature of the services provided;
c) The fees usually charged by the provider;
d) Prevailing provider rates charged in the general
geographic area in which the services were rendered;
e) Other aspects of the economics of the medical provider's
practice that are relevant; and,
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f) Any unusual circumstances in the case.
4)Allows a non-contracted provider to dispute the
appropriateness of a plan's computation of the reasonable and
customary value and requires the plan to respond to the
dispute through the plans mandated provider dispute resolution
process.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, annual increased arbitration costs to health plans
and noncontracting physicians. Recent amendments delete
hospital responsibility and payment related to arbitration,
therefore no direct public medical center fiscal impact occurs.
Increased contracting between physicians and health plans may
reduce the occurrence of balance billing. Out-of-pocket costs
for insured patients may therefore be reduced and the payment of
contracted rates may increase.
COMMENTS : According to the author, this bill is intended to
increase the number of contracts between physicians and health
plans, medical groups, and independent practice associations.
The author argues that there are currently insufficient
incentives for certain physicians and plans or medical groups to
agree on contracts for some medical services, including
out-of-network emergency services. The author points out that a
particular reason this bill is needed is that plans or their
contracted medical groups have been offering below market
contracts to hospital-based physicians knowing that the
physicians are still required to treat patients in an emergency.
By prodding physicians and plans to arbitrate outstanding
issues using final offer arbitration whenever possible, the
author is hopeful that more contracts will be signed and less
balance billing of patients will occur. The author states that
patients should obviously be kept out of the middle of billing
disputes and getting more contracts signed can avoid or
substantially minimize the problem beforehand.
Balance billing most often occurs when hospital-based physicians
who provide services on an emergency basis do not have direct
contracts with the health plans of patients who were seen
because of the emergency. The noncontracting doctor bills the
health plan, and if dissatisfied with the payment from the
health plan, bills the patient directly for the balance of the
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charges they feel are appropriate. In these instances,
consumers are caught in the middle between plans and providers.
The problem of balance billing often stems from
physician-physician disputes, in cases where a health plan
delegates responsibility for claims payments and care management
to a large medical group or independent practice association and
it is the medical group who refuses to pay the billing physician
or pays what the physician considers to be a low payment.
On March 28, 2008, the Department of Managed Health Care
proposed adoption of a new regulation that defines unfair
billing practices by providers of emergency health care
services, who provide covered services to enrollees of
Knox-Keene licensees but lack written contracts with the
enrollees' health plans, to include billing enrollees for
amounts owed by the health plan.
Arbitration is the most traditional form of private dispute
resolution. Generally, arbitration is adjudicatory, as opposed
to advisory, because of the fact that the arbitrator (usually a
retired judge or attorney) renders a decision at the end of an
arbitration hearing, and that decision is final and binding,
subject only to a very limited court review. Two widely used
forms of arbitration are conventional arbitration, in which the
arbitrator makes an unconstrained settlement choice, and
final-offer arbitration as required in this bill whenever
possible (also known as baseball arbitration) in which the
arbitrator must choose either one of the disputants' final
offers. In baseball arbitration, there are only two possible
outcomes.
The California Chapter of the American College of Emergency
Physicians (CAL/ACEP) supports this bill and states that it will
drastically reduce the number of bills patients receive from
noncontracting providers. According to CAL/ACEP, this bill
would require an emergency room physician group and a health
plan or medical group/IPA to enter into binding contract
arbitration when the two groups, who are already negotiating,
are stuck on a few details. CAL/ACEP contends that health plans
and medical group/IPAs repeatedly offer "below market" contracts
to physicians in the emergency room knowing that even if the
physician does not sign a contract the physician is obligated to
see the patient under federal EMTALA. According to CAL/ACEP,
emergency physicians want to contract and do contract when a
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fair contract is negotiated. CAL/ACEP argues that the approach
in this bill is an excellent way for both parties to put forward
their best arguments for the remaining pieces of a contract and
to have an independent arbiter decide the outcome.
Organizations representing health plans and large physician
groups were opposed to a prior version of this bill. Health
plans and medical groups specifically opposed the requirement
that health plans pay doctors directly, rather than a health
plan's contracted medical group being responsible for payment.
This provision has been deleted from this bill. The California
Association of Health Plans also raised questions about the role
of hospitals in forcing parties into binding arbitration but all
requirements imposed on hospitals have also been removed from
this bill.
Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097
FN: 0005207