BILL ANALYSIS
SB 917
Page 1
Date of Hearing: July 5, 2005
ASSEMBLY COMMITTEE ON HEALTH
Wilma Chan, Chair
SB 917 (Speier) - As Amended: April 21, 2005
SENATE VOTE : 26-12
SUBJECT : Payers' Bill of Rights: diagnostic related groups
(DRGs).
SUMMARY : This bill establishes the Hospital Transparency Act
of 2005, which amends the Payers' Bill of Rights to require the
Office of Statewide Health Planning and Development (OSHPD) to
compile and publish on its web site the top 25 most common
Medicare DRGs and the average charge for each by hospital.
Specifically, this bill :
1)Requires, rather than authorizes, OSHPD to compile a list of
the 25, rather than ten, most common Medicare DRGs, the
average charge for each of these DRGs per hospital, and
publish this information on its Internet Website.
2)Requires OSHPD to use Medicare All Patient Refined (APR)-DRGs
for all hospitals, except hospitals with fewer than 10%
Medicare admissions in the previous year, and requires OSHPD
to designate the APR-DRG methodology for hospitals that are
not reported on the Medicare DRG system.
3)Requires a hospital to provide a copy of its charge
description master to a person who requests it and permits a
hospital to charge a fee to cover the cost of copying.
4)Revises existing law to require each hospital to compile a
list of the average charges for the hospital's 25 most common
Medicare DRGs, instead of 25 services or procedures commonly
charged to patients, and requires, beginning July 1, 2006,
instead of 2004, each hospital to make this list available to
any person upon request.
EXISTING LAW :
1)Requires hospitals to file with OSHPD a copy of their charge
description master and to compile a list of charges for 25
services or procedures commonly charged to patients annually
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in a format determined by OSHPD.
2)Establishes the Payers' Bill of Rights, which requires
hospitals to compile a list of charges for 25 services or
procedures commonly charged to patients, and make a written or
electronic copy of its charge description master available on
the hospital's Internet Web site, or available at the hospital
location. Exempts small or rural hospitals.
3)Defines "charge description master" as a uniform schedule of
charges represented by the hospital as its gross billed charge
for a given service or item, regardless of payer type.
4)Authorizes OSHPD to compile a list of the ten most common
Medicare DRGs and the average charge for each of these DRGs
per hospital, and to publish this information on its Internet
Web site.
5)Provides that a hospital is in violation of these provisions
if it knowingly or negligently fails to comply with these
requirements.
6)Provides that any health facility that does not file a report
with OSHPD, as specified, is liable for a civil penalty of
$100 a day for each day the filing of any report is delayed.
Provides that no penalty will be imposed if an extension is
granted in accordance with the guidelines and procedures
established by OSHPD, as specified.
FISCAL EFFECT : Unknown. The Senate Appropriations Committee
approved this bill pursuant to Senate Rule 28.8.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
necessary because, although hospitals must compile and file
annually with OSHPD their charges for 25 common procedures,
there is no requirement that OSHPD analyze or report data to
the public. The author states that more open disclosure of
hospital charges better informs purchasers of health care
services such as consumers, employers, health plans, and
insurers. The author contends that this bill will better
inform the public of the costs of health care services and
make it easier for the public to obtain this information. The
author adds that although hospitals must make their charge
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description master available to anyone who requests it, they
are not required to provide a copy that may be removed from
their premises or make a copy available so that it can be
photocopied. The author points out that OSHPD projects a
one-time cost of approximately $17,500 to purchase computer
software needed to analyze and report Medicare APR-DRG data,
and an annual fee of approximately $3,000 to continue use of
the software. The author states that hospitals already report
the necessary data to OSHPD, and are not expected to incur any
additional cost as a result of this bill.
2)DRG . According to a research project of the National
Association of Children's Hospitals and Related Institutions,
Inc., DRGs are a patient classification scheme which provides
a means of relating the type of patients a hospital treats
(i.e., its case mix) to the costs incurred by the hospital.
There are currently three major versions of the DRG in use:
basic DRGs, All Patient DRGs (AP-DRGs), and APR-DRGs. The
basic DRGs are used by the Centers for Medicare and Medicaid
Services (CMS) for hospital payment for Medicare
beneficiaries. The AP-DRGs are an expansion of the basic DRGs
to be more representative of non-Medicare populations such as
pediatric patients. The APR-DRGs incorporate severity of
illness and risk of mortality subclasses into the AP-DRGs.
3)PRIOR AND RELATED LEGISLATION . AB 1627 (Frommer), Chapter
582, Statutes of 2003, establishes the Payers' Bill of Rights,
which requires hospitals to make available to the public their
charge description masters and to file them with OSHPD,
requires hospitals to compile and make available lists of
charges for commonly performed procedures, and authorizes
OSHPD to compile a list of the most common Medicare DRGs and
their average charges.
This year, AB 1045 (Frommer) passed the Assembly and is
currently pending in the Senate. AB 1045 revises the Payers'
Bill of Rights to establish lists of 25 common outpatient
procedures and inpatient procedures grouped by Medicare DRGs,
average charges associated with those procedures, if
applicable, and requires OSHPD to create a database and
develop an online query system that lists average charges for
the 25 common outpatient and inpatient procedures to be
published on its Internet Web site. AB 1045 also requires a
hospital to provide a person without health coverage, upon
request, a written estimate of the amount the hospital will
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require the person to pay for the health care services,
procedures, and supplies that are reasonably expected to be
provided to the person by the hospital.
4)SUPPORT . Proponents, such as Health Access, assert that
hospital charges are the equivalent of the sticker price for a
car, the rack rate for a hotel room, or the standard airfare-
except that hospital charges have traditionally been secret.
After a scandal involving hospital pricing, earlier
legislation attempted to make these charges public. Hospitals
have interpreted the law in a way that makes only charges for
small items public. This bill corrects this practice by
requiring public availability of the charges for the 25 most
common Medicare DRGs.
5)SUPPORT IF AMENDED . The CalPERS Board of Administration
supports this bill if it is amended. The letter submitted to
the committee expresses concern that OSHPD data may be used to
undermine provider accountability efforts by CalPERs but the
does not specify the amendments that are being requested.
6)OPPOSE UNLESS AMENDED . The California Hospital Association
(CHA) raises concerns about the requirement in this bill that
copies of the hospital's charge description master be made
available to the public, upon request. Even though the bill
permits the hospital to charge a fee to cover the cost of
copying the document, CHA argues that this requirement could
result in significant disruptions to a hospital business
office because these documents are generally hundreds of pages
of information. CHA adds that the information is virtually
meaningless to the average person.
REGISTERED SUPPORT / OPPOSITION :
Support
AARP California
Health Access
American Federation of State, County, and Municipal Employees
Opposition
None on File.
SB 917
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Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097