Dear Supervisors: PUBLIC HEARING ON PROPOSED BILLING …

#33

October 14, 2014

October 14, 2014

The Honorable Board of Supervisors County of Los Angeles 383 Kenneth Hahn Hall of Administration 500 West Temple Street Los Angeles, California 90012

Dear Supervisors:

PUBLIC HEARING ON PROPOSED BILLING RATES FOR THE DEPARTMENT OF HEALTH SERVICES (ALL SUPERVISORIAL DISTRICTS) (3 VOTES)

SUBJECT

Request approval of new and increased billing rates to be used at different times at various County of Los Angeles, Department of Health Services facilities.

The Honorable Board of Supervisors 10/14/2014 Page 2

IT IS RECOMMENDED THAT THE BOARD AFTER THE PUBLIC HEARING,

1. Approve for use in billing all patients and payers, to the extent permitted by the payer, for services provided by each Department of Health Services (DHS) facility, new itemized rates for services, as set forth in Attachment I (Generally Applicable Itemized Rates), effective when DHS determines that the facility is capable of appropriately issuing, processing and documenting itemized charges, but no earlier than November 1, 2014, at Harbor-UCLA Medical Center and its associated health centers and later dates for other facilities;

2. Approve for use in billing all patients, and payers who will accept all-inclusive rates, increased allinclusive charges for inpatient services provided by DHS hospitals , as set forth in Attachment II, effective on November 1, 2014, until such time as each individual DHS facility is capable of issuing, processing and documenting itemized charges for all patients and payers but no earlier than November 1, 2014; and

3. Delegate authority to the Director of DHS, or his designee, to establish temporary itemized rates for newly added services or services with newly established billing codes from the list of 44 rates listed as Undesignated Procedure Codes, so the rates for such services approximate the rates for other services that use equivalent DHS resources.

PURPOSE/JUSTIFICATION OF RECOMMENDED ACTION

Historically, DHS has billed its patients and most of its third party payers, including Medi-Cal, on an all-inclusive basis for inpatient and outpatient services at its hospitals and for ambulatory care rendered at its freestanding clinics. In an all-inclusive claim, a single amount is billed for an inpatient day or an outpatient visit, and no amounts are assigned to the individual components of that care, such as routine services, laboratory, radiology or therapy. However, all-inclusive billing is unusual in the health care industry, and certain payers, such as Medicare?s Outpatient Perspective Payment System (OPPS), Family Planning, Access, Care and Treatment program (Family PACT), and California's Every Woman Counts (EWC) program, require itemized charges (i.e. a separate rate for each service or component of care) as a condition of payment. For such payers, DHS has created manual and contracted work-arounds which have allowed it to collect reimbursement from those sources. With the advent of Online Real-Time Centralized Health Information Database (ORCHID), DHS' electronic health record system, DHS will have the infrastructure to bill itemized charges for its services to all payers and patients. ORCHID will be phased in at DHS over a fifteen (15) month period of time, with Harbor-UCLA Medical Center and its health centers scheduled to begin use on November 1, 2014. Rather than waiting for ORCHID to be operational system-wide, DHS is seeking your Board's authority to initiate itemized charging at each site, as soon as ORCHID and NonORCHID systems and processes (provider and payer) can produce/process accurate bills/payments for itemized charges. Approval of the first recommendation will allow DHS to bill itemized charges on a continuous basis after ORCHID's implementation using the rates in Attachment I.

DHS will continue to bill all-inclusive rates at sites where ORCHID has not yet been implemented or it is not yet feasible to bill itemized charges for its services. Approval of the second recommendation will allow DHS to utilize updated all-inclusive rates for hospital services to assure that charges sufficiently cover costs, and will maximize reimbursement.

DHS is aware that, when billed on an itemized basis, the total amount billed for a day or a visit will be different than it is now. The amount and range of such variances is presently unknown. In the upcoming months, DHS will further analyze the Generally Applicable Itemized Rates in Attachment I to determine how itemized charges affect aggregate charges for a particular day, stay or visit.

The Honorable Board of Supervisors 10/14/2014 Page 3

Individual rates may need to be adjusted once the effect of itemized billing on total charges is better understood. Accordingly, DHS may return to your Board with a request to modify specific rates.

Occasionally, DHS begins offering new procedures or services, or the coding/payment rules redefine services or procedures so that a new rate must be assigned. Approval of the third recommendation will allow DHS to use temporarily, one of the 44 rates assigned to undesignated procedure codes on Attachments I for new procedures, or when changes in the coding rules create distinct codes for existing procedures. Such rates shall be used until DHS next returns to your Board for formal rate approvals. DHS will assign rates to the new procedures or newly created procedure codes from the 44 undesignated procedure code rates so that the selected rates approximate, as closely as possible, rates assigned to other procedures which use equivalent equipment, supplies, personnel and other resources.

Implementation of Strategic Plan Goals

The recommended actions support Goal 1, Operational Effectiveness/Fiscal Sustainability, of the County's Strategic Plan.

FISCAL IMPACT/FINANCING

Approval of these rates will allow DHS to meet payer requirements and maximize reimbursement under various programs by ensuring charges cover the cost of services provided. DHS does not expect the change to itemized charges to materially change the amount of its revenue. However, the change to itemized charges will allow DHS to issue bills that are in a more familiar and easy to use format, which will provide the payers and patients with more service information than the current allinclusive rates.

FACTS AND PROVISIONS/LEGAL REQUIREMENTS

Health and Safety Code Section 1473 authorizes your Board to set fees for hospital and hospital related clinician services. Further, Government Code Section 25261 authorizes your Board to arrange for the establishment of fees for other DHS services. Under Section 2.76.350 of the County Code, DHS is required to pursue recovery of the costs of patient care. Approval of the recommendations above will allow DHS to meet that obligation, and maximize its revenues from its payers. All-inclusive inpatient rates at certain hospitals were last adjusted on July 1, 2013, and the other rates were last adjusted prior to July 1, 2012. Accordingly, they were increased to ensure that they cover costs. Both the itemized rates and the all-inclusive rates apply only in fee-for-service systems. These rates do not affect services reimbursed on a capitated basis or similar methodology under managed care contracts.

As discussed above, it is not possible at this time to state exactly when the Generally Applicable Itemized Rates will be applied to services at a particular DHS facility. The effective date depends both on when the ORCHID and Non-ORCHID systems and processes (provider/payer) at each facility can together accurately process itemized claims. However, the itemized rates will not be generally applied before the dates set forth in Attachment III.

Government Code Section 66018 requires a public hearing to be held prior to the creation of the new, Generally Applicable Itemized Rates, or to the increase of any of the existing fees, which will be held before your Board approves recommendations one and two. Special notice of that public

The Honorable Board of Supervisors 10/14/2014 Page 4 hearing (Attachment IV), in compliance with Government Code Section 6062a, has been published by Executive Office.

CONTRACTING PROCESS

Not applicable.

IMPACT ON CURRENT SERVICES (OR PROJECTS) There should be no impact on current services or access to health services as a result of these actions since most of DHS?patients are not responsible for paying full charges. Most DHS patients have limited financial resources and are covered by a government payment program or Covered California, or can apply for one of the County?s No Cost/Low Cost programs, such as the Ability-toPay Plan. Consequently the all-inclusive rate increases in the second recommendation should not have a material impact on these individuals. Approval of these actions will allow DHS to meet payer requirements and revenue projections included in the DHS Fiscal Outlook.

Respectfully submitted,

Mitchell H. Katz, M.D. Director MHK:js Enclosures c: Chief Executive Office

County Counsel Executive Officer, Board of Supervisors

COUNTY OF LOS ANGELES - DEPARTMENT OF HEALTH SERVICES

GENERALLY APPLICABLE ITEMIZED RATES

Fiscal Year 2014-15 (Effective November 1, 2014)

PROCEDURE DESCRIPTION

Room and Board

CORONARY CARE UNIT - GENERAL INTENSIVE CARE UNIT LEAVE OF ABSENCE - NO CHARGE LEAVE OF ABSENCE - W/CHARGE MULTIBED STANDARD ( 3 - 4) NURSERY NURSERY - NEWBORN LEVEL IV (NICU) OBSERVATION PER HOUR IP PRIVATE SEMI-PRIVATE WARD

Outpatient

ADM/INTPRT HEALTH RISK INSTRMT CRITICAL CARE CONSTANT 30-74 MINS CRITICAL CARE CONSTANT EA ADDL 30 MIN ER VISIT BRIEF-LEVEL 1 ER VISIT COMPLEX-LEVEL 5 ER VISIT EXTENDED-LEVEL 4 ER VISIT INTERM-LEVEL 3 ER VISIT LIMITED-LEVEL 2 INITL PREVENTIVE MED NEW PT 18-39YRS INITL PREVENTIVE MED NEW PT 12-17YRS INITL PREVENTIVE MED NEW PT 1-4YRS INITL PREVENTIVE MED NEW PT 40-64YRS INITL PREVENTIVE MED NEW PT ................
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