OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

SB-811

AN ACT CONCERNING PARITY IN HOSPITAL SALES OVERSIGHT.

As Amended by Senate "A" (LCO 8044), Senate "B" (LCO 8095)

Senate Calendar No.: 378


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 16 $

FY 17 $

Department of Social Services

GF - Potential Cost

64,523

98,637

Department of Social Services

GF - Cost

Indeterminate

Indeterminate

State Comptroller - Fringe Benefits (State Employee Health)

GF - Potential Savings

Less than $1,200,000

Less than $1,600,000

State Comptroller - Fringe Benefits (State Employee Health)

GF - Potential Cost

Minimal

Minimal

UConn Health Center

Other - Cost

Up to $90,000

82,400

UConn Health Center

Other - Revenue Loss

1,275,000

1,700,000

Insurance Department

IF - Potential Cost

Up to $160,000

Up to $160,000

Consumer Protection, Dept.

GF - Cost

58,798

124,970

Consumer Protection, Dept.

GF - Revenue Gain

Less than $30,000

Less than $30,000

Public Health, Dept.

GF - Cost

25,625

38,875

State Comptroller - Fringe Benefits1

GF - Cost

80,288

124,262

Note: GF=General Fund; IF=Insurance Fund

Municipal Impact: None

Explanation

The bill makes numerous changes related to state hospital and healthcare policy. The sections with specific fiscal impacts are noted below. It should be noted that sHB 6824, the FY 16 and FY 17 budget bill, as favorably reported by the Appropriations Committee, appropriated $1,000,000 in FY 16 and FY 17 to the Department of Public Health for the Bipartisan Hospital and Healthcare Roundtable plans.

Sections 1 through 7 make several changes concerning hospital pricing and transparency.

These sections will result in costs of up to $90,000 in FY 16 and $82,400 in FY 17 for the UConn Health Center (UCHC). The bill requires hospitals to identify and provide certain information to patients. UCHC would incur a one-time cost of up to $50,000 to develop the necessary data system to collate information and produce the required documents. Additionally, one full time position in the Patient Access Department would be required to identify patients and provide the written reports. This position would result in additional salary and fringe benefit costs of $40,000 in FY 16 and $82,400 in FY 17.

The bill also results in a potential cost to the Department of Insurance (DOI) related to the requirement to annually post certain information and to develop standard terms for provisions of the bill. The bill does not specify where the information to be posted is to be acquired. Should this information not be readily available from other sources, such as the All-Payer Claims Database, DOI may have to annually survey insurance carriers and analyze the data. Likewise, should DOI not be able to utilize existing information to develop standardized terms, a one-time administrative cost may result. It is assumed that the potential combined administrative costs would not exceed the equivalent of a half time position, with annualized salary and fringe benefit costs of approximately $60,000.

The bill also requires the Connecticut Health Insurance Exchange to create a consumer health information website. This does not result in a fiscal impact to the state. As a quasi-public state agency, the Exchange is responsible to charge assessments or fees as necessary to carry out its duties.

Sections 8 and 9 of the bill require DOI to assess health insurers' compliance with the federal Affordable Care Act and annually report its findings to the General Assembly. It is anticipated that the department will require at least one additional research analyst with annual salary and fringe benefit costs of $100,000 to perform this function. It should be noted that the bill requires the research to be conducted within available appropriations. It does not mandate the agency perform the activity regardless of available funding, and therefore the cost described above is potential.

Additionally, the department must post links to any online tools or calculators to help consumers compare health insurance plans. It is unclear whether the department must simply post links to existing tools or create new tools itself. Should the department have to create new comparison tools on its website, additional information technology costs would be incurred.

Sections 10 through 15 concern surprise hospital bills and bills for emergency hospital services

The Department of Consumer Protection (DCP) will require a Consumer Information Representative and a Special Investigator to handle complaints related to these sections. The cost in FY 16 (half-year funding) includes $58,335 for Personal Services, $23,088 for Fringe Benefits and $3,000 for Equipment and Other Expenses. The cost in FY 17 includes $116,669 in Personal Services, $46,176 for Fringe Benefits and $1,000 in Other Expenses. It is anticipated that investigations would lead to less than $20,000 in fines for violations in FY 16 and less than $40,000 in FY 17.

Sections 16 and 17 concern hospital facility fees. These sections prohibit hospitals from billing for a facility fee for certain outpatient health care services provided at a facility located away from the hospital campus. The sections also limit what hospitals can charge for facility fees for outpatient care provided to uninsured patients. Based on current billings, it is estimated that these changes will reduce revenue at the UCHC by approximately $1,275,000 in FY 16 and $1,700,000 in FY 17.

These sections result in no additional costs to DCP as it is anticipated that few violations related to charging certain facilities fees to enrollees of health insurance plans will occur. The sections may result in a revenue gain of less than $20,000 in FY 16 and FY 17 due to violations.

Section 16 may result in a savings to the state employee and retiree health plan and fully insured municipal plans after October 1, 2015 or the expiration of a current contract, by prohibiting the billing of facility fees at hospital outpatient facilities which are billed using a CPT E/M code. The savings is likely to be less than $1.6 million2 to the state plan, as (1) current practice for one of the state plan's carriers is to reject any claims billed using an office visit and evaluation code and (2) in general, the state plan's experience reflects professional practices associated with hospitals not using provider based billing which allows for both a professional fee and a facility fee to be charged.3 The actual savings will depend on the amount of fees prohibited.

Section 17 may result in a minimal cost to the state employee and retiree health plan and fully insured municipal plans for facility fees, other than those billed using a CPT E/M code, without additional cost sharing. The costs may be mitigated as the health plans may charge the insured up to the negotiated fee if the insured has not yet met their annual deductible. A deductible applies to less than 10% of the state employee health plan. The cost will depend on the amount of eligible covered charges.

Sections 18 through 24 make a variety of changes concerning health insurance contracting.

Section 20 requires hospitals and health systems to negotiate separately for certain services, when requested by the insurer. Should insurers frequently request such negotiations, the UCHC may incur increased costs for additional contracting staff. These costs will be dependent upon the number of such request by insurers, which cannot be known. Each additional contracting staff has an annual salary and fringe benefit cost of approximately $150,000. This section may further reduce revenue to UCHC if the health center's ability to negotiate rates and coverages is negatively impacted.

Section 21 requires insurers to have site neutral reimbursement provisions for outpatient health care service providers in the same regions. These provisions must require the same reimbursement rates for outpatient health care services, regardless of the employer or affiliation of a health care provider. It is uncertain what impact this provision will have for applicable services provided by UCHC off-site from its Farmington campus.

These sections also modify the membership and responsibilities of the health care cabinet within the Office of the Lieutenant Governor. These changes are not anticipated to result in a fiscal impact to that Office.

Sections 25 through 31 establish a Health Information Exchange and establish standards for electronic health records.

Section 25 makes health information blocking an unfair trade practice and subject to civil penalties of not more than $5,000 per violation, which could result in an associated revenue gain. This is not anticipated to result in additional costs to DCP as it is anticipated that few violations would occur.

Section 26 establishes a State-wide Health Information Exchange (the Exchange) and requires the Department of Social Services (DSS), in consultation with the Office of Policy and Management (OPM) to issue a request for proposals (RFP) for the development, management and operation of the Exchange. The RFP will be issued when bond funds to establish the Exchange are approved, which is unspecified in the bill. Based on the state's existing Health Insurance Exchange, which entailed intensive technology and system development, significant funding over two to five years would support the development of an IT system to facilitate data development and information exchange among various entities. For purposes of context, the Level Two Establishment grant associated with the CT Health Insurance Exchange was $107 million for August 2012 through December 2014. Less funding would be needed for the Information Exchange under the bill as 1) the Insurance Exchange required eligibility and enrollment functions, and 2) the non-profit eligible for the RFP is required to have significant experience as well as the administrative structure to operate and manage the Exchange. The fiscal impact associated with related bond funding is dependent upon the amount approved as well as the date of issuance.

In addition, Section 28 requires DSS, in consultation with the Health Information Technology Advisory Council, to oversee the development and implementation of the Information Exchange. This is anticipated to result in the need for additional staff such as a Program Manager (annually salary of approximately $98,637) and a Program Assistance Technician (annual salary of approximately $64,523) and associated fringe benefits (totaling $63,061). Additional positions may be required in FY 17 to review data standards and integration processes associated with the Exchange. It should be noted that these provisions are established within existing resources. It does not appear that this mandates DSS to perform related activities regardless of available funding, therefore the cost described above is potential.

Section 30 establishes the State Health Information Technology Advisory Council, which could result in a cost of less than $1,000 to agencies participating in the council to reimburse legislators and agency staff for reasonable expenses.

Sections 32 through 42 concern the oversight of hospital sales.

Section 33 requires the Office of Health Care Access (OHCA) to hire a Post-Transfer Compliance Reporter for a period of three years after a transfer of hospital ownership. This will result in a potential cost to OHCA, to the extent that any hospitals are sold in any given year. The bill states that the purchaser of the hospitals shall provide funds, not to exceed $200,000 annually, for the hiring of the reporter.

Section 34 requires OHCA to conduct a cost and market impact review upon the application for a certificate of need for the sale of a hospital. The bill specifies that OHCA shall retain an independent consultant to conduct this review. This will result in a potential cost to OHCA, to the extent that any hospitals are sold in any given year. The bill states that the purchaser of the hospital shall pay for the cost of this independent consultant, not to exceed $200,000 per application.

Section 38 results in additional salary and fringe benefit costs of $35,229 in FY 16 and $53,900 in FY 17 to OHCA by extending the current hospital reporting requirements to health systems.

Currently, OHCA receives annual filings from the state's 29 acute care hospitals. By extending the reporting requirements to hospital parent corporations, additional filings will result. It is anticipated that an additional one-half healthcare analyst position will be required to review and analyze these additional filings, beginning October 1, 2015. This results in additional salary costs of $35,229 in FY 16 and $53,900 in FY 17, and fringe benefit costs of $9,904 in FY 16 and $15,025 in FY 17.

Section 44 requires a study of financing options to enable hospitals to acquire medical equipment, update information technology, build renovate or acquire facilities and other functions. There is no anticipated fiscal impact to the state.

Senate “A” struck the underlying bill and resulted in the fiscal impact noted above.

Senate “B” removed DSS as a recipient of a report required by the underlying bill. There was no fiscal impact

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 38.65% of payroll in FY 16 and FY 17.

2 Based on an analysis of claims data for the state employee and retiree health plan for the calendar year period 2010 to 2013. The figure may be underrepresented as the analysis only looked at spikes in charges.

3 Source: Testimony of the Office of the State Comptroller, March 11, 2015 for SB 993.