Happy Thursday! In today’s newsletter, we bring you a Q&A with Democratic Sen. Susan Talamantes Eggman that you won’t want to miss, an overview of two contentious bills moving through the California Legislature, and data that associates higher investment in primary care with positive quality and cost outcomes.
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State of Reform
1. Q&A: Sen. Susan Eggman on behavioral health
Sen. Susan Talamantes Eggman recently introduced a package of bills aimed at improving California’s provision of behavioral health care across the continuum—from prevention and early intervention to enhancing the conservatorship process. The senator spoke with State of Reform last week about these bills and what she’s focused on as the Chair of the Budget Subcommittee on Health and Human Services.
Eggman said one of the most impactful policies in the 8-bill package is SB 1416, which aims to modernize the definition of “gravely disabled” to include individuals who are unable to provide for their basic medical needs. “If your psychiatric condition has rendered you incapable of making decisions to provide for your medical care, that should be included in the addition of just basic food, clothing, and shelter,” she said. The bills have been moving swiftly through the legislature.
2. Bills to watch: Kaiser no-bid contract, anti-competitive practices
The legislation to confirm Kaiser’s no-bid Medi-Cal contract with the state recently passed its committee of origin. Supporters of the controversial bill, including bill sponsor Asm. Joaquin Arambula and DHCS Director Michelle Baass, say the deal allows Kaiser to use its unique status as a plan, provider network, and pharmacy operator to serve more Medi-Cal beneficiaries. But opponents, including many counties and local health plans, say the deal lets Kaiser bypass a well-established public process and leaves other Medi-Cal plans with the more expensive patients.
Another bill we’re watching would prohibit plan-provider contracts made after Jan. 1, 2023, from containing anti-competitive terms. Opposition, including California hospitals, argue AB 2080 places unjust restrictions on the contracting practices of payers and providers. Supporters, including Health Access California, say it’s a necessary response to increasing market consolidation in Northern California. The bill will soon receive a vote on the Assembly floor.
3. What They’re Watching: Jonathan Freedman, Health Management Associates
For Jonathan Freedman, Regional Vice President at Health Management Associates, the “enormous surge of activity” happening in California’s Medi-Cal program is the most important thing to watch in state health policy. CalAIM is transforming how the state delivers health care and, with initial program rollouts having started in January, it is significantly changing the work of all siloes in the California health sector.
“What’s being asked of the Medi-Cal delivery system is to work together in ways that have been very hard for those actors—both payers, delivery system entities, as well as non-medical social supports—to work together,” Freedman said. “So how all that’s stitched together, the degree to which we have administrative and clinical data sharing, which is critical to making any of this work, are really the implementation challenges that all of the parties are facing.”
4. CHCF report on primary care
A recent CHCF study found higher investment in primary care across various health plan products in California (HMOs, PPOs, and EMOs) yield better results in both care quality and cost. The HMOs in the study had the highest average investment rate in primary care at 7.9%, and the high rates of primary care funding within their provider organizations were found to improve metrics including ED utilization and the cost of care.
CHCF’s Primary Care Investment Coordinating Group laid out a series of recommendations to increase the health sector’s investment in primary care. These include measuring and publicly reporting primary care spending in a standardized way, setting a floor and/or target for primary care spending, and paying for advanced primary care using prospective, risk-adjusted payments.
5. Hospital margins stagnate below pre-pandemic levels
California hospitals saw a $6 billion volume-adjusted loss in revenue last year, according to a new analysis from KaufmanHall. The analysis concludes that although 2021 profit margins weren’t as low as in 2020, hospitals in the state have continued to experience negative profit margins that are likely to continue through 2022.
Hospital expenses in California were 6% higher than the national average in 2021, according to the analysis. KaufmanHall attributes hospitals’ persistently low profit margins to rising costs coupled with decreased revenue, citing increased wages, an increased use of contract labor, and longer lengths of hospital visits as key drivers of the deficit.