OVERVIEW
Health care is funny. The slow pace of change, necessitated by annual insurance coverage enrollment and the heavy regulatory burden, often means the mere threat of change is sufficient enough of an event to alter behavior.
Last night, California Assembly Bill AB290 passed the State Senate and is headed to the General Assembly for concurrence, which may occur on or after Sept. 11. DVA bulls cheered a 2022 delay in implementation of the bill meant to allow time the American Kidney Fund to request an updated Advisory Opinion from the HHS Office of the Inspector General.
Having watched similar scenarios play out over the years (See: most notably the Affordable Care Act), delays like the one built into AB290 mostly serve the purpose of extending the ramp rather than forestalling or mitigating the inevitable.
In the case of AB290, it appears dialysis providers have some difficult decisions to make in the face of a near term grandfather provision and an unknown outcome at the Office of the Inspector General in Washington. Given other threats to DVA's insurance strategy such as a pending rule at the White House on third party payments; a lawsuit by Florida Blue; congressional interest in DVA’s practices and other legislative initiatives in Oregon and Illinois; the inevitable in this case is most likely to be the slow demise of DVA’s reliance on third-party payments to support commercial insurance.
AB290.
Near term changes:
- AB290 requires an outpatient dialysis facility to post notice in a large font type informing patients about the Insurance Counseling and Advocacy Program and prohibits a dialysis facility from steering, directing or advising a patient regarding any specific coverage program option or health care service plan.
- Effective immediately, dialysis providers that are not “Large Dialysis Provider” (i.e. having no more than 10% of market share in California) may continue to make contributions to the American Kidney Fund and treat patients enrolled in charity assistance program without penalty.
- Effective Oct 1, 2019, grandfathering provisions for dialysis patients enrolled in a plan supported by a charity assistance program will terminate; patients subsequently enrolled will trigger the reimbursement provisions of the bill
- Dialysis patients grandfathered due to enrollment in a charity assistance program prior to Oct. 1, 2019 will lose that status if they switch health plans on or after March 1, 2020.
Intermediate changes:
- Beginning Jan. 1, 2022, a large dialysis provider that makes payments to the American Kidney Fund or has a financial relationship with an entity making third-party premium payments to a health plan on behalf of an insured will be paid the higher of Medicare reimbursement or an independently arbitrated rate for in-network provider. For out-of-network providers, the dialysis provider will be paid the lower of an independently arbitrated rate of the out-of-network rate.
- Effective Jan. 1, 2022, patient cost-sharing is to be based on the amount paid by the health plan and prohibits billing to patients any amount other than cost-sharing under the terms of the plan.
- Requires reporting to health plans of third-party payments for premium assistance.
Except for the notice provision, most of AB290 is delayed until the HHS Office of the Inspector General issues a finding that compliance with the bill does not violate certain federal anti-kickback laws. A request for an updated opinion must be submitted no later than July 1, 2020.
This unusual provision delaying AB290 was included to address concerns by the American Kidney Fund that the bill would violate state and federal patient privacy laws by requirement of disclosure to insurers.
It is not clear that the OIG will concur with the AKF. In their 1997 Advisory Opinion, the OIG made no mention of limits on sharing information with health insurance plans. Since the outcome is unknown, yet new patients enrolled in dialysis are only grandfathered until Oct. 1, 2019 and only if they do not change their plan after March 1, 2020, dialysis providers must weigh the benefits of enrolling AKF supported patients against a finding that AB290 does not violate federal privacy laws, thus triggering the more onerous reimbursement provisions.
What to do?
Enrolling commercially insured AKF supported patients (1,400 on employer and COBRA and 300 on other commercial) will continue to have short term benefits for DVA due to the higher reimbursement offered by these plans. However, after Oct. 1, 2019, DVA will have to decide if the benefits of higher commercial reimbursement outweigh the risk that non-grandfathered patients will eventually trigger the lower reimbursement rates as described in the bill.
Complicating things further is DVA’s reported tendency to fund cost-sharing for commercially enrolled patient. This arrangement may make it difficult for DVA to migrate patients from AKF-supported commercial insurance to Medicare and Medicaid in the face of an arbitration process. In that case, DVA could end the cost-sharing support to encourage migration or continue to do so while accepting lower commercial reimbursement.
Meanwhile, smaller dialysis providers will have no similar limitations and can continue to support the AKF, who in turn can provide premium assistance without triggering the reimbursement provisions of AB290.
Years of watching similar scenarios play out in health care make us think that DVA will begin immediately to adapt to a new reimbursement environment that limits third party support of commercial premiums. DVA said as much on 2Q 2019 earnings call when they noted the dearth of de novo leases signed. Given that Illinois and Oregon are considering similar bills and the federal government has a rule pending to address some of the same issues raised in California, changes to reimbursement seem inevitable even if it takes a while to get there.
DVA is holding a Capital Markets Day on Thursday and we eagerly await some illiumination of their strategy.
Thomas Tobin
Managing Director
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Emily Evans
Managing Director – Health Policy
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