SENATE BILL REPORT

ESSB 5927

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Majority Report: That Substitute Senate Bill No. 5927 be substituted therefor, and the substitute bill do pass.

Signed by Senators Murray, Chair; Kilmer, Vice Chair, Capital Budget Chair; Zarelli, Ranking Minority Member; Parlette, Ranking Minority Member Capital; Baumgartner, Baxter, Brown, Conway, Fraser, Hatfield, Hewitt, Holmquist Newbry, Honeyford, Kastama, Keiser, Pflug, Pridemore, Regala, Rockefeller, Schoesler and Tom.

Background: The state contracts with health insurance systems to deliver medical care services under the state Medicaid, Disability Lifeline, and Basic Health Plan programs. These systems contract with individual health care practitioners, group practices, clinics, hospitals, pharmacies, and other entities to participate in their network of providers. Persons enrolled in the managed care plan must typically obtain their medical care services from providers who participate in their plan's network in order for the service to be covered.

When they receive services at an in-network facility, managed care enrollees sometimes receive services from health care providers who have not contracted to participate in their managed care plan's network. For example, an enrollee may have surgery at a hospital that has contracted to participate in their managed care plans' network but receive anesthesia from a practitioner who has not.

Disputes have arisen about how much the managed care plan should pay the health care practitioner in such instances. A Snohomish County Superior Court judge has ruled that in such instances the managed care organizations should pay the non-contracted practitioner the full amount billed by the practitioner. Managed care organizations, the Department of Social and Health Services, and the Health Care Authority have expressed concern this will increase the cost of services delivered under state-purchased plans.

Summary of Engrossed Substitute Bill: State-contracted managed care plans must negotiate with health care providers to assure an adequate network of health care providers within the plan's service delivery area and within each facility with which the managed care plan contracts. Disagreements between the managed care plan and providers regarding whether negotiations have been conducted in accordance with community standards for industry are to be decided by the department.

A nonparticipating provider is defined as a health care practitioner or facility that does not have a written contract to participate in a managed health care system's provider network. When a nonparticipating provider provides services to an enrollee covered by a state-contracted managed care plan, the plan must pay the nonparticipating provider the mode rate that the managed care plan pays participating providers for the same service in the same area. The plan must notify the department and the provider as to the basis for utilizing the nonparticipating provider's services.

These provisions expire January 1, 2014.

Staff Summary of Public Testimony on Original Bill: PRO: The bill addresses what is a growing problem not only for state-purchased managed care programs, but commercial insurance programs as well. The problem arises when professionals working at a hospital that accepts a managed care plan's payment rates refuse to do so for their services. Billed charges are often as much as five times higher than Medicaid fee-for-service rates upon which state managed care payments are based. The bill provides a common sense solution to a growing problem that could result in major cost increases that the state simply can't afford.

CON: Hospitals are concerned that including the term "facilities" in the bill could weaken their ability to negotiate favorable rates with state-contracted managed care plans. The state agencies' concerns about the cost impact of the court case are over-stated. Nothing in the superior court ruling mandates that billed charges be paid to all providers. For other providers to be entitled to the payments at issue in the case in question, their situation would need to match the very specific fact pattern in the case. The situation can be resolved without a legislative solution.

Persons Testifying: PRO: Senator Keiser, prime sponsor; Preston Cody, Health Care Authority, Department of Social and Health Services; Rebecca Kavoussi, Community Health Plan of Washington; Davor Gjurassic, Laurel Lee, Molina Healthcare; Joe King, Group Health Cooperative.

CON: Lisa Thatcher, Washington State Hospital Association; Tim Layton, Washington State Medical Association.