The Weekly Articles

A 2023 law amended existing law to require additional reporting regarding certain hospitals' procurement activity.  Existing law requires licensed hospitals with operating expenses of $50 million or more, and a licensed hospital with operating expenses of $25 million or more that is part of a hospital system, to submit an annual report to the Department of Health Care Access and Information (HCAI) on the hospital's minority, women, LGBT, and disabled veteran business enterprise procurement efforts.   The report is due July 1 of each year, and while the deadline for 2024 just passed, a 2023 amendment requires that beginning July 1, 2025, hospitals submit  a plan, instead of a report, for increasing procurement from minority, women, LGBT, and disabled veteran business enterprises. 

The plan is required to include the following:

(i) the hospital's supplier diversity policy statement;

(ii) short and long-term goals and timetables, but not quotas, for increasing procurement from minority, women, LGBT, and disabled veteran business enterprises;

(iii) the hospital's outreach and communications to minority, women, LGBT, and disabled veteran business enterprises, with detailed requirements as detailed in the law;

(iv) the hospital's procurements that are made from minority, women, LGBT, and disabled veteran business enterprises with at least a majority of the enterprise's workforce in California; and

 (v) planned and past implementation of relevant recommendations made by the hospital diversity commission, convened by the HCAI pursuant to the law (Hospital Supplier Diversity Commission). 

HCAI may review each hospital's plan for completeness, and failure to file the plan will result in a civil penalty of $100 per day.  A hospital may request a 30-day extension to file the plan if needed due to unintended or unforeseen delays. 

To assist hospitals in their efforts, HCAI, in consultation with the Hospital Supplier Diversity Commission, is required to establish guidelines for hospitals to voluntarily utilize in their procurement efforts.   At its May 1, 2024 meeting, the Hospital Supplier Diversity Commission considered potential resources in establishing these guidelines.  The rulemaking process and related activity to specify the reporting requirements and related procedures is expected to continue through 2024.  The next public meeting of the Hospital Supplier Diversity Commission is on August 7, 2024. 

After returning from a well deserved vacation, Melanie Neumeyer, of Sutter Health, learned she was promoted to Senior Counsel. Congratulations Melanie! 

California's SB 1120 aims to tackle AI-related errors and biases in health plans’ prior authorization and management decisions.  If enacted, the bill will require human oversight by licensed providers to ensure decisions are patient-specific and non-discriminatory. 

The California Medical Board is reviewing proposed changes to the introductory statement and questions on its licensing applications concerning mental and physical health. These revisions are designed to ensure that healthcare professionals are capable of providing safe and effective care. The board aims to create a more supportive environment for practitioners who may be dealing with health issues through encouraging disclosure. Affirmative responses to any of the questions will not automatically disqualify candidates. The board invites feedback from the public, medical professionals, and other stakeholders to ensure the changes are comprehensive and fair. Comments on the proposed changes are due by July 19, 2024 to impairment-questions@mbc.ca.gov. A meeting to discuss the feedback and finalize any modifications will be held on July 30, 2024.

The minimum hourly wage increase established for healthcare workers under last year’s Senate Bill (SB) 525, and currently set to go into effect on July 1, will be delayed again based on an agreement between Governor Gavin Newsom and California legislative leaders. The agreement, which is subject to approval by the California legislature, is part of budget negotiations focused on closing the state’s significant budget deficit. Under SB 525, the minimum wage for healthcare workers was to gradually increase to $25 per hour over the next decade. Recent legislation moved SB 525’s effective date to July 1, 2024.

The new plan conditions the minimum wage increase on two triggers, the first related to the submission of a new federal waiver for an additional Quality Assurance Fee, and the other requiring that California tax revenues between July and September are at least 3% higher than what officials have estimated. If the further changes are approved by the California legislature next week, which is widely expected, the minimum wage increases will now be implemented no earlier than October 2024 and no later than January 1, 2025.

The California Office of Health Care Affordability (OHCA) posted draft proposed amendments to its Cost and Market Impact Review (CMIR) regulations. The pre-notice draft, dated May 15, 2024, was posted to OHCA’s regulations page on June 5. While OHCA’s informal public comment period for the regulations ended on June 20, 2024,  the draft proposed revisions are slated to be discussed at OHCA’s June 26, 2024 Board Meeting. There will also be a formal public comment period once OHCA files the proposed emergency rulemaking action with the Office of Administrative Law. OHCA has not shared a timeline for when the proposed regulations would be finalized.

The existing CMIR regulations went into effect on December 18, 2023 and were previously discussed in CSHA’s January 30, 2024 edition of Watching. The existing regulations require covered “health care entities” to notify OHCA of “material change transactions” meeting certain thresholds at least 90 days prior to the closing of the transaction.  

The proposed CMIR regulations would make the following changes: (1) expand the scope of health care entities that must file transactions with OHCA, (2) provide a definition of “annual California-derived revenue” to describe what constitutes a “material change transaction,” (3) add a reasonable diligence attestation requirement for submitters regarding the information provided to OHCA and impose a standard for submitters to ascertain and report all other parties subject to a transaction, and (4) permit submitters to request a withdrawal of information or documents that did not receive confidential treatment from OHCA. These proposed changes are discussed in greater detail below.

1) Expansion of circumstances when health care entities must file notice: The proposed amendments would expand the scope of entities responsible for filing a notice of a transaction with OHCA to also include those who are “a subject of” a transaction, defined as those transactions that concern a health care entity’s assets, control, responsibility, governance or operations, in whole or in part. With respect to the filing obligation for health care entities that are in a designated primary care health professional shortage area in California, the term health care entity would be replaced with “a provider or fully integrated delivery system” that is “a party to, or a subject of, the transaction and provides health care services.” Additionally, the requirement for health care entities with annual revenue or California assets of at least $10 million to file a notice would be extended to scenarios where the entity is a party to, or a subject of, a transaction with any entity that owns or controls a health care entity with at least $25 million in annual revenue or California assets.

2) Definition of “annual California-derived revenue”: For the purposes of determining whether a transaction is a “material change transaction” required to be submitted to OHCA, the amendments would include a definition for “annual California-derived revenue,” which would be “revenue from the provision of health care services in California.”

3) Attestation requirement and standard for reporting other parties to a transaction: Submitters would also be required to submit an attestation to OHCA that it used reasonable diligence to ascertain the information required regarding a material change transaction. With respect to reporting other parties to the transaction, the regulations would impose a reasonable diligence standard on submitters to ascertain and report all other parties to the transaction.

4) Ability to request withdrawal of materials not given confidential treatment by OHCA: Lastly, OHCA would permit submitters to request a withdrawal of any information or documents that were submitted through OHCA’s portal that were not granted confidential treatment by OHCA. Submitters would also be able to submit a request through the portal to withdraw a request to expedite OHCA’s review if a request for confidential treatment is denied in any part.

On June 6, California Attorney General Rob Bonta released a comment letter addressing the Federal Trade Commission (FTC), Department of Justice (DOJ), and Department of Health and Human Services' (HHS) request for information on consolidation in healthcare markets. This letter is part of a broader initiative to scrutinize and address the growing trend of consolidation within the healthcare industry, which has significant implications for competition, pricing, and patient care quality. Attorney General Bonta's letter highlights the detrimental effects of increased consolidation, such as higher healthcare costs, reduced access to care, and diminished incentives for maintaining high-quality services. He emphasized that market consolidation often leads to monopolistic behaviors, where large healthcare providers and insurers can dictate prices and terms, ultimately disadvantaging consumers. Bonta's comments are particularly relevant in California, a state that has witnessed significant mergers and acquisitions among hospitals, insurance companies, and physician groups. These consolidations, according to the Attorney General, have not only limited consumer choice but also contributed to the rising cost of healthcare services. His letter calls for stronger regulatory oversight and more rigorous antitrust enforcement to prevent anti-competitive practices and ensure a more equitable and efficient healthcare market. In addition to addressing the negative impacts, the letter also proposes several measures to mitigate the effects of consolidation. These include enhancing transparency in healthcare transactions, promoting competitive practices, and implementing policies that protect consumers from exorbitant costs and inadequate service levels. Bonta's proactive stance aligns with California's broader efforts to lead in healthcare reform and consumer protection. His letter to the FTC, DOJ, and HHS underscores the critical need for federal and state collaboration in tackling the complex challenges posed by healthcare market consolidation.

On June 4, 2024, the California Supreme Court heard oral argument in Stone v. Alameda Health System (Case No. S279137).  The primary issue in the case is whether all public entities are exempt from obligations under the Labor Code, such as providing meal and rest breaks and paying overtime, or only those public entities that meet the “hallmarks of sovereignty” standard applied by the Court of Appeal.

Cathy Kay, a CSHA Past President, will be retiring on July 5, 2024. A member of CSHA since 1981, Cathy has served on every CSHA committee possible, currently including the Diversity Task Force. She’s taken the last-speaker-on-Sunday slot more than once at Annual Meetings, and happily recalls her time as a member of the Larry Kessenick Players. Cathy began her practice as a hospital lawyer for the Lutheran Hospital Society of Southern California, which then owned California Hospital Medical Center. She ends her career working for CommonSpirit Health, which now owns California Hospital Medical Center. In the interim, Cathy has practiced in every setting possible, focusing her expertise primarily on hospital operations and physician relationships. She also created one of the first PPOs in California and was the first Chief Counsel for LA Care Health Plan, obtaining its first license for an initial enrollment of 600,000 enrollees. Cathy has long been recognized for her efforts as a mentor and teacher; as a past Adjunct Professor at the USC School of Policy, Planning and Development, as a partner at Manatt, Phelps and Phillips, and through to her current role at CommonSpirit Health where she was awarded the 2022 CommonSpirit Health Acts of Humankindness Award. Cathy will be sincerely missed at CommonSpirit Health and beyond. We wish her a happy retirement and raise a gin martini to her extraordinary career!

As reported by Brandi Hannagan in last week's The Watching, SB 828 was introduced to delay the implementation of the health worker minimum wage law by one month.  As anticipated, the law passed and was approved by the governor on May 31, 2024.  The statutes in question are Labor Code sections 1182.14 and 1182.15.