The Weekly Articles

The California Department of Public Health (“CDPH”) is seeking public comment in response to a petition for rulemaking to expand eligibility for medical staff membership under the Title 22 hospital licensing regulations. The deadline for submitting comments to CDPH is June 9, 2024.

On May 23, 2024 Governor Newsom signed Senate Bill 233 allowing Arizona abortion providers to temporarily provide abortion care to patients from Arizona who travel to California for that care. The urgent legislation, described as a critical stopgap, aims to bridge abortion care as Arizona leaders work to repeal and challenge the Arizona Supreme Court’s recent ruling reimposing a near-total abortion ban law from 1864. Effective immediately and through November 30, 2024, Arizona abortion providers in good standing can register with the California’s Medical Board and Osteopathic Medical Board to provide abortion care on a temporary basis in California to patients from Arizona.

On May 20, 2024 California law makers announced they are pursuing legislation to postpone the effective date of the health worker minimum wage law by a month, to July 1, 2024. The effective date in current law, enacted by Senate Bill 525 last year, is June 1, 2024. But last Monday State Senator Maria Elana Durazo, the lead author of SB 525, introduced SB 828 to delay the start date by 30 days. The one-month proposed delay aims to align the law with the state fiscal year and would give legislators and Governor Newsom time to continue negotiations about potential modifications to the minimum wage law for health care workers in light of the projected state budget deficit. SB 828 would go into effect immediately upon the Governor’s signature.

Gov. Newsom announced his intent to postpone the wage increases earlier this year due to the impact on the expected state budget deficit, as his office engaged in negotiations with the Legislature and proponents of the law. These negotiations include potential changes to the law including an annual “trigger” to tie the wage increases to the state’s budget conditions.

The original bill, signed in October 2023, raises the minimum wage on June 1 for health care employees from between $18 to $23 per hour, depending on the type of health care facility at which the employee works. All health care workers eventually reach $25 per hour, but the pay scales increase in phases depending on industry, employer size, and other employer characteristics. For example, hospital institutions with a high governmental payor mix, rural independent covered health facilities, or health facilities in counties with fewer than 250,000 people as of January 12, 2023 don’t reach $25 per hour until June 1, 2033. The broad-sweeping law includes non-clinical workers such as janitors, housekeepers and laundry workers, groundskeepers, security guards, clerical and administrative workers, food service workers, schedulers, and warehouse workers. The law also extends to independent contractors.

Since the passage of SB 855, California has focused on mental health parity – treating mental health and substance use disorders (MH/SUD) the same as other health conditions. Under SB 855, the California Department of Managed Health Care (DMHC) has exercised oversight over California plans in recent years through audits and reports. But most health plans fall under the Employee Retirement Income and Security Act of 1974 (ERISA), not state law. Recently, the Ninth Circuit weighed in on how the federal mental health parity law operates under ERISA.

In Ryan S. v. UnitedHealth Group, Inc., the Ninth Circuit partially denied a motion to dismiss, allowing a putative class action to move forward, which claimed that UnitedHealth subjected MH/SUD claims to a more stringent review process than surgical or medical claims. Ryan S. claimed UnitedHealth violated ERISA by largely denying his claims (to the tune of hundreds of thousands of dollars) and pointing to a 2018 DMHC report on UnitedHealth that described an algorithm applied to all MH/SUD claims. In that report, DMHC concluded that the algorithm treated mental health and substance use claims “differently” than medical/surgical claims. Without this additional evidence in the form of a report, it’s questionable whether this matter would have survived the motion to dismiss.

“The [Mental Health] Parity [and Addiction Equity] Act requires that any limitations on “mental health or substance use disorder benefits” in an ERISA plan be “no more restrictive than the predominant treatment limitations applied to substantially all [covered] medical and surgical benefits.” Ryan S. v. UnitedHealth Group, Inc., 98 F.4th 965, 971 (2024); see also 29 U.S.C. § 1185(a)(3).

The Court recognized three theories for bringing a parity claim. The first option is a facial exclusion where the plan contains an express exclusion that is discriminatory on its face. The second option is an “as applied” fact pattern where a plaintiff claims that a facially neutral term was discriminatorily applied to that plaintiff’s medical claim.

At issue here is the third option, an internal process claim, where a plaintiff alleges that a plan administrator applied an internal process that resulted in exclusion of mental health and substance use disorder treatment. “A plaintiff advancing an internal process challenge needs to provide some reason to believe that the denial of MH/SUD claims was impacted by a process that does not apply to medical/surgical claims.” Ryan S. at p. 973.

Although still at the procedural phase of the litigation, this decision provides insights into how courts may view these claims and class actions in the future under the proposed federal regulations and the standards used for internal process claims. Stay tuned for more developments in this space.

Bob Sullivan, an original member of CSHA, was awarded a Life Membership at the Spring Conference and Annual Meeting.  For those of you who were not able to attend, we are including the comments of David Balfour, who presented the award to Bob, as well as Bob's response.  The event was well-attended and Bob received a standing ovation.

On February 6, 2024, Governor Gavin Newsom signed SB 339 into law, increasing the ability of pharmacists to supply Pre-Exposure Prophylaxis (PrEP) and Post-Exposure Prophylaxis (PEP) in California.  The legislation takes aim at combatting the HIV/AIDS epidemic by expanding access to PrEP by allowing pharmacists to provide up to a 90-day supply of PrEP without a prescription and requiring health insurance plans to cover the costs associated with PrEP and PEP. 

PrEP is a daily pill (or injectable) that reduces the risk of contracting HIV through sexual contact by more than 99%.  High costs, lack of awareness, and limited availability have created barriers to access to PrEP.  SB 339 improves upon SB 159, signed in 2019, under which pharmacies have had little success furnishing PrEP due to limitations imposed by that legislation.  Learning from broader legislation passed in Colorado, Nevada and Utah, SB 339 aims to reduce those limitations to provide greater access.

The legislation was raised last September, but it was paused after an amendment was added that would allow insurance companies to impose prior authorization and step-therapy requirements, two obstacles SB 339 was intended to avoid.  Senator Scott Wiener then reintroduced the bill in its previous form, which passed in January, and went into effect immediately upon signature by Governor Newsom.  Reducing the additional barriers to access of PrEP or PEP is hoped to improve awareness and use, and, with it, decrease the number of infections.

Rob Marasco beat out the tough competition to win CSHA's Spring Conference App Game.  The game awarded points for obtaining QR codes from CSHA leaders, checking out our valued sponsors, and other significant and onerous tasks.  Rob scored an incredible 2,625 points to beat out Shari Covington (2,455 points), Anne Schneider (2,415 points), and Jaqueline Garman (2,295 points).  Congratulations to Rob!

April was a busy month at the Office for Civil Rights (OCR), with the agency releasing a number of final rules that have significant import for the health care industry.

On April 26, the agency issued its final rule amending the HIPAA Privacy Rule to enhance privacy safeguards for reproductive health care information. At a high-level, the final rule will prohibit covered entities and their business associates from disclosing PHI for the purpose of investigating or imposing liability on individuals “for the mere act of seeking, obtaining, providing, or facilitating” lawful reproductive health care. Regulated entities will also be obligated to secure attestations for these types of requests confirming that the requestor does not seek PHI for a prohibited purpose. Covered health care providers will need to update their Notices of Privacy Practices, as well as internal privacy policies and procedures, to implement the new prohibition and attestation requirements. With the exception of the NPP updates, regulated entities will have until December 23, 2024 to comply.

In the last few weeks, the agency also finalized a number of rules bolstering protections against discrimination, including restoring protections under Section 1557 of the Affordable Care Act (ACA), affirming nondiscrimination in HHS-funded programs and services, and clarifying prohibitions against discrimination on the basis of disability under Section 504 of the Rehabilitation Act.

In response to a concerning trend highlighted by a recent CalMatters investigation, California legislators Assembly Member Akilah Weber and Senator Dave Cortese are spearheading efforts to enhance transparency regarding planned closures of maternity wards across the state. The investigation shed light on the closure of several maternity wards in California, raising questions about accessibility to maternal healthcare services for expectant mothers. Assembly Member Akilah Weber and Senator Dave Cortese have recognized the urgency of addressing this issue and are pushing for legislation aimed at increasing transparency surrounding planned closures of maternity wards. By advocating for greater disclosure requirements, they seek to ensure that communities are informed well in advance of any impending closures, allowing for proper planning and mitigation of potential healthcare gaps. The proposed legislation aims to establish clear guidelines for hospitals planning to shut down their maternity wards, requiring them to provide ample notice to the public, local officials, and relevant stakeholders. Additionally, it seeks to mandate the provision of alternative options for maternal healthcare services within the affected communities. The California Hospital Association opposes Cortese’s bill and has registered “concerns” about Weber’s. The group argues that neither bill will address the underlying reasons for maternity ward closures.

One does not have to look too long or too hard to find or access one of the myriad artificial intelligence (“AI”) tools available to businesses and consumers alike that industry evangelists proclaim will change the way we work and live. And while some have clear applications we already can wrap our heads around—say, a student using an AI tool to write that term paper at the last minute—AI almost certainly has a lot more to show us still in terms of its full potential and contributions.

In light of this reality, the Legislature is working to define more clearly the appropriate use of AI tools in California’s healthcare industry. On February 13, 2024, State Senator Becker introduced SB 1120, which aims to set parameters around the use of AI tools by health plans with respect to utilization review and care delivery. The bill would accomplish this by requiring that algorithms, AI, or “other software tools” be used in a fair and equitable manner, pursuant to publicly disclosed policies, and that the use of such tools not supplant provider-driven decision making or review and consideration of a patient’s individualized medical history and clinical needs.

While there is still a long road ahead, the bill already has seen one substantive amendment: excising the requirement that health care service plans ensure that a licensed physician “supervise the use of artificial intelligence decision-making tools” whenever said tools are used to “inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds.” This amendment came about in response to concerns over the type of supervision expected or required of physicians to ensure compliance with the proposed law. And because a violation of the Knox-Keene Act can expose a health care service plan to liability, removing such vague and ambiguous supervision language removes that category of compliance risk.

Notwithstanding these developments, SB 1120’s goals seem largely to follow the lead already established by CMS in its February 2024 FAQ guidance on the April 5, 2023, final rule for Medicare Advantage coverage criteria. In that guidance, CMS acknowledged the role AI tools already play in making coverage decisions, and offered industry guidance on how health plans should think about utilizing AI tools in this context. For example, CMS emphasized that AI tools not be used as a substitute for a physician’s recommendations, clinical notes, or the patient’s individualized medical history. CMS further expressed its concern that algorithms and AI tools potentially could exacerbate discrimination and bias, and admonished those who utilize these tools to be mindful of complying with the nondiscrimination requirements of Section 1557 of the Affordable Care Act. Like SB 1120, the CMS guidance also requires that AI tools be used in a manner consistent with publicly posted policies. In other words, SB 1120 appears largely to follow in CMS’ footsteps, meaning health plans might not have to worry about navigating dramatically different statutory and regulatory landscapes on this topic.

Those similarities aside, SB 1120 and the CMS guidance appear to differ in one important way: appreciating the differences among various AI tools. As noted above, SB 1120 paints AI tools with a broad brush, referring to, “algorithms, artificial intelligence, and other software tools.” CMS by contrast points out the technical differences among algorithms and machine learning AI systems. In other words, the CMS guidance acknowledges the nuance among the various technological tools on the market as opposed to SB 1120’s catchall framing. Whether this distinction will persist is yet to be seen. Setting that difference aside, California health plans can expect state and federal scrutiny into how AI tools are used to ensure they do not supplant fully the traditional approaches to patient-centered, provider-driven care.