MINUTES OF THE meeting
of the
ASSEMBLY SubCommittee on Health and Human Services
Seventy-First Session
March 1, 2001
The Subcommittee on Health and Human Serviceswas called to order at 3:45 p.m., on Thursday, March 1, 2001. Chairman Debbie Smith presided in Room 3138 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
SUBCOMMITTEE MEMBERS PRESENT:
Ms. Debbie Smith, Chairman
Ms. Dawn Gibbons
Ms. Bonnie Parnell
SUBCOMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblyman Doug Bache, District #11
STAFF MEMBERS PRESENT:
Marla McDade Williams, Committee Policy Analyst
Darlene Rubin, Committee Secretary
OTHERS PRESENT:
William R. Hale, CEO, University Medical Center
Gary Crews, Audit Division, Legislative Counsel Bureau
Elizabeth Gilbertson, Director of Strategic Planning and Public Policy, Hotel Employees and Restaurant Employees International Union (HEREIU) Welfare Fund
Fred Hillerby, Associated Pathology Labs
Guy Perkins, Chief Insurance Examiner, Division of Insurance
Dana R. Bennett, Nevada State Medical Association
Chairman Smith opened the subcommittee on A.B. 52.
Assembly Bill 52: Limits fees which providers of health services that accept insurance payments may collect from patients and requires legislative audit of University Medical Center of Southern Nevada. (BDR 40-655)
Ms. Smith noted amendments had been offered and there was a work document. She referred to the bill section that dealt with the audit first and invited testimony from the witnesses present.
William R. Hale, Chief Executive Officer, University Medical Center (UMC) of southern Nevada, referenced Exhibit C, Nevada Baseline Full Case Review. It was an audit done by Health Insights, the peer review organization that monitored all Medicare hospital inpatient days, who had performed an audit of all hospitals in Clark County and took samples. They looked at coding, intensity of service, severity of illness, procedure indications, quality issues, discharge screens, and disposition codes. In other words, they examined the gamut of services provided by all the hospitals.
Mr. Hale referred to the bar graph on page C-9 (Exhibit C) that showed the error rate at Hospital A, UMC, was far below any other hospital in Clark County. The auditors called UMC “over-achievers” because they had such a low error rate. He explained a system was in place at UMC that provided the highest quality in servicing patients in quality of care and documentation in its various entities.
Chairman Smith asked if the issue under discussion, balanced billing, was covered in the disposition code. Mr. Hale said it was.
UMC, Mr. Hale continued, could not be compared to any other hospital in Nevada. There were over 800,000 outpatient visits per year, more than any other hospital in Nevada. In fact, no other hospital had more than 100,000 such visits. Accordingly, there might be more errors overall but when compared to those other hospitals the error ratio was less significant.
Mr. Hale next referred to letters (Exhibit D) to UMC from managed-care organizations, all stating UMC had done a wonderful job in working with them. He was not declaring they were error-free, however, they worked closely with all the managed care companies and tried to assure they had a good system for representation of the billing systems that were required.
A document entitled, Report on the Registration and Billing Process at UMC’s Quick Care and Primary Care Centers, (Exhibit E), Mr. Hale explained, detailed all the steps in the process of billing at UMC. The situation with Assemblyman Bache, A.B. 52’s sponsor, when he brought a family member to UMC was that a lab test was ordered. On most contracts the lab tests were done in-house. Approximately five contracts required the lab tests be sent to Associated Pathology Labs (APL). The lab tech in each center was responsible for identifying whether the patient was covered by one the five managed-care companies who required the test to be sent out. The lab tech in the Bache case made an error; instead of sending the lab test out, it was done in-house. It was a human error, not a system error or process error. When the managed care company received the bill they denied that service, calling it a non-covered service. Normally, he said, when they received that remittance advice back and the posting clerk saw a non-covered service, it went to the patient because it was not part of their plan. When UMC was advised what had happened they wrote off that charge because it was their mistake, even though they had provided the service in-house.
Mr. Hale said that might occur in other areas of the hospital as well, but when they identified those situations they tried to make their staff accountable for what had happened.
Mr. Hale next presented a letter (Exhibit F) addressed to Assemblywoman Smith, from the Internal Audit Department of Clark County, regarding the many audits they had performed at UMC and stating they were the appropriate entity for reviewing UMC systems and procedures. Their reports were presented to the board of trustees and were also a public document that could be reviewed by anyone.
In 1988 an extensive audit was performed and paid for by the State of Nevada. One of the recommendations made at that time was that the Internal Audit Department be separately identified and a part of the county system and not UMC’s system; that had been implemented. The Internal Audit Director, Jeremiah P. Carroll, author of the above-mentioned letter, suggested it would be appropriate if the legislature felt it was necessary to request the Internal Audit Department to audit any part of UMC systems.
Mr. Hale felt the amendments to the bill made the intent much clearer, however, the bill asked UMC to pay $50,000 for that audit. UMC at the present was having some financial difficulties. Two years ago UMC made $9 million; it was a great year. Last year UMC made only $500,000. In 2001, the deficit to date was $640,000. Mr. Hale said they would have to absorb the audit charge whereas if the Internal Audit Department did an audit it was part of the county allocation and UMC would not be charged for it. He explained the reason UMC’s net profit margin had gone down was because Medicare, as part of the Balanced Budget Act of 1997, reduced reimbursement to hospitals. The net effect to their bottom line last year along was $4 million. Also last year, the charity care costs rose from $27 million to $33 million which was uncompensated care. The total uncompensated costs that UMC must absorb, or the county and taxpayers had to help subsidize, were over $75 million.
Accordingly, Mr. Hale said he did not feel an audit by the state was necessary. It would be a learning process for the state auditors, hospital billing was a very complicated system. Internal Audit Department had audited UMC previously and it would be the most efficient way and the most responsible.
Chairman Smith noted Mr. Hale had indicated on the sign-in sheet he was opposed to the bill, but wanted to know if he was opposed to all portions or just the audit portion. Mr. Hale was opposed to the audit. He had no problem with the new language; the first paragraph was clearer. He was uncertain about the second paragraph. They tried to tell their patients if UMC did not have a contract, but again there could be human error. They had contracts with all but three managed care companies in Clark County. He said he could not guarantee that an error would not be made in the future; errors had occurred especially when new employees were involved.
Assemblywoman Parnell asked how often the Internal Audit Department of Clark County performed an audit at UMC. Mr. Hale said they were continually doing audits. Usually four to five audits every year on particular parts of UMC, thus they were very familiar with the operation. There were in fact assigned auditors at the hospital all the time. Ms. Parnell asked if it was possible for someone to come in to see the results of the most recent audit. Mr. Hale said yes, however, the audits were not only about billing but also other aspects of the hospital operation.
Mr. Hale added that every year an audit was performed by Arthur Anderson Company who certified UMC’s financial statements, billing processes, and account receivables. Anderson Company also provided a management letter every year with recommendations for improved systems. That information was also available to the public. Ms. Parnell asked if corporate compliance was also ongoing. Mr. Hale said it was an ongoing process at UMC and taken very seriously. The federal government had put greater emphasis on that over the last three or four years. The corporate compliance committee reviewed all processes to make sure the charges were appropriate for the services provided. Mr. Hale could provide all the information mentioned to the committee upon request, however, the corporate compliance may be privileged information and not available to the public.
Ms. Smith asked Gary Crews to address the proposed amendments.
Gary Crews, Legislative Auditor, Legislative Counsel Bureau, was accompanied by Paul Townsend, Audit Supervisor, who, Mr. Crews explained, had participated in the last audit at UMC in 1987. Mr. Crews explained the suggested cost of $50,000 was an increase from the $15,000 appropriation stated initially. Consistent with what the legislature had done previously in financing the Legislative Counsel Bureau’s operations, a provision had been made to transfer funds to the Legislative Counsel Bureau whenever the audit section performed an outside audit. He calculated the cost to perform an audit at UMC to be $50,000 including travel, per diem, and staff salaries. His staff had prior experience in the health care arena; last year they audited the Nevada Mental Health Institute and Medicaid’s billing systems, and two years ago they audited the state’s self-funded program.
Mr. Crews had also suggested another provision to accommodate the scheduling by changing the effective date of Section 2 of the bill to July 1, 2001. That would give the audit section a head start toward completion.
Chairman Smith asked Mr. Crews what his thoughts were about the suggestion to use Internal Audit Department instead of the Legislative Counsel Bureau, and his ideas on the appropriate language to achieve that, rather than the proposed amendment.
Mr. Crews was not familiar with the Internal Audit Department’s reporting structure. He expressed concern about the independence factor; were they in fact independent from the UMC operation. For example, in state government there were internal auditors but they were not independent. He felt the committee might want to examine that further.
Next to speak was Elizabeth Gilbertson, Director of Strategic Planning and Public Policy for the Hotel Employees and Restaurant Employees International Union (HEREIU) Welfare Fund, a national health benefits fund, of which the Culinary Fund in Las Vegas was the single largest component. Prior to assuming her present position, she spent ten years running the Las Vegas operation of the Culinary Fund. The Culinary Fund covered 125,000 people in Clark County and they had contracts with all of the hospitals.
Ms. Gilbertson said she had asked to testify because she wanted to speak to the portion of the bill that pertained to the audit, however, she first remarked that no payer, particularly a union trust fund, wanted to have its participants balanced billed or get bills for things they should not have to pay for. It was something she worried about with every provider, because there were unusual arrangements for financing health care wherein every payer entity had a separate benefit plan and usually separate contracts. That resulted in a vast amount of detail the providers and the trust had to deal with. Each provider must deal with dozens to hundreds of trusts. Ms. Gilbertson emphasized the administrative burden of doing that perfectly every time was very heavy.
She noted that in the many years she had operational responsibility for the Culinary Fund in Las Vegas, UMC had never come to her attention for anything more that an incidental problem with regard to a particular billing issue. Since A.B. 52 was introduced she had her staff research carefully whether there was a new problem of which she should have been aware. They had found no information from either provider relations or from the claims staff about more than the occasional problem in that area, which happened with everyone.
Chairman Smith noted that in the work document at the hearing there had been recommended language for amendment for Section 1 and Section 2, the audit section, and she asked for input on Section 1.
Fred Hillerby, representing Associated Pathology Laboratories, remarked the amendment was preferable to the original language. In the case of his client, he offered a scenario to explain: They would be sent a request to perform three lab tests; two of the tests were covered by the health plan but the third one might be a discretionary test that was not covered. The way both the bill and the amendment read, if the laboratory accepted the payment for the two lab tests they could not bill for the third one that was non-covered. That was the part, Mr. Hillerby said, that needed to be distinguished when talking about “in excess of those fees agreed to.” He had not yet determined what the appropriate language would be to remedy that situation. He had spoken to Mr. Bache prior to the original hearing and Mr. Bache said it had not been his intent to limit the provider’s ability to bill the patient if those charges were not covered. He added, if it had been just one service that was not covered it would be simple and would not be addressed by the bill, but in the case where payment was accepted for some of the services rendered, the bill precluded providers from billing the patient for those non-covered services they might have received.
Ms. Smith believed the language offered that by specifically adding the word “contract” to the section the issue would be resolved because a provider would be bound to the terms of the contract. She asked if that would cover non-covered services. Mr. Hillerby thought it might. In fact, in discussing the matter recently with Larry Matheis, Nevada Medical Association, he said the contract may or may not say the patient could be charged for non-covered benefits. The contract stated what was being accepted for those benefits being covered, what the patient’s obligation was, and what the payer’s obligation was under that contract.
In closing, Mr. Hillerby was concerned the existing and proposed language would be misconstrued to meant that a provider could not bill for any service if partial payment was accepted for some of the services. He would provide appropriate language to Marla McDade Williams.
Guy Perkins, Chief Insurance Examiner, Division of Insurance, said he understood Mr. Hillerby’s concern and felt the clarification he described would be appropriate under the proposed amended language.
Warren Hardy, representing the Clark County Association of School Administrators, felt that Section 1 of the bill appeared to resolve the concern of his client. He was agreeable to Mr. Hillerby’s proposed clarification.
Assemblyman Douglas Bache, District 11, had read through the proposed amendments and was furnished with a copy of a similar concept. He asked Marla McDade Williams if she had incorporated that language into the amendment under discussion.
Chairman Smith said neither she nor Ms. Williams had seen the similar concept he spoke of, they were only aware of the amendment under discussion.
Dana Bennett, representing the Nevada State Medical Association, informed she had originally proposed that the words “by contract” be added to the amendment. She had provided Mr. Bache with a copy before the hearing as well as the committee members. It appeared that the staff language addressed those issues as well, and she agreed with Mr. Hillerby that there were some other far-reaching issues that needed to be addressed in the amendment. However, she had not seen the similar concept amendment Mr. Bache referred to.
Mr. Bache said a gentleman whose name he could not recall had given him the amendment, which was similar in substance to the language suggested for Amendment 1. He would be glad to provide copies to the committee, and expressed surprise that the party who had given him the amendment was not present. In any event, the amendment given to him was similar to what was contained in Section 1. There was no amendment proposed for Section 2 or 3.
Mr. Bache added that he agreed with Mr. Hillerby’s suggestion to clarify the intent that if those services were not covered they could still be billed to the patient.
Regarding the audit, he was not concerned how it was funded, whether funded by the legislature or UMC or split- funded. He was concerned however that an outside audit be performed, not by Clark County’s Internal Audit Department.
In the hearing of February 26, 2001, Mr. Bache felt that Gary Badal, Director of Managed Care, UMC, who had accompanied lobbyist Gary Milliken, had impugned his integrity with regard to his Clark County Education Association (CCEA) Health and Welfare Benefit Trust. At least he had interpreted Mr. Badal’s remarks to infer that he, Mr. Bache, never had the conversation with the front line claims worker as he had related to the committee. Mr. Bache added he had been in contact with the president of CCEA, who was also president of the Health and Welfare Benefit Trust, and she would be happy to provide any information with regard to his discussions with the claims examiner at that time, as well as any history they had had with UMC. Mr. Bache advised that in his conversations with the claims examiner, in August, 2000, he would not have requested the audit had the claims examiner not indicated at that particular time those types of problems were recurring. The claims examiner said UMC would correct the problem when UMC was notified.
Chairman Smith noted the subcommittee had taken Ms. Bennett’s suggestion to add “by contract” and Marla McDade Williams had incorporated it into very clear language in the amendment. Another matter that had been dealt with was the insurer issue, so that verbiage covered trust funds and other types of payers, and it was determined that the words “health plan” would cover all of those entities the parties were trying to include.
Assemblyman Bache believed the health trust would fall under the Employment Retirement Income Security Act (ERISA), because it was created in 1984 through CCEA’s contract, and was a corporation separate but owned by the Clark County Education Association.
Chairman Smith had checked with a trust fund administrator to verify that the health plan terms would apply to them.
Mr. Bache said he would give the proposed amendment to Ms. Williams.
Chairman Smith told Mr. Hillerby she would await his recommendations for an amendment and forward on to committee Chair Koivisto and await her direction.
Marla McDade Williams, Committee Policy Analyst, directed members attention to the handout, Assembly Bill 52 Subcommittee Working Document, (Exhibit G), the second bulleted item, when reviewing the bill it appeared the bill chose to amend Chapter 439B of the Nevada Revised Statutes (NRS),which addressed restraining the cost of health care. The issue proposed in the bill concerned a health facility or practitioner’s billing practices and might not ultimately affect the cost of health care. Health facilities were generally regulated in Chapter 449 of the NRS, and health practitioners were generally regulated under Title 54 Professions, Occupations, and Businesses. Ms. Williams listed the potential chapters of the NRS that could be affected in terms of the practitioners. Also, under Title 52, Trade Regulations and Practices, that might also be an appropriate place to include the measure, rather than in Chapter 439B. Ms. Williams asked if the subcommittee wanted further investigation into those aspects of the bill.
Chairman Smith apologized for not having had that discussion with members because she assumed the legal staff would make that determination for them.
Assemblywoman Parnell said she would have made the same assumption and believed it best to leave that interpretation to the legal staff, if the sponsor of the bill was comfortable with that.
Ms. Williams explained she had meant she would ask the legal staff to look into the matter if that was the subcommittee’s desire.
Mr. Bache said however the legal division wrote it was satisfactory to him; it did not matter to him which chapter the measure fell under.
There was no further testimony and Chairman Smith adjourned the meeting at 4:28 p.m.
RESPECTFULLY SUBMITTED:
Darlene Rubin
Committee Secretary
APPROVED BY:
Assemblywoman Debbie Smith, Chairman
DATE: