August 16, 2017

California’s Former Director of Finance: SB 349 Would Increase Costs to Care for Medi-Cal Patients on Dialysis by Up to $270 Million Annually

For Immediate Release:  August 16, 2017 Contact: Kathy Fairbanks, 916-443-0872

California’s Former Director of Finance:

SB 349 Would Increase Costs to Care for Medi-Cal Patients on Dialysis by Up to $270 Million Annually

SACRAMENTO – A new analysis prepared by Michael Genest, California’s former Director of Finance, finds that Senate Bill 349 (Lara), the dialysis clinic staffing ratio bill, would increase costs to care for Medi-Cal patients by as much as $270 million each year. SB 349 would mandate minimum staffing ratios for nurses, technicians, social workers and dieticians at California dialysis clinics. A significant percentage of patients on dialysis in California are covered by the state’s Medi-Cal program for low-income people. “SB 349 would increase staffing costs at dialysis clinics by 35%. If Medi-Cal were to reimburse fully for those increased costs, it would be $60 million annually, or $30 million in direct General Fund costs,” said Genest.  “If the state Medi-Cal program does not increase its reimbursement rates, many clinics will have to reduce access and care for fewer patients. These patients will develop complications and be forced to receive care in more costly settings, like emergency rooms and the hospital.  Medi-Cal potentially would incur additional annual costs of $270 million or more, or $135 million from the state General Fund, for additional health care for patients whose access to clinic-based dialysis is reduced or eliminated.” Genest pointed to a separate report conducted earlier by Health Management Associates (HMA) that found research does not demonstrate a link between higher staffing ratios and quality of care.”  Additionally, HMA evaluated publicly available data from the Centers for Medicare & Medicaid Services (CMS) which regulates and tracks dialysis clinic performance and found, there is no demonstrated relationship between staffing ratios, on the one hand, and improved patient outcomes and patient satisfaction, on the other.” The lack of evidence supporting the claim that staffing ratios are linked to better care, in addition to the fact that California dialysis clinics already provide some of the highest quality care in the country as tracked by independent, government entities, demonstrates that SB 349 is a solution in search of a problem. Nonetheless, that “solution” would cost the state significantly in terms of reduced access and impact to the state General Fund, specifically:
  • A 35% increase in staffing costs at dialysis clinics for salary and benefits due to the staffing mandates. This equates to total annual costs beginning in 2019 of $370 million to community dialysis clinics in California.
  • For Medi-Cal to increase reimbursement rates to cover its share of these staffing-related costs would total $60 million annually ($30 million General Fund).
The reality is that SB 349 would ultimately reduce supply of dialysis appointment slots. With supply constraints would come missed appointments, or for some patients, no access to outpatient dialysis at all. With missed treatments, many individuals on dialysis develop complications from associated co-morbidities (like heart complications or fluid buildup) that must be cared for in hospital emergency rooms. Additionally, those unable to get dialysis elsewhere will seek their dialysis treatment in the more expensive hospital setting, at minimum 3 times per week. According to the HMA study, “total costs of care for patients with access only to emergent dialysis was 3.7 times higher” than receiving regular dialysis in an outpatient clinic.
  • As a result of this reduced access, Medi-Cal could incur additional annual costs of $270 million or more ($135 million General Fund) to cover patients who develop complications and must receive emergent care and/or dialysis treatment in the hospital.
An analysis of SB349 by the Senate Appropriations Committee reached a similar conclusion:  “By imposing staffing requirements that exceed current practices in chronic dialysis clinics, the bill will increase the costs to operate those clinics. This is likely to increase Medi-Cal managed care payments to chronic dialysis clinics…. To the extent that chronic dialysis clinics have difficulty meeting the required staff to patient ratios, it is possible that patients would seek treatment in emergency departments and/or hospital inpatient dialysis units. Receiving dialysis in those settings is likely to be substantially more expensive than receiving dialysis in a clinic. Any such increases in the cost to provide dialysis would impact Medi-Cal.” About Michael C. Genest Prior to forming Capitol Matrix Consulting, Mr. Genest served for four years as Director of the California Department of Finance from 2003 – 2007.  Among other roles in state government, Genest also worked for ten years in the non-partisan Legislative Analyst’s Office and managed the Department of Health Care Services Office of Prevention Services. About SB 349: SB 349 would mandate rigid staffing ratios at dialysis clinics and adds a 45-minute “time out” transition time between patient appointments. Doctors, nurses, patients and dialysis clinics warn the bill is:
  • Dangerous for Patients ­– Arbitrary staff ratios and specified “time outs” between treatments would result in fewer available appointments, more missed treatments and a dangerous backlog of needed care. California already faces a shortage of dialysis clinics and appointment times, as well as staff. SB 349 will reduce the availability of treatment slots, increasing hospitalizations and emergency room visits, and will end in less flexibility for working patients as evening and overnight treatments would be jeopardized.
  • Unnecessary Federal data collected by the Centers for Medicare & Medicaid Services (CMS) show that California dialysis clinics outperform dialysis clinics nationwide in both clinical quality and patient satisfaction, including outperforming states with some form of mandated staffing ratios.
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