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AB-2817 Office of Health Care Quality and Affordability.(2019-2020)

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Date Published: 03/02/2020 09:00 PM
AB2817:v98#DOCUMENT

Amended  IN  Assembly  March 02, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2817


Introduced by Assembly Member Wood

February 20, 2020


An act to add Division 117 (commencing with Section 150300) 121 (commencing with Section 152000) to the Health and Safety Code, relating to the Office of Health Care Quality and Affordability.


LEGISLATIVE COUNSEL'S DIGEST


AB 2817, as amended, Wood. Office of Health Care Quality and Affordability.
Existing federal law, the Patient Protection and Affordable Care Act (PPACA), enacts various health care market reforms. Existing state law creates the California Health Benefit Exchange (Exchange), also known as Covered California, to facilitate the enrollment of qualified individuals and qualified small employers in qualified health plans as required under PPACA. Until January 1, 2023, existing law requires the Exchange to administer a program to provide health care coverage financial assistance to California residents with household incomes at or below 600% of the federal poverty level.
This bill would create the Office of Health Care Quality and Affordability to improve the affordability of private health care coverage. The bill would require the office to, among other things, create strategies to address cost trends by region and develop measures of affordability for consumers and other purchasers of private health care coverage. to analyze the health care market for cost trends and drivers of spending, develop data-informed policies for lowering health care costs, and create a strategy to control health care costs. The bill would require the office to be governed by a board with specified membership, and would require the board to hire an executive director to organize, administer, and manage the operations of the office. The bill would require health care entities to report specified data to the board, which the board would be required to keep confidential. Based on that data, the bill would require the board to annually establish statewide health care cost growth targets beginning in the 2022 calendar year and sector-based health care cost growth targets beginning in the 2023 calendar year.
This bill would require health care entities to comply with the above-described health care cost growth targets and would authorize the board to assess civil penalties for violations of the health care cost growth targets. The bill would establish the Health Care Quality and Affordability Fund, within the State Treasury, into which civil penalties would be deposited. Upon appropriation by the Legislature, the bill would require moneys in the fund to be expended by the board in a manner that prioritizes the return of the moneys to consumers and payers.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Division 121 (commencing with Section 152000) is added to the Health and Safety Code, to read:

DIVISION 121. Office of Health Care Quality and Affordability

152000.
 This division shall be known as the California Health Care Quality and Affordability Act.

152001.
 As used in this division:
(a) “Board” means the Office of Health Care Quality and Affordability Board established by Section 152004.
(b) “Executive director” means the executive director of the Office of Health Care Quality and Affordability.
(c) “Fund” means the Health Care Quality and Affordability Fund established by Section 152014.
(d) “Health care cost growth” means the annual percentage change in total health care expenditures in the state.
(e) “Health care cost growth target” means the target percentage for health care cost growth, whether negative or positive.
(f) “Health care entity” means a payer or a provider.
(g) “Material change” means any change in ownership, operations, or governance for health care entities, occurring through mergers, acquisitions, or corporate affiliations, including conversions, involving physician organizations, hospitals, health systems, health clinics, health care service plans, health insurers, and pharmacy benefit managers.
(h) “Net cost of health coverage” means the costs associated with the administration of health coverage, and is defined as the difference between premiums received by a payer and the expenditures for covered benefits from both public and private sources.
(i) “Office” means the Office of Health Care Quality and Affordability, established by Section 152003.
(j) “Payer” means a public or private entity, other than an individual, that pays or reimburses for any part of the cost for the provision of health care, including a health care service plan, a specialized health care service plan, an insurer licensed to provide health insurance, as defined in Section 106 of the Insurance Code, a self-insured employer subject to Section 1349.2, and a health entity contracted pursuant to Section 14087.3 of the Welfare and Institutions Code.
(k) “Provider” means a professional person, organization, including a physician organization or other similar group of providers, a health facility, a health clinic, an ambulatory surgery clinic, or other person or institution licensed by the state to deliver or furnish health care services, including providers and suppliers as defined in paragraphs (2) and (3) of subdivision (b) of Section 1367.50.
(l) “Total health care expenditures” means all health care expenditures in this state by public and private sources, including all of the following:
(1) All payments on providers’ claims for reimbursement of the cost of health care provided.
(2) All nonclaims-based payments to providers.
(3) All cost sharing paid by residents of this state, including copayments, deductibles, and coinsurance.
(4) The net cost of health coverage.

152002.
 (a) The Legislature finds and declares all of the following:
(1) It is in the public interest that all Californians receive universal, high-quality health care that is affordable, accessible, and equitable.
(2) While California has reduced the uninsured share of its population to a historic low of 7 percent through implementation of the federal Patient Protection and Affordable Care Act (Public Law 111-148) and other state efforts, affordability has reached a crisis point as health care costs continue to grow.
(3) As costs rise, employers are increasingly shifting the cost of premiums and deductibles to employees. At the same time, increased employer contributions to premiums directly and negatively impact the potential for wage growth. Compared to a decade ago, families contribute 67 percent more to their health benefits, while employers contribute 51 percent more in premium contributions. Meanwhile, wages have increased by only 26 percent.
(4) Escalating health care costs are being driven primarily by high prices, particularly in geographic areas and sectors with a lack of competition due to consolidation and market power. Consolidation through acquisitions, mergers, or corporate affiliations is pervasive across the industry and involves hospitals, health care service plans and health insurers, physician organizations, and pharmacy benefit managers.
(5) Surveys show that people are delaying or forgoing care due to concerns about cost, or getting care but struggling to pay the resulting bill. In California, one in four people report problems paying or an inability to pay their medical bills, with two-thirds cutting back on basic household items such as food and clothing.
(b) It is the intent of the Legislature to have a comprehensive view of health care spending, cost trends, and variation to inform actionable policies to reduce health care costs while maintaining quality of care, with the goal of improving affordability and equity of health care for Californians.
(c) It is the intent of the Legislature to encourage policies, payments, and initiatives that improve the quality, efficiency, and value of health care service delivery, with a particular focus on ensuring health equity and reducing disparities in care and outcomes across California.
(d) It is the intent of the Legislature to facilitate increased adoption of value-based payment models focused on improving affordability, quality, service, equity, and efficiency.
(e) It is the intent of the Legislature to increase investment in primary care as it facilitates increased adoption of value-based payment models.
(f) It is the intent of the Legislature to promote the goal of health care affordability while recognizing the need to maintain and increase the supply of trained health care workers, and to monitor the effects of cost containment efforts on labor standards, working conditions, and training needs of health care workers.
(g) It is the intent of the Legislature to fill gaps in California’s regulatory framework by reviewing mergers, acquisitions, and corporate affiliations involving health care entities, such as physician organizations, hospitals or health systems, health care service plans and health insurers, and pharmacy benefit managers, for their impact on market competition and costs for consumers.
(h) It is the intent of the Legislature therefore to establish an independent public entity not affiliated with a state agency or department charged with developing a comprehensive strategy for cost containment in California, including measuring progress towards lowering per capita health care spending while maintaining quality of care, addressing cost increases in excess of health care cost growth targets through public transparency, opportunities for remediation, and other progressive actions commensurate with the offense or violation, and referring transactions that may reduce market competition or increase costs to the Attorney General for further review.

152003.
 (a) There is hereby established the Office of Health Care Quality and Affordability, an independent public entity not affiliated with an agency or department, charged with analyzing the health care market for cost trends and drivers of spending, developing data-informed policies for lowering health care costs for consumers, creating a state strategy for controlling the cost of health care and ensuring affordability for consumers, and enforcing target costs.
(b) The office shall do all of the following:
(1) Increase cost transparency through public reporting of total health care spending and factors contributing to health care cost growth.
(2) Establish and update, through its board, a statewide health care cost growth target for per capita spending and health care cost growth targets by specific sector, including payer, physician organization, hospital or health system, health clinic, insurance market, line of business, and geographic region.
(3) Oversee the state’s progress towards the health care growth targets by providing technical assistance, compelling public testimony, requiring submission of compliance action plans, assessing civil penalties, and reviewing contract terms between payers and providers.
(4) Promote and measure quality, access, and health equity through the adoption of standard measures for assessing health care service plans and health insurers, physician organizations, and hospitals, with consideration for minimizing administrative burden and duplication.
(5) Address consolidation, market power, and other market failures through cost and market impact reviews of mergers, acquisitions, or corporate affiliations involving payers and providers.
(6) Advance standards for evidence-based and value-based payments.
(7) Advance labor standards and workforce supply and investment for ensuring the stability of the health care workforce.
(8) Analyze cost growth trends in the pharmaceutical sector.
(c) For purposes of implementing this division, including hiring staff and consultants, facilitating and conducting meetings, conducting research and analysis, and developing the required reports, the office may enter into exclusive or nonexclusive contracts on a bid or negotiated basis. Contracts entered into or amended pursuant to this section shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.

152004.
 (a) The office shall be governed by the Office of Health Care Quality and Affordability Board with membership as follows:
(1) Six members shall be appointed by the Governor.
(2) Two members shall be appointed by the Senate Committee on Rules.
(3) Two members shall be appointed by the Speaker of the Assembly.
(4) One member shall be appointed by the Attorney General.
(5) The Secretary of Health and Human Services or their designee shall serve as an ex officio, nonvoting member of the board.
(b) Members of the board, other than the ex officio member, shall be appointed for a term of four years, except that the initial appointment by the Senate Committee on Rules shall be for a term of five years, and the initial appointment by the Speaker of the Assembly shall be for a term of two years. A member of the board may continue to serve until the appointment and qualification of a successor. Vacancies shall be filled by appointment for the unexpired term. The board shall elect a chairperson on an annual basis.
(c) (1) Each person appointed to the board shall have demonstrated and acknowledged expertise in at least two of the following areas:
(A) Health care economics and markets.
(B) Health care delivery.
(C) Health care technology.
(D) Health care management or health care finance and administration, including payment methodologies.
(E) Health plan administration and finance.
(F) Primary care.
(G) Behavioral health, including mental health and substance use disorder services.
(H) Purchasing or self-funding group health care coverage for employees.
(I) Enhancing value and affordability of health care coverage.
(J) Health care organized labor.
(K) Health care consumer advocacy.
(L) Antitrust law.
(2) The appointing authorities shall consider the expertise of the other members of the board and attempt to make appointments so that the board’s composition reflects a diversity of expertise.
(3) The appointing authorities shall take into consideration the cultural, ethnic, and geographical diversity of the state so that the board’s composition reflects the communities of California.
(d) (1) A board member or an office staff member shall not be employed by, a consultant to, a member of the board of directors of, affiliated with, or otherwise a representative of, a health care entity or another health care industry-related employer while serving on the board or on the staff of the office.
(2) A board member or an office staff member shall not be a member, a board member, or an employee of a trade association of health care entities or other health care industry-related employers while serving on the board or on the staff of the office.
(3) A board member or an office staff member shall not be a health care provider unless the person does not receive compensation for rendering services as a health care provider and does not have an ownership interest in a professional health care practice.
(e) A board member shall not receive compensation for service on the board, but may receive a per diem and reimbursement for travel and other necessary expenses, as provided in Section 103 of the Business and Professions Code, while engaged in the performance of official duties of the board.
(f) A board member shall not make, participate in making, or in any way attempt to use their official position to influence the making of a decision that the member knows or has reason to know will have a reasonably foreseeable material financial effect, distinguishable from its effect on the public generally, on the member or a member of their immediate family, or on either of the following:
(1) A source of income, other than gifts and other than loans by a commercial lending institution in the regular course of business on terms available to the public without regard to official status, aggregating two hundred fifty dollars ($250) or more in value provided to, received by, or promised to the member within 12 months before the decision is made.
(2) A business entity in which the member is a director, officer, partner, trustee, employee, or holds a management position.
(g) (1) The board shall meet at least quarterly or at the call of the chair.
(2) The board shall be subject to the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code).
(h) The board shall develop a plan of operation for the office.
(i) The board shall hire an executive director to organize, administer, and manage the operations of the office. The executive director shall be exempt from civil service and shall serve at the pleasure of the board.
(j) The board may establish an advisory council to the board. The advisory council shall advise on the overall operation and policy of the board. The council shall be chosen by the executive director and shall reflect a broad distribution of diverse perspectives on the health care system. The membership of the advisory council shall include health care professionals, health economists, consumer representatives, consumer advocacy organizations, representatives of the biotechnology industry, pharmaceutical manufacturers, pharmacy benefit managers, providers, provider organizations, labor organizations, and private payers.

152005.
 (a) The board shall do all of the following:
(1) Beginning in the 2022 calendar year, and each calendar year thereafter, establish statewide health care cost growth targets using total health care expenditures, which shall:
(A) Promote a predictable and sustainable rate of growth for total health care expenditures.
(B) Be based on an economic indicator.
(C) Be informed by historical cost data and other relevant data.
(D) Be met by health care entities in the state.
(E) Be annually reviewed and updated.
(F) Include the methodology and process for setting, reviewing, and updating the targets, including adjustment factors and economic indicators to be used in establishing the targets.
(2) Beginning in the 2023 calendar year, and each calendar year thereafter, establish health care cost growth targets by specific sector, including payer, physician organization, hospital or health system, health clinic, insurance market, line of business, and geographic region, which shall:
(A) Promote a predictable and sustainable rate of growth for total health care expenditures.
(B) Be based on an economic indicator.
(C) Be informed by historical cost data and other relevant data.
(D) Be met by health care entities in the state.
(E) Be annually reviewed and updated.
(F) Include the methodology and process for setting, reviewing, and updating the targets, including adjustment factors and economic indicators to be used in establishing the targets.
(3) Direct the public reporting of performance on the health care cost growth targets by specific sector, which, at a minimum, shall include analysis of total health care cost growth by each of the following:
(A) Statewide.
(B) Geographic region.
(C) Insurance market and line of business.
(D) For health care entities, both unadjusted and using a standard risk adjustment methodology.
(E) Per capita.
(4) Within 30 days of establishing a statewide or sector-based health care cost growth target, hold a public meeting to adopt that target. The meeting shall be subject to the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code), and notice shall be posted on the office’s internet website.
(5) Establish a methodology to set health care cost growth targets, including adjustment factors.
(6) Consider economic indicators that shall be used to establish health care growth targets.
(7) Adjust health care growth targets as needed.
(8) Collect, analyze, and publicly report additional data for the purposes of implementing this division.
(9) Determine and analyze factors that contribute to cost growth within the state’s health care system, including the pharmaceutical sector.
(10) Make recommendations for updates to statutory provisions necessary to promote innovation and enable the increased adoption of value-based payments.
(11) Evaluate and determine administrative simplification in the health care delivery system.
(b) To set the statewide and sector-based health care cost growth targets, the board may take into consideration a self-insured employer not subject to Section 1349.2 and a multiemployer self-insured plan that is responsible for paying for health care services provided to beneficiaries and the trust administrator if the multiemployer self-insured plan is reporting data to the Health Care Cost Transparency Database.
(c) The adoption of health care cost growth targets pursuant to this section shall be exempt from the requirements of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

152006.
 (a) The board shall collect data and other information necessary to calculate health care cost growth, leveraging emerging and existing data sources to minimize administrative burdens for reporting.
(b) The board shall establish requirements for health care entities to report data and other information necessary to do all of the following:
(1) Measure health care expenditures.
(2) Determine whether health care entities met health care cost growth targets.
(3) Identify the health care cost growth of health care entities.
(c) (1) The board shall develop reporting schedules, technical specifications, and other resources that support the submission of timely data in a standardized format. The board shall promulgate regulations as necessary to ensure compliance with uniform reporting of total health care expenditures by payers.
(2) For the baseline health care spending report published pursuant to subdivision (a) of Section 152007, health care entities shall submit data on total health care expenditures for the 2020 and 2021 calendar years no later than December 31, 2022. This initial baseline health care spending report submission shall serve as baseline data for measuring against the statewide cost growth target effective for the 2022 calendar year, and health care cost growth target by sector beginning 2023.
(3) For subsequent annual reports commencing with the 2023 calendar year, published pursuant to subdivision (b) of Section 152007, health care entities shall submit data on total health care expenditures for the prior calendar year according to the reporting schedule established by the board.
(d) The board may consider separate reporting of total health care cost growth that includes and excludes prescription drugs, including both outpatient and other drug costs.
(e) The board shall adopt emergency regulations for data collection and reporting requirements under this section no later than January 1, 2022.
(f) All nonpublic clinical, financial, strategic, or operational documents or information provided or reported to the board shall be confidential and shall not be disclosed pursuant to any state law, including the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code).
(g) The board shall enter into an interagency agreement with other state departments, which shall agree to provide information to the board to fulfill its function. If the information provided is confidential, the board shall maintain that confidentiality, consistent with federal and state privacy and confidentiality requirements, including the federal Health Insurance Portability and Accountability Act (Public Law 104-191) and the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code).

152007.
 (a) For data reported to the board for the 2020 and 2021 calendar years, the board shall prepare a report on baseline health care spending consistent with subparagraph (A) of paragraph (2) of subdivision (b) no later than June 1, 2023.
(b) (1) Beginning with the 2024 calendar year, the board shall prepare and publish an annual report concerning health care spending trends and underlying factors, along with policy recommendations to control costs and improve quality performance of the health care system. The report shall be based on the board’s analysis of data collected pursuant to this division and information received by the board. The first annual report shall cover the 2022 calendar year.
(2) The annual report shall detail all of the following:
(A) Total per capita health care expenditures, disaggregated by service category, consumer out-of-pocket spending, payer, and provider, and, beginning with the annual report for the 2023 calendar year, health care expenditures by health care sector, insurance market, line of business, and geographic region.
(B) Beginning with the annual report for the 2022 calendar year, the state’s progress towards achieving the statewide health care cost growth target.
(C) Upon implementation of the Health Care Cost Transparency Database, or the availability of an alternative source of medical claims data for health care entities required to report to the board, cost growth trends by type of provider and health care sector. Any detailed cost growth trend in the pharmaceutical sector shall consider the effect of drug rebates and other price concessions in the aggregate without disclosure of a product or manufacturer-specific rebate or price concession information, and without limiting or otherwise affecting the confidential or proprietary nature of a rebate or price concession agreement.
(D) Factors that contribute to cost growth within the state’s health care system.
(E) Penalties imposed and assessed, and amount returned to consumers, if any.
(c) The annual report and the report on baseline health care spending shall be submitted to the Governor and the Legislature, and be made available to the public on the office’s internet website. These reports shall be submitted in compliance with Section 9795 of the Government Code.
(d) (1) Beginning with the 2024 calendar year, the board shall conduct a public meeting following the release of the annual report to inform about the implementation of this division, including the health care cost growth targets, cost trends, and actionable recommendations for mitigating cost growth.
(2) The board may call for public statements on findings of the annual report from payers, providers, and experts on matters relevant to health care affordability, costs, quality and equity of care, and administrative simplification.
(3) The public meetings shall be subject to the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code).
(4) Notwithstanding the 10-day notice requirement of subdivision (a) of Section 11125 of the Government Code, the board shall provide notice at least 60 days in advance of a meeting.
(e) The board shall be responsive to requests for additional information from the Legislature, including providing testimony and commenting on proposed legislation or policy issues. The Legislature finds and declares that activities including, but not limited to, responding to legislative or executive inquiries, tracking and commenting on legislation and regulatory activities, and preparing reports on the implementation of this division and the performance of the office are necessary state requirements.
(f) The board shall submit and post a report on its annual expenditures on the office’s internet website.

152008.
 (a) The board shall pursue enforcement of the statewide and sector-based health care cost growth targets in a graduated approach or manner that allows health care entities opportunities for remediation. Commensurate with the health care entity’s offense or violation, the director may take the following graduated enforcement actions:
(1) Providing technical assistance.
(2) Compelling public testimony.
(3) Requiring submission and implementation of corrective compliance action plans.
(4) Assessing civil penalties, commensurate with the failure to meet the targets.
(5) Reviewing contract terms between payers and providers and adjusting rates a provider may charge as payment in full for health care services on a prospective basis.
(b) In implementing this section, the board shall develop regulations in accordance with the following principles:
(1) Solicitation of input from a broad range of stakeholders.
(2) Transparent articulation for how enforcement actions will be commensurate with the offense or violation.
(3) Accountability for excessive cost growth to the appropriate health care entity through the use of standard patient attribution methods and statistical techniques for data analysis.
(4) Valid and measurable criteria for examining warranted or unwarranted factors contributing to cost growth in excess of the target.
(5) Consideration of mitigating factors that can reasonably be considered unanticipated and outside the control of the health care entity.
(6) Due process and appeals rights.
(7) Remittance of civil penalties on health care entities to consumers and purchasers in a feasible, efficient manner using existing state and regulatory processes.
(c) The 2022 calendar year shall be a data reporting year only. Beginning in the 2023 calendar year, the board shall enforce compliance with health care cost growth targets.
(d) The civil penalties for acts in violation of this division and the remedies provided for by any other law are not exclusive and may be sought and employed in any combination to enforce this division.

152009.
 (a) (1) The board shall, by regulation, adopt a standard quality measure set for assessing health care quality among health care service plans and health insurers, physician organizations, and hospitals. Performance on quality and health equity measures shall be included in the annual report required pursuant to Section 152007.
(2) The standard quality measure set shall use established clinical quality, patient experience, patient safety, and utilization measures for health care service plans and health insurers, physician organizations, and hospitals.
(3) The standard quality measure set shall reflect the diversity of California in terms of race, ethnicity, and language, as well as other characteristics, including age, gender, sexual orientation, and gender identity, and shall be appropriate to a population 65 years of age and under that includes children, adolescents, women of childbearing age, and an adult population that is predominantly a working population.
(4) The standard quality measure set shall consider available measures for reliable measurement of disparities in health care by race, ethnicity, sexual orientation, and gender identity.
(5) The board shall reduce administrative burden by selecting quality measures that simplify reporting and align performance measurements with other payers and programs.
(b) To implement this section, the board shall consult with state departments, external quality improvement organizations, payers, and providers.
(c) The standard quality measurement set shall be periodically reviewed and updated by the board no less than every five years.

152010.
 The board shall receive from the Department of Managed Health Care, the Department of Insurance, and the State Department of Health Care Services information on the compliance of health plans and health insurers with existing standards for access to care, including timely access, language access, geographic access, and other standards as provided in existing law and regulation. To determine health care cost targets and compliance actions, the board shall take into consideration whether or not consumers have appropriate and timely access to medically necessary care.

152011.
 (a) (1) The board may, by regulation, adopt model standards for establishing value-based payments that may be used by providers and payers when contracting for those services.
(2) The model standards shall focus on improving affordability, equity, quality, and efficiency by considering the current best evidence for strategies, such as investments in primary care and behavioral health, population-based payments, and alternative payment models.
(3) The model standards shall include minimum criteria for what is considered a value-based payment, but shall be flexible enough to allow for innovation and evolution over time.
(4) The model standards shall address appropriate incentives to providers and balanced measures, including total cost of care and quality requirements to protect against perverse incentives and unintended consequences.
(5) The model standards shall attempt to reduce administrative burden by incorporating value-based payment standards that align with other payers and programs or national models.
(b) To implement this section, the board shall consult with state departments, external organizations promoting value-based payment reforms, and other entities and individuals with expertise in health care financing and quality measurement.

152012.
 (a) The intent of this section is to monitor the effects of health care cost growth targets on labor standards, working conditions, and training needs of health care workers. The intent is for the board to monitor how health care entities achieve the health care cost growth targets and highlight best practices and discourage practices harmful to workers and patients through a process that is transparent and allows for public input.
(b) The board shall monitor health care costs while protecting labor standards and the professional judgment of health professionals, acting within their current scope of practice. The board shall monitor health care workforce supply with the goal that workforce shortages do not undermine the goal of health care affordability. The board shall also promote the goal of health care affordability while recognizing the need to maintain and increase the supply of trained health care workers.
(c) To assist health care entities in implementing cost-reducing strategies that advance the stability of the health care workforce, and without further exacerbating health care workforce shortages, the board shall develop labor standards. The labor standards shall be considered in the approval of compliance action plans.
(d) To effectively monitor labor standards, workforce supply, and development, the board may assess all of the following data:
(1) Overall trends in the health care workforce, including statewide and regional workforce supply, unemployment and wage data, trends and projections of wages and compensation, projections of workforce supply by region and specialty, training needs, and other coming trends in the health care workforce.
(2) The number and classification of workers in internship, clinical placement, apprenticeship, and other training programs sponsored by the employer.
(3) The percentage of employees employed through a registry or casual employment.
(4) The number of workers at health care entities that were retrained through established public training programs.
(5) Investments by health care entities in private training or retraining programs, or both.
(e) The board may request additional data from health care entities if the board finds that data is needed to effectively monitor labor standards, workforce supply, and workforce development.

152013.
 (a) The board shall monitor trends in the health care market, including consolidation and market power on competition, prices, patient access, and quality. The board shall promote competitive health care markets by examining mergers, acquisitions, or corporate affiliations that entail a material change to ownership, operations, or governance structure of various health care entities.
(b) (1) Beginning no later than January 1, 2022, a physician organization, hospital or hospital system, health plan, or health insurer that intends to purchase, merge, or consolidate with, initiate a corporate affiliation with, or enter into an agreement resulting in its purchase, acquisition, or control by, a provider, physician organization, hospital or hospital system, pharmacy benefit manager, or any other entity except for charitable trusts held by a nonprofit health facility or by an affiliated nonprofit health system, shall notify the board at least 90 days before entering into a purchase, merger, consolidation, acquisition, change in control, or another proposed material change. A proposed material change shall consider appropriate thresholds, including net patient revenue and market share in a given service or region.
(2) This section applies to horizontal, vertical, and cross-market mergers, transitions from nonprofit to for-profit status or vice versa, and any combination involving for-profit and nonprofit entities, such as a nonprofit entity merging with, acquiring, or entering into a corporate affiliate with a nonprofit or for-profit entity or vice versa.
(3) The board shall adopt regulations regarding the form and manner of notification regarding a proposed material change.
(c) (1) If the board finds that the proposed material change is likely to have a significant impact on market competition, the state’s ability to meet cost growth targets, or costs for payers, purchasers, and consumers, the board may conduct a cost and market impact review. The board shall adopt regulations for notification to affected parties for the basis of the review, factors considered in the review, requests for data and information from affected parties and other relevant market participants, and relevant timelines.
(2) Upon completion of the cost and market impact review, the board shall make factual findings and issue a preliminary report of its findings. After allowing for the affected parties to respond in writing to the findings in the preliminary report, the board shall issue its final report.
(3) This section does not prohibit a proposed material change, but a proposed material change shall not be completed until at least 30 days after the board has issued its final report.
(4) The board may investigate pursuant to and in furtherance of this section, and may compel the entities referenced in paragraph (1) of subdivision (b), and other relevant market participants, to submit data and documents to the board.
(d) The board shall keep confidential all nonpublic information and documents obtained pursuant to this section and shall not disclose the information or documents to any person without the consent of the health care entity that produced the information or documents, except in a preliminary report or final report under this section if the board believes that disclosure may be made in the public interest after taking into account any privacy, trade secret, or anticompetitive considerations. Notwithstanding any other law, all nonpublic information and documents obtained under this section shall not be required to be disclosed pursuant to the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code) or any similar local law requiring the disclosure of public records.
(e) (1) The board may refer its findings, including the totality of documents gathered and data analysis performed, to the Attorney General for further review of unfair methods of competition or anticompetitive behavior. The board shall develop criteria for referring its report to the Attorney General, which may consider factors such as price increases that do not result in efficiency gains, quality improvement, or harm to the state’s goal of meeting health care cost growth targets.
(2) This section does not limit the authority of the Attorney General to protect consumers in the health care market under any other state law.

152014.
 (a) There is hereby established in the State Treasury the Health Care Quality and Affordability Fund. All civil penalties assessed for violations of this division shall be deposited into the Health Care Quality and Affordability Fund.
(b) All moneys in the fund, upon appropriation by the Legislature, shall be expended by the board in a manner that prioritizes the return of the moneys to consumers and purchasers.
(c) The board or staff of the office shall not utilize any funds intended for the administrative and operations expenses of the office for staff retreats, promotional giveaways, excessive executive compensation, or promotion of federal or state legislative or regulatory modifications.
(d) The board may identify opportunities to leverage existing public and private financial resources to provide technical assistance and support to the office.

152015.
 Until January 1, 2024, any rules and regulations necessary to implement this division may be adopted as emergency regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). The adoption of emergency regulations pursuant to this section shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, including subdivisions (e) and (h) of Section 11346.1, an emergency regulation adopted pursuant to this section shall be repealed by law unless the adoption, amendment, or repeal of the regulation is promulgated by the board pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code within five years of the initial adoption of the emergency regulation. A rule or regulation adopted pursuant to this section shall be discussed by the board during at least one properly noticed meeting before the adoption of the rule or regulation. Notwithstanding subdivision (h) of Section 11346.1 of the Government Code, until January 1, 2027, the Office of Administrative Law may approve more than two readoptions of an emergency regulation adopted pursuant to this section.

SEC. 2.

 The Legislature finds and declares that Section 1 of this act, which adds Sections 152006 and 152013 to the Health and Safety Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
To protect private information and trade secrets, it is necessary for information collected by the Office of Health Care Quality and Affordability and its board to remain confidential.
SECTION 1.Division 117 (commencing with Section 150300) is added to the Health and Safety Code, to read:
117.Office of Health Care Affordability
150300.

There is in state government an Office of Health Care Affordability.

150301.

(a)The office shall be responsible for improving the affordability of private health care coverage by doing all of the following:

(1)Increasing price and quality transparency.

(2)Developing specific strategies and cost targets for different sectors of the health care industry with an initial goal of reducing the rate of growth and a future goal of reducing the actual cost of care.

(3)Imposing financial consequences on entities that fail to meet the targets.

(4)Setting the ultimate goal of returning savings to consumers who are directly impacted by health care costs.

(b)The office shall create strategies to address cost trends by region, with a particular focus on cost increases driven by delivery system consolidation.

(c)To improve health outcomes, the office shall work to establish standards to advance evidence-based and value-based payments to physicians, physician groups, and hospitals, as well as to reduce administrative waste.

(d)The office shall develop measures of affordability for consumers and other purchasers of private health care coverage.

(e)The office shall promote and measure quality to ensure that California’s health care system is improving access and equity while delivering value.