Governor Releases May Budget Revise

Dear Colleague,

Last week the Governor released the May Revise that reflects an update on the current budget year ending June 30, 2023 and informs the likely discussion on the proposed budget for the next fiscal year beginning July 1, 2023. The 2023-24 budget must be adopted by the Legislature by the June 15^th deadline.

As expected the anticipated deficit for the next fiscal year has grown slightly to about $31 billion. The Governor offers limited Medi-Cal rate increases through renewal of the Managed Care Organization tax for a 3 year period, subject to approval by CMS. Most importantly it does not suggest any Medi-Cal rate reductions. CSP has continued to advocate for elimination of the Medi-Cal 10% rate reduction from 2011 that still applies to pathology and most medical services. We did have some success in changing the cap from 80-100% of Medicare on the lab services but still limited by the rate study on private payer rates. Relief for the 10% cut for physician services has been limited. Here is a description of the MCO Tax provisions.

• Managed Care Organization (MCO) Tax and Medi-Cal Provider Rate increases. The May Revision includes the renewal of the MCO tax, effective April 1, 2023, nine months earlier than planned at Governor’s Budget. This earlier start results in approximately $3.7 billion in additional General Fund for calendar year 2023. Additionally, the May Revision increases MCO revenue (as compared to Governor’s Budget) to achieve an approximately $5 billion annual state benefit.
• A portion of this revenue will support an increase in provider rates to at least 87.5 percent of Medicare for specified providers, including Primary Care (inclusive of nurse practitioners and physician assistants), Maternity Care (inclusive of OB/GYN and doulas), and non-specialty mental health services beginning January 1, 2024.

The Governor does not propose to expend all of the MCO tax revenue and indicates that additional rate adjustments may occur in the future. Therefore we remain optimistic that may be progress in the future. The Legislative leadership may push for more rate increases and has suggested some tax increases as a solution to the deficit. The Governor appears resistant to any tax increases.

Physician Data Sharing Requirement:

What Do Path Groups/Labs Have to Share

We previously informed you that all California health care entities including physicians, physician groups, clinical labs and other entities need to register and acknowledge the Data Sharing Agreement. The new law directs the California Health and Human Services Agency (CalHHS) to establish a Data Exchange Framework designed “to enable and require real-time access to, or exchange of, health information among health care providers and payers through any health information exchange network, health information organization, or technology that adheres to specified standards and policies.”

The CSP began to assess the breadth of the data sharing requirement and whether it could potentially include all digital images or other data related to a given procedure. The state mandate refers to the definition of “electronic health information” ( EHI) contained in federal law which is very broad. Pathology digital images, flow cytometry data are typically stored in a LIS system which does not interface with an EHR and the data sharing requirement typically refers to the EHR system and data contained within. The shear volume of images and the capacity to interface with an EHR could be challenging and expensive.

The CSP worked in collaboration with CMA staff and ultimately met with CAHHS staff and consultants who are managing this project. We were assured that the data to be shared would be limited to the procedure performed, the report but not images or other data that is not contained in the EHR.

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