BILL NUMBER: AB 1629 CHAPTERED
BILL TEXT
CHAPTER 875
FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2004
APPROVED BY GOVERNOR SEPTEMBER 29, 2004
PASSED THE ASSEMBLY AUGUST 28, 2004
PASSED THE SENATE AUGUST 25, 2004
AMENDED IN SENATE AUGUST 24, 2004
AMENDED IN SENATE AUGUST 16, 2004
AMENDED IN SENATE JULY 16, 2003
AMENDED IN ASSEMBLY JUNE 2, 2003
AMENDED IN ASSEMBLY APRIL 28, 2003
INTRODUCED BY Assembly Member Frommer
(Coauthors: Assembly Members Berg, McCarthy, Nunez, Richman, and
Strickland)
(Coauthors: Senators Burton and Johnson)
FEBRUARY 21, 2003
An act to add Section 1418.81 to, and to add and repeal Article
7.6 (commencing with Section 1324.20) of Chapter 2 of Division 2 of,
the Health and Safety Code, and to amend Section 14105.06 of, to add
and repeal Section 14126.033 of, and to repeal and add Article 3.8
(commencing with Section 14126) of Chapter 7 of Part 3 of Division 9
of, the Welfare and Institutions Code, relating to health and
dependent care, making an appropriation therefor, and declaring the
urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1629, Frommer. Health and dependent care facilities.
Existing law provides for the licensure and regulation of health
facilities by the State Department of Health Services. Existing law
provides for the imposition each state fiscal year upon the entire
gross receipts of certain intermediate care facilities a quality
assurance fee, as a condition of participation in the Medi-Cal
program.
This bill would provide for the imposition of a quality assurance
fee on each skilled nursing facility, with some exemptions, to be
administered by the Director of Health Services and deposited in the
State Treasury. The bill would provide that funds assessed pursuant
to these provisions shall be available to enhance federal financial
participation in the Medi-Cal program or to provide additional
reimbursement to, and support facility quality improvement efforts
in, licensed skilled nursing facilities. The bill would provide that
these provisions are to be implemented as long as 2 conditions are
met, including federal approval. The bill would also specify 4
circumstances, concerning continued federal approval of the quality
assurance fee, the enactment and continued effect of the Medi-Cal
Long-Term Reimbursement Act under this bill, the failure of the state
to sustain a continued maintenance of effort for state funding of
nursing facility reimbursement, and any judicial or federal
administrative determinations regarding the unavailability of federal
financial participation, under which these provisions would become
inoperative. In addition, these provisions would become inoperative
on July 1, 2008, and would be repealed on January 1, 2009.
Existing law requires the department to perform various activities
to promote the quality of care and life of residents, clients, and
patients in these facilities.
This bill would require a skilled nursing facility to include in a
resident's care assessment the resident's projected length of stay
and the resident's discharge potential. The bill would specify
additional requirements of a skilled nursing facility and attending
physicians at the facility related to resident assessment, care
planning, and assistance. The bill would also require the attending
physician, if applicable, to indicate in the plan of care the needed
care to assist the resident in achieving a resident's preference of
return to the community.
Existing law provides for the Medi-Cal program, which is
administered by the department and pursuant to which qualified
low-income persons receive health care benefits. Existing law
required that the Medi-Cal reimbursement rates in effect on August 1,
2003, remain in effect through July 31, 2005, for, among others,
freestanding nursing facilities licensed as skilled nursing
facilities, intermediate care facilities, and intermediate care
facilities for the developmentally disabled.
This bill would delete skilled nursing facilities from the
application of this reimbursement rate limitation and would, instead,
provide that the reimbursement rate limitation applies to skilled
nursing facilities only until the first day of the month following
federal approval to implement both the skilled nursing quality
assurance fee and the rate methodology.
Existing law provides for the Medi-Cal Long-Term Reimbursement Act
of 1990 under which the department is required to develop a
reimbursement methodology for freestanding nursing facilities
licensed as skilled nursing facilities and intermediate care
facilities, and for intermediate care facilities for the
developmentally disabled. These provisions, among other things,
require the department to implement a facility specific ratesetting
system by August 1, 2004, subject to federal approval and the
availability of federal or other funds.
This bill would repeal these provisions. The bill would enact the
Medi-Cal Long-Term Reimbursement Act, to be under the administration
of the director. The act would require the department to implement
a facility specific ratesetting system, subject to federal approval,
that would be effective commencing on August 1, 2005, and implemented
commencing on the first day of the month following federal approval.
The bill would authorize the department to retroactively increase
and make payment of rates to facilities under this provision. The
act would require the department to develop and implement a
cost-based reimbursement rate methodology for free standing nursing
facilities. The act would require the department to seek approval of
a Medicaid state plan amendment specifically outlining the
reimbursement methodology developed pursuant to these provisions and
would provide that this methodology shall be effective commencing on
August 1, 2005, and implemented on the first day of the month
following federal approval. The act would provide that it shall
remain operative only as long as the skilled nursing facility quality
assurance fee provisions provided by the bill continues as approved
by the federal Centers for Medicare and Medicaid Services and federal
financial participation for the methodology implemented under these
provisions continues. The rate methodology established pursuant to
these provisions would cease to be implemented on and after July 31,
2008.
The bill would make the following appropriations:
(a) $106,781,000 from both the State Treasury and the Federal
Trust Fund to the department for expenditure to fund an increase to
the 2004-05 skilled nursing facility Medi-Cal reimbursement rate
consistent with the existing rate methodology in the Medicaid state
plan.
(b) $2,000,000 for the 2004-05 fiscal year and $1,000,000 for the
2005-06 fiscal year to the department from the General Fund for
expenditure for purposes of expeditiously implementing the
ratesetting system that would be required under this bill.
(c) $350,000 for both the 2004-05 fiscal year and the 2005-06
fiscal year to the department from the General Fund for expenditure
for purposes of funding the implementation of the bill.
(d) $200,000 for the 2005-06 fiscal year to the Bureau of State
Audits from the General Fund for purposes of implementing the bill.
This bill would declare that it is to take effect immediately as an
urgency statute.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 7.6 (commencing with Section 1324.20) is added
to Chapter 2 of Division 2 of the Health and Safety Code, to read:
Article 7.6. Skilled Nursing Facility Quality Assurance Fee
1324.20. For purposes of this article, the following definitions
shall apply:
(a) "Continuing care retirement community" means a provider of a
continuum of services, including independent living services,
assisted living services as defined in paragraph (5) of subdivision
(a) of Section 1771, and skilled nursing care, on a single campus,
that is subject to Section 1791, or a provider of such a continuum of
services on a single campus that has not received a Letter of
Exemption pursuant to subdivision (b) of Section 1771.3.
(b) "Exempt facility" means a skilled nursing facility that is
part of a continuing care retirement community, a skilled nursing
facility operated by the state or another public entity, or a skilled
nursing facility that is a distinct part of a facility that is
licensed as a general acute care hospital.
(c) (1) "Net revenue" means gross resident revenue for routine
nursing services and ancillary services provided to all residents by
a skilled nursing facility, less Medicare revenue for routine and
ancillary services including Medicare revenue for services provided
to residents covered under a Medicare managed care plan, less payer
discounts and applicable contractual allowances as permitted under
federal law and regulation.
(2) "Net revenue" does not mean charitable contributions and bad
debt.
(d) "Payer discounts and contractual allowances" means the
difference between the facility's resident charges for routine or
ancillary services and the actual amount paid.
(e) "Skilled nursing facility" means a licensed facility as
defined in subdivision (c) of Section 1250.
1324.21. (a) For facilities licensed under subdivision (c) of
Section 1250, there shall be imposed each state fiscal year a uniform
quality assurance fee per resident day. The uniform quality
assurance fee shall be based upon the entire net revenue of all
skilled nursing facilities subject to the fee, except an exempt
facility, as defined in Section 1324.20, calculated in accordance
with subdivision (b).
(b) The amount of the uniform quality assurance fee to be assessed
per resident day shall be determined based on the aggregate net
revenue of skilled nursing facilities subject to the fee, in
accordance with the methodology outlined in the request for federal
approval required by Section 1324.27 and in regulations, provider
bulletins, or other similar instructions. The uniform quality
assurance fee shall be calculated as follows:
(1) (A) For the rate year 2004-05, the net revenue shall be
projected for all skilled nursing facilities subject to the fee. The
projection of net revenue shall be based on prior rate year data.
Once determined, the aggregate projected net revenue for all
facilities shall be multiplied by 2.7 percent, as determined under
the approved methodology, and then divided by the projected total
resident days of all providers subject to the fee.
(B) Notwithstanding subparagraph (A), the Director of Health
Services may increase the amount of the fee up to 3 percent of the
aggregate projected net revenue if necessary for the implementation
of Article 3.8 (commencing with Section 14126) of Chapter 7 of Part 3
of Division 9 of the Welfare and Institutions Code.
(2) For the rate year 2005-06 and subsequent rate years through
and including the 2007-08 rate year, the net revenue shall be
projected for all skilled nursing facilities subject to the uniform
quality assurance fee. The projection of net revenue shall be based
on the prior rate year's data. Once determined, the aggregate
projected net revenue for all facilities shall be multiplied by 6
percent, as determined under the approved methodology, and then
divided by the projected total resident days of all providers subject
to the fee.
(c) The director may assess and collect a nonuniform fee
consistent with the methodology approved pursuant to Section 1324.27.
(d) In no case shall the aggregate fees collected annually
pursuant to this article exceed 6 percent of the annual aggregate net
revenue for licensed skilled nursing facilities subject to the fee.
(e) If there is a delay in the implementation of this article for
any reason, including a delay in the approval of the quality
assurance fee and methodology by the federal Centers for Medicare and
Medicaid Services, in the 2004-05 rate year or in any other rate
year, all of the following shall apply:
(1) Any facility subject to the fee may be assessed the amount the
facility will be required to pay to the department, but shall not be
required to pay the fee until the methodology is approved and
Medi-Cal rates are increased in accordance with paragraph (2) of
subdivision (a) of Section 1324.28 and the increased rates are paid
to facilities.
(2) The department may retroactively increase and make payment of
rates to facilities.
(3) Facilities that have been assessed a fee by the department
shall pay the fee assessed within 60 days of the date rates are
increased in accordance with paragraph (2) of subdivision (a) of
Section 1324.28 and paid to facilities.
(4) The department shall accept a facility's payment
notwithstanding that the payment is submitted in a subsequent fiscal
year than the fiscal year in which the fee is assessed.
1324.22. (a) The quality assurance fee, as calculated pursuant to
Section 1324.21, shall be paid by the provider to the department for
deposit in the State Treasury on a monthly basis on or before the
last day of the month following the month for which the fee is
imposed, except as provided in subdivision (d) of Section 1324.21.
(b) On or before the last day of each calendar quarter, each
skilled nursing facility shall file a report with the department, in
a prescribed form, showing the facility's total resident days for the
preceding quarter and payments made. If it is determined that a
lesser amount was paid to the department, the facility shall pay the
amount owed in the preceding quarter to the department with the
report. Any amount determined to have been paid in excess to the
department during the previous quarter shall be credited to the
amount owed in the following quarter.
(c) On or before August 31 of each year, each skilled nursing
facility subject to an assessment pursuant to Section 1324.21 shall
report to the department, in a prescribed form, the facility's total
resident days and total payments made for the preceding state fiscal
year. If it is determined that a lesser amount was paid to the
department during the previous year, the facility shall pay the
amount owed to the department with the report.
(d) A newly licensed skilled nursing facility, as defined by the
department, shall complete all requirements of subdivision (a) for
any portion of the year in which it commences operations and of
subdivision (b) for any portion of the quarter in which it commences
operations.
(e) When a skilled nursing facility fails to pay all or part of
the quality assurance fee within 60 days of the date that payment is
due, the department may deduct the unpaid assessment and interest
owed from any Medi-Cal reimbursement payments to the facility until
the full amount is recovered. Any deduction shall be made only after
written notice to the facility and may be taken over a period of
time taking into account the financial condition of the facility.
(f) Should all or any part of the quality assurance fee remain
unpaid, the department may take either or both of the following
actions:
(1) Assess a penalty equal to 50 percent of the unpaid fee amount.
(2) Delay license renewal.
(g) In accordance with the provisions of the Medicaid state plan,
the payment of the quality assurance fee shall be considered as an
allowable cost for Medi-Cal reimbursement purposes.
(h) The assessment process pursuant to this section shall become
operative not later than 60 days from receipt of federal approval of
the quality assurance fee, unless extended by the department. The
department may assess fees and collect payment in accordance with
subdivision (d) of Section 1324.21 in order to provide retroactive
payments for any rate increase authorized under this article.
1324.23. (a) The Director of Health Services, or his or her
designee, shall administer this article.
(b) The director may adopt regulations as are necessary to
implement this article. These regulations may be adopted as
emergency regulations in accordance with the rulemaking provisions 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). For purposes of this article, the adoption of regulations
shall be deemed an emergency and necessary for the immediate
preservation of the public peace, health and safety, or general
welfare. The regulations shall include, but need not be limited to,
any regulations necessary for any of the following purposes:
(1) The administration of this article, including the proper
imposition and collection of the quality assurance fee not to exceed
amounts reasonably necessary for purposes of this article.
(2) The development of any forms necessary to obtain required
information from facilities subject to the quality assurance fee.
(3) To provide details, definitions, formulas, and other
requirements.
(c) As an alternative to subdivision (b), and notwithstanding the
rulemaking provisions of Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 of Title 2 of the Government Code, the
director may implement this article, in whole or in part, by means of
a provider bulletin, or other similar instructions, without taking
regulatory action, provided that no such bulletin or other similar
instructions shall remain in effect after July 31, 2007. It is the
intent of the Legislature that the regulations adopted pursuant to
subdivision (b) shall be adopted on or before July 31, 2007.
1324.24. The quality assurance fee assessed and collected
pursuant to this article shall be deposited in the State Treasury.
1324.25. The funds assessed pursuant to this article shall be
available to enhance federal financial participation in the Medi-Cal
program or to provide additional reimbursement to, and to support
facility quality improvement efforts in, licensed skilled nursing
facilities.
1324.26. In implementing this article, the department may utilize
the services of the Medi-Cal fiscal intermediary through a change
order to the fiscal intermediary contract to administer this program,
consistent with the requirements of Sections 14104.6, 14104.7,
14104.8, and 14104.9 of the Welfare and Institutions Code.
1324.27. (a) (1) The department shall request approval from the
federal Centers for Medicare and Medicaid Services for the
implementation of this article. In making this request, the
department shall seek specific approval from the federal Centers for
Medicare and Medicaid Services to exempt facilities identified in
subdivision (b) of Section 1324.20, including the submission of a
request for waiver of broad based requirement, waiver of uniform fee
requirement, or both, pursuant to paragraphs (1) and (2) of
subdivision (e) of Section 433.68 of Title 42 of the Code of Federal
Regulations.
(2) The director may alter the methodology specified in this
article, to the extent necessary to meet the requirements of federal
law or regulations or to obtain federal approval. The Director of
Health Services may also add new categories of exempt facilities,
such as facilities designated as institutions for mental diseases or
special treatment programs, or apply a nonuniform fee to the skilled
nursing facilities subject to the fee in order to meet requirements
of federal law or regulations. The Director of Health Services may
apply a zero fee to one or more exempt categories of facilities, if
necessary to obtain federal approval.
(3) If after seeking federal approval, federal approval is not
obtained, this article shall not be implemented.
(b) The department shall make retrospective adjustments, as
necessary, to the amounts calculated pursuant to Section 1324.21 in
order to assure that the aggregate quality assurance fee for any
particular state fiscal year does not exceed 6 percent of the
aggregate annual net revenue of facilities subject to the fee.
1324.28. (a) This article shall be implemented as long as both of
the following conditions are met:
(1) The state receives federal approval of the quality assurance
fee from the federal Centers for Medicare and Medicaid Services.
(2) Legislation is enacted in the 2004 legislative session making
an appropriation from the General Fund and from the Federal Trust
Fund to fund a rate increase for skilled nursing facilities, as
defined under subdivision (c) of Section 1250, for the 2004-05 rate
year in an amount consistent with the Medi-Cal rates that specific
facilities would have received under the rate methodology in effect
as of July 31, 2004, plus the proportional costs as projected by
Medi-Cal for new state or federal mandates.
(b) This article shall remain operative only as long as all of the
following conditions are met:
(1) The federal Centers for Medicare and Medicaid Services
continues to allow the use of the provider assessment provided in
this article.
(2) The Medi-Cal Long Term Care Reimbursement Act, Article 3.8
(commencing with Section 14126) of Chapter 3 of Part 3 of Division 9
of the Welfare and Institutions Code, as added during the 2003-04
Regular Session by the act adding this section, is enacted and
implemented on or before July 31, 2005, or as extended as provided in
that article, and remains in effect thereafter.
(3) The state has continued its maintenance of effort for the
level of state funding of nursing facility reimbursement for rate
year 2005-06, and for every subsequent rate year continuing through
the 2007-08 rate year, in an amount not less than the amount that
specific facilities would have received under the rate methodology in
effect on July 31, 2004, plus Medi-Cal's projected proportional
costs for new state or federal mandates, not including the quality
assurance fee.
(4) The full amount of the quality assurance fee assessed and
collected pursuant to this article remains available for the purposes
specified in Section 1324.25 and for related purposes.
(c) If all of the conditions in subdivision (a) are met, this
article is implemented, and subsequently, any one of the conditions
in subdivision (b) is not met, on and after the date that the
department makes that determination, this article shall not be
implemented, notwithstanding that the condition or conditions
subsequently may be met.
(d) Notwithstanding subdivisions (a), (b), and (c), in the event
of a final judicial determination made by any state or federal court
that is not appealed, or by a court of appellate jurisdiction that is
not further appealed, in any action by any party, or a final
determination by the administrator of the federal Centers for
Medicare and Medicaid Services, that federal financial participation
is not available with respect to any payment made under the
methodology implemented pursuant to this article because the
methodology is invalid, unlawful, or contrary to any provision of
federal law or regulations, or of state law, this section shall
become inoperative.
1324.29. The quality assurance fee shall cease to be assessed and
collected on or after July 31, 2008.
1324.30. This article shall become inoperative on July 1, 2008,
and, as of January 1, 2009, is repealed, unless a later enacted
statute, that becomes operative on or before January 1, 2009, deletes
or extends the dates on which it becomes inoperative and is
repealed.
SEC. 2. Section 1418.81 is added to the Health and Safety Code, to
read:
1418.81. (a) In order to assure the provision of quality patient
care and as part of the planning for that quality patient care,
commencing at the time of admission, a skilled nursing facility, as
defined in subdivision (c) of Section 1250, shall include in a
resident's care assessment the resident's projected length of stay
and the resident's discharge potential. The assessment shall include
whether the resident has expressed or indicated a preference to
return to the community and whether the resident has social support,
such as family, that may help to facilitate and sustain return to the
community. The assessment shall be recorded with the relevant
portions of the minimum data set, as described in Section 14110.15 of
the Welfare and Institutions Code. The plan of care shall reflect,
if applicable, the care ordered by the attending physician needed to
assist the resident in achieving the resident's preference of return
to the community.
(b) The skilled nursing facility shall evaluate the resident's
discharge potential at least quarterly or upon a significant change
in the resident's medical condition.
(c) The interdisciplinary team shall oversee the care of the
resident utilizing a team approach to assessment and care planning
and shall include the resident's attending physician, a registered
professional nurse with responsibility for the resident, other
appropriate staff in disciplines as determined by the resident's
needs, and, where practicable, a resident's representative, in
accordance with applicable federal and state requirements.
(d) If return to the community is part of the care plan, the
facility shall provide to the resident or responsible party and
document in the care plan the information concerning services and
resources in the community. That information may include information
concerning:
(1) In-home supportive services provided by a public authority or
other legally recognized entity, if any.
(2) Services provided by the Area Agency on Aging, if any.
(3) Resources available through an independent living center.
(4) Other resources or services in the community available to
support return to the community.
(e) If the resident is otherwise eligible, a skilled nursing
facility shall make, to the extent services are available in the
community, a reasonable attempt to assist a resident who has a
preference for return to the community and who has been determined to
be able to do so by the attending physician, to obtain assistance
within existing programs, including appropriate case management
services, in order to facilitate return to the community. The
targeted case management services provided by entities other than the
skilled nursing facility shall be intended to facilitate and sustain
return to the community.
(f) Costs to skilled nursing facilities to comply with this
section shall be allowable for Medi-Cal reimbursement purposes
pursuant to Section 1324.25, but shall not be considered a new state
mandate under Section 14126.023 of the Welfare and Institutions Code.
SEC. 3. Section 14105.06 of the Welfare and Institutions Code is
amended to read:
14105.06. (a) Notwithstanding Section 14105 and any other
provision of law, the Medi-Cal reimbursement rates in effect on
August 1, 2003, shall remain in effect through July 31, 2005, for the
following providers:
(1) Freestanding nursing facilities licensed as either of the
following:
(A) An intermediate care facility pursuant to subdivision (d) of
Section 1250 of the Health and Safety Code.
(B) An intermediate care facility for the developmentally disabled
pursuant to subdivision (e), (g), or (h) of Section 1250 of the
Health and Safety Code.
(2) A skilled nursing facility that is a distinct part of a
general acute care hospital. For purposes of this paragraph,
"distinct part" shall have the same meaning as defined in Section
72041 of Title 22 of the California Code of Regulations.
(3) A subacute care program, as described in Section 14132.25 or
subacute care unit, as described in Sections 51215.5 and 51215.8 of
Title 22 of the California Code of Regulations.
(4) An adult day health care center.
(b) (1) The director may adopt regulations as are necessary to
implement subdivision (a). These regulations shall be adopted as
emergency regulations in accordance with the rulemaking provisions 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. For purposes of this section, the adoption of regulations
shall be deemed an emergency and necessary for the immediate
preservation of the public peace, health, and safety or general
welfare.
(2) As an alternative to paragraph (1), and Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, the director may implement this article by
means of a provider bulletin, or similar instructions, without taking
regulatory action.
(c) The director shall implement subdivision (a) in a manner that
is consistent with federal medicaid law and regulations. The
director shall seek any necessary federal approvals for the
implementation of this section. This section shall be implemented
only to the extent that federal approval is obtained.
(d) The provisions of subdivision (a) shall apply to a skilled
nursing facility, as defined in subdivision (c) of Section 1250 of
the Health and Safety Code, only until the first day of the month
following federal approval to implement both the skilled nursing
quality assurance fee imposed by Article 7.6 (commencing with Section
1324.20) of Chapter 2 of Division 2 of the Health and Safety Code
and the rate methodology developed pursuant to Article 3.8
(commencing with Section 14126) of Chapter 3 of Part 3 of Division 9.
SEC. 4. Article 3.8 (commencing with Section 14126) of Chapter 7
of Part 3 of Division 9 of the Welfare and Institutions Code is
repealed.
SEC. 5. Article 3.8 (commencing with Section 14126) is added to
Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code, to read:
Article 3.8. Medi-Cal Long-Term Care Reimbursement Act
14126. This article shall be known as the Medi-Cal Long-Term Care
Reimbursement Act.
14126.02. (a) It is the intent of the Legislature to devise a
Medi-Cal long-term care reimbursement methodology that more
effectively ensures individual access to appropriate long-term care
services, promotes quality resident care, advances decent wages and
benefits for nursing home workers, supports provider compliance with
all applicable state and federal requirements, and encourages
administrative efficiency.
(b) The department shall implement a facility-specific ratesetting
system, subject to federal approval and the availability of federal
funds, that reflects the costs and staffing levels associated with
quality of care for residents in nursing facilities, as defined in
subdivision (c) of Section 1250 of the Health and Safety Code. The
facility-specific ratesetting system shall be effective commencing on
August 1, 2005, and shall be implemented commencing on the first day
of the month following federal approval. The department may
retroactively increase and make payment of rates to facilities.
(c) In implementing this section, the department may contract as
necessary, on a bid or nonbid basis, for professional consulting
services from nationally recognized higher education and research
institutions, or other qualified individuals and entities not
associated with a skilled nursing facility, with demonstrated
expertise in long-term care reimbursement systems. The ratesetting
system specified in subdivision (b) shall be developed with all
possible expedience. This subdivision establishes an accelerated
process for issuing contracts pursuant to this section and contracts
entered into pursuant to this subdivision shall be exempt from the
requirements of Chapter 1 (commencing with Section 10100) and Chapter
2 (commencing with Section 10290) of Part 2 of Division 2 of the
Public Contract Code.
(d) The department shall implement a facility-specific ratesetting
system by August 1, 2004, subject to federal approval and
availability of federal or other funds, that reflects the costs and
staffing levels associated with quality of care for residents in
hospital-based nursing facilities.
14126.021. The department shall develop and implement a
cost-based reimbursement rate methodology using the cost categories
as described in Section 14126.023, for freestanding nursing
facilities pursuant to this article, excluding nursing facilities
that are a distinct part of a facility that is licensed as a general
acute care hospital as identified pursuant to subdivision (d) of
Section 14126.02. The cost-based reimbursement rate methodology
shall be effective on August 1, 2005, and shall be implemented on the
first day of the month following federal approval.
14126.023. (a) The methodology developed pursuant to this article
shall be facility specific and reflect the sum of the projected cost
of each cost category and passthrough costs, as follows:
(1) Labor costs limited as specified in subdivision (c).
(2) Indirect care nonlabor costs limited to the 75th percentile.
(3) Administrative costs limited to the 50th percentile.
(4) Capital costs based on a fair rental value system (FRVS)
limited as specified in subdivision (d).
(5) Direct passthrough of proportional Medi-Cal costs for property
taxes, facility license fees, new state and federal mandates,
caregiver training costs, and liability insurance projected on the
prior year's costs.
(b) The percentiles in paragraphs (1) through (3) of subdivision
(a) shall be based on annualized costs divided by total resident days
and computed on a specific geographic peer group basis. Costs
within a specific cost category shall not be shifted to any other
cost category.
(c) The labor costs category shall be comprised of a direct
resident care labor cost category, an indirect care labor cost
category, and a labor-driven operating allocation cost category, as
follows:
(1) Direct resident care labor cost category which shall include
all labor costs related to routine nursing services including all
nursing, social services, activities, and other direct care
personnel. These costs shall be limited to the 90th percentile.
(2) Indirect care labor cost category which shall include all
labor costs related to staff supporting the delivery of patient care
including, but not limited to, housekeeping, laundry and linen,
dietary, medical records, inservice education, and plant
operations and maintenance. These costs
shall be limited to the 90th percentile.
(3) Labor-driven operating allocation shall include an amount
equal to 8 percent of labor costs, minus expenditures for temporary
staffing, which may be used to cover allowable Medi-Cal expenditures.
In no instance shall the operating allocation exceed 5 percent of
the facility's total Medi-Cal reimbursement rate.
(d) The capital cost category shall be based on a FRVS that
recognizes the value of the capital related assets necessary to care
for Medi-Cal residents. The capital cost category includes mortgage
principal and interest, leases, leasehold improvements, depreciation
of real property, equipment, and other capital related expenses. The
FRVS methodology shall be based on the formula developed by the
department that assesses facility value based on age and condition
and uses a recognized market interest factor. Capital investment and
improvement expenditures included in the FRVS formula shall be
documented in cost reports or supplemental reports required by the
department. The capital costs based on FRVS shall be limited as
follows:
(1) For the 2005-06 rate year, the capital cost category for all
facilities in the aggregate shall not exceed the department's
estimated value for this cost category for the 2004-05 rate year.
(2) For the 2006-07 rate year and subsequent rate years, the
maximum annual increase for the capital cost category for all
facilities in the aggregate shall not exceed 8 percent of the prior
rate year's FRVS cost component.
(3) If the total capital costs for all facilities in the aggregate
for the 2005-06 rate year exceeds the value of the capital costs for
all facilities in the aggregate for the 2004-05 rate year, or if
that capital cost category for all facilities in the aggregate for
the 2006-07 rate year or any rate year thereafter exceeds 8 percent
of the prior rate year's value, the department shall reduce the
capital cost category for all facilities in equal proportion in order
to comply with paragraphs (1) and (2).
(e) For the 2005-06 and 2006-07 rate years, the facility specific
Medi-Cal reimbursement rate calculated under this article shall not
be less than the Medi-Cal rate that the specific facility would have
received under the rate methodology in effect as of July 31, 2005,
plus Medi-Cal's projected proportional costs for new state or federal
mandates for rate years 2005-06 and 2006-07, respectively.
(f) The department shall update each facility specific rate
calculated under this methodology annually. The update process shall
be prescribed in the Medicaid state plan, regulations, and the
provider bulletins or similar instructions described in Section
14126.027, and shall be adjusted in accordance with the results of
facility specific audit and review findings in accordance with
subdivisions (h) and (i).
(g) The department shall establish rates pursuant to this article
on the basis of facility cost data reported in the integrated
long-term care disclosure and Medi-Cal cost report required by
Section 128730 of the Health and Safety Code for the most recent
reporting period available, and cost data reported in other facility
financial disclosure reports or supplemental information required by
the department in order to implement this article.
(h) The department shall conduct financial audits of facility and
home office cost data as follows:
(1) The department shall audit facilities a minimum of once every
three years to ensure accuracy of reported costs.
(2) It is the intent of the Legislature that the department
develop and implement limited scope audits of key cost centers or
categories to assure that the rate paid in the years between each
full scope audit required in paragraph (1) accurately reflects actual
costs.
(3) For purposes of updating facility specific rates, the
department shall adjust or reclassify costs reported consistent with
applicable requirements of the Medicaid state plan as required by
Part 413 (commencing with Section 413.1) of Title 42 of the Code of
Federal Regulations.
(4) Overpayments to any facility shall be recovered in a manner
consistent with applicable recovery procedures and requirements of
state and federal laws and regulations.
(i) (1) On an annual basis, the department shall use the results
of audits performed pursuant to subdivision (h), the results of any
federal audits, and facility cost reports, including supplemental
reports of actual costs incurred in specific cost centers or
categories as required by the department, to determine any difference
between reported costs used to calculate a facility's rate and
audited facility expenditures in the rate year.
(2) If the department determines that there is a difference
between reported costs and audited facility expenditures pursuant to
paragraph (1), the department shall adjust a facility's reimbursement
prospectively over the intervening years between audits by an amount
that reflects the difference, consistent with the methodology
specified in this article.
(j) For nursing facilities that obtain an audit appeal decision
that results in revision of the facility's allowable costs, the
facility shall be entitled to seek a retroactive adjustment in its
facility specific reimbursement rate.
(k) Compliance by each facility with state laws and regulations
regarding staffing levels shall be documented annually either through
facility cost reports, including supplemental reports, or through
the annual licensing inspection process specified in Section 1422 of
the Health and Safety Code.
14126.025. (a) The department shall seek approval of an amendment
to the Medicaid state plan specifically outlining the reimbursement
methodology developed pursuant to this article not later than
February 1, 2005.
(b) The amendment to the Medicaid state plan pursuant to
subdivision (a), and any regulations, provider bulletins, or other
similar instructions, shall be prepared in consultation with
representatives of the long-term care industry, organized labor,
seniors, and consumers.
14126.027. (a) (1) The Director of Health Services, or his or her
designee, shall administer this article.
(2) The regulations and other similar instructions adopted
pursuant to this article shall be developed in consultation with
representatives of the long-term care industry, organized labor,
seniors, and consumers.
(b) (1) The director may adopt regulations as are necessary to
implement this article. The adoption, amendment, repeal, or
readoption of a regulation authorized by this section is deemed to be
necessary for the immediate preservation of the public peace, health
and safety, or general welfare, for purposes of Sections 11346.1 and
11349.6 of the Government Code, and the department is hereby
exempted from the requirement that it describe specific facts showing
the need for immediate action.
(2) The regulations adopted pursuant to this section may include,
but need not be limited to, any regulations necessary for any of the
following purposes:
(A) The administration of this article, including the specific
analytical process for the proper determination of long-term care
rates.
(B) The development of any forms necessary to obtain required cost
data and other information from facilities subject to the
ratesetting methodology.
(C) To provide details, definitions, formulas, and other
requirements.
(c) As an alternative to the adoption of regulations pursuant to
subdivision (b), and notwithstanding Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code, the director may implement this article, in whole or in part,
by means of a provider bulletin or other similar instructions,
without taking regulatory action, provided that no such bulletin or
other similar instructions shall remain in effect after July 31,
2007. It is the intent that regulations adopted pursuant to
subdivision (b) shall be in place on or before July 31, 2007.
14126.031. (a) In implementing this article, the department may
use the process outlined in subdivision (c) of Section 14126.02 to
obtain professional consulting services for the purpose of finalizing
design of the system, procurement of required technical hardware and
software, establishing operational parameters, implementation, and
transitional management pending assumption of operational management
by state staff.
(b) The ratesetting system described in subdivision (b) of Section
14126.02 shall be developed expeditiously in order to meet the
implementation date required under Section 14126.02.
(c) To ensure compliance with the timeframes set forth in this
article, it is the intent of the Legislature that the department be
authorized to hire up to three full-time equivalents to support
implementation and continuous operation of the system.
14126.033. (a) This article, including Section 14126.031, shall
be funded as follows:
(1) General Fund moneys appropriated for purposes of this article
pursuant to Section 6 of the act adding this section shall be used
for increasing rates, except as provided in Section 14126.031, for
freestanding skilled nursing facilities, and shall be consistent with
the approved methodology required to be submitted to the Centers for
Medicare and Medicaid Services pursuant to Article 7.6 (commencing
with Section 1324.20) of Chapter 2 of Division 2 of the Health and
Safety Code.
(2) (A) Notwithstanding Section 14126.023, for the 2005-06 rate
year, the maximum annual increase in the weighted average Medi-Cal
rate required for purposes of this article shall not exceed 8 percent
of the weighted average Medi-Cal reimbursement rate for the 2004-05
rate year as adjusted for the change in the cost to the facility to
comply with the nursing facility quality assurance fee for the
2005-06 rate year, as required under subdivision (b) of Section
1324.21 of the Health and Safety Code, plus the total projected
Medi-Cal cost to the facility of complying with new state or federal
mandates.
(B) Beginning with the 2006-07 rate year, the maximum annual
increase in the weighted average Medi-Cal reimbursement rate required
for purposes of this article shall not exceed 5 percent of the
weighted average Medi-Cal reimbursement rate for the prior fiscal
year, as adjusted for the projected cost of complying with new state
or federal mandates.
(C) Beginning with the 2007-08 rate year, the maximum annual
increase in the weighted average Medi-Cal reimbursement rate required
for purposes of this article shall not exceed 5.5 percent of the
weighted average Medi-Cal reimbursement rate for the prior fiscal
year, as adjusted for the projected cost of complying with new state
or federal mandates.
(D) To the extent that new rates are projected to exceed the
adjusted limits calculated pursuant to subparagraph (A) or (B), the
department shall adjust the increase to each skilled nursing facility'
s projected rate for the applicable rate year by an equal percentage.
(b) The rate methodology shall cease to be implemented on and
after July 31, 2008.
(c) (1) It is the intent of the Legislature that the
implementation of this article result in individual access to
appropriate long-term care services, quality resident care, decent
wages and benefits for nursing home workers, a stable workforce,
provider compliance with all applicable state and federal
requirements, and administrative efficiency.
(2) Not later than December 1, 2006, the Bureau of State Audits
shall conduct an accountability evaluation of the department's
progress toward implementing a facility-specific reimbursement
system, including a review of data to ensure that the new system is
appropriately reimbursing facilities within specified cost categories
and a review of the fiscal impact of the new system on the General
Fund.
(3) Not later than January 1, 2007, to the extent information is
available for the three years immediately preceding the
implementation of this article, the department shall provide baseline
information in a report to the Legislature on all of the following:
(A) The number and percent of freestanding skilled nursing
facilities that complied with minimum staffing requirements.
(B) The staffing levels prior to the implementation of this
article.
(C) The staffing retention rates prior to the implementation of
this article.
(D) The numbers and percentage of freestanding skilled nursing
facilities with findings of immediate jeopardy, substandard quality
of care, or actual harm, as determined by the certification survey of
each freestanding skilled nursing facility conducted prior to the
implementation of this article.
(E) The number of freestanding skilled nursing facilities that
received state citations and the number and class of citations issued
during calendar year 2004.
(F) The average wage and benefits for employees prior to the
implementation of this article.
(4) Not later than January 1, 2008, the department shall provide a
report to the Legislature that does both of the following:
(A) Compares the information required in paragraph (2) to that
same information two years after the implementation of this article.
(B) Reports on the extent to which residents who had expressed a
preference to return to the community, as provided in Section
1418.81, were able to return to the community.
(5) The department may contract for the reports required under
this subdivision.
(d) This section shall become inoperative on July 31, 2008, and as
of January 1, 2009, is repealed, unless a later enacted statute,
that is enacted before January 1, 2009, deletes or extends the dates
on which it becomes inoperative and is repealed.
14126.035. (a) This article shall remain operative only as long
as Article 7.6 (commencing with Section 1324.20) of Chapter 2 of
Division 2 of the Health and Safety Code, which imposes a skilled
nursing facility quality assurance fee continues as approved by the
federal Centers for Medicare and Medicaid Services pursuant to
Section 1324.27 of the Health and Safety Code.
(b) In the event of a final judicial determination made by any
state or federal court that is not appealed, or by a court of
appellate jurisdiction that is not further appealed, in any action by
any party or a final determination by the administrator of the
Centers for Medicare and Medicaid Services, that federal financial
participation is not available with respect to any payment made under
the methodology implemented pursuant to this article because the
methodology is invalid, unlawful, or is contrary to any provision of
federal law or regulations, or of state law, this section shall
become inoperative.
SEC. 6. (a) The following amounts are hereby appropriated to the
State Department of Health Services for expenditure to fund an
increase to the 2004-05 skilled nursing facility Medi-Cal
reimbursement rate consistent with the existing rate methodology in
the Medicaid state plan:
(1) The sum of one hundred six million seven hundred eighty-one
thousand dollars ($106,781,000) from the State Treasury.
(2) The sum of one hundred six million seven hundred eighty-one
thousand dollars ($106,781,000) from the Federal Trust Fund.
(b) The sum of two million dollars ($2,000,000) for the 2004-05
fiscal year and one million dollars ($1,000,000) for the 2005-06
fiscal year is hereby appropriated to the State Department of Health
Services from the General Fund for expenditure for purposes of
implementing Section 14126.031 of the Welfare and Institutions Code.
(c) The sum of three hundred fifty thousand dollars ($350,000) for
both the 2004-05 fiscal year and the 2005-06 fiscal year is hereby
appropriated to the State Department of Health Services from the
General Fund for expenditure for purposes of implementing Section
14126.033 of the Welfare and Institutions Code.
(d) The sum of two hundred thousand dollars ($200,000) for the
2005-06 fiscal year is hereby appropriated to the Bureau of State
Audits from the General Fund for expenditure for purposes of
implementing Section 14126.033 of the Welfare and Institutions Code.
SEC. 7. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to make the necessary statutory changes to implement a
comprehensive program to improve the quality of care provided in
health facilities at the earliest possible time, it is necessary that
this act take effect immediately.