BILL ANALYSIS
AB 511
Page 1
Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 511 (De La Torre) - As Amended: April 20, 2009
SUBJECT : Medi-Cal: ambulance transportation services
providers: quality assurance fees.
SUMMARY : Imposes as a condition of participation in the
Medi-Cal Program a 5.5% quality assurance fee (QAF) on ambulance
transportation services providers until the 2015-16 fiscal year,
and requires revenue from the QAF to be used exclusively to
enhance federal financial participation (FFP) under Medi-Cal or
to support quality improvement efforts. Implements this bill
only if the state receives federal approval and legislation is
enacted during the 2009-10 legislative session that makes an
appropriation to fund a Medi-Cal rate increase for ambulance
transportation services providers. Specifically, this bill :
1)Imposes, as a condition of participation in the Medi-Cal
Program, for each ambulance transportation services provider
that derives revenue from the provision of ambulance
transportation services, a QAF, each state fiscal year based
on the provision of ambulance transportation services.
2)Requires the QAF to be assessed on all Medi-Cal ambulance
transportation services providers, except for a Medi-Cal
ambulance transportation services provider that is exempt
pursuant to 18) below because the Department of Health Care
Services (DHCS) had to alter the provider fee methodology to
obtain federal approval.
3)Requires the amount of the QAF assessed on each Medi-Cal
ambulance transportation services provider to be based on the
revenue received by the provider from the provision of
ambulance transportation services and to be calculated in
accordance with the methodology outlined in 4) directly below.
4)Requires, for the 2009-10 through 2015-16 fiscal years, the
QAF for each ambulance transportation services provider to be
calculated by multiplying by 5.5% the revenue that the
ambulance transportation services provider derived from
providing ambulance transportation services, as determined
under the approved methodology. For the 2010-11 to 2015-16
AB 511
Page 2
fiscal years, prohibits the QAF calculated pursuant to this
provision and collected under this bill, taken together with
applicable licensing fees, from exceeding the amounts
allowable under federal law.
5)Requires DHCS to deposit the QAF collected pursuant to this
bill in the Medi-Cal Ambulance Transportation Services
Providers Fund (Fund), which is created in the State Treasury,
and requires the Fund to also include interest and dividends
earned on moneys in the Fund.
6)Requires moneys in the Fund, upon appropriation by the
Legislature, to be available to exclusively enhance FFP for
ambulance transportation services under the Medi-Cal program
or to provide additional reimbursement to, and to support
quality improvement efforts of, ambulance transportation
services providers, including increased reimbursement for and
improvement of the quality of the provision of advanced life
support services.
7)Requires this bill to be implemented only if both of the
following conditions are met:
a) The state receives federal approval of the QAF from the
Centers for Medicare and Medicaid Services (CMS); and,
b) Legislation is enacted during the 2009-10 session that
makes an appropriation from the Fund and from the Federal
Trust Fund to fund a Medi-Cal rate increase for ambulance
transportation services providers.
8)Requires this bill to remain operative only as long as all of
the following conditions are met:
a) CMS continues to allow the use of the QAF provided in
this bill;
b) The Medi-Cal rate increase for ambulance transportation
providers remains in effect; and,
c) The full amount of the QAF assessed and collected
pursuant to this bill remains available exclusively to
enhance FFP for ambulance transportation service providers
in Medi-Cal.
9)Permits DHCS to retroactively increase and make payments of
rates to Medi-Cal ambulance transportation services providers.
10) Requires providers that have been assessed a fee by DHCS
AB 511
Page 3
to pay the fee assessed within 60 days of the date rates are
increased in accordance with this bill and paid to those
providers.
11) Requires DHCS to accept a provider's payment of the fee
even if the payment is submitted in a subsequent rate year
than the rate year in which the fee was assessed.
12) Requires the QAF to be paid by providers to DHCS on a
quarterly basis on or before the last fiscal day of the fiscal
quarter following the fiscal quarter for which the QAF was
imposed.
13) Permits DHCS, when a provider fails to pay all or part of
the QAF within 60 days of the date that payment is due, to
deduct the unpaid fee and interest owed from any Medi-Cal
reimbursement payments owed to the provider until the full
amount of the fee and interest are recovered.
14) Requires any deduction made pursuant to 13) above to be
made only after the DHCS gives the provider written
notification, and permits any deduction made to be deducted
over a period of time that takes into account the financial
condition of the provider.
15) Permits DHCS, if all or any part of the QAF remains
unpaid, to assess a penalty on the provider equal to 50% of
the unpaid fee amount.
16) Requires the director of DHCS, or his or her designee, to
administer this bill, permits the director to adopt
regulations as are necessary to implement this bill, including
emergency regulations, through the rulemaking provisions of
the Administrative Procedure Act. States legislative intent
that the regulations adopted pursuant to this bill be adopted
on or before July 31, 2012.
17) Permits the director of DHCS, as an alternative to
adopting regulations to implement this bill, in whole or in
part, by means of a provider bulletin, or other similar
instructions, without taking regulatory action, provided that
no bulletin or other similar instructions remain in effect
after July 31, 2012.
18) Requires DHCS to request approval from the CMS for the
implementation of this bill, and permits the director of DHCS
AB 511
Page 4
to alter the methodology specified in this bill, to the extent
necessary to meet the requirements of federal law or
regulations or to obtain federal approval. Permits the
director to also add categories of exempt ambulance
transportation services providers or apply a non-uniform fee
to ambulance transportation services providers that are
subject to the fee in order to meet the requirements of
federal law or regulations. Permits the director to exempt
categories of ambulance transportation services providers from
the fee, if necessary to obtain federal approval.
19) Requires DHCS to make retrospective adjustments, as
necessary, to the amounts calculated pursuant to this bill in
order to ensure that the QAF for any provider in a particular
state fiscal year does not exceed 5.5% of the revenue derived
by a provider subject to the fee from the provision of
ambulance transportation services.
20) Requires this bill to become inoperative 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 CMS that FFP is not
available with respect to any payment made under the
methodology implemented pursuant to this bill because the
methodology is invalid, unlawful, or contrary to any provision
of federal law or regulations, or of state law.
21) Requires this bill to be repealed on the date that it
becomes inoperative.
EXISTING LAW :
1)Establishes the Medi-Cal Program, administered by DHCS, which
provides comprehensive health benefits to low-income children,
their parents or caretaker relatives, pregnant women, elderly,
blind or disabled persons, nursing home residents, and
refugees who meet specified eligibility criteria.
2)Establishes a schedule of benefits under the Medi-Cal Program,
which includes emergency and nonemergency medical
transportation.
3)Establishes, through regulation, maximum reimbursement rates
for medical transportation services under Medi-Cal, and
AB 511
Page 5
prohibits bills from exceeding charges made to the general
public.
4)Imposes a quality improvement fee on Medi-Cal managed care
plans and a QAF on skilled nursing facilities (SNFs) and
intermediate care facilities for the developmentally disabled
(ICF-DD).
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . This bill is sponsored by American
Medical Response (AMR), which states this bill is the
legislative vehicle for statutory changes needed to craft
an ambulance QAF. AMR argues this bill represents a
unique opportunity to expand health care access and raise
the level of health care outcomes by providing a pathway
in state law to draw down additional federal Medicaid
funding for ambulance transport services. AMR argues
inadequate Medi-Cal reimbursement for ambulance transport
has put an enormous strain on the state's health care
structure and in particular, the state's emergency medical
services (EMS) system. Unlike other Medi-Cal providers,
ambulance providers cannot limit their Medi-Cal patients
in order to find a survivable payor mix. AMR states
ambulance providers have been recently saddled with
debilitating Medi-Cal cuts including last year's 10%
Medi-Cal provider rate reduction, while having to endure
additional increases in vehicle license fees and fuel
costs which are significant for large emergency vehicles.
AMR states that ambulance transport has the worst
cost-of-service to reimbursement ratio of all health care
providers in the Medi-Cal system.
AMR states there are federal dollars that can be drawn back
down to the state through a QAF that will permit ambulance
providers to establish a means to increase patient
outcomes and reverse, or at least slow, the rate of
degradation of reimbursement rates to ambulance transport.
The QAF in this bill would be assessed on ambulance
providers who chose to participate in the Medi-Cal Program
and the resulting revenue would be matched by federal
funds and then returned to ambulance providers in the form
AB 511
Page 6
of an increase in the Medi-Cal rate. No additional
funding through the state's General Fund (GF) is required
to affect this program and the federal dollars which will
flow back to the state will be used by ambulance providers
to maintain the high level of care that is expected of the
state's EMS and 9-1-1 programs. AMR states it is
committed to working diligently with this partnership
between the state and federal authorities in crafting this
important program to ensure the state has a safety-net EMS
system its residents can rely upon.
2)PROVIDER FEES . Federal law authorizes states to levy fees on
health care providers if the fees meet federal requirements.
Many states (including California) fund a portion of their
share of Medicaid Program costs through a fee on health care
providers. Under these funding methods, states collect funds
(through fees, taxes, or other means) from providers, which
can then be matched with federal funds to increase Medicaid
reimbursement to providers. To prevent states from only
levying an assessment on certain providers, federal law
requires provider fees to be "broad based" and uniformly
imposed throughout a jurisdiction, and states are prohibited
from having a provision that would ensure providers are "held
harmless" from the impact of the fee. Forty-five states have
Medicaid provider fees. The health reform proposal from last
session by Governor Schwarzenegger and then-Assembly Speaker
Fabian N??ez would have levied a provider fee on hospitals
through a separate ballot initiative to be submitted to the
voters. That proposal would have increased Medi-Cal
reimbursements to hospitals as a way of reducing the "hidden
tax" where below-market Medi-Cal reimbursement rates shift
costs onto insured individuals, families, and employers.
California currently has provider fees on ICF-DDs, Medi-Cal
managed care plans, and SNFs as follows:
a) A quality improvement fee (QIF) is assessed on Medi-Cal
managed care plans at a rate of 5.5% of revenues. The net
increase in revenue is deposited into the state GF, and is
estimated to be $238.8 million (total funds) in 2008-09.
Half of the fee is used to draw down federal funds and is
returned to the Medi-Cal managed care plans through
increased rates. The fee sunsets on October 1, 2009 is
projected to raise $89.9 million in 2009-10. The QIF is
currently assessed on Medi-Cal managed care revenue, but
AB 511
Page 7
changes in federal law will likely result in this fee
sunsetting under state law;
b) A QAF on skilled nursing facilities at a rate of 6% of
net revenues (which excludes Medicare revenue). The QAF is
projected to generate $289 million in 2008-09 and $293
million in 2009-10. The QAF sunsets on July 31, 2011. The
legislation that established the QAF (AB 1629, Chapter 875,
Statutes of 2004) also restructured the payment system for
SNFs from a flat rate system to one that reimbursed based
on costs, and that provides an incentive for facilities to
spend more in certain areas, such as labor. The QAF has
been covering the additional costs generated by AB 1629,
but beginning in 2010-11, the GF is expected to have to
fund the growth in AB 1629 costs;
c) As a condition of participation in Medi-Cal, a QAF is
assessed on the gross receipts of ICF-DDs at a rate of 5.5%
with the amount paid in licensing fees reduced from the
total amount of revenue generated. The QAF on ICF-DD
facilities does not sunset under existing law, and is
projected to raise, on a net basis, $18.6 million in the
current fiscal year and $19.2 million in the 2009-10 fiscal
year. Revenue from the QAF is placed in the GF. DHCS
performs a rate study to determine the rates of ICF-DDs,
and the QAF augments the rates above the amounts in the
rate study by $39 million (total funds) or 8.99%. DHCS
indicates ICF-DDs receive $13.1 million above the amount
facilities paid in fees.
3)HOW DOES A PROVIDER FEE WORK ? In its analysis of the
Governor's 2004-05 budget plan, the Legislative Analyst's
Office (LAO) discussed provider fees and provided a simplified
explanation of how such fees can be structured to draw down
additional federal funds, reduce state costs, and provide
additional resources to medical providers to improve the
quality of health care. In the LAO example, a state imposes a
6% quality improvement fee on the gross revenues of certain
health care providers who currently are reimbursed at a rate
of $100 per day (Step 1). As a result, the state collects
about $6 in revenues for each $100 of revenues received from
the providers subject to the fee. These fee revenues would
then be deposited in the state's GF. The state, in turn,
agrees to increase its Medicaid reimbursements to $106 per
day. Under this scenario, a Medicaid provider would receive a
new, higher reimbursement rate for its services that equals
the cost of the fee (Step 2).
AB 511
Page 8
According to the LAO, the state benefits from this transaction
because the federal government shares in the cost of the
Medicaid Program. The split between California and the
federal government for Medi-Cal Program costs is usually
50-50. Thus, in the LAO's example, the state would pay only
half the additional cost of the reimbursements for providers
($3 per day of health care services) and the federal
government would pay the other half of these costs (also $3
per day). This leaves the state with $3 of the $6 that it
collected originally.
States have generally chosen to use part of their financial gain
from such transactions - $3 in the LAO example - to invest in
improvements in the quality of health care provided under
their Medicaid programs. In the LAO example (Step 3), the
state does so by increasing rates for providers subject to the
fee by the equivalent of $2 per day, bringing their total
reimbursement rate to $108. The state uses $1 of its $3
revenue gain, plus a $1 match in federal Medicaid funds-to pay
the $2 rate increase. This leaves the state with a net revenue
gain of $2.
The LAO summarizes that, in its example: a) Additional federal
funding is drawn down that was not previously available; b)
The state experiences a net financial gain by receiving new
quality improvement fee revenues that exceed the state cost of
the rate increases it authorizes for Medicaid providers; and,
c) The providers experience a net financial gain due to rate
increases that exceed their new fees. The LAO noted that this
explanation of how the fee mechanism works in this analysis
has been slightly simplified and slightly understates the
potential gain to a state and slightly overstates the gain to
providers.
4)MEDI-CAL AMBULANCE RATES . According to the Medi-Cal policy
manual, Medi-Cal covers ambulance and other medical
transportation only when ordinary public or private conveyance
is medically contra-indicated and transportation is required
for obtaining needed medical care. To receive reimbursement,
a recipient must be eligible for Medi-Cal on the date of
service. Ambulance providers are instructed to use the Basic
Life Support base rate, emergency transport, one way when
billing for responses to a 911 call. The maximum
reimbursement rate for this service is set at $117.02 for
AB 511
Page 9
daytime calls (7 a.m. to 7 p.m.) and $126.80 (for calls 7 p.m.
to 7 a.m.), plus $3.51 per mile. Current medical
transportation services reimbursement rates, including rates
for ambulance transportation are in state regulation, although
the rates in regulation are reduced by 1% to reflect last
year's budget action. Existing regulations prohibit rates
from exceeding charges made to the general public. Existing
rates, effective March 1, 2009, are as follows:
---------------------------------------------------------
|Ambulance service, basic life support (BLS) |$117.02 |
|base rate, emergency transport, one way | |
|(includes allowance for emergency run) | |
|------------------------------------------------+--------|
|Non-emergency transportation, ambulance, base |106.01 |
|rate one way | |
|------------------------------------------------+--------|
|Response to call, 2 patients, each patient | 36.65 |
|(does not include an allowance for emergency | |
|run) | |
|------------------------------------------------+--------|
|Ambulance service, (BLS) per mile, transport | 3.51 |
|one way | |
|------------------------------------------------+--------|
|Night call - 7:00 p.m. to 7:00 a.m. | 9.78 |
|------------------------------------------------+--------|
|Emergency run | 9.78 |
|------------------------------------------------+--------|
|Ambulance service, oxygen, administration and | 9.78 |
|supplies, life sustaining situation | |
|------------------------------------------------+--------|
|Neonatal intensive care incubator | 50.98 |
|------------------------------------------------+--------|
|Waiting time over 15 min. -each 15 min | 9.78 |
|------------------------------------------------+--------|
|Compressed air for infant respirator | 10.13 |
---------------------------------------------------------
---------------------------------------------------------
|Extra attendant -RN, EMT, or equivalent; (in addition to |
| normal crew of two): |
---------------------------------------------------------
---------------------------------------------------------
| a) First hour | 16.28 |
---------------------------------------------------------
| b) Second and third hour, each hour | 11.39 |
AB 511
Page 10
---------------------------------------------------------
| c) Each additional hour | 5.20 |
---------------------------------------------------------
| d) Cost of IV fluids (invoice must be | By |
| attached) | Report |
---------------------------------------------------------
| e) ECG in ambulance | 15.91 |
|------------------------------------------------+--------|
| f) Unlisted | By |
| |Report |
---------------------------------------------------------
5)HOW DO MEDI-CAL RATES COMPARE WITH OTHER PAYERS ? The
California Ambulance Association (CAA) provides the following
comparison of ambulance rates, which CAA states is from an
"Industry Performance Survey" done by Hobbs & Ong on behalf of
CAA:
Annual California Ambulance Services - By Source of
Payment
-------------------------------------------------------------
|Payment | % of | % of | 2005 Cost per | 2005 |
|Source |Transport | Revenue | Transport | Average |
| | | | |Reimbursemen|
| | | | | t Per |
| | | | | Transport |
|----------+----------+----------+---------------+------------|
|Medicare | 34.9% |34.9% | $562 |$ 520 |
|----------+----------+----------+---------------+------------|
|Medi-Cal | 21% |10.7% | $562 |$ 250 |
|----------+----------+----------+---------------+------------|
|Facility | 8.2% | 8.9% | $562 |$ 723 |
|----------+----------+----------+---------------+------------|
|Private | 17.9% | 6.3% | $562 |$ 201 |
|pay | | | | |
|----------+----------+----------+---------------+------------|
|Other | 17.7% |38.7% | $562 | $1,100 |
|insurers | | | | |
|----------+----------+----------+---------------+------------|
|Other | 0.3% | 0.2% | $562 |$ |
| | | | |342 |
| | | | | |
-------------------------------------------------------------
AB 511
Page 11
6)SUPPORT IN CONCEPT . CAA writes it supports "in concept" this
bill, which provides broad parameters for the enactment of a
QAF for private ambulance providers in this state. CAA states
ambulance providers are an essential part of California's
health-care safety net, and unique in two ways when compared
to other Medi-Cal providers: a) Ambulance providers are
required to respond to, treat and transport all emergency
patients, regardless of ability to pay; and, b) Are required
to do so within a specified time according to mandated
response times. CAA states California's ambulance services
are in crisis and there are many reasons for this, but chief
among them is the ever increasing cost of providing these
important public services and the increasingly inadequate
reimbursement level for providing these services under the
state's Medi-Cal Program. CAA states based upon discussions
with the Administration, and taking into account the fiscal
realities faced by the state, CAA believes that a QAF, such as
that provided under current law for SNFs, may be the best
avenue to provide a desperately needed Medi-Cal funding
increase for private ambulance providers in this state.
7)RELATED LEGISLATION .
a) AB 1174 (Hernandez) requires Medi-Cal to cover ambulance
services when a patient reasonably believes that without an
ambulance a serious health condition, as specified, might
result; increases and establishes in statute maximum
Medi-Cal reimbursement rates for ambulance transportation
services; and, requires the rates be adjusted per changes
in the California Consumer Price Index. AB 1174 was heard
in the Assembly Health Committee on April 21, 2009 and is
currently awaiting hearing in the Assembly Appropriations
Committee.
b) AB 1153 (Beall) levies an additional penalty of $3 upon
every fine, penalty, or forfeiture imposed and collected by
the courts for all offenses involving a vehicle violation,
except certain parking offenses, in each county. Counties
would be required to establish in the county treasury an
emergency air medical transportation act fund into which
the penalty collected would be deposited, and the county
treasurer would transfer moneys in the county's emergency
air medical transportation act fund to the State Controller
for credit to the Emergency Air Medical Transportation Act
Fund created by AB 1153, which would be continuously
appropriated to DHCS solely for the purposes of augmenting
AB 511
Page 12
Medi-Cal reimbursement paid to emergency air medical
transportation services providers. DHCS would be required
to use the moneys in the Emergency Air Medical
Transportation Act Fund and federal matching funds to
increase the Medi-Cal reimbursement or supplemental
payments for emergency air medical transportation services
in an amount not to exceed normal and customary charges
charged by the emergency air ambulance transportation
services provider. AB 1153 is scheduled to be heard in the
Assembly Public Safety Committee on April 28, 2009.
c) AB 1383 (Jones) would state legislative intent to enact
legislation that would impose a fee to be paid by hospitals
that must be used to increase FFP in order to increase
Medi-Cal payments to hospitals, and would require DHCS to
seek to maximize federal funding in Medi-Cal, including
funding for hospital reimbursement. AB 1383 is scheduled
to be heard in the Assembly Health Committee on May 5,
2009.
8)PREVIOUS LEGISLATION .
a) AB 1629 (Frommer) Chapter 875, Statutes of 2004
established the SNF QAF, established the Medi-Cal Long-Term
Care Reimbursement Act; and contained an appropriation to
fund an increase in the 2004-05 SNF Medi-Cal reimbursement
rates.
b) AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008 extended the AB 1629 QAF by an additional two years,
to July 31, 2011.
9)HOSPITAL PROVIDER FEE AS PART OF HEALTH CARE REFORM . The
health care reform initiative proposed by then-Speaker N??ez
and Governor Schwarzenegger last year contained a coverage
dividend fee assessed on hospitals to increase fee-for-service
Medi-Cal inpatient and outpatient rates to hospitals and rates
paid to hospitals by Medi-Cal managed care plans.
Additionally, the coverage dividend fee paid by hospitals was
also used to help fund the hospital component of the cost of a
coverage expansion for low-income parents and adults contained
in the health reform bill, AB 1 X1 (N??ez), after the rate
increases were provided to hospitals. The fee was capped at
4% of aggregate hospital net patient revenue and was projected
to generate $2.3 billion in revenue. After the failure of AB
1 X1, the initiative was withdrawn.
AB 511
Page 13
10)AUTHOR'S AMENDMENT . The author proposes to amend this bill
to require each provider paying a QAF to submit with the QAF
paid, in a prescribed form, the gross receipts from the
provision of ambulance transportation services for that fiscal
year in order for DHCS to verify the accuracy of the QAF paid.
11)FEE REVENUE AND RATE INCREASE INFORMATION NOT YET AVAILABLE .
AMR and CAA indicate they will be modeling the proposed
provider fee for purposes of determining the amount of revenue
the fee would generate, and the increase in Medi-Cal
reimbursement that would result from this bill.
REGISTERED SUPPORT / OPPOSITION :
Support
American Medical Response (sponsor)
Opposition
None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097