BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 896
A
AUTHOR: Galgiani
B
INTRODUCED: February 26, 2009
HEARING DATE: June 17, 2009
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CONSULTANT:
9
Bain
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SUBJECT
Health care programs: inpatient provider reimbursement
rates
SUMMARY
Repeals a requirement due to take effect January 1, 2010
that hospital inpatient payment rates for the California
Children's Services Program (CCS Program) and the
Genetically Handicapped Persons Program (GHPP) be identical
to payment rates for the same service performed by the same
provider type under the Medi-Cal program.
CHANGES TO EXISTING LAW
Existing law:
Requires provider payment rates for services rendered in
the CCS Program, the GHPP, the Breast and Cervical Cancer
Early Detection Program (BCCEDP), the State-Only Family
Planning Program (State-Only FPP) and the Family Planning,
Access, Care, and Treatment (Family PACT) Waiver Program be
identical to the rates of payment for the same service
performed by the same provider type pursuant to the
Medi-Cal program, except that hospital inpatient rates of
Continued---
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payment are required to be 90 percent of the Medi-Cal
hospital interim rates of payment, as developed by the
Department of Health Care Services (DHCS). The requirement
that inpatient rates of payment be 90 percent of the
Medi-Cal hospital interim rate sunsets January 1, 2010,
after which provider payment rates for services rendered in
those programs must be identical to the Medi-Cal rates of
payment for the same service performed by the same provider
type.
Authorizes services provided under the programs above to be
reimbursed at rates greater than the Medi-Cal rate that
would otherwise be applicable if those rates are increased
by the DHCS director in regulations.
This bill:
Repeals a requirement due to take effect January 1, 2010
that hospital inpatient payment rates for the CCS Program,
the GHPP, BCCEDP, State-Only FPP, and the Family PACT
Waiver Program be identical to payment rates for the same
service performed by the same provider type under the
Medi-Cal program.
FISCAL IMPACT
According to the Assembly Appropriations Committee:
Annual Medi-Cal costs in the range of $15 million (50
percent General Fund) to $25 million (50 percent GF),
that have been accounted for in the Budget Act, to hold
hospitals addressed by this bill harmless by deleting the
AB 2474 sunset (AB 2474 requires hospital inpatient rates
of payment for CCS and GHPP to be 90 percent of the
Medi-Cal hospital interim rates of payment until January
1, 2010). Actual costs could be less to the extent that
certain patients with costs of $100,000 to $500,000 each
for in-patient services do not have significant health
needs in a given year.
High-cost conditions and services create significant
fiscal risk for in-patient children's hospitals. Due to
the serious nature of CCS-eligible conditions, such as
leukemia, parasitic disease, cancer, and hemophilia, the
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hospitals providing services may incur significant losses
on expensive treatments if reduced to the California
Medical Assistance Commission (CMAC) Medi-Cal contract
rate (rather than the existing 90 percent of the Medi-Cal
interim rate). For example, according to the sponsors of
this bill, a four-year old with recently diagnosed
leukemia was hospitalized for three weeks at a cost of
$65,000. Without AB 2474 rate protections, reimbursement
would be $25,000 less than cost. Another example
demonstrating the impact of a high-cost service provision
is a 12-year old with a cardiac valve malformation
resulting in six weeks of hospitalization and a $141,000
cost. This would be reimbursed at $82,000 less than cost
without AB 2474.
The Medi-Cal emergency injunction does not apply to AB
2474 payments. Because AB 2474 moved the payments
addressed in AB 896 out of the code sections under the
injunction, AB 2474 hospitals are not protected from
reductions like most other providers.
BACKGROUND AND DISCUSSION
This bill is sponsored by the California Children's
Hospital Association (CCHA) to make permanent a delay in
the requirement that hospital inpatient rates in the CCS
Program and GHPP be reimbursed at their lower California
Medical Assistance Commission (CMAC) Medi-Cal rate rather
than their existing Medi-Cal interim rate. The author
argues that hospitals such as children's' hospitals treat a
disproportionate number of low-income patients, including
CCS patients. CCHA argues a cut in provider reimbursement
directly impacts access to care, and delays in accessing
care costs the health care system more because the children
are sick and treatments are more costly. The author states
this bill would clarify that it was never the Legislature's
intent that these high-cost services to seriously ill
children be reimbursed at an amount less than Medi-Cal
allowable costs, and this bill would do that by removing
the January 1, 2010 sunset date in existing law.
CCS and GHPP
This bill only affects inpatient reimbursement in the CCS
Program and GHPP for non-Medi-Cal individuals enrolled in
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those programs because the other programs (BCCEDP,
State-Only FFP, Family PACT) do not reimburse for inpatient
services.
The CCS Program provides diagnostic and treatment services,
medical case management, and medical and occupational
therapy services to eligible children and young adults less
than 21 years of age. Eligibility includes diagnosis of
specified medical conditions such as cancer, congenital
heart disease, and sickle cell anemia. Children receive
services in one of three enrollment pathways: a)
CCS-Medi-Cal, in which 128,559 children are estimated to be
enrolled in 2009-10; b) CCS-Healthy Families program (HFP),
in which 26,414 children are estimated to be enrolled in
2009-10; and, c) CCS-only, in which 19,260 children are
estimated to be enrolled in 2009-10. This bill affects
inpatient reimbursement rates for CCS-HFP and CCS-only
children.
GHPP provides medical care to individuals with genetically
handicapping conditions, including cystic fibrosis,
hemophilia, sickle cell disease, Huntington's disease,
Friedreich's Ataxia, and certain hereditary metabolic
disorders. Individuals receive services in one of two
enrollment pathways: a) GHPP-Medi-Cal, in which 334
individuals are estimated to be enrolled in 2009-10; and,
b) GHPP-only, in which 1,426 individuals are estimated to
be enrolled in 2009-10. This bill affects inpatient
reimbursement rates for GHPP-only individuals.
Hospital reimbursement
CMAC is a state commission established to negotiate
Medi-Cal contracts with hospitals on behalf of the state.
Hospitals that treat Medi-Cal fee-for-service beneficiaries
receive reimbursement either by contracting with the state
through CMAC, or billing for services provided. CMAC rates
are confidential for four years. When hospitals do not
contract with CMAC (referred to as non-contract hospitals),
they are initially paid an interim rate. Hospitals are
then required to submit a cost report within five months of
the close of their fiscal period, and DHCS reviews each
hospital's cost report and prepares a tentative settlement,
which is a determination of the allowable reimbursable
reported costs for a hospital's fiscal period. DHCS
compares what a hospital was paid in interim payments, to
the hospital's allowable reimbursable reported costs. The
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difference may result in either a payment to the hospital
(if the interim rate was lower than the hospital's
reimbursable reported cost), or a recoupment if the interim
rate paid was higher than the hospital's reported costs.
Under current law (until January 1, 2010), hospital
inpatient rates of payment for non-Medi-Cal patients in CCS
and GHPP are required to be 90 percent of the Medi-Cal
hospital interim rate of payment.
CCHA indicates that its members' non-contract Medi-Cal
interim rates are higher than their Medi-Cal contract rates
with CMAC. Because children's hospitals are
CMAC-contracting hospitals, their payment rates for
state-only and CCS-HFP children will be, effective January
1, 2010, their lower CMAC Medi-Cal contract rate, rather
than their higher Medi-Cal interim rate.
Previous legislation
Last session, two budget measures affected non-contract
Medi-Cal hospital reimbursement: the mid-year reduction
bill in February 2008 (AB X3 5 (Committee on Budget)
Chapter 3, Statutes of 2008 Third Extraordinary Session)
and the health budget trailer bill of 2008 (AB 1183
(Committee on Budget), Chapter 758, Statutes of 2008)
passed in September 2008. AB X3 5 reduced, for services
provided on and after July 1, 2008, Medi-Cal interim
payments and cost report settlements by 10 percent for
amounts paid for inpatient hospital services provided by
hospitals that are not under contract with the state, for
services provided on and after July 1, 2008. AB 1183,
effective October 1, 2008, reduced non-contract rates to
the lesser of the 10 percent reduction enacted by AB X3 5
or the regional average CMAC per diem contract rate,
reduced by 5 percent and multiplied by the number of
Medi-Cal covered inpatient days. A stay of the AB 1183
Medi-Cal interim payment rate reduction was ordered in
April of this year by a federal court in a lawsuit brought
by hospital plaintiffs.
During budget discussions last year over reductions in
Medi-Cal non-contract hospital rates, the DHCS practice of
reimbursing hospitals the Medi-Cal interim rate for CCS and
GHPP patients who were not enrolled in Medi-Cal was
different than what was required under law, because
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existing law at that time required provider payment rates
for services rendered in the CCS Program and GHPP to be
identical to the provider's Medi-Cal rates of payment
(which would have been the hospitals' CMAC rate). Instead,
hospitals providing services to children enrolled in the
CCS Program and GHPP who were not enrolled in Medi-Cal were
being reimbursed at their interim Medi-Cal rate.
At the end of last session, the Legislature passed AB 2474
(Galgiani), Chapter 496, Statutes of 2008, which was also
sponsored by CCHA. AB 2474 requires hospital inpatient
rates of payment to be 90 percent of the Medi-Cal hospital
interim rates of payment until January 1, 2010, thus
delaying until January 1, 2010 the requirement that rates
in the CCS Program and GHPP inpatient hospital rates be
reimbursed at their lower Medi-Cal CMAC rate. In addition,
AB 2474 made legislative findings to prevent a recoupment
of previous year hospital inpatient overpayments in the CCS
Program and GHPP by stating that it was never the
Legislature's intent, in enacting the 2002 health budget
trailer bill, that services to non-Medi-Cal children
enrolled in the CCS Program and GHPP be reimbursed at an
amount less than the Medi-Cal interim rate. The intent
language in AB 2474 was intended to protect hospitals that
provide care in the CCS Program and GHPP from being subject
to recoupment for overpayments, and also to protect the
state from being obligated to reimburse the federal
government for overpayments in the HFP, which is generally
funded 65 percent by federal funds.
Arguments in support
CCHA writes as the sponsor of this bill that this measure
would ensure hospitals receive adequate reimbursement for
providing high-cost services to seriously ill children in
CCS. CCHA argues that hospitals such as children's
hospitals that treat a disproportionate number of
low-income patients cannot absorb any additional
reimbursement reductions without seriously compromising
patient access. CCHA argues that childrens' hospitals are
currently operating with a -1.4 percent operating margin,
and this is prior to experiencing the full impact of the
economic downturn, which is resulting in both increased
Medi-Cal enrollment and decreased non-operating revenues.
The impact of reducing hospital reimbursement for
non-Medi-Cal CCS patients to the individual hospital CMAC
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rate would be significant for California's Children's
Hospitals - approximately $1 million up to $1.8 million per
facility annually.
PRIOR ACTIONS
Assembly Floor: 78-0
Assembly Appropriations: 17-0
Assembly Health: 15-0
COMMENTS
1. Postponement of payment reduction made permanent.
AB 2474 (Galgiani) delayed until January 1, 2010, the
requirement that inpatient rates in the CCS and GHPP be
reimbursed at their Medi-Cal rate (their lower CMAC
rate). This bill addresses an important issue in that
provider payment rates in public programs are a key
factor in beneficiaries' ability to access program
services. However, given the state's current fiscal
constraints and potential cuts to existing health
programs, should a temporary delay in a payment reduction
be made permanent?
2. CCS and GHPP reimbursement different depending upon
underlying eligibility.
In the health budget trailer bill of 2002 (AB 434
(Committee on Budget), Chapter 1161, Statutes of 2002),
the Legislature required that provider rates of payment
for services rendered in CCS Program, GHPP, BCCEDP,
State-Only FPP, and Family PACT be identical to the rates
of payment for the same service performed by the same
provider type in the Medi-Cal program. As described
above, this requirement was not implemented for
non-Medi-Cal inpatient services in the CCS Program and
GHPP.
CCHA argues the reason a higher rate is necessary for
non-Medi-Cal CCS is that when hospitals negotiate with
CMAC, they are considering the entire Medi-Cal patient
population they serve, which includes both the high-cost
services provided by the hospital along with the less
intensive, more moderate-cost services. However, CCHA
argues that the services provided to the non-Medi-Cal CCS
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population are all associated with the CCS condition, so
the services are primarily all high-cost. Should
inpatient reimbursement be different depending upon
whether the CCS or GHPP-eligible individual is enrolled
in Medi-Cal versus GHPP-only, CCS-only, or CCS-HFP?
POSITIONS
Support: California Children's Hospital Association
(sponsor)
Children's Specialty Care Coalition
California Hospital Association
Oppose: None received.
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