BILL NUMBER: AB 1383	ENROLLED
	BILL TEXT

	PASSED THE SENATE  SEPTEMBER 12, 2009
	PASSED THE ASSEMBLY  SEPTEMBER 12, 2009
	AMENDED IN SENATE  SEPTEMBER 12, 2009
	AMENDED IN SENATE  SEPTEMBER 11, 2009
	AMENDED IN SENATE  SEPTEMBER 4, 2009
	AMENDED IN SENATE  SEPTEMBER 3, 2009
	AMENDED IN SENATE  AUGUST 18, 2009
	AMENDED IN SENATE  JULY 15, 2009
	AMENDED IN SENATE  JULY 9, 2009
	AMENDED IN SENATE  JULY 1, 2009
	AMENDED IN SENATE  JUNE 25, 2009
	AMENDED IN SENATE  JUNE 17, 2009
	AMENDED IN SENATE  JUNE 11, 2009
	AMENDED IN ASSEMBLY  JUNE 1, 2009
	AMENDED IN ASSEMBLY  MAY 14, 2009
	AMENDED IN ASSEMBLY  APRIL 30, 2009

INTRODUCED BY   Assembly Member Jones
   (Principal coauthor: Senator Alquist)
   (Coauthor: Assembly Member De Leon)

                        FEBRUARY 27, 2009

   An act to add Article 5.225 (commencing with Section 14167.41) to,
and to add and repeal Articles 5.21 (commencing with Section
14167.1) and 5.22 (commencing with Section 14167.31) of, Chapter 7 of
Part 3 of Division 9 of, the Welfare and Institutions Code, relating
to Medi-Cal.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1383, Jones. Medi-Cal: hospital payments: quality assurance
fees.
   Existing law establishes the Medi-Cal program, administered by the
State Department of Health Care Services, under which basic health
care services are provided to qualified low-income persons. The
Medi-Cal program is partially governed and funded as part of the
federal Medicaid Program. Under existing law, the Medi-Cal
Hospital/Uninsured Care Demonstration Project Act, specified hospital
reimbursement methodologies are applied in order to maximize the use
of federal funds consistent with federal Medicaid law and stabilize
the distribution of funding for hospitals that provide care to
Medi-Cal beneficiaries and uninsured patients.
   This bill would require the department to make supplemental
payments for certain services, as specified, to private hospitals,
nondesignated public hospitals, and designated public hospitals, as
defined, for subject federal fiscal years, which this bill would
define to mean federal fiscal years that end after the latest
effective date all federal approvals or waivers necessary for the
implementation of these supplemental payments and begin before
December 31, 2010. This bill would also require the department to pay
direct grants in support of health care expenditures to designated
public hospitals for each subject federal fiscal year, as specified.
   This bill would require the department to make enhanced payments
to managed health care plans, as defined, and would require the state
to make enhanced payments to mental health plans, as defined, for
each subject federal fiscal year, as specified. This bill would
require the managed health care plans and mental health plans that
received enhanced payments to make supplemental payments to subject
hospitals, as defined, pursuant to specified formulas.
   This bill would provide that the above-described payments shall be
made only from the quality assurance fee that is due and payable on
or before December 31, 2010, and related matching federal funds.
   This bill would require the Director of Health Care Services to
submit any state plan amendment or waiver request that may be
necessary to implement the above provisions.
   This bill would provide for the imposition, as a condition of
participation in state-funded health insurance programs, other than
the Medi-Cal program, of a quality assurance fee, as specified, on
certain general acute care hospitals through, and including, December
31, 2010. This bill would require the department to seek federal
approval, as defined, for assessment of the fee.
   This bill would provide that no hospital shall be required to pay
the quality assurance fee to the department unless and until the
state receives and maintains federal approval of the quality
assurance fee for the above-described additional payments from the
federal Centers for Medicare and Medicaid Services (CMS). The bill
would require hospitals, for calendar quarters prior to federal
approval of the fee, and in the calendar quarter in which the
department receives notice of federal approval of the fee, to certify
to the best of its knowledge, on a form provided by the department,
that the hospital is prepared to pay the fee. The bill would provide
that within 30 days of when federal approval is received, the
hospitals shall pay the amount they certified they were prepared to
pay multiplied by certain applicable fee percentages, except that, in
the event that the director has made modifications to the fee model
to secure federal approval, the hospital shall pay the
above-described amount adjusted to reflect the director's
modifications.
   This bill would create the Hospital Quality Assurance Revenue Fund
in the State Treasury and require the money collected from the
quality assurance fee be deposited into the fund. This bill would
provide that the moneys in the fund shall, upon appropriation by the
Legislature, be available only for certain purposes, including
providing the above-described supplemental payments and health care
coverage for children.
   This bill would require the department to provide the Joint
Legislative Budget Committee and the fiscal and appropriate policy
committees of the Legislature a status update of the implementation
of the above-described provisions, on January 1, 2010, and quarterly
thereafter.
   This bill would provide that the above provisions shall not be
implemented with respect to the 2009-10 and 2010-11 federal fiscal
years until the earlier of April 30, 2010, or the date the federal
government approves a federal waiver for a demonstration that will
replace the Medi-Cal Hospital/Uninsured Care Demonstration Project
Act.
   This bill would, under specified conditions, provide that the
above provisions shall become inoperative if, among other things, CMS
denies approval for, or does not approve before January 1, 2012, the
implementation of the above provisions. This bill would, in the
event certain conditions occur, retroactively invalidate the
requirements for supplemental payments or other payments made
pursuant to this bill.
   This bill would repeal the above provisions on January 1, 2013.
   This bill would specify that a quality assurance fee is to be
imposed pursuant to a subsequent statute, effective January 1, 2011,
and subject to federal approval in a manner necessary to obtain
federal matching funds, that shall be due and payable to the
department by each general acute care hospital at a specified rate
for the purpose of making Medi-Cal payments to hospitals.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Article 5.21 (commencing with Section 14167.1) is added
to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code, to read:

      Article 5.21.  Medi-Cal Hospital Provider Rate Stabilization
Act


   14167.1.  (a) "Acute psychiatric days" means the total number of
Short-Doyle administrative days, Short-Doyle acute care days, acute
psychiatric administrative days, and acute psychiatric acute days
identified in the Final Medi-Cal Utilization Statistics for the
2008-09 state fiscal year as calculated by the department on
September 15, 2008.
   (b) "Converted hospital" means a private hospital that becomes a
designated public hospital or a nondesignated public hospital after
the implementation date, a nondesignated public hospital that becomes
a private hospital or a designated public hospital after the
implementation date, or a designated public hospital that becomes a
private hospital or a nondesignated public hospital after the
implementation date.
   (c) "Current Section 1115 Waiver" means California's Medi-Cal
Hospital/Uninsured Care Section 1115 Waiver Demonstration in effect
on the effective date of the article.
   (d) "Designated public hospital" shall have the meaning given in
subdivision (d) of Section 14166.1 as that section may be amended
from time to time.
   (e) "General acute care days" means the total number of Medi-Cal
general acute care days paid by the department to a hospital in the
2008 calendar year, as reflected in the state paid claims files on
July 10, 2009.
   (f) "High acuity days" means Medi-Cal coronary care unit days,
pediatric intensive care unit days, intensive care unit days,
neonatal intensive care unit days, and burn unit days paid by the
department during the 2008 calendar year, as reflected in the state
paid claims files on July 10, 2009.
   (g) "Hospital inpatient services" means all services covered under
Medi-Cal and furnished by hospitals to patients who are admitted as
hospital inpatients and reimbursed on a fee-for-service basis by the
department directly or through its fiscal intermediary. Hospital
inpatient services include outpatient services furnished by a
hospital to a patient who is admitted to that hospital within 24
hours of the provision of the outpatient services that are related to
the condition for which the patient is admitted. Hospital inpatient
services include physician services only where the service is
furnished to a hospital inpatient, the physician is compensated by
the hospital for the service, and the service is billed to Medi-Cal
by the hospital under a provider number assigned to the hospital.
Hospital inpatient services do not include services for which a
managed health care plan is financially responsible.
   (h) "Hospital outpatient services" means all services covered
under Medi-Cal furnished by hospitals to patients who are registered
as hospital outpatients and reimbursed by the department on a
fee-for-service basis directly or through its fiscal intermediary.
Hospital outpatient services include physician services only where
the service is furnished to a hospital outpatient, the physician is
compensated by the hospital for the service, and the service is
billed to Medi-Cal by the hospital under a provider number assigned
to the hospital. Hospital outpatient services do not include services
for which a managed health care plan is financially responsible, or
services rendered by a hospital-based federally qualified health
center for which reimbursement is received pursuant to Section
14132.100.
   (i) (1) "Implementation date" means the latest effective date of
all federal approvals or waivers necessary for the implementation of
this article and Article 5.22 (commencing with Section 14167.31),
including, but not limited to, any approvals on amendments to
contracts between the department and managed health care plans or
mental health plans necessary for the implementation of this article.
The effective date of a federal approval of a contract amendment
shall be the earliest date to which the computation of payments under
the contract amendment is applicable that may be prior to the date
on which the contract amendment is executed.
   (2) If federal approval is sought initially for only the 2008-09
federal fiscal year and separately secured for subsequent federal
fiscal years, the implementation date for the 2008-09 federal fiscal
year shall occur when all necessary federal approvals have been
secured for that federal fiscal year.
   (j) "Individual hospital acute psychiatric supplemental payment"
means the total amount of acute psychiatric hospital supplemental
payments to a subject hospital for a quarter for which the
supplemental payments are made. The "individual hospital acute
psychiatric supplemental payment" shall be calculated for subject
hospitals by multiplying the number of acute psychiatric days for the
individual hospital for which a mental health plan was financially
responsible by four hundred eighty-five dollars ($485) and dividing
the result by 4.
   (k) "Individual hospital managed care supplemental payment" means
the total amount of managed care hospital supplemental payments to a
subject hospital for a month for which the supplemental payments are
made.
   (1) The "individual hospital managed care supplemental payment"
shall be calculated for private hospitals and designated public
hospitals by multiplying the number of Medi-Cal managed care days for
the individual hospital by one thousand three hundred forty-one
dollars and eighty-nine cents ($1,341.89) and dividing the result by
12.
   (2) The "individual hospital managed care supplemental payment"
shall be calculated for nondesignated public hospitals by multiplying
the number of Medi-Cal managed care days for the individual hospital
by three hundred seventy-five dollars ($375) and dividing the result
by 12.
   (l) (1) "Managed health care plan" means a health care delivery
system that manages the provision of health care and receives prepaid
capitated payments from the state in return for providing services
to Medi-Cal beneficiaries.
   (2) (A) Managed health care plans, include, but are not limited
to, county organized health systems, prepaid health plans, and
entities contracting with the department to provide services pursuant
to two-plan models and geographic managed care. Entities providing
these services contract with the department pursuant to any of the
following:
   (i) Article 2.7 (commencing with Section 14087.3).
   (ii) Article 2.8 (commencing with Section 14087.5).
   (iii) Article 2.81 (commencing with Section 14087.96).
   (iv) Article 2.91 (commencing with Section 14089).
   (v) Article 1 (commencing with Section 14200) of Chapter 8.
   (vi) Article 7 (commencing with Section 14490) of Chapter 8.
   (B) Managed health care plans do not include any mental health
plan contracting to provide mental health care for Medi-Cal
beneficiaries pursuant to Part 2.5 (commencing with Section 5775) of
Division 5.
   (m) "Medi-Cal managed care days" means the total number of general
acute care days, including well baby days, listed for the county
organized health system and prepaid health plans identified in the
Final Medi-Cal Utilization Statistics for the 2008-09 state fiscal
year, as calculated by the department on September 15, 2008, except
that the general acute care days, including well baby days, for the
Santa Barbara Health Care Initiative shall be derived from the Final
Medi-Cal Utilization Statistics for the 2007-08 state fiscal year.
   (n) "Medicaid inpatient utilization rate" means Medicaid inpatient
utilization rate as defined in Section 1396r-4 of Title 42 of the
United States Code and as set forth in the final disproportionate
share hospital eligibility list for the 2008-09 state fiscal year
released by the department on October 22, 2008.
   (o) "Mental health plan" means a mental health plan that contracts
with the State Department of Mental Health to furnish or arrange for
the provision of mental health services to Medi-Cal beneficiaries
pursuant to Part 2.5 (commencing with Section 5775) of Division 5.
   (p) "New hospital" means a hospital that was not in operation
under current or prior ownership as a private hospital, a
nondesignated public hospital, or a designated public hospital for
any portion of the 2008-09 state fiscal year.
   (q) "Nondesignated public hospital" means a public hospital that
is licensed under subdivision (a) of Section 1250 of the Health and
Safety Code, is not designated as a specialty hospital in the
hospital's annual financial disclosure report for the hospital's
latest fiscal year ending in 2007, and satisfies the definition in
paragraph (25) of subdivision (a) of Section 14105.98, excluding
designated public hospitals.
   (r) "Outpatient base amount" means the total amount of payments
for hospital outpatient services made to a hospital in the 2007
calendar year, as reflected in state paid claims files on January 26,
2008.
   (s) "Private hospital" means a hospital that meets all of the
following conditions:
   (1) Is licensed pursuant to subdivision (a) of Section 1250 of the
Health and Safety Code.
   (2) Is in the Charitable Research Hospital peer group, as set
forth in the 1991 Hospital Peer Grouping Report published by the
department, or is not designated as a specialty hospital in the
hospital's Office of Statewide Health Planning and Development Annual
Financial Disclosure Report for the hospitals latest fiscal year
ending in 2007.
   (3) Does not satisfy the Medicare criteria to be classified as a
long-term care hospital.
   (4) Is a nonpublic hospital, nonpublic converted hospital, or
converted hospital as those terms are defined in paragraphs (26) to
(28), inclusive, respectively, of subdivision (a) of Section
14105.98.
   (t) "Subject federal fiscal year" means a federal fiscal year that
ends after the implementation date and begins before December 31,
2010.
   (u) "Subject hospital" shall mean a hospital that meets all of the
following conditions:
   (1) Is licensed pursuant to subdivision (a) of Section 1250 of the
Health and Safety Code.
   (2) Is in the Charitable Research Hospital peer group, as set
forth in the 1991 Hospital Peer Grouping Report published by the
department, or is not designated as a specialty hospital in the
hospital's Office of Statewide Health Planning and Development Annual
Financial Disclosure Report for the hospitals latest fiscal year
ending in 2007.
   (3) Does not satisfy the Medicare criteria to be classified as a
long-term care hospital.
   (v) "Subject month" means a calendar month beginning on or after
the implementation date and ending before January 1, 2011.
   (w) "Upper payment limit" means a federal upper payment limit on
the amount of the Medicaid payment for which federal financial
participation is available for a class of service and a class of
health care providers, as specified in Part 447 of Title 42 of the
Code of Federal Regulations.
   14167.2.  (a) Private hospitals shall be paid supplemental amounts
for the provision of hospital outpatient services as set forth in
this section. The supplemental amounts shall be in addition to any
other amounts payable to hospitals with respect to those services and
shall not affect any other payments to hospitals.
   (b) Except as set forth in subdivisions (e) and (f), each private
hospital shall be paid an amount for each subject federal fiscal year
equal to a percentage of the hospital's outpatient base amount. The
percentage shall be the same for each hospital for a subject federal
fiscal year and shall result in payments to hospitals which equals
the applicable federal upper payment limit.
   (c) In the event federal financial participation for a subject
federal fiscal year is not available for all of the supplemental
amounts payable to private hospitals under subdivision (b) due to the
application of a federal upper limit or for any other reason, both
of the following shall apply:
   (1) The total amount payable to private hospitals under
subdivision (b) for the subject federal fiscal year shall be reduced
to the amount for which federal financial participation is available.

   (2) The amount payable under subdivision (b) to each private
hospital for the subject federal fiscal year shall be equal to the
amount computed under subdivision (b) multiplied by the ratio of the
total amount for which federal financial participation is available
to the total amount computed under subdivision (b).
   (d) The supplemental amounts set forth in this section are
inclusive of federal financial participation.
   (e) No payments shall be made under this section to a new
hospital.
   (f) No payments shall be made under this section to a converted
hospital for the subject federal fiscal year in which the hospital
becomes a converted hospital or for subsequent subject federal fiscal
years.
   14167.3.  (a) Private hospitals shall be paid supplemental amounts
for the provision of hospital inpatient services and subacute
services as set forth in this section. The supplemental amounts shall
be in addition to any other amounts payable to hospitals with
respect to those services and shall not affect any other payments to
hospitals.
   (b) Except as set forth in subdivisions (g) and (h), each private
hospital shall be paid the following amounts as applicable for the
provision of hospital inpatient services for each subject federal
fiscal year:
   (1) Six hundred forty-seven dollars and seventy cents ($647.70)
multiplied by the hospital's general acute care days.
   (2) Four hundred eighty-five dollars ($485) multiplied by the
hospital's acute psychiatric days that were paid directly by the
department and were not the financial responsibility of a mental
health plan.
   (3) One thousand three hundred fifty dollars ($1,350) multiplied
by the number of the hospital's high acuity days if the hospital's
Medicaid inpatient utilization rate is less than 41.1 percent, at
least 5 percent of the hospital's general acute care days are high
acuity days, and the hospital is not a small and rural hospital as
defined in Section 124840 of the Health and Safety Code. This amount
shall be in addition to the amounts specified in paragraphs (1) and
(2).
   (4) One thousand three hundred fifty dollars ($1,350) multiplied
by the number of the hospital's high acuity days if the hospital
qualifies to receive the amount set forth in paragraph (3) and has
been designated as a Level I, Level II, Adult/Ped Level I, or
Adult/Ped Level II trauma center by the emergency medical services
authority established pursuant to Section 1797.1 of the Health and
Safety Code. This amount shall be in addition to the amounts
specified in paragraphs (1), (2), and (3).
   (c) A private hospital that provides Medi-Cal subacute services
during a subject federal fiscal year and has a Medicaid inpatient
utilization rate that is greater than 5.0 percent and less than 26.10
percent shall be paid for the provision of subacute services during
each subject federal fiscal year a supplemental amount equal to 50
percent of the Medi-Cal subacute payments made to the hospital during
the 2008 calendar year.
   (d) (1) In the event federal financial participation for a subject
federal fiscal year is not available for all of the supplemental
amounts payable to private hospitals under subdivision (b) due to the
application of a federal limit or for any other reason, both of the
following shall apply:
   (A) The total amount payable to private hospitals under
subdivision (b) for the subject federal fiscal year shall be reduced
to reflect the amount for which federal financial participation is
available.
   (B) The amount payable under subdivision (b) to each private
hospital for the subject federal fiscal year shall be equal to the
amount computed under subdivision (b) multiplied by the ratio of the
total amount for which federal financial participation is available
to the total amount computed under subdivision (b).
   (2) In the event federal financial participation for a subject
federal fiscal year is not available for all of the supplemental
amounts payable to private hospitals under subdivision (c) due to the
application of a federal upper limit or for any other reason, both
of the following shall apply:
   (A) The total amount payable to private hospitals under
subdivision (c) for the subject federal fiscal year shall be reduced
to reflect the amount for which federal financial participation is
available.
   (B) The amount payable under subdivision (c) to each private
hospital for the subject federal fiscal year shall be equal to the
amount computed under subdivision (c) multiplied by the ratio of the
total amount for which federal financial participation is available
to the total amount computed under subdivision (c).
   (e) In the event the amount otherwise payable to a hospital under
this section for a subject federal fiscal year exceeds the amount for
which federal financial participation is available for that
hospital, the amount due to the hospital for that federal fiscal year
shall be reduced to the amount for which federal financial
participation is available.
   (f) The amounts set forth in this section are inclusive of federal
financial participation.
   (g) No payments shall be made under this section to a new
hospital.
   (h) No payments shall be made under this section to a converted
hospital for the subject federal fiscal year in which the hospital
becomes a converted hospital or for subsequent subject federal fiscal
years.
   14167.4.  (a) Nondesignated public hospitals shall be paid
supplemental amounts for the provision of hospital inpatient services
as set forth in this section. The supplemental amounts shall be in
addition to any other amounts payable to hospitals with respect to
those services and shall not affect any other payments to hospitals.
   (b) Except as set forth in subdivisions (f) and (g), each
nondesignated public hospital shall be paid the following amounts for
each subject federal fiscal year:
   (1) Two hundred eighteen dollars and eighty-two cents ($218.82)
multiplied by the hospital's general acute care days.
   (2) Four hundred eighty-five dollars ($485) multiplied by the
hospital's acute psychiatric days that were paid directly by the
department and were not the financial responsibility of a mental
health plan.
   (c) In the event federal financial participation for a subject
federal fiscal year is not available for all of the supplemental
amounts payable to nondesignated public hospitals under subdivision
(b) due to the application of a federal upper payment limit or for
any other reason, both of the following shall apply:
   (1) The total amount payable to nondesignated public hospitals
under subdivision (b) for the subject federal fiscal year shall be
reduced to the amount for which federal financial participation is
available.
   (2) The amount payable under subdivision (b) to each nondesignated
public hospital for the subject federal fiscal year shall be equal
to the amount computed under subdivision (b) multiplied by the ratio
of the total amount for which federal financial participation is
available to the total amount computed under subdivision (b).
   (d) In the event the amount otherwise payable to a hospital under
this section for a subject federal fiscal year exceeds the amount for
which federal financial participation is available for that
hospital, the amount due to the hospital for that federal fiscal year
shall be reduced to the amount for which federal financial
participation is available.
   (e) The amounts set forth in this section are inclusive of federal
financial participation.
   (f) No payments shall be made under this section to a new
hospital.
   (g) No payments shall be made under this section to a converted
hospital for the subject federal fiscal year in which the hospital
becomes a converted hospital or for subsequent subject federal fiscal
years.
   14167.5.  (a) Designated public hospitals shall be paid direct
grants in support of health care expenditures, which shall not
constitute Medi-Cal payments, and which shall be funded by the
quality assurance fee set forth in Article 5.22 (commencing with
Section 14167.31). The aggregate amount of the grants to designated
public hospitals for each subject federal fiscal year shall be three
hundred ten million dollars ($310,000,000).
   (b) The director shall allocate the amount specified in
subdivision (a) among the designated public hospitals in accordance
with this subdivision. In determining the allocation, the director
shall rely on data from the Interim Hospital Payment Rate Workbooks.
For purposes of this section, "Interim Hospital Payment Rate Workbook"
means the Interim Hospital Payment Rate Workbook, developed by the
department and approved by the federal Centers for Medicare and
Medicaid Services for use in connection with the Medi-Cal
Hospital/Uninsured Care 1115 Waiver Demonstration, as submitted by
each designated public hospital, or the governmental entity with
which the hospital is affiliated, on or around June 2009 for the
period of July 1, 2007, to June 30, 2008, inclusive.
   (1) Each designated public hospital's share of 80 percent of the
amount specified in subdivision (a) shall be determined by applying a
fraction, the numerator of which is the certified public
expenditures reported by the designated public hospital as allowable
Medi-Cal inpatient expenditures on Schedule 2.1, Column 5, Step 5 of
the Interim Hospital Payment Rate Workbook, and the denominator of
which is the total amount of certified public expenditures reported
as allowable Medi-Cal inpatient expenditures by all designated public
hospitals on Schedule 2.1, Column 5, Step 5 of the Interim Hospital
Payment Rate Workbooks.
   (2) Each designated public hospital's share of 20 percent of the
amount described in subdivision (a) shall be determined by applying a
fraction, the numerator of which is the sum of the uninsured days of
inpatient hospital services reported by the designated public
hospital on Schedule 1, Column 5a, lines 25 through 33 of the Interim
Hospital Payment Rate Workbook, and the denominator of which is the
total uninsured days of inpatient hospital services reported by all
designated public hospitals on Schedule 1, Column 5a, lines 25
through 33 of the Interim Hospital Payment Rate Workbooks.
   (c) In the event federal financial participation for a subject
federal fiscal year is not available for all of the supplemental
amounts payable to private hospitals under Section 14167.3, due to
the limitations on supplemental payments based on a partial-year
federal upper payment limit, the amount payable to each designated
public hospital under subdivision (b) shall equal the designated
public hospital's allocated grant amount under subdivision (b)
multiplied by a fraction, the numerator of which is the total number
of months in the subject federal fiscal year for which federal
financial participation is available for supplemental payment amounts
to private hospitals up to the federal upper payment limit, and the
denominator of which is 12.
   (d) Designated public hospitals shall be paid supplemental
Medi-Cal amounts for acute inpatient psychiatric services that are
paid directly by the department and are not the financial
responsibility of a mental health plan, as set forth in this
subdivision. The supplemental amounts shall be in addition to any
other amounts payable to designated public hospitals, or a
governmental entity with which the hospital is affiliated, with
respect to those services and shall not affect any other payments to
hospitals or to any governmental entity with which the hospital is
affiliated.
   (1) Each designated public hospital shall be paid an amount for
each subject federal fiscal year equal to four hundred eighty-five
dollars ($485) multiplied by the hospital's acute psychiatric days
that were paid directly by the department and were not the financial
responsibility of a mental health plan, inclusive of federal
financial participation.
   (2) In the event federal financial participation for a subject
federal fiscal year is not available for all of the supplemental
amounts payable to designated public hospitals under paragraph (1)
due to the application of a federal upper payment limit or for any
other reason, both of the following shall apply:
   (A) The total amount payable to designated public hospitals under
paragraph (1) for the subject federal fiscal year shall be reduced to
the amount for which federal financial participation is available.
   (B) The amount payable under paragraph (1) to each designated
public hospital for the subject federal fiscal year shall be equal to
the amount computed under paragraph (1) multiplied by the ratio of
the total amount for which federal financial participation is
available to the total amount computed under paragraph (1).
   (3) In the event the amount otherwise payable to a designated
public hospital under this subdivision for a subject federal fiscal
year exceeds the amount for which federal financial participation is
available for that hospital, the amount due to the hospital for that
federal fiscal year shall be reduced to the amount for which federal
financial participation is available.
   14167.6.  (a) The department shall enhance payments to Medi-Cal
managed health care plans for the subject federal fiscal years as set
forth in this section.
   (b) The enhanced payments shall be made as part of the monthly
capitated payments made by the department to managed health care
plans.
   (c) The department shall determine the amount of the enhanced
payments to managed health care plans for each subject month
consistent with the following objectives:
   (1) Pay to managed health care plans in the aggregate the sum of
the individual hospital managed care supplemental payments for each
month.
   (2) Result in payment of the individual hospital managed care
supplemental payment to each subject hospital in accordance with
Section 14167.10.
   (3) Result in rates that may be certified as actuarially sound.
   (4) Result in rates that are approved by the federal government
for purposes of federal financial participation.
   (d) The department shall make enhanced payments to managed health
care plans exclusively for the purpose of making supplemental
payments to hospitals, in order to support the availability of
hospital services and ensure access for Medi-Cal beneficiaries.
Managed health care plans shall pass through enhanced payments to
hospitals in a manner determined by the department. The enhanced
payments to managed health care plans shall be made as follows:

  (1) The enhanced payments shall commence during the second month
following the month during which the quality assurance fee set forth
in Article 5.22 (commencing with Section 14167.31) is due and payable
from hospitals if the quality assurance fee includes funds for
enhanced payments to managed health care plans. The last enhanced
payments made pursuant to this section shall be made during December
2010.
   (2) The enhanced payments made during the first month in which
enhanced payments are made pursuant to this section shall include the
sum of the enhanced payments for all prior months for which payments
are due.
   (3) The enhanced payments made during December 2010 shall include
payments for December 2010 to September 2011, inclusive, to the
extent that federal financial participation is available for the
enhanced payments.
   (e) Payments to managed health care plans that would be paid in
the absence of the payments made pursuant to this section shall not
be reduced as a consequence of payment under this section.
   (f) (1) Each managed health care plan shall expend, in the form of
supplemental payments to hospitals, 100 percent of any rate enhanced
payments it receives under this section, pursuant to Section
14167.10.
   (2) Interest earned by the managed health care plans during timely
implementation of subdivision (b) of Section 14167.10 shall be in
lieu of any administrative fee that the department might otherwise
pay to the plans for implementation of this article.
   (3) The department may issue change orders to amend contracts with
managed health care plans on either a quarterly or semiannual basis
to adjust monthly capitation payments to coincide with updated
enrollment data so that the amounts paid to hospitals pursuant to
this section equals, or nearly equals, the amounts set forth in
subdivision (a) of Section 14167.10.
   (g) In the event federal financial participation is not available
for all of the enhanced managed care payments determined for a month
pursuant to this section for any reason, the enhanced payments
mandated by this section for that month shall be reduced
proportionately to the amount for which federal financial
participation is available.
   (h) Enhanced payments to a managed health care plan pursuant to
this section shall not be taken into consideration by the department
or the Department of Managed Health Care in determining the
percentage of total costs attributed to administrative costs for the
purposes of determining compliance with any administrative costs
limit, including, but not limited to, those described in Sections
14087.1 and 14464, Section 1378 of the Health and Safety Code, and
Section 1300.78 of Title 28 of the California Code of Regulations.
   (i) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department shall implement this section by means of policy letters or
similar instructions, without taking further regulatory action.
   14167.7.  (a) The amount of any payments made under this article
to private hospitals, including the amount of payments made under
Sections 14167.2 and 14167.3 and additional payments to private
hospitals by managed health care plans pursuant to Section 14167.6,
shall not be included in the calculation of the low-income percent or
the OBRA 1993 payment limitation, as defined in paragraph (24) of
subdivision (a) of Section 14105.98, for purposes of determining
payments to private hospitals pursuant to Section 14166.11.
   (b) The amount of any payments made to a hospital under this
article shall not be included in the calculation of stabilization
funding under Article 5.20 (commencing with Section 14166).
   14167.8.  The payments to a hospital under this article shall not
be made for a subject federal fiscal year or any portion of a subject
federal fiscal year during which the hospital is closed. A hospital
shall be deemed to be closed on the first day of any period during
which the hospital has no acute inpatients for at least 30
consecutive days. A hospital's payments under this article for a
subject federal fiscal year during which a hospital is closed for a
portion of the subject federal fiscal year shall be reduced by
applying a fraction, expressed as a percentage, the numerator of
which shall be the number of days after the implementation date
during the subject federal fiscal year that the hospital is closed
and the denominator of which is the number of days in the subject
federal fiscal year after the implementation date.
   14167.9.  Subject to the limitations in Section 14167.4, the
following shall apply:
   (a) The payments to hospitals under Sections 14167.2, 14167.3,
14167.4, and 14167.5 for the 2008-09 federal fiscal year shall be
made on or before the 45th day following the day on which federal
approval is granted.
   (b) The payments to hospitals under Sections 14167.2, 14167.3,
14167.4, and 14167.5 for the 2009-10 federal fiscal year shall be
made on a quarterly basis. The amounts payable to a hospital for each
quarter shall be one-fourth of the amount payable to the hospital
for the entire federal fiscal year, except as may be adjusted by the
department under Section 14167.8. Payments to hospitals for each
quarter during the 2009-10 federal fiscal year shall be made the
later of the last day of the second month of the quarter or the 45th
day following the day on which federal approval is granted.
   (c) The payments to hospitals under Sections 14167.2, 14167.3,
14167.4, and 14167.5 for the 2010-11 federal fiscal year shall be
made on or before the later of December 31, 2010, or the 45th day
following the day on which federal approval is granted.
   (d) For purposes of this subdivision, "federal approval" shall
have the meaning set forth in subdivision (h) of Section 14167.31.
   14167.10.  (a) (1) At the same time that the department makes an
enhanced payment to a managed health care plan under Section 14167.6,
the department shall notify the plan of each hospital to which the
plan shall make supplemental managed care payments as a consequence
of receiving the enhanced payment and the amount of the supplemental
payment. The department shall determine the amount of the
supplemental payment due to each subject hospital so that the total
supplemental managed care payments to the hospital from all managed
health care plans resulting from payments made to the managed health
care plans for the subject month under Section 14167.6 equals or
approximately equals the hospital's individual hospital managed care
supplemental payment.
   (2) In the case of the enhanced payments made to a managed health
care plan during the first month in which the payments are made to
the plan, the amounts of supplemental payments due to each hospital
pursuant to paragraph (1) shall be multiplied by the number of months
for which the enhanced payments were made.
   (3) The notice provided by the department in connection with the
enhanced managed care payments to each managed health care plan
during December 2010 shall also direct the managed health care plan
to make monthly supplemental payments to hospitals for months, if
any, from January 2011 to September 2011, inclusive, for which
federal financial participation is available as described in
paragraph (3) of subdivision (d) of Section 14167.6 and the amount of
the supplemental payments as calculated pursuant to this
subdivision.
   (b) Each managed health care plan receiving payments under Section
14167.6 shall make supplemental payments to hospitals within 30 days
of receiving the payments under Section 14167.6, except that if the
managed health care plan receives enhanced payments during December
2010, which include payments relating to some or all of the month of
January 2011 to September 2011, inclusive, the managed health care
plan shall make payments relating to the months of January 2011 to
September 2011, inclusive, during each month to which the payment
relates. The payments shall be made to those hospitals and in those
amounts set forth by the department in its notice provided pursuant
to subdivision (a).
   (c) The supplemental payments made to hospitals pursuant to this
section shall be in addition to any other amounts payable to
hospitals by a managed health care plan or otherwise and shall not
affect any other payments to hospitals.
   (d) For each subject federal fiscal year, the sum of all
supplemental payments made by a managed health care plan to subject
hospitals pursuant to this section shall equal, or approximately
equal, all enhanced payments received by the managed health care plan
from the department pursuant to Section 14167.6.
   (e) Managed health care plans shall not take into account payments
made pursuant to this article in negotiating the amount of payments
to hospitals that are not made pursuant to this article.
   (f) The obligations of a Medi-Cal managed health care plan to make
payments to a hospital for services furnished by the hospital that
are not covered by a contract between the managed health care plan
and the hospital, including the amounts of payments required apart
from payments under this article, shall not be affected by any
payments made under this article.
   (g) In the event federal financial participation for a month is
not available for all of the enhanced managed health care plan
payments pursuant to Section 14167.6 for any reason, the supplemental
payments made to hospitals under this section shall be reduced
proportionately to the amount for which federal financial
participation is available, and the department's notice under
subdivision (a) shall reflect that reduction.
   (h) No payments shall be made under this section to a new
hospital.
   (i) Any delegation or attempted delegation by a managed health
care plan of its obligation to make payments under this section shall
not relieve the plan from its obligation to make those payments.
Managed health care plans shall submit the documentation the
department may require to demonstrate compliance with this
subdivision. The documentation shall demonstrate actual payments to
hospitals, and not assignment to subcontractors of the managed health
care plan's obligation of the duty to pay hospitals. The department
and each managed health care plan shall make available to each
subject hospital, within 15 days of receipt of the hospital's written
request, documentation demonstrating the amount that the plan paid
to the subject hospital for a subject month and the amount due from
the plan to the subject hospital for the subject month.
   (j) If the department determines that a managed health care plan
has failed to pay any enhanced payment amounts it received pursuant
to Section 14167.6 to hospitals as required by this section, the
department shall immediately recover the amounts determined by an
offset to the capitation payments made to the managed health care
plan and by any other legal means available. At least 30 calendar
days prior to seeking any recovery, the department shall notify the
managed health care plan to explain the nature of the department's
determination, to establish the amount of the enhanced payment amount
in excess of supplemental payments to hospitals, and to describe the
recovery process. The department may terminate any or all contracts
between the department and a managed health care plan that fails to
make payments as required by this section.
   (k) The department shall pay to a managed health care plan or
plans, as the director determines is or are appropriate, any amounts
recovered under subdivision (i) for the purpose of making payments to
hospitals pursuant to this section and shall direct the managed
health care plan or plans receiving those amounts to make specific
payments to specific hospitals to ensure that hospitals receive the
amounts set forth in this section.
   (l) Managed health care plans shall in no event be obligated under
this section to make supplemental payments to hospitals that exceed
the enhanced payments made to the managed care health plans under
Section 14167.6.
   14167.11.  (a) The department shall increase payments to mental
health plans for the subject federal fiscal years as set forth in
this section.
   (b) For each fiscal quarter that begins on or after the
implementation date, the state shall make enhanced payments to each
mental health plan. The amount of those enhanced payments to a mental
health plan shall be the sum of all individual hospital acute
psychiatric supplemental payments for subject hospitals located in
each county in which the mental health plan operates.
   (c) The state shall make enhanced payments to mental health plans
exclusively for the purpose of making supplemental payments to
hospitals, in order to support the availability of hospital mental
health services and ensure access for Medi-Cal beneficiaries to
hospital mental health services. The enhanced payments to mental
health plans shall be made as follows:
   (1) The enhanced payments shall commence on or before the later of
the last day of the second month of the quarter in which federal
approval is granted or the 45th day following the day on which
federal approval is granted. Subsequent enhanced payments shall be
made on the last day of the second month of each quarter. The last
enhanced payments made pursuant to this section shall be made during
November 2010.
   (2) The enhanced payments made for the first quarter for which
enhanced payments are made under this section shall include the sum
of enhanced payments for all prior quarters for which payments are
due under subdivision (b).
   (3) The enhanced payments made during November 2010 shall include
payments computed under subdivision (b) for all quarters in the
2010-11 federal fiscal year to the extent that federal financial
participation is available for the payments.
   (d) (1) Each mental health plan shall expend, in the form of
additional payments to hospitals, 100 percent of any enhanced
payments it receives under this section, pursuant to Section
14167.12.
   (2) At the discretion of the director, the plans shall receive an
administrative fee, in an amount determined by the department, that
is in addition to the enhanced payments, that is reflective of actual
administrative costs and that shall be paid from the fund created in
Article 5.22 (commencing with Section 14167.31).
   (e) In the event federal financial participation for a subject
federal fiscal year is not available for all of the enhanced acute
psychiatric payments determined for a quarter pursuant to this
section for any reason, the enhanced payments mandated by this
section for that quarter shall be reduced proportionately to the
amount for which federal financial participation is available.
   (f) Payments to mental health plans that would be paid in the
absence of the payments made pursuant to this section shall not be
reduced as a consequence of the payments under this section.
   (g) In the event the director determines that payment of the
individual acute psychiatric supplemental payments may be made by the
department directly to the hospitals under this section and Section
14167.12 without the need for transmitting the funds through the
mental health plans, those direct payments shall be made
notwithstanding any other provision of this article or Article 5.22
(commencing with Section 14167.31).
   (h) The department may, as necessary, allocate money appropriated
to it from the Hospital Quality Assurance Revenue Fund to the State
Department of Mental Health for the purposes of making increased
payments to mental health plans pursuant to this article.
   14167.12.  (a) At the same time that the state makes an enhanced
payment to a mental health plan under Section 14167.11, the state
shall notify the mental health plan that the plan shall make payments
in the amount of the individual hospital acute psychiatric
supplemental payment to each subject hospital located in each county
in which the mental health plan operates as a consequence of
receiving the enhanced payment and the amount of the individual
hospital acute psychiatric supplemental payment due to each hospital,
subject to the following:
   (1) In the case of the enhanced payments made to a mental health
plan during the first quarter in which the payments are made to the
plan, the notice shall direct mental health plans to make
supplemental payments to each hospital in an amount equal to each
hospital's individual hospital acute psychiatric supplemental payment
multiplied by the number of quarters for which the enhance payments
were made.
   (2) The notice provided by the department in connection with the
enhanced payments to each mental health plan during November 2010
shall also direct the mental health plan to make quarterly
supplemental payments to hospitals for quarters, if any, between
January 2011 and September 2011, inclusive, for which federal
financial participation is available as described in paragraph (3) of
subdivision (c) of Section 14167.11 and the amount of the
supplemental payments as calculated pursuant to this subdivision.
   (b) Each mental health plan receiving payments under Section
14167.11 shall make supplemental payments to hospitals within 30 days
of receiving the payments under Section 14167.11, except that if the
mental health plan receives enhanced payments during November 2010,
which include payments relating to some or all of the quarters
between January 2011 and September 2011, inclusive, the mental health
plan shall make payments relating to the quarters between January
2011 and September 2011, inclusive, on or before the end of each
quarter to which the payment relates. The payments shall be made to
those hospitals and in those amounts set forth by the department in
its notice provided pursuant to subdivision (a).
   (c) The supplemental payments made to hospitals pursuant to this
section shall be in addition to any other amounts payable to
hospitals by a mental health plan or otherwise and shall not affect
any other payments to hospitals.
   (d) For each subject federal fiscal year, the sum of all
supplemental payments made by a mental health plan to subject
hospitals pursuant to this section shall equal all enhanced payments
received by the mental health plan from the state pursuant to Section
14167.11.
   (e) Mental health plans shall not take into account payments made
pursuant to this article in negotiating the amount of payments to
hospitals that are not made pursuant to this article.
   (f) A mental health plan is obligated to make payments under this
section only to the extent of the payments it receives under Section
14167.11. A mental health plan may retain any interest it earns on
funds it receives under Section 14167.11 prior to making payments of
the funds to hospitals under this section.
   (g) No payments shall be made under this section to a new
hospital.
   (h) In the event federal financial participation for a quarter is
not available for all of the enhanced mental health payments made
pursuant to Section 14167.11 for any reason, the supplemental
payments to hospitals under this section shall be reduced
proportionately to the amount for which federal financial
participation is available and the department's notice under
subdivision (a) shall reflect the reduction.
   14167.13.  (a) Payment rates for hospital outpatient services,
furnished by private hospitals, nondesignated public hospitals, and
designated public hospitals before January 1, 2011, exclusive of
amounts payable under this article, shall not be reduced below the
rates in effect on the effective date of this article.
   (b) Rates payable to hospitals for hospital inpatient services
furnished before January 1, 2011, under contracts negotiated pursuant
to the Selective Provider Contracting Program shall not be reduced
below the contract rates in effect on the effective date of this
article. This subdivision shall not prohibit changes to the
supplemental payments paid to individual hospitals under Sections
14166.12, 14166.17, and 14166.23. The aggregate supplemental payments
under Sections 14166.12, 14166.17, and 14166.23 that are not derived
from the funding made available under Section 14166.20, or
intergovernmental transfers described in paragraph (4) of subdivision
(d) of Section 14166.12, and paragraph (4) of subdivision (d) of
Section 14166.17, for the 2009-10 and 2010-11 state fiscal years,
shall not be less than the aggregate payments under each of these
sections during the 2008-09 state fiscal year that are not derived
from the funding made available under Section 14166.20, or
intergovernmental transfers described in paragraph (4) of subdivision
(d) of Section 14166.12, and paragraph (4) of subdivision (d) of
Section 14166.17.
   (c) Payments to private hospitals and nondesignated public
hospitals for hospital inpatient services furnished before January 1,
2011, that are not reimbursed under a contract negotiated pursuant
to the Selective Provider Contracting Program, exclusive of amounts
payable under this article, shall not be less than the amount of
payments that would have been made under the payment methodology in
effect on the effective date of this article.
   (d) Payments to hospitals under Sections 14166.6, 14166.11, and
14166.16 for the 2009-10 and 2010-11 state fiscal years shall not be
less than the payments due under the methodology set forth in those
sections in effect on the effective date of this article.
   (e) Reimbursement to designated public hospitals, or the
governmental units with which they are affiliated, for services
furnished before January 1, 2011, pursuant to Sections 14166.4 and
14166.7, shall not be reduced below the level of reimbursement
provided for in the applicable methodologies in effect on the
effective date of this article.
   (f) Payments for subacute services furnished by private hospitals,
nondesignated public hospitals, and designated public hospitals
before January 1, 2011, exclusive of amounts payable under this
article, shall not be reduced below the payments that would be made
under rates or methodologies in effect on the effective date of this
article.
   (g) Solely for purposes of this article, a rate reduction or a
change in a rate methodology made on or before the effective date of
this article that is enjoined by a court shall be included in the
determination of a rate or a rate methodology in effect on the
effective date of this article until all appeals or judicial review
have been exhausted and the rate reduction or change in rate
methodology has been permanently enjoined or otherwise permanently
prevented from being implemented.
   14167.14.  (a) The director shall do all of the following:
   (1) Submit any state plan amendment or waiver request that may be
necessary to implement this article.
   (2) Seek federal approval for the use of the entire federal upper
payment limits applicable to hospital services for payments under
this article for the 2008-09, 2009-10, and 2010-11 federal fiscal
years.
   (3) Seek federal approvals or waivers as may be necessary to
implement this article and to obtain federal financial participation
to the maximum extent possible for the payments under this article.
   (4) Amend the contracts between the managed health care plans and
the department as necessary to incorporate the provisions of Sections
14167.6 and 14167.10 and promptly seek all necessary federal
approvals of those amendments. The department shall pursue amendments
to the contracts as soon as possible after the effective date of
this article and Article 5.22 (commencing with Section 14167.31), and
shall not wait for federal approval of this article or Article 5.22
(commencing with Section 14167.31) prior to pursuing amendments to
the contracts. The amendments to the contracts shall, among other
provisions, set forth an agreement to increase payment rates to
managed health care plans under Section 14166.6 and increase payments
to hospitals under Section 14166.10 effective April 2009 or as soon
thereafter as possible, conditioned on obtaining all federal
approvals necessary for federal financial participation for the
enhanced payments to the managed health care plans.
   (b) 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. Contracts entered into for purposes of
implementing this article or Article 5.22 (commencing with Section
14167.31) shall not be subject to Part 2 (commencing with Section
10100) of Division 2 of the Public Contract Code.
   (c) This article shall become inoperative if either of the
following occur:
   (1) In the event, and on the effective date, of a final judicial
determination made by any court of appellate jurisdiction or a final
determination by the federal Department of Health and Human Services
or the federal Centers for Medicare and Medicaid Services that any
element of this article cannot be implemented.
   (2) In the event both of the following conditions exist:
   (A) The federal Centers for Medicare and Medicaid Services denies
approval for, or does not approve before January 1, 2012, the
implementation of Article 5.22 (commencing with Section 14167.31) or
this article.
   (B) Either or both articles cannot be modified by the department
pursuant to subdivision (e) of Section 14167.35 in order to meet the
requirements of federal law or to obtain federal approval.
   (d) If this article becomes inoperative pursuant to paragraph (1)
of subdivision (c) and the determination applies to any period or
periods of time prior to the effective date of the determination, the
department shall have authority to recoup all payments made pursuant
to this article during that period or those periods of time.
   (e) In the event any hospital, or any party on behalf of a
hospital, shall initiate a case or proceeding in any state or federal
court in which the hospital seeks any relief of any sort whatsoever,
including, but not limited to, monetary relief, injunctive relief,
declaratory relief, or a writ, based in whole or in part on a
contention that any or all of this article is unlawful and may not be
lawfully implemented, both of the following shall apply:
   (1) No payments shall be made to the hospital pursuant to this
article until the case or proceeding is finally resolved, including
the final disposition of all appeals.
   (2) Any amount computed to be payable to the hospital pursuant to
this section for a project year shall be withheld by the department
and shall be paid to the hospital only after the case or proceeding
is finally resolved, including the final disposition of all
                                    appeals.
   (f) No payment shall be made under this article until all
necessary federal approvals for the payment and for the fee
provisions in Article 5.22 (commencing with Section 14167.31) have
been obtained and the fee has been imposed and collected. Payments
under this article shall be made only to the extent that the fee
established in Article 5.22 (commencing with Section 14167.31) is
collected and available to support the payments.
   (g) Supplemental payments for the 2008-09 federal fiscal year
shall not reduce the maximum federal funds available annually
pursuant to the Special Terms and Conditions, as amended October 5,
2007, of the Current Section 1115 Waiver.
   (h) (1) The director shall negotiate the federal approvals
required to implement this article and Article 5.22 (commencing with
Section 14167.31) for the 2009-10 and 2010-11 federal fiscal years
concurrently with the negotiation of a federal waiver that will
replace the Current Section 1115 Waiver, with a goal of obtaining
federal approvals that do not adversely impact the federal funds that
would otherwise be available for services to Medi-Cal beneficiaries
and the uninsured. The director may initiate the concurrent
negotiations required by this subdivision by submitting a concept
paper to the federal Centers for Medicare and Medicaid Services
outlining the key elements of the replacement waiver consistent with
the goals set forth in this subdivision.
   (2) In negotiating the terms of a federal waiver that will replace
the Current 1115 Waiver, the department shall explore opportunities
for reform of the Medi-Cal program and strengthen California's health
care safety net. Subject to subsequent legislative approval, the
department shall explore program reforms, that may include, but need
not be limited to, strategies to accomplish payment system reforms
for hospital inpatient and outpatient care, including incentive based
payments, new payment methodologies such as diagnostic-related
group-based (DRG-based), or similar methodologies, patient safety
protocols, and quality measurement.
   (3) This article and Article 5.22 (commencing with Section
14167.31) shall not be implemented with respect to the 2009-10 and
2010-11 federal fiscal years until the earlier of April 30, 2010, or
the date the federal government approves a federal waiver for a
demonstration that will replace the Current Section 1115 Waiver.
   (i) A hospital's receipt of payments under this article for
services rendered prior to the effective date of this article is
conditioned on the hospital's continued participation in Medi-Cal for
at least 30 days after the effective date of this article.
   (j) All payments made by the department to hospitals, managed
health care plans, and mental health plans under this article shall
be made only from the following:
   (1) The quality assurance fee set forth in Article 5.22
(commencing with Section 14167.31) and due and payable on or before
December 31, 2010.
   (2) Federal reimbursement and any other related federal funds.
   14167.15.  Notwithstanding any other provision of this article or
Article 5.22 (commencing with Section 14167.31), the director may
proportionately reduce the amount of any supplemental payments,
enhanced payments, or grants under this article to the extent that
the payment or grant would result in the reduction of other amounts
payable to a hospital or managed health care plan or mental health
plan due to the application of federal law.
   14167.16.  The director may, pursuant to Section 14167.39, decide
not to implement or to discontinue implementation of this article and
Article 5.22 (commencing with Section 14167.31), and to
retroactively invalidate the requirements for supplemental payments
or other payments under this article.
   14167.17.  This article shall remain in effect only until January
1, 2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
  SEC. 2.  Article 5.22 (commencing with Section 14167.31) is added
to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code, to read:

      Article 5.22.  Quality Assurance Fee Act


   14167.31.  (a) "Aggregate quality assurance fee" means the sum of
all of the following:
   (1) The annual fee-for-service days for an individual hospital
multiplied by the fee-for-service per diem quality assurance fee
rate.
   (2) The annual managed care days for an individual hospital
multiplied by the managed care per diem quality assurance fee rate.
   (3) The annual Medi-Cal days for an individual hospital multiplied
by the Medi-Cal per diem quality assurance fee rate.
   (b) "Annual fee-for-service days" means the number of
fee-for-service days of each hospital subject to the quality
assurance fee in the 2007 calendar year, as reported on the days data
source.
   (c) "Annual managed care days" means the number of managed care
days of each hospital subject to the quality assurance fee in the
2007 calendar year, as reported on the days data source.
   (d) "Annual Medi-Cal days" means the number of Medi-Cal days of
each hospital subject to the quality assurance fee in the 2007
calendar year, as reported on the days data source.
   (e) "Days data source" means the following:
   (1) For a hospital that did not submit an Annual Financial
Disclosure Report to the Office of Statewide Health Planning and
Development for a fiscal year ending during 2007, but submitted that
report for a fiscal period ending in 2008 that includes at least 10
months of 2007, the Annual Financial Disclosure Report submitted by
the hospital to the Office of Statewide Health Planning and
Development for the fiscal period in 2008 that includes at least 10
months of 2007.
   (2) For a hospital owned by Kaiser Foundation Hospitals that
submitted corrections to reported patient days to the Office of
Statewide Health Planning and Development for its fiscal year ending
in 2007 before July 31, 2009, the corrected data.
   (3) For all other hospitals, the hospital's Annual Financial
Disclosure Report in the Office of Statewide Health Planning and
Development files as of October 31, 2008, for its fiscal year ending
during 2007.
   (f) "Designated public hospital" shall have the meaning given in
subdivision (d) of Section 14166.1 as that section may be amended
from time to time.
   (g) "Exempt facility" means any of the following:
   (1) A public hospital as defined in paragraph (25) of subdivision
(a) of Section 14105.98.
   (2) With the exception of a hospital that is in the Charitable
Research Hospital peer group, as set forth in the 1991 Hospital Peer
Grouping Report published by the department, a hospital that is a
hospital designated as a specialty hospital in the hospital's Office
of Statewide Health Planning and Development Hospital Annual
Disclosure Report for the hospital's fiscal year ending in the 2007
calendar year.
   (3) A hospital that satisfies the Medicare criteria to be a
long-term care hospital.
   (4) A small and rural hospital as specified in Section 124840 of
the Health and Safety Code designated as that in the hospital's
Office of Statewide Health Planning and Development Hospital Annual
Disclosure Report for the hospital's fiscal year ending in the 2007
calendar year.
   (h) (1) "Federal approval" means the last approval by the federal
government required for the implementation of this article and
Article 5.21 (commencing with Section 14167.1).
   (2) If federal approval is sought initially for only the 2008-09
federal fiscal year and separately secured for subsequent federal
fiscal years, the implementation date, as defined in subdivision (i)
of Section 14167.1, for the 2008-09 federal fiscal year shall occur
when all necessary federal approvals have been secured for that
federal fiscal year.
   (i) "Fee-for-service per diem quality assurance fee rate" means a
fixed fee on fee-for-service days of two hundred thirty-three dollars
and sixty-six cents ($233.66) per day.
   (j) "Fee-for-service days" means inpatient hospital days where the
service type is reported as "acute care," "psychiatric care," and
"chemical dependency care and rehabilitation care," and the payer
category is reported as "Medicare traditional," "county indigent
programs-traditional," "other third parties-traditional," "other
indigent," and "other payers," for purposes of the Annual Financial
Disclosure Report submitted by hospitals to the Office of Statewide
Health Planning and Development.
   (k) "Fee percentage" means, for a subject federal fiscal year, a
fraction, expressed as a percentage, the numerator of which is the
amount of payments under Sections 14167.2, 14167.3, and 14167.4,
subdivision (b) of Section 14167.5, and Section 14167.6 for which
federal financial participation is available and the denominator of
which is three billion seven hundred eleven million seven hundred
eight thousand seven hundred forty dollars ($3,711,708,740).
   (l) "General acute care hospital" shall mean any hospital licensed
pursuant to subdivision (a) of Section 1250 of the Health and Safety
Code.
   (m) "Hospital community" means any hospital industry organization
or system that represents children's hospitals, nondesignated public
hospitals, designated public hospitals, private safety-net hospitals,
and other public or private hospitals.
   (n) "Managed care days" means inpatient hospital days in the 2007
calendar year as reported on the days data source where the service
type is reported as "acute care," "psychiatric care," and "chemical
dependency care and rehabilitation care," and the payer category is
reported as "Medicare managed care," "county indigent
programs-managed care," and "other third parties-managed care," for
purposes of the Annual Financial Disclosure Report submitted by
hospitals to the Office of Statewide Health Planning and Development.

   (o) "Managed care per diem quality assurance fee rate" means a
fixed fee on managed care days of twenty-seven dollars and
twenty-five cents ($27.25) per day.
   (p) "Medi-Cal days" means inpatient hospital days in the 2007
calendar year as reported on the days data source where the service
type is reported as "acute care," "psychiatric care," and "chemical
dependency care and rehabilitation care," and the payer category is
reported as "Medi-Cal-traditional" and "Medi-Cal-managed care," for
purposes of the Annual Financial Disclosure Report submitted by
hospitals to the Office of Statewide Health Planning and Development.

   (q) "Medi-Cal per diem quality assurance fee rate" means a fixed
fee on Medi-Cal days of two hundred ninety-three dollars ($293) per
day.
   (r) "Nondesignated public hospital" means a public hospital that
is licensed under subdivision (a) of Section 1250 of the Health and
Safety Code and is defined in paragraph (25) of subdivision (a) of
Section 14105.98, excluding designated public hospitals.
   (s) "Prior fiscal year data" means any data taken from sources
that the department determines are the most accurate and reliable at
the time the determination is made, or may be calculated from the
most recent audited data using appropriate update factors. The data
may be from prior fiscal years, current fiscal years, or projections
of future fiscal years.
   (t) "Private hospital" means a hospital licensed under subdivision
(a) of Section 1250 of the Health and Safety Code that is a
nonpublic hospital, nonpublic converted hospital, or converted
hospital as those terms are defined in paragraphs (26) to (28),
inclusive, respectively, of subdivision (a) of Section 14105.98.
   (u) "Subject federal fiscal year" means a federal fiscal year
ending after the implementation date, as defined in Section 14167.1,
and beginning before December 31, 2010.
   (v) "Upper payment limit" means a federal upper payment limit on
the amount of the Medicaid payment for which federal financial
participation is available for a class of service and a class of
health care providers, as specified in Part 447 of Title 42 of the
Code of Federal Regulations.
   14167.32.  (a) There shall be imposed on each general acute care
hospital that is not an exempt facility a quality assurance fee, as a
condition of participation in state-funded health insurance
programs, other than the Medi-Cal program.
   (b) The quality assurance fee shall be computed starting on the
effective date of this article and continue through and including
December 31, 2010.
   (c) The department shall calculate the amount of the aggregate
quality assurance fee for each general acute care hospital that is
not an exempt facility within 30 days after the effective date of
this article. Within 20 days of calculating the aggregate quality
assurance fee, the department shall send notice to each general acute
care hospital that is not an exempt facility of the amount of the
hospital's aggregate quality assurance fee.
   (d) For calendar quarters prior to federal approval of the
implementation of this article and the calendar quarter in which the
department receives notice of federal approval of the implementation
of this article, the following provisions shall apply:
   (1) For the partial calendar quarter ending September 30, 2009, 20
days after the effective date of this article, each general acute
care hospital that is not an exempt facility shall certify to the
best of its knowledge, on a form provided by the department, that the
hospital is prepared to pay the aggregate quality assurance fee for
that hospital.
   (2) For each calendar quarter beginning on or after October 1,
2009, and ending on or before September 30, 2010, within 30 days
following the beginning of each calendar quarter, each general acute
care hospital that is not an exempt facility shall certify to the
best of its knowledge, on a form provided by the department, that the
hospital is prepared to pay the aggregate quality assurance fee for
that hospital divided by four.
   (3) For the calendar quarter beginning October 1, 2010, on or
before November 1, 2010, each general acute care hospital that is not
an exempt facility shall certify to the best of its knowledge, on a
form provided by the department, that the hospital is prepared to pay
the aggregate quality assurance fee for that hospital.
   (4) Each certification required by this subdivision shall be
cumulative, and in addition, to any prior certification.
   (e) Upon receipt of federal approval, the following shall become
operative:
   (1) Within 10 days following receipt of the notice of federal
approval from the federal government, the department shall send
notice to each hospital subject to the quality assurance fee, and
publish on its Internet Web site, the following information:
   (A) The date that the state received notice of federal approval.
   (B) The fee percentage for each subject federal fiscal year.
   (2) The notice to each hospital subject to the quality assurance
fee shall also state the following:
   (A) Within 30 days after the date the department received notice
of federal approval, the hospital shall pay the amount of the quality
assurance fee the hospital has certified or will certify for
calendar quarters, up to, and including, the quarter in which the
department receives notice of approval by the federal government of
the implementation of this article, pursuant to subdivision (d),
multiplied by the applicable fee percentage or percentages, except
that, in the event that the director has made modifications to the
fee model to secure federal approval pursuant to subdivision (f) or
(g) of Section 14167.35, the above-described amount, adjusted to
reflect the director's modifications.
   (B) The total amount of the fee that will be payable by the
hospital within 30 days after the date the department received notice
of federal approval.
   (3) Within 30 days after the date the department received notice
of federal approval, each general acute care hospital that is not an
exempt facility shall pay the amounts stated in the department's
notice pursuant to paragraph (2).
   (4) Within 30 days following the beginning of each calendar
quarter, commencing with the quarter following the last quarter
governed by subdivision (d) and ending with, and including, the
calendar quarter ending December 31, 2010, each general acute care
hospital that is not an exempt facility shall pay to the department
the amounts that the hospital would certify to pay for the relevant
quarter pursuant to subdivision (d), multiplied by the applicable fee
percentage, provided that, if modifications were made to the fee
model by the director in order to secure federal approval pursuant to
subdivision (f) or (g) of Section 14167.35, then the hospital shall
pay the amount resulting from the modifications.
   (f) The quality assurance fee, as paid pursuant to this
subdivision, shall be paid by each hospital subject to the fee to the
department for deposit in the Hospital Quality Assurance Revenue
Fund. Deposits may be accepted at any time and will be credited
toward the fiscal year for which they were assessed.
   (g) Subdivisions (d) and (e) shall become inoperative if the
federal Centers for Medicare and Medicaid Services denies approval
for, or does not approve before January 1, 2012, the implementation
of this article or Article 5.21 (commencing with Section 14167.1),
and either or both article cannot be modified by the department
pursuant to subdivision (e) of Section 14167.35 in order to meet the
requirements of federal law or to obtain federal approval. If
subdivisions (d) and (e) become inoperative pursuant to this
subdivision, each hospital subject to the quality assurance fee shall
be released from any certifications made pursuant to subdivision
(d).
   (h) In no case shall the aggregate fees collected in a subject
federal fiscal year pursuant to this section exceed the maximum
percentage of the annual aggregate net patient revenue for hospitals
subject to the fee that is prescribed pursuant to federal law and
regulations as necessary to preclude a finding that an indirect
guarantee has been created.
   (i) (1) Interest shall be assessed on quality assurance fees not
paid on the date due at the greater of 10 percent per annum or the
rate at which the department assesses interest on Medi-Cal program
overpayments to hospitals that are not repaid when due. Interest
shall begin to accrue the day after the date the payment was due and
shall be deposited in the Hospital Quality Assurance Revenue Fund.
   (2) In the event that any fee payment is more than 60 days
overdue, a penalty equal to the interest charge described in
paragraph (1) shall be assessed and due for each month for which the
payment is not received after 60 days.
   (j) When a hospital 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 payments or other state payments to the hospital in
accordance with Section 12419.5 of the Government Code until the full
amount is recovered. Any deduction shall be made only after written
notice to the hospital and may be taken over a period of time. All
amounts, except penalties, deducted by the department under this
subdivision shall be deposited in the Hospital Quality Assurance
Revenue Fund. The remedy provided by this section is in addition to
other remedies available under law.
   (k) The payment of the quality assurance fee shall not be
considered as an allowable cost for Medi-Cal cost reporting and
reimbursement purposes.
   (l) The department shall work in consultation with the hospital
community to implement the quality assurance fee.
   (m) This subdivision creates a contractually enforceable promise
on behalf of the state to use the proceeds of the quality assurance
fee, including any federal matching funds, solely and exclusively for
the purposes set forth in this article as they existed on the
effective date of this article, to limit the amount of the proceeds
of the quality assurance fee to be used to pay for the health care
coverage of children to the amounts specified in this article and to
make any payments for the department's costs of administration to the
amounts set forth in this article on the effective date of this
article to maintain and continue prior reimbursement levels as set
forth in Article 5.21 (commencing with Section 14167.1) on the
effective date of that article, and to otherwise comply with all its
obligations set forth in Article 5.21 (commencing with Section
14167.1) and this article.
   (n) For the purpose of this article, references to the receipt of
notice by the state of federal approval of the implementation of this
article shall refer to the last date that the state receives notice
of all federal approval or waivers required for implementation of
this article and Article 5.21 (commencing with Section 14167.1),
subject to Section 14167.14.
   (o) (1) Effective January 1, 2011, the rates payable to hospitals
and managed health care plans under Medi-Cal shall be the rates then
payable without the supplemental and enhanced payments set forth in
Article 5.21 (commencing with Section 14167.1).
   (2) The supplemental payments and other payments under Article
5.21 (commencing with Section 14167.1) shall be regarded as quality
assurance payments, the implementation or suspension of which does
not affect a determination of the adequacy of any rates under federal
law.
   14167.35.  (a) The Hospital Quality Assurance Revenue Fund is
hereby created in the State Treasury.
   (b) (1) All fees required to be paid to the state pursuant to this
article shall be paid in the form of remittances payable to the
department.
   (2) The department shall directly transmit the fee payments and
any related federal reimbursement to the Treasurer to be deposited in
the Hospital Quality Assurance Revenue Fund. Notwithstanding Section
16305.7 of the Government Code, any interest and dividends earned on
deposits in the fund shall be retained in the fund for purposes
specified in subdivision (c).
   (c) All funds in the Hospital Quality Assurance Revenue Fund,
together with any interest and dividends earned on money in the fund,
shall, upon appropriation by the Legislature, be used exclusively to
enhance federal financial participation for hospital services under
the Medi-Cal program, to provide additional reimbursement to, and to
support quality improvement efforts of, hospitals, and to minimize
uncompensated care provided by hospitals to uninsured patients, in
the following order of priority:
   (1) To pay for the department's staffing and administrative costs
directly attributable to implementing Article 5.21 (commencing with
Section 14167.1) and this article, including any administrative fees
that the director determines shall be paid to mental health plans
pursuant to subdivision (d) of Section 14167.11 and repayment of the
loan made to the department from the Private Hospital Supplemental
Fund pursuant to the act that added this section.
   (2) To pay for the health care coverage for children in the amount
of eighty million dollars ($80,000,000) for each quarter for which
payments are made under Article 5.21 (commencing with Section
14167.1). In any quarter for which payments reflect room under the
upper payment limit that was available from prior or subsequent
quarters, the prior or subsequent quarters shall constitute quarters
for purposes of the payment for health care coverage for children
required by this paragraph.
   (3) To make increased payments to hospitals pursuant to Article
5.21 (commencing with Section 14167.1).
   (4) To make enhanced payments to managed health care plans
pursuant to Article 5.21 (commencing with Section 14167.1).
   (5) To make increased payments to mental health plans pursuant to
Article 5.21 (commencing with Section 14167.1).
   (d) Any amounts of the quality assurance fee collected in excess
of the funds required to implement subdivision (c), including any
funds recovered under subdivision (d) of Section 14167.14 or
subdivision (e) of Section 14167.36, shall be refunded to general
acute care hospitals, pro rata with the amount of quality assurance
fee paid by the hospital, subject to the limitations of federal law.
If federal rules prohibit the refund described in this subdivision,
the excess funds shall be deposited in the Distressed Hospital Fund
to be used for the purposes described in Section 14166.23, and shall
be supplemental to and not supplant existing funds.
   (e) Any methodology or other provision specified in Article 5.21
(commencing with Section 14167.1) and this article may be modified by
the department, in consultation with the hospital community, to the
extent necessary to meet the requirements of federal law or
regulations to obtain federal approval or to enhance the probability
that federal approval can be obtained, provided the modifications do
not violate the spirit and intent of Article 5.21 (commencing with
Section 14167.1) or this article and are not inconsistent with the
conditions of implementation set forth in Section 14167.36.
   (f) The department, in consultation with the hospital community,
shall make adjustments, as necessary, to the amounts calculated
pursuant to Section 14167.32 in order to ensure compliance with the
federal requirements set forth in Section 433.68 of Title 42 of the
Code of Federal Regulations or elsewhere in federal law.
   (g) 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 providers identified in this article as exempt from the
fees specified, including the submission, as may be necessary, of a
request for waiver of the broad based requirement, waiver of the
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.
   (h) (1) For purposes of this section, a modification pursuant to
this section shall be implemented only if the modification, change,
or adjustment does not do either of the following:
   (A) Reduces or increases the supplemental payments or grants made
under Article 5.21 (commencing with Section 14167.1) in the aggregate
for the 2008-09, 2009-10, and 2010-11 federal fiscal years to a
hospital by more than 2 percent of the amount that would be
determined under this article without any change or adjustment.
   (B) Reduces or increases the amount of the fee payable by a
hospital in total under this article for the 2008-09, 2009-10, and
2010-11 federal fiscal years by more than 2 percent of the amount
that would be determined
under this article without any change or adjustment.
   (2) The department shall provide the Joint Legislative Budget
Committee and the fiscal and appropriate policy committees of the
Legislature a status update of the implementation of Article 5.21
(commencing with Section 14167.1) and this article on January 1,
2010, and quarterly thereafter. Information on any adjustments or
modifications to the provisions of this article or Article 5.21
(commencing with Section 14167.1) that may be required for federal
approval shall be provided coincident with the consultation required
under subdivisions (f) and (g).
   (i) Notwithstanding subdivision (h), in consultation with the
hospital community, the department, as necessary to receive federal
approval for the implementation of this article, may do the
following:
   (1) Increase or decrease the managed care per diem quality
assurance fee rate by an amount not to exceed five dollars ($5).
   (2) Decrease the fee-for-service per diem quality assurance fee
rate by an amount not to exceed six dollars ($6).
   (3) Increase the Medi-Cal per diem quality assurance fee rate by
an amount not to exceed two dollars ($2).
   (j) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement this article or Article 5.21 (commencing
with Section 14167.1) by means of provider bulletins, all plan
letters, or other similar instruction, without taking regulatory
action. The department shall also provide notification to the Joint
Legislative Budget Committee and to the appropriate policy and fiscal
committees of the Legislature within five working days when the
above-described action is taken in order to inform the Legislature
that the action is being implemented.
   14167.36.  (a) This article shall only be implemented so long as
the following conditions are met:
   (1) Subject to Section 14167.35, the quality assurance fee is
established in a manner that is fundamentally consistent with this
article.
   (2) The quality assurance fee, including any interest on the fee
after collection by the department, is deposited in a segregated fund
apart from the General Fund.
   (3) The proceeds of the quality assurance fee, including any
interest and related federal reimbursement, may only be used for the
purposes set forth in this article.
   (b) No hospital shall be required to pay the quality assurance fee
to the department unless and until the state receives and maintains
federal approval of the quality assurance fee and Article 5.21
(commencing with Section 14167.1) from the federal Centers for
Medicare and Medicaid Services.
   (c) Hospitals shall be required to pay the quality assurance fee
to the department as set forth in this article only as long as all of
the following conditions are met:
   (1) The federal Centers for Medicare and Medicaid Services allows
the use of the quality assurance fee as set forth in this article.
   (2) Article 5.21 (commencing with Section 14167.1) is enacted and
remains in effect and hospitals are reimbursed the increased rates
beginning on the implementation date, as defined in Section 14167.1.
   (3) The full amount of the quality assurance fee assessed and
collected pursuant to this article remains available only for the
purposes specified in this article.
   (d) This article shall become inoperative if either of the
following occur:
   (1) In the event, and on the effective date, of a final judicial
determination made by any court of appellate jurisdiction or a final
determination by the federal Department of Health and Human Services
or the federal Centers for Medicare and Medicaid Services that any
element of this article cannot be implemented.
   (2) In the event both of the following conditions exist:
   (A) The federal Centers for Medicare and Medicaid Services denies
approval for, or does not approve before January 1, 2012, the
implementation of Article 5.21 (commencing with Section 14167.1) or
this article.
   (B) Either or both articles cannot be modified by the department
pursuant to subdivision (e) of Section 14167.35 in order to meet the
requirements of federal law or to obtain federal approval.
   (e) If this article becomes inoperative pursuant to paragraph (1)
of subdivision (d) and the determination applies to any period or
periods of time prior to the effective date of the determination, the
department may recoup all payments made pursuant to Article 5.21
(commencing with Section 14167.1) during that period or those periods
of time.
   (f) This article and Article 5.21 (commencing with Section
14167.1) shall not be implemented with respect to the 2009-10 and
2010-11 federal fiscal years until the earlier of April 30, 2010, or
the date the federal government approves a federal waiver for a
demonstration that will replace the Current Section 1115 Waiver, as
defined in subdivision (c) of Section 14167.1.
   14167.37.  Each report or informational submission required from
providers pursuant to this article shall contain a legal verification
to be signed by the provider verifying that the information provided
is true and correct to the best of the provider's knowledge, and
that any information in supporting documents submitted by the
provider is true and correct.
   14167.38.  Notwithstanding any other provision of this article or
Article 5.21 (commencing with Section 14167.1), supplemental payments
or other payments under Article 5.21 (commencing with Section
14167.1) shall only be required and payable in any quarter for which
a fee payment obligation exists. In any quarter where payments under
Article 5.21 (commencing with Section 14167.1) are based on upper
payment limit room resulting from other quarters, no payment shall be
made that reflects the room resulting from other quarters unless the
fee payment is similarly increased.
   14167.39.  (a) This article and Article 5.21(commencing with
Section 14167.1) shall become inoperative and the requirements for
supplemental payments or other payments under Article 5.21
(commencing with Section 14167.1) shall be retroactively invalidated,
on the first day of the first month of the calendar quarter
following notification to the Joint Legislative Budget Committee by
the Department of Finance, that any of the following have occurred:
   (1) A final judicial determination by the California Supreme Court
or any California Court of Appeal that the revenues collected
pursuant to this article that are deposited in the Hospital Quality
Assurance Fund are either of the following:
   (A) "General Fund proceeds of taxes appropriated pursuant to
Article XIII B of the California Constitution," as used in
subdivision (b) of Section 8 of Article XVI of the California
Constitution.
   (B) "Allocated local proceeds of taxes," as used in subdivision
(b) of Section 8 of Article XVI of the California Constitution.
   (2) The department has sought but has not received federal
financial participation for the supplemental payments and other costs
required by this article for which federal financial participation
has been sought.
   (3) A lawsuit related to this article or Article 5.21 (commencing
with Section 14167.1) is filed against the state and a preliminary
injunction or other order has been issued that results in a financial
disadvantage to the state.
   (4) The director, in consultation with the Department of Finance,
determines that the implementation of this article or Article 5.21
(commencing with Section 14167.1) has resulted in a financial
disadvantage to the state.
   (b) For purposes of this section, "financial disadvantage to the
state" means either:
   (1) A loss of federal financial participation.
   (2) A cost to the General Fund, that is equal to or greater than
one-quarter of a percent of the General Fund expenditures authorized
in the most recent annual Budget Act.
   (c) (1) The director shall have the authority to recoup any
payments made under Article 5.21 (commencing with Section 14167.1) if
any of the following apply:
   (A) Recoupment of payments made under Article 5.21 (commencing
with Section 14167.1) is ordered by a court.
   (B) Federal financial participation is not available for payments
made under Article 5.21 (commencing with Section 14167.1) for which
federal financial participation has been sought.
   (C) Recoupment of payments made under Article 5.21 (commencing
with Section 14167.1) is necessary to prevent a General Fund cost
that is estimated to be equal to or greater than one-quarter of a
percent of the General Fund expenditures authorized in the most
recent annual Budget Act and that results from implementation of a
court order or the unavailability of federal financial participation.

   (2) In the event payments are recouped for a particular quarter,
fees paid by a hospital for that quarter pursuant to this article
shall be refunded to the extent that the hospital meets both of the
following conditions:
   (A) The hospital has actually paid the fee for the subject quarter
and for all prior quarters.
   (B) The hospital has returned the payment received pursuant to
Article 5.21 (commencing with Section 14167.1) for that quarter, or
has had that payment recouped through a withholding of funds owed by
Medi-Cal or other state payments, or recouped through other means.
   (d) In the event the department determines that recoupment of
supplemental payments is necessary to implement any provision of this
section, the department may recoup payments made pursuant to Article
5.21 (commencing with Section 14167.1) from fees paid by the
hospital pursuant to this article.
   (e) Concurrent with invoking any provision of this section, the
director shall notify the fiscal and appropriate policy committees of
the Legislature of the intended action and the specific reason or
reasons for the proposed action.
   14167.40.  This article shall remain in effect only until January
1, 2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
  SEC. 3.  Article 5.225 (commencing with Section 14167.41) is added
to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions
Code, to read:

      Article 5.225.  Quality Assurance Fee Act


   14167.41.  (a) Effective January 1, 2011, there shall be imposed,
pursuant to subdivision (b), a quality assurance fee in a manner
necessary to obtain federal Medicaid matching funds that shall be due
and payable to the department by each general acute care hospital at
the rate of twenty-seven dollars and twenty-five cents ($27.25) per
managed care day, as defined by the department, for the purpose of
making Medi-Cal payments to hospitals.
   (b) The quality assurance fee required by this article shall be
imposed pursuant to the authority of a subsequent statute enacted to
take effect on or after January 1, 2011, that also does both of the
following:
   (1) Establishes how the revenue from the quality assurance fee on
managed care days required by this article is apportioned among
hospitals.
   (2) Imposes a quality assurance fee for all other applicable
hospital days.
   (c) The subsequent statute described in subdivision (b) shall
provide for a supplemental payment for Medi-Cal managed care
inpatient days that shall not be less than the supplemental per diem
rate for Medi-Cal managed care inpatient days set forth in Article
5.21 (commencing with Section 14167.1).
   (d) This article shall be implemented only if, and to the extent
that, all necessary federal approvals have been obtained.
   (e) This article shall be implemented only if, and to the extent
that, no increased cost to the General Fund results from
implementation of this article.