BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1653| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1653 Author: Jones (D), et al Amended: 8/20/10 in Senate Vote: 27 - Urgency SENATE HEALTH COMMITTEE : 6-2, 6/30/10 AYES: Alquist, Cedillo, Leno, Negrete McLeod, Pavley, Romero NOES: Strickland, Aanestad NO VOTE RECORDED: Cox SENATE APPROPRIATIONS COMMITTEE : 10-1, 8/12/10 AYES: Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno, Price, Wolk, Wyland, Yee NOES: Walters ASSEMBLY FLOOR : 63-14, 6/1/10 - See last page for vote SUBJECT : Medi-Cal: hospitals: managed health care plans: mental health plans SOURCE : California Childrens Hospital Association California Hospital Association Daughters of Charity Health System DIGEST : This bill amends the methodology for the calculation, collection, and distribution of the existing provider fee on general acute care hospitals for the 21 months spanning April 1, 2009, to December 31, 2010. CONTINUED AB 1653 Page 2 Senate Floor Amendments of 8/20/10 ensure that the quality assurance fee enacted last year (AB 1383 (Jones), Chapter 627, Statutes of 2009), can be successfully implemented. The amendments reflect the product of prolonged negotiations between the state and the federal Centers for Medicare and Medicaid Services (CMS), the agency that approves the quality assurance fee. The amendments establish timetables and procedures to adjust to the delay in federal approval. In addition, the amendments allow the state and county to swap funds, which will allow the state a relatively simply means to draw down approximately $750 million in certain federal funds. ANALYSIS : 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, in part, governed and funded by federal Medicaid provisions. Existing law, subject to federal approval, requires 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, as defined. This bill makes various changes to the formulas used to determine the amount of supplemental payments made to private and designated public hospitals. This bill expands the definition of a nondesignated public hospital. Existing law proscribes certain deadlines by which the above-described supplemental payments are required to be made to hospitals depending upon the federal fiscal year for which the payment is to be made. This bill requires the department to make to hospitals the supplemental payments for the 2008-09, 2009-10, and 2010-11 federal fiscal years in 7 payments, as specified. Existing law requires the department to make enhanced payments to managed health care plans, as defined, and requires the state to make enhanced payments to mental AB 1653 Page 3 health plans, as defined, for each subject federal fiscal year, as specified. Existing law requires 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, instead, refers to the payments made by the department to the managed health care plans and mental health plans as increased capitation payments. The bill requires the department to determine the amount of increased capitation payments for each Medi-Cal managed care plan and to consider certain factors in making that determination. The bill prohibits the amount of increased capitation payments to each Medi-Cal managed care health plan from exceeding an amount that results in capitation payments that are certified by the state's actuary as meeting federal requirements. The bill would require each managed health care plan to expend 100% of any increased capitation payments it receives from the department on hospital services. This bill: 1. Allows implementation of the quality assurance fee upon the Department of Health Care Services (DHCS) receiving conditional federal approval. Establish requirements for what will constitute conditional approval, including receiving such approval in a written form from an official of CMS or its parent agency, the Department of Health and Human Services that the conditional federal approval provide sufficient justification for implementing the quality assurance fee. Requires DHCS to consult with the hospital community. 2. Requires DHCS to seek approval from the federal government to make payments to hospitals that meet the definition of a converted hospital, meaning they have undergone a change in ownership status during the period that the quality assurance fee is in effect, and also are a nondesignated public hospital. Require that DHCS await federal approval for the overall implementation before requesting a change for converted hospitals. AB 1653 Page 4 3. Provides a timetable for DHCS to accumulate funds for making lump sum increased payments to managed care plans. Provide a timetable for accumulating funds for payments to the state for children's health coverage and for funds that are either used for grants to designated public hospitals or retained by the state. 4. Grants DHCS authority to modify timelines if federal approval or conditional federal approval is not obtained by September 1, 2010 and such modification is necessary to implement the program. 5. Provides that if conditional federal approval is not obtained on or before December 1, 2010, then the statutes creating the quality assurance fee are inoperative. 6. Allows payments to hospitals and managed care plans to be recouped by the state if the final approval is not obtained from the federal government. Establishes that fees paid by hospitals will be refunded if federal approval is not obtained. 7. Clarifies the definition of a nondesignated public hospital (district hospitals). 8. Clarifies the contractual obligation created by the original legislation whereby the state agreed to use fee proceeds only for the specific purposes stated in the legislation, can be altered by subsequent amendments to the original legislation. 9. Allows the state to retain $420 million from quality assurance fee revenues that were originally to be allocated for grants to designated public hospitals. 10.Provides an alternative mechanism for designated public hospitals to claim an equal amount of federal funds from the safety net care pool, in effect allowing a swap of funds between the state and the designated public hospitals. Provide protections to ensure that the swap does not jeopardize funding for designated public hospitals. AB 1653 Page 5 The bill provides that the quality assurance fee shall not be imposed on a converted hospital, as defined, for a subject federal fiscal year in which the hospital becomes a converted hospital or for subsequent federal fiscal years. Prior to federal approval of implementation of the above-described provisions, existing law requires each general acute care hospital that is not an exempt facility to certify to the best of its knowledge that the hospital is prepared to pay the aggregate quality assurance fee, as defined. This bill deletes the above-described certification requirement. The bill would require hospitals to pay the quality assurance fee in 7 equal installments, as specified and subject to federal approval of the above-described provisions. Existing law authorizes the department, as necessary to receive federal approval for the implementation of the above-described provisions, to increase or decrease certain amounts used to calculate the quality assurance fee. This bill deletes the above-described authorization. Existing law, effective January 1, 2011, and subject to the authority of a subsequent statute enacted to take effect on or after January 1, 2011, that meets certain conditions, imposes 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 specified rates for the purpose of making Medi-Cal payments to hospitals. This bill, effective January 1, 2011, imposes on each general acute care hospital that is not an exempt facility, as defined, a quality assurance fee, as a condition of participation in state-funded health insurance programs, other than the Medi-Cal program. This bill would require the quality assurance fee to be computed starting on the effective date of the bill and continue through and including December 31, 2010. The bill would require the proceeds from the fee to be used for the same purposes as AB 1653 Page 6 the above-described quality assurance fee that is imposed on hospitals through and including December 31, 2010. The bill would provide that the method of calculation and collection of the quality assurance fee is to be determined in an unspecified manner. This bill requires the director to seek federal approvals or waivers as may be necessary to implement the above-described provisions and to obtain federal financial participation to the maximum extent possible with the proceeds from the quality assurance fee paid pursuant to those provisions. This bill requires the fee payments and any related federal reimbursement under the above-described provisions that become effective January 1, 2011, to be deposited in the Hospital Quality Assurance Revenue Fund. The bill would continuously appropriate these moneys in an unspecified manner. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Fee revenue prior to ($3,081,000) $0 $0Special* December 31, 2010 Supplemental payments $2,000,000 $0 $0Special/** to hospitals prior to $3,215,000 $0$0Federal December 31, 2010 Grant to DPHs prior $516,000 $0 $0Special* to December 31, 2010 Children's coverage prior $560,000 $0 AB 1653 Page 7 $0Special*** to December 31, 2010 $560,000 - $1,040,000 $0$0Federal QAF revenue January 1, (likely $500 million - $1 billion) Special* 2011, to June 30, 2011 Supplemental payments likely $500 million - $1.5 billion Special/** to hospitals January 1, 2011, Federal through June 30, 2011-includes managed care, DPH payments, children's coverage DHCS QAF start-up and likely hundreds of thousands of dollars General/**** administration 1/1/11 tocommencing upon the passage of this bill Federal 6/30/11 *Hospital Quality Assurance Revenue Fund (Hospital QA Revenue Fund) **Approximately 50 percent federal funds, 50 percent Hospital QA Revenue Fund; significant General Fund cost pressure upon the expiration of the QAF ***35-50 percent Hospital QA Revenue Fund, 50-65 percent federal funds ****50 percent General Fund, 50 percent federal funds SUPPORT : (Verified 8/23/10) California Children's Hospital Association (co-source) California Hospital Association (co-source) Daughters of Charity Health System (co-source) Adventist Health Alliance of Catholic Health Care American Federation of State, County and Municipal Employees County of Los Angeles Board of Supervisors County of San Bernardino Board of Supervisors AB 1653 Page 8 Health Access Loma Linda University Private Essential Access Community Hospitals, Inc. (PEACH) Service Employees International Union ARGUMENTS IN SUPPORT : According to the California Hospital Association, California Children's Hospital Association and Daughters of Charity, hospitals in California are under serious financial pressures as a result of the traditional low Medi-Cal reimbursement rate in California, recent reductions, the increase in the number of uninsured and the economic downturn. Supporters state that this bill would extend the Medi-Cal hospital provider fee to take maximum advantage of an extension for the enhanced federal match for an additional six months, if passed by Congress. The supporters note that this bill could provide an additional $160 million to the state as well. ASSEMBLY FLOOR : AYES: Adams, Ammiano, Arambula, Bass, Beall, Bill Berryhill, Block, Blumenfield, Bradford, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Galgiani, Gilmore, Hall, Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Lieu, Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, Nestande, Niello, Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas, Saldana, Skinner, Smyth, Solorio, Swanson, Torlakson, Torres, Torrico, Villines, Yamada, John A. Perez NOES: Anderson, Blakeslee, DeVore, Gaines, Garrick, Hagman, Harkey, Jeffries, Knight, Logue, Miller, Norby, Silva, Tran NO VOTE RECORDED: Tom Berryhill, Audra Strickland, Vacancy CTW:RJG:nl 8/23/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** AB 1653 Page 9