BILL ANALYSIS AB 2599 Page 1 Date of Hearing: May 19, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 2599 (Bass) - As Introduced: February 19, 2010 Policy Committee: Health Vote:17-0 Urgency: Yes State Mandated Local Program: No Reimbursable: SUMMARY This bill requires the California Department of Health Care Services (DHCS) and the California Medical Assistance Commission (CMAC) to ensure the availability of funding to open a new private nonprofit hospital on the grounds where the Martin Luther King Jr-Harbor Hospital (MLKH) was closed in August of 2007. Specifically, this bill requires DHCS and CMAC to ensure once the facility reopens: 1)Reimbursement for hospital inpatient rates, negotiated by California Medical Assistance Commission, at no less than 60% of the hospital's costs. 2)Reimbursement related to enhanced Medi-Cal supplemental payments for seismic safety-related debt service under provisions of SB 1732 (Presley) Chapter 1635, Statutes of 1988. 3)Reimbursement for 100% cost-based reimbursement for outpatient services pursuant to provisions by AB 131(Committee on Budget), Chapter 80, Statutes of 2005. These provisions relate specifically to services provided in facilities owned or operated by Los Angeles County. 4)Reimbursement from the South Los Angeles Medical Services Preservation Fund established by SB 474, Chapter 518, Statutes of 2007. FISCAL EFFECT 1)The funding mechanisms, providing a minimum of tens of millions of dollars, addressed in this bill are: a) California Medical Assistance Commission inpatient AB 2599 Page 2 contracts (50% federal/50% GF) b) SB 1732 supplemental seismic safety debt service payments (50% federal/50% GF) c) 100% cost-based outpatient reimbursement (50% federal/50% GF) d) South Los Angeles Medical Services Preservation fund (50% federal/50% local certified public expenditures) 2)Several features of this bill propose establishing baselines that are not typically available to hospitals, such as guaranteeing a specified CMAC funding level. In addition, some funding availability proposed in this bill is typically available to public, not nonprofit facilities. 3)The precise fiscal impact of this bill is unknown because only a tentative agreement has been established, facility seismic safety efforts are ongoing, and the facility may not open until some time in 2012. In addition, since the closure of MLKH other hospitals in the area have provided care and additional funding has been provided to support the safety net in this medically underserved area of Los Angeles County. Some of this funding will shift back toward MLKH once the facility is re-opened. COMMENTS 1)Rationale . This bill is co-sponsored by Los Angeles County (LA County) and the University of California (UC). LA County and UC recently reached a tentative agreement to re-open MLKH as an independent nonprofit in the South Los Angeles area. This bill establishes mechanisms to ensure baseline funding for the re-opened facility. The tentative agreement between the county and the UC is for the hospital to contract with UC for physician services and to establish quality assurance and training efforts. 2)Background . MLKH, is located in the Watts/Willowbrook area of Los Angeles County. In August 2007, serious concerns involving patient care activities led the county board of supervisors, which had administrative and fiscal responsibility for the hospital to close MLKH. According to the author, when MLKH closed, the 1.6 million residents of Service Planning Area 6 of Los Angeles County were left without a public hospital in their area. The author and supporters of this bill indicate the University of California is a good choice for affiliation with the new AB 2599 Page 3 nonprofit hospital because of the University's experience in administering public hospitals and the need for physician and health professional training. 3)CMAC rates . CMAC negotiates contracts with hospitals on behalf of the Department of Health Care Services for inpatient services under the Medi-Cal program. CMAC selectively contracts on a competitive basis with hospitals for inpatient services provided to beneficiaries in the fee-for-service Medi-Cal program via the Selective Provider Contracting Program (SPCP). CMAC contracts with about 200 general acute care hospitals. 4)Cost-Based Reimbursement . This bill proposes ensuring the new nonprofit MLKH has access to 100% cost-based reimbursement for outpatient services. This funding mechanism was available initially in a Los Angeles County-specific waiver and then extended in budget trailer bill in 2005. 5)Seismic Safety Funding . The Construction and Renovation Reimbursement Program was established by SB 1732 (Presley) Chapter 1635, Statutes of 1988. This program provides supplemental reimbursement for the debt service incurred on revenue bonds for hospital construction, renovation, or replacement of facilities or fixed equipment. 6)South Los Angeles Medical Services Preservation Fund . SB 474, Chapter 518, Statutes of 2007 established the South Los Angeles Medical Services Preservation Fund which made $100 million per year of hospital Safety Net Care Pool funds available to hospitals in the South Los Angeles area from 2007-08 through 2009-10 to address the closure of MLKH. 7)Related Legislation . SB 1409 (Price) in the current session and pending in the Senate extends the South Los Angeles Medical Services Preservation Fund. Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081