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  






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               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  






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            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