BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1236 (Alquist)
Hearing Date: 5/27/2010 Amended: 5/20/2010
Consultant: Katie Johnson Policy Vote: Health 9-0
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BILL SUMMARY: SB 1236 would create a program where treatment
authorization requests (TARs) would not be required for
inpatient hospitalization of Medi-Cal beneficiaries at
designated public hospitals.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Potential increased federal potentially in the hundreds of
thousands Federal*
fund expenditures to low millions annually per hospital
SS Waiver update low hundreds of thousands
County/**
of dollars one-time in FY
2010-2011Federal
*See staff comments
**Funding shared approximately 50 percent General Fund, 50
percent Federal Funds-However, the General Fund portion would be
fully offset by public hospital funds.
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STAFF COMMENTS: SUSPENSE FILE.
This bill would provide for a treatment authorization request
(TAR) review option that would permit the 22 designated public
hospitals, as defined in statute, of which 21 are operational,
to review and approve or deny their own inpatient
hospitalization TARs in lieu of the current TAR review process
conducted by the Department of Health Care Services (DHCS). Two
designated public hospitals, Alameda County Medical Center and
San Joaquin General Hospital, currently approve their own TARs
as part of a pilot project under the Superior Systems (SS)
Waiver, the waiver of federal Medicaid utilization review law
that permits DHCS to review 100 percent of the TARs, instead of
a sampling.
SS Waiver Renewal and Pilot Project Expansion and DHCS Oversight
This bill would permit the alteration of the utilization control
methods at up to 19 of the 22 designated public hospitals. The
SS waiver is up for its biennial renewal in December 2010, at
which time DHCS would renew the waiver as per usual and would
also, pursuant to this bill, apply to the federal government to
add any of the 19 designated public hospitals that apply to the
pilot project. This would change the way that DHCS would
renegotiate the waiver and could result in additional workload
to the department up to the low hundreds of thousands of dollars
to fund additional staff. This bill would state that the
applicant public hospitals would pay the state share of any
increased staff costs.
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SB 1236 (Alquist)
If this bill were signed into law, DHCS no longer would review
100 percent of the TARs submitted by public hospitals. Pursuant
to federal law, the public hospitals would need to implement
another form of utilization control to ensure that Medi-Cal
funds are expended only on medically necessary services. The
department would regularly survey a sample of hospital-approved
TARs to ensure that they were consistent with DHCS's medically
necessary standards. It is unclear whether or not this bill
would result in DHCS ongoing administrative savings due to the
elimination of staff positions that had reviewed TARs at the
public hospitals. Instead, existing staff would likely be
redistributed to adjudicate other currently pending TARs and
would also be needed to conduct DHCS oversight of the public
hospitals' new internal utilization control systems. The staff
nurses that approve DHCS TARs are funded 25 percent General Fund
and 75 percent federal funds.
Additionally, it would be important that the internal public
hospital utilization reviews would be able to ensure that
inpatient services for Medi-Cal enrollees who are also enrolled
in other publicly-funded programs, such as the California
Children Services (CCS) program and the Genetically Handicapped
Person's Program (GHPP), are billed to the appropriate program
and that double billing does not ensue.
Impact on Federal Funds
Even though DHCS would monitor the hospital's utilization
control system, it would not guarantee that all of the TARs that
DHCS would have denied would continue to be denied. To the
extent that a public hospital approves TARs that DHCS would have
denied, this bill would result in increased federal expenditures
to reimburse more inpatient hospital claims, potentially in the
hundreds of thousands to millions of dollars per hospital per
year. The percent of TARs denied for inpatient hospitalizations
at public hospitals was 8 percent in Calendar Year 2009.
These federal funds are part of the Medi-Cal entitlement program
and while there could be an increased expenditure of federal
funds, there is no limit on the amount of federal funds public
hospitals may draw down, provided they are matched appropriately
by non-federal funds.
According to a 2003 report presented by the California Health
Care Foundation, these TARs are generally approved or denied
after the service has been delivered and then matched with
federal funds. Thus, there would be no additional non-federal
funds expenditures because those local funds would have been
spent regardless of whether the TAR was approved or denied. The
approval or denial determines whether or not the provider is
reimbursed with federal funds.
This bill would specify that these provisions would only be
implemented to the extent federal financial participation is
available.
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SB 1236 (Alquist)
Designated Public Hospital Financing Background
Pursuant to the current Section 1115 hospital financing waiver,
implemented by SB 1100 (Perata and Ducheny), Chapter 560,
Statutes of 2005, no General Fund monies are currently used to
reimburse public hospitals for services rendered to Medi-Cal
enrollees on a fee-for-service basis. The designated public
hospitals use certified public expenditures (CPEs), which are
made up of local funds, to match federal funds. Public hospitals
that treat Medi-Cal enrollees enrolled in Medi-Cal Managed Care
are reimbursed through a separate process that involves
contracts with managed care plans, which are in turn contracted
with the state.
Medi-Cal fee-for-service CPEs are generally matched by federal
funds at 50 cents on the dollar. However, as a result of the
passage of the American Reinvestment and Recovery Act (ARRA) in
February of 2009, California's Federal Medical Assistance
Percentage (FMAP) increased from 50 percent to 61.59 percent.
Thus, retroactively from October 1, 2008, through December 31,
2010, the federal government would pay for approximately 62
cents for every CPE dollar spent. After December 31, 2010, the
FMAP reduces back to 50 cents on the dollar, unless Congress
approves and the President signs an extension.
SB 1100 also created the Safety Net Care Pool and reconfigured
the way in which hospitals that serve a disproportionate share
of the uninsured and Medi-Cal beneficiaries may receive
Disproportionate Share Hospital (DSH) funding. Designated public
hospitals use CPEs to draw down SNCP funds and CPEs and
intergovernmental transfers (IGTs) to access DSH funds for
services rendered to the uninsured. California has access to
specified allotments of both SNCP and DSH funds. It is unclear
whether or not this bill would reduce cost pressure on SNCP and
DSH funds. If uncompensated costs due to a denied TAR are then
counted as uninsured CPEs and used to draw down SNCP and DSH
funds, then this bill would range from being cost pressure
neutral to a cost pressure savings to the extent that there is
less uncompensated care overall.
Finally, the Section 1115 waiver expires August 31, 2010. Since
the department has yet to determine the contents of the new
waiver, including the public hospital financing piece, it is
unknown whether or not the current CPE process will continue in
the same way in which it currently functions. This bill
addresses this concern by stating that it would become
inoperative upon a declaration by the Director of DHCS that the
non-federal share of expenditures for inpatient hospitalization
at designated public hospitals used to claim federal
reimbursement is no longer comprised of CPEs.