BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 1409 (Price) Hearing Date: 5/27/2010 Amended: 4/13/2010 Consultant: Katie Johnson Policy Vote: Health 5-0 _________________________________________________________________ ____ BILL SUMMARY: SB 1409 would require the County of Los Angeles (LA County) and the State of California to continue to pay funds to the private hospitals that currently serve the population formerly served by Los Angeles County Martin Luther King, Jr.-Harbor Hospital through FY 2012-13. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund County mandate to $5,000 $5,000 $5,000County/* draw down FFP $8,200 $5,000 $5,000Federal SNCP transfers to $100,000 $100,000 $100,000Federal** South LA Medical Services Preservation Fund *38 percent county, 62 percent federal financial participation (FFP) until December 31, 2010; 50 percent county, 50 percent FFP ongoing **Safety Net Care Pool _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. This bill would require the County of Los Angeles (LA County) to continue to send intergovernmental transfers (IGTs) to the state to fund the nonfederal share of increased Medi-Cal payments to those private hospitals that serve the South Los Angeles population that was formerly served by Los Angeles County Martin Luther King, Jr.-Harbor Hospital (MLK-Harbor) for FYs 2010-11, 2011-12, and 2012-13, in an amount not to exceed $5 million each project year. These IGTs would draw down federal funds that would then be allocated back to LA County in increased Medi-Cal reimbursement rates to private hospitals. Additionally, the bill would require that an amount not to exceed $100 million annually of the Safety Net Care Pool (SNCP) funds claimed and received by the state that are based on the certified public expenditures (CPEs) of LA County or its designated public hospitals would be transferred to the South Los Angeles Medical Services Preservation Fund for each of the three project years 2010-11, 2011-12, and 2012-13. This bill would continue the system of reimbursement to private hospitals that serve this population under the new Section 1115 Medi-Cal Hospital Financing Waiver. The existing 1115 Waiver specifies the methodology by which the 22 designated public hospitals, of which MLK-Harbor is one, access federal funds for reimbursement for Page 2 SB 1409 (Price) CPEs for treatment of Medi-Cal beneficiaries and uninsured Californians. It expires August 31, 2010, and is currently being renegotiated by the Department of Health Care Services (DHCS). This bill would assume that the existing funding structure for public hospitals would continue and it would require that a specified amount of future funding be set aside for LA County area hospitals. Without this bill, the funds would be spent elsewhere in California. 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. MLK-Harbor, one of the designated public hospitals, closed in August 2007. Existing law established the South Los Angeles Medical Services Preservation Fund into which a maximum amount of $100 million of SNCP funds could be deposited for the project years 2007-2008, 2008-2009, and 2009-2010 to pay for services provided by LA County facilities continuing to operate on the MLK-Harbor site, other LA County designated public hospitals, and other providers that contract with LA County. Existing law also requires LA County to make IGTs to DHCS to provide the nonfederal share of increased Medi-Cal payments to those private hospitals that serve the population formerly served by MLK-Harbor. On November 19, 2009, LA County and the University of California (UC) announced that they would partner to reopen MLK-Harbor as a nonprofit organization. The hospital would no longer be run by the county, but it would contribute $50 million in start-up funds, $353.8 million in capital project commitment, and $63 million annually in operating funds, including $13.3 million to support care for the uninsured. The facility is scheduled to reopen as early as late 2012.