BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 335|
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THIRD READING
Bill No: SB 335
Author: Hernandez (D) and Steinberg (D)
Amended: 6/9/11
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 6-2, 6/22/11
AYES: Hernandez, Strickland, Alquist, De León, DeSaulnier,
Wolk
NOES: Anderson, Blakeslee
NO VOTE RECORDED: Rubio
SENATE APPROPRIATIONS COMMITTEE : 6-0, 7/11/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NO VOTE RECORDED: Walters, Emmerson, Runner
SUBJECT : Medi-Cal: hospitals: quality assurance fee
SOURCE : California Hospital Association
DIGEST : This bill imposes a Quality Assurance Fee (QAF)
on specified hospitals for one year (June 30, 2011 until
June 30, 2012), and uses the resulting revenue to draw down
federal funds to provide supplemental payments to private
hospitals in fee-for-service Medi-Cal, Medi-Cal managed
care, and for acute psychiatric days, and to provide $320
million for children's health coverage in the budget year.
This bill permits county and University of California
hospitals to be paid direct grants (not Medi-Cal payments)
in support of health care expenditures, funded from the
QAF.
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ANALYSIS :
Existing law:
1. Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), under which
health care services are provided to qualified
low-income persons. Inpatient and outpatient hospital
services are a covered benefit under the Medi-Cal
program, subject to utilization controls.
2. Establishes the Medi-Cal Hospital Rate Stabilization Act
of 2011 to provide supplemental payments from January 1,
2011 to June 30, 2011 to private hospitals for inpatient
and outpatient services in Medi-Cal fee-for-service,
managed care and acute psychiatric days.
3. Establishes the Hospital QAF Act of 2011 which levies a
hospital QAF, from January 1, 2011 to June 30, 2011, on
each hospital that is not an exempt hospital, with
varying fee amounts by payor source and type of payment.
4. Requires all funds from the Hospital QAF Act of 2011 to
be used exclusively to enhance federal financial
participation (FFP) for hospital services under
Medi-Cal, to provide additional reimbursement to
hospitals, to fund children's health coverage, in a
specified order of priority.
5. Sunsets the Medi-Cal Hospital Rate Stabilization Act of
2011 and the 2011Act on January 1, 2013.
6. Allows hospitals that have received extensions to
January 1, 2013 of the January 1, 2008 hospital seismic
safety deadline, for their Structural Performance
Category 1 buildings, to request an additional extension
of up to seven years.
7. Allows the Office of Statewide Health Planning and
Development (OSHPD) to grant the extension if the
hospital meets several interim deadlines and
requirements.
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8. Requires OSHPD, in deciding whether to grant the
extension as well as the length of the extension, to
consider several criteria including the structural
integrity of the building, community access to the
hospital services, and the hospital owner's financial
capacity, as specified.
9. Conditions the seismic extension provisions becoming
operative on the date that DHCS receives federal
approvals for a 2011-12 hospital QAF program that
includes $320 million in fee revenue to pay for health
coverage for children, as specified.
This bill:
1. Enacts the Medi-Cal Hospital Provider Rate Stabilization
Act of 2012 to provide supplemental payments from July
1, 2011 to June 30, 2012 to private hospitals for
inpatient and outpatient services in Medi-Cal
fee-for-service, managed care and acute psychiatric
days.
2. Requires DHCS to structure the supplemental payments so
as to maximize the statewide aggregate upper payment
limit for private hospitals.
3. Requires each private hospital to be paid an amount
equal to a percentage of the hospital's outpatient base
amount (the total amount of payments for hospital
outpatient services made to a hospital in the 2009
calendar year), and to result in payments to hospitals
that equal the applicable federal upper payment limit.
4. Provides inpatient supplemental payment amounts that are
in addition to any other amounts payable to hospitals.
These payments are prohibited from affecting any other
payments to hospitals. Inpatient supplemental payment
amounts vary depending upon the type of hospital care
provided (for example, high acuity days) and whether the
hospital is a private trauma center or a private
hospital that provides Medi-Cal subacute services with a
specified Medi-Cal inpatient utilization rate. Each
private hospital is required to be paid the following
amounts for the provision of hospital inpatient services
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from July 1, 2011 through June 30, 2012:
A. An unspecified amount (placeholder language);
B. An unspecified amount (placeholder language)
multiplied by the hospital's number of acute
psychiatric days that were paid directly by DHCS and
were not the financial responsibility of a mental
health plan;
C. $1,350 multiplied by the number of the hospital's
high acuity days if the hospital's Medicaid inpatient
utilization rate is less than 41.1 percent, and
greater than five percent, and at least five percent
of the hospital's general acute care days are high
acuity days. (This payment amount is in addition to
the amounts specified above.)
D. $1,350 multiplied by the number of the hospital's
high acuity days if the hospital qualifies to receive
the $1,350 amount described above and has been
designated as a Level I or Level II trauma center, an
Adult/Pediatric Level I trauma center, or an
Adult/Pediatric Level II trauma center. (This
payment amount is in addition to the amounts
described in the bullets above.)
5. Requires a private hospital that provides Medi-Cal
subacute services from July 1, 2011 to June 30, 2012,
and has a Medicaid inpatient utilization rate that is
greater than five percent and less than 41.1 percent, to
be paid a supplemental amount equal to 20 percent of the
Medi-Cal subacute payments made to the hospital during
the 2009 calendar year.
6. Requires DHCS to increase payments to mental health
plans for the purpose of making supplemental payments to
hospitals.
7. Requires the aggregate amount of the increased payments
to be the total of the individual hospital acute
psychiatric supplemental payment amounts for all
hospitals for which FFP is available.
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8. Requires DHCS to increase capitation payments to
Medi-Cal managed care plans exclusively for the purpose
of making payments to hospitals.
9. Requires DHCS to determine the amount of the increased
capitation payments for each plan, taking into account
specified factors and federal requirements.
10.Requires Medi-Cal managed care plans to expend 100
percent of any increased capitation payments it receives
on hospital services within 30 days of receiving the
increased capitation payments.
11.Permits designated public hospitals (county and
University of California hospitals) to be paid direct
grants (not Medi-Cal payments) in support of health care
expenditures, funded from the QAF.
12.Requires all payments made by DHCS to hospitals, managed
health care plans and mental health plans under the
Medi-Cal Hospital Provider Rate Stabilization Act of
2012 to be made only from the QAF and federal
reimbursement, and any related federal funds.
13.Prohibits Medi-Cal outpatient rates paid to private
hospitals, nondesignated public hospitals (NDPHs are
district hospitals) and designated public hospitals
(DPHs) provided before July 1, 2011 from being reduced
below the rates in effect on July 1, 2011.
14.Prohibits California Medical Assistance Commission
(CMAC) inpatient rates for Medi-Cal inpatient services
furnished before July 1, 2011 from being reduced below
the lower of the contract amounts in effect on
July 1, 2011.
15.Prohibits private non-contract hospital rates for
services furnished before July 1, 2011 from being less
than the amount of payments that would have been made
under the payment methodology in effect on the effective
date of this bill.
16.Requires, for purposes of this bill, a rate reduction or
a change in a rate methodology that is enjoined by a
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court to be included in the determination of a rate or
rate methodology until all appeals or judicial reviews
have been exhausted and the rate reduction/change in
methodology has been permanently enjoined, denied or
otherwise prevented from being implemented.
17.Enacts the Hospital QAF Act of 2012 which levies a
hospital QAF, from July 1, 2011 to June 30, 2012, on
each hospital that is not an exempt hospital. Hospitals
exempt from paying the fee are DPHs, NDPHs, small and
rural hospitals, a hospital that satisfies the criteria
to be a long-term care hospital and a hospital that
converts from one type of hospital to another type
(e.g., private to NDPH). The fee amounts for hospitals
subject to the QAF are as follows:
A. The fee-for-service per diem QAF rate must be no
greater than an unspecified amount per day;
B. The managed care per diem QAF rate is a fixed fee
on managed care days of an unspecified amount per
day;
C. The Medi-Cal per diem QAF rate is a fixed fee on
Medi-Cal days of an unspecified amount per day;
D. The prepaid health plan hospital managed care per
diem QAF rate is a fixed fee on non-Medi-Cal managed
care days for prepaid health plan hospitals of an
unspecified amount per day; and,
E. The prepaid health plan hospital Medi-Cal managed
care per diem QAF rate is a fixed fee on Medi-Cal
managed care days for prepaid health plan hospitals
of an unspecified amount per day.
18.Requires all funds from the QAF to be used exclusively
to enhance FFP for hospital services under Medi-Cal, to
provide additional reimbursement to hospitals, in the
following order of priority:
A. To pay for DHCS staffing, not to exceed $500,000;
B. To pay for children's health care coverage in the
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amount of $80 million for each quarter for which
payments from the QAF are made under this bill;
C. To make increased capitation payments to managed
care plans;
D. To reimburse the General Fund (GF) for the
increase in the overall compensation to a private
hospital that is attributable to its change in status
from a CMAC contract hospital to a non-contract
hospital;
E. To make increased payments to hospitals under this
bill; and,
F. To make increased payments to mental health plans
under this bill.
19.Establishes requirements for the QAF and the
supplemental payment provisions to be in effect,
including that federal approval is received and federal
funding is available, that QAF funds are segregated from
the GF and not considered GF proceeds of taxes under the
state Constitution, and that there is a contractually
enforceable promise on behalf of the state to use the
proceeds of the QAF and any federal matching funds
solely and exclusively for the purposes in this Hospital
QAF Act of 2012.
20.Sunsets the provisions of this bill on January 1, 2013,
the date of the last payment of the QAF payments or the
date of the last payment from DHCS under this bill,
whichever is later.
Background
Federal Medicaid law authorizes states to levy fees on
health care providers if the fees meet federal
requirements. Many states (including California) fund a
portion of their share of Medicaid program costs through a
fee on health care providers. Under these funding methods,
states collect funds (through fees, taxes, or other means)
from providers, which are then matched to allow increased
Medicaid reimbursement to providers. To prevent states
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from levying an assessment on only Medicaid providers,
federal law requires provider fees to be "broad based" and
uniformly applied to all providers within specified classes
of provider (unless the broad based and uniform
requirements are waived by the federal government).
States are prohibited from having a provision that would
ensure providers are "held harmless" from the impact of the
fee. Federal approval of provider fees through the Centers
for Medicare and Medicaid Services is required. In
addition to the hospital QAF, California currently has a
QAF for intermediate care facilities for the
developmentally disabled, and a separate QAF for skilled
nursing facilities.
AB 1383 (Jones), Chapter 627, Statues of 2009, and AB 188
(Jones), Chapter 645, Statutes of 2009, enacted a Medi-Cal
QAF, a methodology for making supplemental payments to
hospitals, which also provided funds for children's health
care coverage, and funds for grants to public hospitals.
These measures generated $3.1 billion in revenue from
hospitals paying the QAF. The QAF drew down an additional
$3.2 billion in federal funds, and provided an overall
benefit to the hospital industry of $2.6 billion. In
addition, over the 21 month period in which those bills
applied, the QAF provided $560 million for children's
health coverage, and $513 million in unmatched direct
grants to DPHs. The hospital QAF enacted under the bills
by Assemblymember Jones sunsets December 31, 2010.
In early 2011, the Legislature passed and the Governor
signed into law
SB 90 (Steinberg), Chapter 19, Statutes of 2011. SB 90
establishes a new QAF and hospital supplemental payment
program for the period between
January 1, 2011 and June 30, 2011 that is similar to the
previous fee and supplemental payment program. The most
significant changes made to the funding distribution in SB
90 as compared to the funding distribution in previous
legislation are the elimination of supplemental payments to
the 48 NDPH and grants to the 21 DPH, and an increase in
the per quarter amount for children's coverage (from $80
million per quarter to $110 million per quarter). In
addition, SB 90 established a new intergovernmental
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transfer program that allows the 48 NDPHs and 21 DPHs to
use intergovernmental transfers to increase the Medi-Cal
capitation rate to managed care plans with which they
contract. According to the California Hospital Association
(CHA), of the 357 licensed general acute care hospitals in
the state, 237 pay the QAF under SB 90. Of the 237
hospitals paying the QAF, 15 independent hospitals and four
hospital systems pay more in QAF than they receive back in
supplemental payments. Across all private hospitals, SB 90
was estimated to provide $858 million in payments to
private hospitals above the amounts paid in QAF by these
hospitals.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Children's health $320,000 $0 $0 Special*
care coverage
QAF Revenue (Approximately $2,200,000 inSpecial*
FY 2011-12)
DHCS administration $2,000 $0
$0Federal/**
Special/
General
Supplemental payments Approximately $3,700,000 in
Federal/** to hospitals FY
2011-12 Special
Potential restoration of $39,000 $0
$0General
hospital outpatient rates
* Hospital Quality Assurance Revenue Fund
**50 percent federal funds, 50 percent Hospital Quality
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Assurance Revenue Fund; General Fund costs if bill is
not amended to permit QAF revenue to cover all of DHCS'
administrative needs
SUPPORT : (Verified 7/13/11)
California Hospital Association (source)
Adventist Health
Alliance of Catholic Health Care
California Children's Hospital Association
Loma Linda University Medical Center
Private Essential Access Community Hospitals, Inc.
ARGUMENTS IN SUPPORT : This bill is sponsored by the
California Hospital Association, which writes that the
creation and implementation of the hospital fee program in
California has been extremely successful. The program has
been critical for hospitals to bolster their ability to
preserve health care services for the state's most
vulnerable patients. The 2009-10 program is now complete
and delivered on its goal of bringing $2.6 billion in new
Medi-Cal funding to California hospitals. In addition, the
2009-10 hospital fee program provided the state with $560
million in funding for children's health care coverage.
CHA states the six-month extension is currently in process
and is on track to provide the state with $210 million in
funding for children's health care coverage and about $850
million to hospitals in funding that is desperately needed
to serve the state's Medi-Cal population.
CTW:kc 7/13/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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