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: 8/15/11
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 30 months (from June 30, 2011
until December 31, 2013), 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 $85 million per quarter for children's health
coverage until December 31, 2013. In addition, this bill
requires county and University of California hospitals to
be paid direct grants (not Medi-Cal payments), funded from
the QAF. This bill establishes the Low-Income Health
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Program Medicaid Coverage Expansion Out-of-Network
Emergency Care Services Fund (LIHP Fund), and requires
moneys in the LIHP Fund to be used for medically necessary
hospital emergency services for emergency medical
conditions and post-stabilization care furnished by private
hospitals and nondesignated public hospitals outside of the
Low Income Health Program coverage network. This bill
prohibits disproportionate share replacement payments to
private hospitals from being reduced, as specified. This
bill appropriates $13.6 billion to the Department of Health
Care Services for purposes of this bill.
Senate Floor Amendments of 8/15/11 (1) extend the duration
of the Medi-Cal hospital QAF and the supplemental payment
provisions of this bill from 12 months to 30 months, (2)
increase the amount of revenue for children's health
coverage from the QAF from $80 million per quarter to $85
million per quarter, (3) require grants in specified
amounts each year the bill is in effect, to be provided to
designated public hospitals and nondesignated public
hospitals (NDPHs), (4) establish the LIHP Fund, and
requires moneys in the LIHP Fund to be used for medically
necessary hospital emergency services for emergency medical
conditions and post-stabilization care furnished by private
hospitals and NDPHs outside of the Low Income Health
Program coverage network, (5) prohibit disproportionate
share replacement payments to private hospitals from being
reduced, as specified, and appropriate $13.6 billion to the
Department of Health Care Services for purposes of this
bill.
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,
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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.
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.
10.Requires DHCS to authorize local Low Income Health
Programs (LIHPs) to provide scheduled health care
services to eligible low-income individuals 19 to 64
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years of age, inclusive, who are not otherwise eligible
for the Medi-Cal program or the Children's Health
Insurance Program, with family incomes at or below 133
percent of the federal poverty level.
This bill:
1. Enacts the Medi-Cal Hospital Provider Rate Improvement
Act of 2011 to provide supplemental payments from July
1, 2011 to December 31, 2013 to private hospitals for
inpatient and outpatient services in Medi-Cal
fee-for-service.
2. Requires the supplemental payment amounts to be in
addition to any other amounts payable to hospitals, and
to result in payments equal to the state aggregate upper
payment limit for private hospitals.
3. Requires 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
from July 1, 2011 through December 31, 2013:
A. $917.66 multiplied by the number of the hospital's
general acute care days for 2011-12 fiscal year,
$1,055.41 for the 2012-13 fiscal year, and $1,274.22
for the 2013-14 fiscal year.
B. $695 multiplied by the hospital's acute
psychiatric days for the 2011-12 fiscal year, $790
for the 2012-13 fiscal year and $995 for the 2013-14
fiscal year. These payments are for hospital's
psychiatric days that were paid directly by the DHCS
and were not the responsibility of the mental health
plan.
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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.)
4. Requires $85 million per quarter until December 31, 2013
to be provided for children's health coverage from the
QAF, and provides $2.5 million in funding from the QAF
for DHCS' staffing and administrative costs.
5. Requires direct grants to be provided to designated
public hospitals (DPHs) (DPHs are University of
California and county hospitals) of $50 million per year
in 2011-12 and 2012-13, and $25 million per year in
2013-14. Requires direct grants to be provided to NDPHs
(NDPHs are hospitals owned by hospital districts) of $10
million per year in 2011-12 and 2012-13, and $5 million
per year in 2013-14. Requires the direct grant amounts
to be allocated pursuant to a methodology developed by
the director of DHCS in consultation with the DPHs and
NDPHs.
6. Establishes the LIHP Fund, consisting of the following
dollar amounts (which would be matched with federal
funds):
A. Funds transferred from governmental entities to
the state in the amount of $20 million annually in
2011-12 and 2012-13, and $10 million in 2013-14.
B. Funds from the QAF in the amount of $75 million in
2011-12 and 2012-13, and $37.5 million in 2013-14.
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C. Requires moneys in the LIHP Fund to be used as the
nonfederal share of expenditures for coverage for the
Medicaid Coverage Expansion population for medically
necessary hospital emergency services for emergency
medical conditions and post-stabilization care that
is furnished by private hospitals and NDPHs outside
of the LIHP coverage network. Requires 70 percent of
the moneys in the LIHP Fund to be allocated for
payments for out-of-network inpatient hospital
post-stabilization care, and 30 percent of the funds
to be allocated for approved out-of-network hospital
emergency room services that result in an approved
out-of-network hospital stay. Requires LIHPs to make
the supplemental payments within 30 days of receiving
funds from DHCS. States legislative intent that the
first $20 million in 2011-12 and 2012-13 and the
first $10 million in 2013-14 be funded through
intergovernmental transfers (IGTs). Requires federal
approval and federal financial participation to be
available for the LIHP-related provisions, and makes
this funding the last order of priority in funding
under the bill. Requires counties, as a condition of
participation in the LIHP, to comply with these
provisions.
7. Appropriates to DHCS for the purposes of this bill:
A. $7.2 billion from the Hospital Quality Assurance
Revenue Fund, to be available for expenditure up
until January 1, 2015;
B. $6.2 billion from the Federal Trust Fund, to be
available for expenditure until January 1, 2015; and
C. $237.5 million from the LIHP Fund, to be available
for expenditure until January 1, 2015.
8. 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
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the 2009 calendar year.
9. Requires a private hospital that provided Medi-Cal
subacute services during the 2009 calendar year and has
a Medicaid inpatient utilization rate that is greater
than five percent and less 41.6 percent to be paid a
supplemental amount during each subject fiscal year
equal to 40 percent of the Medi-Cal subacute payments
paid by DHCS to the hospital during the 2009 calendar
year. For the 2013-14 subject fiscal year, the
supplemental amount shall equal 20 percent of the
Medi-Cal subacute payments paid by DHCS to the hospital
during the 2009 calendar year.
10.Requires DHCS to increase payments to mental health
plans for the purpose of making supplemental payments to
private hospitals.
11.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.
12.Requires DHCS to increase capitation payments to
Medi-Cal managed care plans for the purpose of making
payments to hospitals. Requires DHCS to determine the
amount of the increased capitation payments for each
plan, taking into account specified factors and federal
requirements. 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.
13.Requires all payments made by DHCS to hospitals, managed
health care plans and mental health plans under the
Medi-Cal Hospital Provider Rate Improvement Act of 2011
to be made only from the QAF and federal reimbursement,
and any related federal funds.
14.Prohibits Medi-Cal outpatient rates paid to private
hospitals, NDPHs (NDPHs are district hospitals) and
designated public hospitals provided before December 31,
2013, 2011 from being reduced below the rates in effect
on July 1, 2011.
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15.Prohibits California Medical Assistance Commission
(CMAC) inpatient rates for Medi-Cal inpatient services
furnished before December 31, 2013 from being reduced
below the lower of the contract amounts in effect on
July 1, 2011.
16.Prohibits private non-contract hospital rates for
services furnished before January 1, 2014 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.
17.Requires, for purposes of this bill, a rate reduction or
a change in a rate methodology that is enjoined by a
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.
18.Prohibits disproportionate share (DSH) replacement
payments to private hospitals for the 2011-12 fiscal
year from being less than the amount determined under
existing law, as reduced by SB 90 (Steinberg) in
2011-12. (SB 90 required a reduction of $30 million in
2011-11 and $75 million in 2011-12 in DSH-replacement
payments to private hospitals.) Requires
DSH-replacement payments to private hospitals for July
1, 2012, through December 13, 2013, to be not less than
the amount determined under existing law prior to the 10
percent reduction and the reductions enacted by SB 90.
19.Enacts the Private Hospital QAF Act of 2011 which levies
a hospital QAF, from July 1, 2011 to December 31, 2013,
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:
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20.Establishes the dollar amount of the QAF required to be
paid by hospitals, with differing amounts depending upon
the type of hospital and payor source, as follows:
A. Establishes the fee-for-service per diem QAF rate
of $305.12 per day.
B. Establishes the managed care per diem quality QAF
rate of $86.40 per day.
C. Establishes the Medi-Cal per diem quality QAF rate
of $376.40 per day.
D. Establishes the prepaid health plan hospital
managed care per diem QAF rate of $48.38 per day.
E. Establishes the prepaid health plan hospital
Medi-Cal managed care per diem QAF rate of $210.78
per day.
21.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 $2.5
million;
B. To pay for children's health care coverage in the
amount of $85 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;
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F. To make increased payments to mental health plans
under this bill; and,
G. To make supplemental payments for out-of-network
emergency and poststabilization services provided by
private hospitals and NDPHs to Medi-Cal expansion
enrollees in the LIHP in the amount of $37.5 million
for each fiscal quarter
22.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 bill.
23.Sunsets the provisions of this bill on January 1, 2015,
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
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
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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
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
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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 analysis
of 6/9/11 :
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
Assurance Revenue Fund; General Fund costs if bill is
not amended to permit QAF revenue to cover all of DHCS'
administrative needs
SUPPORT : (Verified 8/15/11)
California Hospital Association (source)
Adventist Health
Alliance of Catholic Health Care
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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. CHA states the
program has been critical for hospitals to bolster their
ability to preserve health care services for the state's
most vulnerable patients. CHA writes the hospital fee in
this bill covering the period from July 1, 2011, through
December 31, 2013 will provides California's hospitals with
an estimated net benefit of $5.2 billion. In addition,
hospitals have committed to provide $850 million ($85
million per quarter) to the state to support the cost of
children's health care coverage. CHA states it is vital to
California hospitals that the provider fee be approved and
implemented as the provider fee program will increase
Medi-Cal payments at a time when there is simply no
alternative way to do so.
CTW:kc 8/17/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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