BILL ANALYSIS Ó
SB 335
Page 1
SENATE THIRD READING
SB 335 (Ed Hernandez and Steinberg)
As Amended August 18, 2011
2/3 vote. Urgency
SENATE VOTE :35-2
HEALTH 16-0 APPROPRIATIONS 17-0
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|Ayes:|Monning, Logue, Atkins, |Ayes:|Fuentes, Harkey, |
| |Eng, Garrick, Gordon, | |Blumenfield, Bradford, |
| |Roger Hernández, Bonnie | |Charles Calderon, Campos, |
| |Lowenthal, Mansoor, | |Davis, Donnelly, Gatto, |
| |Mitchell, Nestande, Pan, | |Hall, Hill, Lara, |
| |V. Manuel Pérez, Silva, | |Mitchell, Nielsen, Norby, |
| |Smyth, Williams | |Solorio, Wagner |
| | | | |
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SUMMARY : For the period from July 1, 2011, through December 31,
2013, enacts a Medi-Cal hospital provider quality assurance fee
(QAF), provides supplemental payments to private hospitals in
the Medi-Cal Program, provides for grants to public hospitals,
funds for children's health care coverage and for supplemental
payments to hospitals for services provided through the Low
Income Health Program (LIHP) Medicaid Expansion (MCE).
Specifically, this bill :
1)Establishes a per diem fee assessed on every private acute
care hospital for every acute, psychiatric, and rehabilitation
inpatient day at a rate of $86.40 per managed care day (other
than Medi-Cal), $383.20 per Medi-Cal day, $48.38 per prepaid
health plan hospital managed care day, $214.59 per prepaid
health plan hospital Medi-Cal managed care (MCMC) day, $309.86
per fee-for-service day (other than Medi-Cal).
2)Imposes the requirement to pay the fee on all private general
acute care hospitals, on a 30 month basis from July 1, 2011,
to December 31, 2013, exempts any hospital that has been
converted from a private hospital to a public hospital or
district hospital, long term care hospitals, specified
specialty hospital and small and rural hospitals.
3)Authorizes the Department of Health Care Services (DHCS) to
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deduct fee payments owed by a hospital from other payments due
to the hospital, to assess interest and penalties, authorizes
the penalties to be waived and provides that such
determination is not subject to judicial review.
4)Requires DHCS to make supplemental payments to private
hospitals for Medi-Cal inpatient services from the proceeds of
the fees, other funds established by this bill, plus matching
federal funds, in addition to payments otherwise payable to
these hospitals, up to the maximum amount allowed under
federal upper payment limits (UPL) and other law, as follows:
a) For each general acute care day, $917.66 for fiscal year
(FY) 2011-12; $1,086.72 for FY 2012-13; and, $1,305.53 for
FY 2013-14;
b) For each acute psychiatric day directly reimbursed by
DHCS, $695 for FY 2011-12; $790 for FY 2012-13; and, $955
for FY 2013-14;
c) An additional $1,350 for each high acuity day, as
defined, for hospitals with Medi-Cal inpatient utilization
rates between 5% and 41.1%;
d) An additional $1,350 for each high acuity day for
qualifying hospitals with certain trauma centers, as
specified; and,
e) For Medi-Cal sub-acute services: 40% for FYs 2011-12;
and FY 2012-13; and, 20% for FY 2013-14 of the amount of
Medi-Cal sub-acute payments made to the hospitals in 2009
for hospitals with Medi-Cal inpatient utilization rates
between 5% and 41.6%.
5)Requires DHCS to increase monthly capitation payments to
Medi-Cal mental health managed care plans for supplemental
payments to private hospitals for acute psychiatric inpatient
days at the same rate as for days that are reimbursed directly
by DHCS and authorizes direct payment by DHCS for days that
were the financial responsibility of the mental health plan as
an alternative, as permitted by federal law.
6)Requires DHCS to increase monthly capitation payments to MCMC
plans to the maximum total amount allowable under federal law
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for supplemental payments to hospitals, including district and
public hospitals, for inpatient services within specified time
limits and authorizes DHCS to set aside fee revenue as
specified in order to accumulate the required amounts.
7)Requires DHCS to determine the amount of increased capitation
for each plan by considering the composition of Medi-Cal
enrollees in each plan, anticipated hospital utilization and
other factors related to ensuring access, but in no event to
exceed an amount certified by the state's actuary as meeting
federal requirements, and provides that payments made to
managed care plans in the absence of these payments are not to
be reduced as a consequences of these payments and requires
the MCMC plans to expend 100% to make payments to hospitals
based on actuarial certification, enrollment and hospital
utilization within 30 days of receipt in a total amount that
equals the increased capitation amount, to document the
payments, and specifies that these provisions are not intended
to create a private right of action by a hospital.
8)Specifies legislative intent that payments made to Designated
Public Hospitals (DPHs) by MCMC plans are to replace revenue
that would otherwise be payable from the managed care
Intergovernmental Transfer (IGT) program enacted by SB 90
(Steinberg), Chapter 19, Statutes of 2011 and further states
that if necessary future legislation will be enacted to ensure
this result.
9)Requires DHCS to deposit the fees in the Hospital Quality
Assurance Revenue Fund (HQARF), provides for the disposition
of funds that are remitted after the date final payments are
due and funds that are collected in excess of the amount
needed for payments and to be used as specified in the
following order of priority:
a) To pay for staffing and administrative costs of DHCS up
to $2.5 million;
b) To pay for health care for children in the amount of $85
million quarterly during 2011-12, and in the amount of
$96.75 million quarterly during 2012-13 and 2013-14;
c) To make increased capitation payments to MCMC plans;
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d) To reimburse the General Fund (GF) for the increase in
compensation due to a hospital that changes status from
contracting to noncontracting;
e) To make increased payments or grants to hospital;
f) To make increased payments to mental health plans; and,
g) To make supplemental payments to private hospitals for
out of network emergency and post stabilization services
provided to LIHP MCE enrollees in the amount of $37.5
million per quarter.
10)Creates a contractually enforceable promise on behalf of the
state to use the proceeds of the fee and the HQARF only for
the purposes, in the amounts authorized by this bill and to
comply with all obligations imposed pursuant to this bill.
11)Authorizes DHCS and the Director to make modifications to the
QAF, payment methodologies, and other adjustments as
necessary, in consultation with the hospital community, to the
extent necessary to obtain federal approval and provides that
the fee is inoperative if the federal Centers for Medicare and
Medicaid Services (CMS) denies approval before July 1, 2014,
and the provisions cannot be modified as authorized in order
to meet federal requirements.
12)Requires the 21 DPHs, (hospitals owned or operated by the
University of California and counties) to be paid direct
grants, for health care expenditures other than Medi-Cal,
funded by the QAF, in the aggregate amount of $50 million in
FY 2011-12, $43 million in FY 2012-13 and $21.5 million in FY
2013-14, to be allocated by the Director of DHCS pursuant to a
methodology to be developed in consultation with the DPHs.
13)Requires nondesignated public hospitals (NDPH), which are
public hospitals owned or operated by local hospital
districts, to be paid direct grants, for health care
expenditures funded by the QAF, in the aggregate amount of $10
million for FYs 2011-12 and 2012-13 and $5 million in FY
2013-14, to be allocated by the Director of DHCS pursuant to a
methodology to be developed in consultation with the NDPHs.
14)Establishes the LIHP MCE Out-of Network Emergency Care
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Services Fund to consist of:
a) For FYs 2011-12 and 2012-13, $20 million and for FY
2013-14, $10 million from optional IGT funds transferred
from local entities; and,
b) For FYs 2011-12 and 2012-13, $75 million and for FY
2013-14 $37.5 million transferred from the HQARF.
15)Requires proceeds of the LIHP Fund to be used by the LIHPs
solely for the nonfederal share of supplemental payments for
emergency and post-stabilization services provided by private
and NDPH hospitals to individuals covered under the LIHP MCE,
as established by the State's 2010 Bridge to Reform Medi-Cal
Section 1115(a) waiver and specifies legislative intent that
IGT funds are to be used first and requires DHCS to obtain
federal financial participation (FFP), to disburse the funds
as specified, in consultation with the hospital community and
based on an allocation of 70% of the funds for inpatient and
30% for outpatient emergency and post-stabilization services
and authorizes DHCS to adjust the allocation and other
operational requirements as necessary to obtain federal
approval.
16)Requires compliance with the out-of-network emergency care
services payments program as a condition of participation in
the voluntary LIHP.
17)Ensures that payments made to hospitals or reimbursement
rates set pursuant to other provisions of existing law are not
affected or reduced as a result of the supplemental payments
established by this bill.
18)Authorizes DHCS to implement by means of policy letters,
provider bulletins, or all plan letters.
19)Requires DHCS to seek approval from CMS, as specified, and
allows for conditional approval and implementation based on
receipt of a letter from CMS indicating likely federal
approval as specified, provides that the provisions requiring
supplemental payments shall be inoperative if this
notification of approval is not received by September 1, 2013,
and provides that if federal approval, as specified, is not
obtained by December 1, 2013, the statutes creating the
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hospital provider fee shall become inoperative.
20)Provides that supplemental payments under the bill are in
addition to Disproportionate Share Hospital (DSH) replacement
supplemental payments, do not impact eligibility for DSH
payments, DSH replacement payments, or stabilization payments
under the 2005 hospital waiver or the 2010 Medi-Cal Bridge to
Reform waiver and are not to be considered in the
determination of adequacy of any rate under federal law.
21)Provides that, if the Selective Provider Contracting Program
(SPCP) is in effect, the supplemental payment to a hospital
that becomes a noncontracting hospital during the period of
this bill shall be reduced by the resulting increase in costs
and the amount shall be transferred to the GF.
22)Prohibits payment rates for hospital outpatient services
furnished before December 31, 2013, by any hospital from being
reduced below those in effect on July 1, 2011.
23)Prohibits payment rates for hospital inpatient services
furnished before December 31, 2013, under contracts negotiated
under the SPCP from being reduced below those in effect on
July 1, 2011, allows changes to supplemental payments as long
as the aggregate is not reduced as specified and establishes a
methodology to measure this requirement if a new
diagnosis-related groups (DRG) hospital reimbursement
methodology is implemented.
24)Prohibits payments to private hospitals for inpatient
services furnished before January 1, 2014, that are not under
contracts negotiated under the SPCP from being reduced below
the amount that would have been made under the methodology in
effect on the effective date of this bill and establishes a
methodology to measure this requirement if a new
diagnosis-related hospital reimbursement methodology is
implemented.
25)Reduces DSH replacement payments to private hospitals by
$10.5 million in FY 2012-13, by $5.25 million for FY 2013-14
and prohibits any further reductions during the effective date
of this QAF.
26)Reduces funds available for payments to private hospitals
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from the Private Hospital Supplemental Fund by $17.5 million
for FY 2012-13 and by $8.75 million for FY 2013-14, requires
the reductions to be allocated equally between children's
hospitals and other private hospital and provides for
alternative distribution if a DRG payment methodology is
implemented.
27)Makes this bill inoperative if a court of appellate
jurisdiction or CMS determines that any element cannot be
implemented and the provisions cannot be modified consistent
with the terms of this bill or if it is not approved by CMS
before January 1, 2013, and the provisions cannot be modified
to meet the requirements of federal law or if a judicial
determination results in specified impact to the GF.
28)Provides for withholding of payment to any hospital that sues
to enjoin implementation and conditions a hospital's receipt
of payments on continued participation in the Medi-Cal
program.
29)Extends the sunset date on the HQARF created by AB 1383
(Jones), Chapter 627, Statutes of 2009, to January 1, 2015,
and appropriates $7.2 billion to DHCS, $6.2 billion from the
federal trust fund, and $237, 500,000 from the LIHP Fund to be
available until January 1, 2015.
30)Specifies legislative intent to consider legislation
requiring the director of DHCS to seek approval for an
increase in the fees and increased payments if there is a
determination that additional FFP is available within the UPL
or the limits on managed care payments and specifies that
these increases shall have priority over any other purposes.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)An increase of $12.4 billion total (50% hospital QAF/50% FFP)
paid to private hospitals through December 2013 in the form of
supplemental Medi-Cal payments for hospital services. This
estimate assumes hospitals subject to the QAF will contribute
$6.9 billion, and that this funding it is matched with FFP at
the rate of 50% and paid as supplemental payments, except for
those funds set aside to the state and for other purposes as
explained below.
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2)Estimated administrative costs in the Department of Health
Care Services (DHCS) of approximately $2 million (50% hospital
QAF/50% FFP) annually for the life of the 30-month program ($5
million total).
3)Total estimated net GF savings of $875 million for the life of
the 30-month program. This is comprised of:
a) GF savings associated with direct QAF revenue for
children's coverage of $85 million per quarter in FY
2011-12 and $97.5 million per quarter in FYs 2012-13 and
2013-14 ($920.5 million total GF savings).
b) Reduced DSH replacement payments to private hospitals of
$21 million (50% GF) in FY 2012-13 and of $10.5 million
(50% GF) for 2013-14 ($15.8 million GF savings).
c) Reduced funds available for payments to private
hospitals from the Private Hospital Supplemental Fund of
$31 million (50% GF) for FY 2012-13 and of $17.5 million
(50% GF) for FY 2013-14 ($26.3 million GF savings).
d) Offsetting loss of GF savings associated with the repeal
of outpatient rate reductions in the Budget Act of 2011 of
$34 million. Assumed loss of savings associated with
prohibition of future outpatient reductions of $35.6
million in FY 2012-13 and $17.8 million in FY 2013-14
($87.4 million total estimated loss of savings).
4)Direct grants to designated public hospitals in the aggregate
amount of $50 million in FY 2011-12, $43 million in FY
2012-13, and $21.5 million in FY 2013-14.
5)Direct grants to non-designated public hospitals of $10
million for FYs 2011-12 and 2012-13, and $5 million in FY
2013-14.
6)Upon the expiration of this program in 2014, GF cost pressure
is created to maintain the higher level of payments to
hospitals and the children's health care coverage programs
funded by the QAF
COMMENTS : According to the author, this bill is intended to
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enact a 30-month extension to the current Medi-Cal hospital
provider fee or QAF to draw down federal funds and increase
payments to private hospitals in the Medi-Cal Program, to pay
for children's health care coverage, to provide grants to DPHs
and NDPHs, to increase payments to MCMC plans for hospital
services and to assure rate stability for hospitals that
participate in the Medi-Cal Program. The author points out that
federal law authorize states to levy fees on health care
providers if the fees meet federal requirements. According to
the author, the Legislature last session enacted a QAF that
ended in December 2010 and a second QAF for the first six months
of this year. The author states that this bill will enact a
third QAF, and enable the state to use the revenue to match
federal funds, in order to boost Medi-Cal payments to hospitals.
In addition, according to the author, the QAF would provide a
total of $930 million for children's health coverage. The
author argues that providing increased funding to hospitals
using state GF dollars alone would not otherwise be possible
given the state's dire fiscal situation
According to the sponsor, the California Hospital Association
(CHA), a new element in this 30-month proposal is the use of the
hospital QAF funds to provide $75 million a year for the
non-federal share of supplemental payments to hospitals that
provide out-of-network emergency services to enrollees in LIHPs.
The sponsor points out that under the LIHP, hospitals excluded
from the provider networks are only entitled to receive 30% of
the average Medi-Cal rate as payment for providing emergency
room and inpatient care services.
CHA estimates that over the 30-month period, the fee will raise
approximately $7 billion and will be matched with approximately
$6.1 billion in federal funds with a net benefit to the hospital
industry of $5.2 billion. According to CHA, private hospitals
could receive up to approximately $6 billion in supplemental
payments for inpatient services, $1.8 billion for outpatient
services, and $475 million for out-of-network emergency medical
services to LIHP enrollees. All hospitals will be eligible for
up to $3.9 billion in payments from MCMC plans. DPHs and NDPHs
will be eligible for up to $139 million in grants. In addition,
over $900 million will be available for children's health care
coverage and the administrative costs to DHCS.
SB 90 (Steinberg) established a new QAF and hospital
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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. SB 90 also authorized the Office
of Statewide Health Planning and Development to grant specified
extensions of hospital seismic safety requirements, contingent
on passage of legislation and federal approval of a new QAF that
allocated $320 million for children's coverage in FY 2011-12.
This bill meets the requirement of providing the required level
of funding. As a result the authority for hospitals to request
additional extensions will be triggered upon federal approval.
Notice of federal approval is required to be sent to each
hospital and posted on the DHCS Web site within 10 days.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0002251