Amended in Senate August 20, 2013

Amended in Senate June 20, 2013

Amended in Assembly May 7, 2013

Amended in Assembly April 23, 2013

Amended in Assembly March 19, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 498

Introduced by Assembly Member Chávez

February 20, 2013

An act to amend Section 14166.151 of begin insert , and to repeal Sections 14166.152, 14166.153, 14166.154, and 14166.155 of, end insert the Welfare and Institutions Code, relating to Medi-Cal.

LEGISLATIVE COUNSEL’S DIGEST

AB 498, as amended, Chávez. Medi-Cal.

begin delete

Existing

end delete

begin insert (1) end insert begin insert   end insert begin insert Existing end insert law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid Program provisions. Existing law, subject to federal approval, modifies the inpatient fee-for-service reimbursement methodology for nondesignated public hospitals, as defined, under a specified demonstration project for services on or after July 1, 2012. Existing law provides that beginning with the 2012-13 fiscal year, and if specified conditions are met, nondesignated public hospitals, or governmental entities with which the hospitals are affiliated, shall be eligible to receive safety net care pool payments for uncompensated care from the Health Care Support Fund. Existing law provides that these provisions shall become operative on the date that all necessary federal approvals have been obtained to implement these and other related provisions. begin insert Existing law requires designated public hospitals to report and certify specified information for each successor demonstration year beginning with the 2012−13 fiscal year. end insert

begin insert This bill would revise and recast those provisions. end insert This bill would instead authorize the department to seek necessary federal approvals or waivers to separately implement the safety net care pool payments for uncompensated care provisions for the 2013-14 and 2014-15 fiscal years. The bill would require the state, if the state receives federal safety net care pool funds for uncompensated care under these begin delete provision end delete begin insert provisions end insert , to retain1⁄2 of the funds for Medi-Cal related expenditures.

begin insert

(2) Under existing law, nondesignated public hospitals may receive fee-for-service payments for inpatient services, as specified. Under existing law, beginning with the 2012-13 fiscal year, subject to federal approval and if specified conditions are met, nondesignated public hospitals may receive delivery system reform incentive pool funding, as specified.

end insert begin insert

This bill would eliminate those provisions.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 14166.151 of the Welfare and Institutions
Code is amended to read:

14166.151.  

(a) It is the intent of the Legislature to begin delete reform the
inpatient fee-for-service reimbursement methodology for end delete begin insert allow
for a voluntary process for end insert nondesignated public hospitals begin insert to claim
reimbursement from the safety net care pool in the successor
demonstration project end insert based on their public structure begin delete in order to
provide new opportunities for nondesignated public hospitals to
receive reimbursement under the successor demonstration project
for care provided to the uninsured and to receive new incentive
payments for achievement related to delivery system reform. end delete begin insert , to
the extent that there is funding available for nondesignated public
hospitals in that pool, as allowed by the federal government, which
shall be allocated equally between the state and the nondesignated
public hospital, so that for every dollar of certified public
expenditure used by the nondesignated public hospital, the
nondesignated public hospital shall voluntarily allow the state to
use a corresponding certified public expenditure amount for
claiming purposes. end insert

(b)  begin delete Subject to subdivision (c), beginning end delete begin insert (1) end insert begin insert   end insert begin insert Beginning end insert with
services provided on or after July 1, begin delete 2012, fee-for-service payments
to nondesignated public hospitals for inpatient services shall be
governed by this subdivision. Each nondesignated public hospital
shall receive as payment for inpatient hospital services provided
to Medi-Cal beneficiaries during any successor demonstration
year, the federal financial participation claimed by the department
based on the hospital’s allowable costs incurred in providing those
services, subject to all of the following: end delete

begin delete

(1) Nondesignated public hospitals shall comply with the
requirements of Section 14166.152. The payments authorized in
this section shall be subject to audit and a final reconciliation where
an overpayment to the nondesignated public hospital shall result
in a collection of the overpayment and an underpayment to the
nondesignated public hospital shall result in a corrective payment.

end delete

begin delete (2) end delete begin delete   end delete begin delete (A) end delete begin delete   end delete begin delete Nondesignated end delete begin insert 2013, nondesignated end insert public hospitals
shall be eligible to receive safety net care pool payments for
uncompensated care costs to the extent that additional federal
funding is made available pursuant to the Special Terms and
Conditions for the safety net care pool uncompensated care limit
of the successor demonstration project and if they comply with
the requirements set forth in begin delete Section 14166.154. end delete begin insert this section. end insert

begin delete

(B)

end delete

begin insert (2) end insert  The amount of funds that may be claimed pursuant to
begin delete subparagraph (A) end delete begin insert paragraph (1) end insert shall not exceed the additional
federal funding made available under the safety net care pool for
nondesignated public hospital uncompensated care costs, and shall
not reduce the amounts of federal funding for safety net care pool
uncompensated care costs that would otherwise be made available
to designated public hospitals in the absence of this paragraph,
including the amounts available under the Special Terms and
Conditions in effect as of April 1, begin delete 2012 end delete begin insert 2013 end insert , and amounts
available pursuant to Section 15916.

begin delete

(C) (i) 

end delete

begin insert (3) end insert begin insert   end insert begin insert (A) end insert begin insert   end insert Notwithstanding begin delete subparagraph (B) end delete begin insert paragraph (2) end insert , if
the designated public hospitals do not have sufficient certified
public expenditures to claim the full amount of federal funding
made available to the designated public hospitals as referenced in
begin delete subparagraph (B) end delete begin insert paragraph (2) end insert , including consideration of the
potential for the designated public hospitals to have sufficient
certified public expenditures in a subsequent year, the department
may authorize the funding to be claimed by the nondesignated
public hospitals.

begin delete

(ii)

end delete

begin insert (B) end insert  The department may determine whether designated public
hospitals do not have sufficient certified public expenditures to
claim the full amount of federal funding pursuant to begin delete clause (i) end delete
begin insert subparagraph (B) end insert no sooner than after the submission of the cost
reporting information required pursuant to Section 14166.8 for the
applicable successor demonstration year.

begin delete

(iii)

end delete

begin insert (C) end insert  If the department makes the determination identified in
begin delete clause (ii) end delete begin insert subparagraph (B) end insert based on as-filed cost reporting
information submitted prior to a final audit, the department shall
make the determination in consultation with the designated public
hospitals and shall apply an audit cushion of at least 5 percent to
the as-filed cost information. If the department makes the
determination identified in begin delete clause (ii) end delete begin insert subparagraph (B) end insert based on
audited cost reporting information, no audit cushion shall be
applied.

begin delete

(3) (A) Nondesignated public hospitals shall be eligible to
receive delivery system reform incentive pool payments to the
extent additional federal funding is made available for this purpose
under the delivery system reform incentive pool in the successor
demonstration project and if the nondesignated public hospitals
comply with the delivery system reform incentive pool funding
requirements set forth in Section 14166.155.

(B) The amount of funds that may be received shall not exceed
the additional federal funding made available for delivery system
reform incentive pool payments to nondesignated public hospitals,
and shall not reduce the amounts that would otherwise be made
available to designated public hospitals in the absence of this
paragraph, including the amounts that designated public hospitals
would be eligible to receive under their delivery system reform
incentive pool plans approved as of January 1, 2012.

(C) Notwithstanding subparagraph (B), if the designated public
hospitals are unable to claim the full amount of federal funding
made available to the designated public hospitals pursuant to
Section 14166.77 and the Special Terms and Conditions, including
through reallocations made pursuant to paragraph (3) of subdivision
(a) of Section 14166.77 as authorized by the Special Terms and
Conditions, and the unused amount of federal funding made
available to the designated public hospitals cannot be used in a
later demonstration year, the department may authorize such
unused funding to be made available to the nondesignated public
hospitals.

(c) (1) (A) The reimbursement methodology developed
pursuant to subdivision (b) shall be effective beginning July 1,
2012. If all necessary federal approvals have not been received by
July 1, 2012, then the effective date shall be retroactive to July 1,
2012. Between July 1, 2012, and when all necessary federal
approvals have been received, any payments made pursuant to any
methodology replaced by subdivision (b) shall be deemed as
interim payments subject to offsetting and recoupment against
payments made under subdivision (b) pursuant to Section 51047
of Title 22 of the California Code of Regulations.

(B) Subject to paragraph (2), beginning January 1, 2014, the
reimbursement methodology developed pursuant to subdivision
(b), which shall be in effect July 1, 2012, through and including
December 31, 2013, shall continue for those nondesignated public
hospitals that certify voluntary participation as described in clause
(i), if the director executes a declaration on or before December
31, 2013, certifying all of the following:

(i) The governmental entities that own or operate a
nondesignated public hospital, or hospitals, have provided
certifications of voluntary participation in the reimbursement
methodology pursuant to subdivision (b).

(ii) Any necessary federal approvals have been obtained.

(iii) Continuation of the reimbursement methodology for those
nondesignated public hospitals certifying voluntary participation
would be cost beneficial to the state.

(2) On December 31, 2013, if one or more of the nondesignated
public hospitals subject to the reimbursement methodology
described in subdivision (b) have not provided written certification
of voluntariness described in clause (i) of subparagraph (B) of
paragraph (1), or if the director determines, for any reason, that
the reimbursement methodology described in subdivision (b)
cannot be implemented on or after January 1, 2014, then the
director shall execute a declaration certifying that the
reimbursement methodology described in subdivision (b) cannot
continue to be implemented for all or one or more of the
nondesignated public hospitals, in which case subdivision (e) shall
be implemented on January 1, 2014.

(d) Upon implementation of subparagraph (A) of paragraph (1)
of subdivision (c), implementation of the laws and regulations
listed in paragraphs (1) to (4), inclusive, shall be suspended with
respect to fee-for-service payments to all nondesignated public
hospitals for inpatient services through and including December
31, 2013. Implementation of the laws and regulations listed in
paragraphs (1) to (4), inclusive, shall also be suspended with
respect to fee-for-service payments to nondesignated public
hospitals that certify voluntary participation if a declaration is
executed pursuant to subparagraph (B) of paragraph (1) of
subdivision (c), beginning on January 1, 2014, and until the
expiration of the successor demonstration project.

(1) The Nondesignated Public Hospital Medi-Cal Rate
Stabilization Act in Article 5.17 (commencing with Section
14165.55).

(2) The inpatient fee-for-service per diem rate authorized in
Article 2.6 (commencing with Section 14081).

(3) The reimbursement methodology for fee-for-service inpatient
services in Sections 14105 and 14105.15, and Article 7.5
(commencing with Section 51536) of Title 22 of the California
Code of Regulations.

(4) Section 14166.17.

(e) Subject to the conditions in paragraph (2) of subdivision (c),
on January 1, 2014, the percentage of each intergovernmental
transfer amount retained pursuant to subdivision (j) of Section
14165.57 shall be increased to 20 percent to reimburse the
department, or transferred to the General Fund, for the
administrative costs of operating the Nondesignated Public Hospital
Intergovernmental Transfer Program and for the benefit of the
Medi-Cal program.

(f) (1) This section and Sections 14166.152, 14166.153,
14166.154, and 14166.155 shall become operative on the date all
necessary federal approvals have been obtained to implement all
of these sections.

(2) Notwithstanding paragraph (1) of this subdivision and
Section 14166.154, if the necessary federal approvals are not
obtained to implement all of the sections set forth in paragraph
(1), the department may seek any necessary federal approvals or
waivers to separately implement the safety net care pool payments
for uncompensated care, as described in paragraph (2) of
subdivision (b) of this section and Section 14166.154, for the
2013-14 and 2014-15 fiscal years. If federal safety net care pool
funds for uncompensated care are received by the state for this
purpose, the state shall retain one-half of the funds for Medi-Cal
related expenditures.

end delete begin insert

(c) Beginning in the 2013-14 fiscal year, within five months
after the end of a successor demonstration year, nondesignated
public hospitals shall submit to the department all of the following
reports:

end insert begin insert

(1) The hospital’s Medicare or Medicaid cost report for the
successor demonstration year.

end insert begin insert

(2) Other cost reporting and statistical data necessary for the
determination of amounts due to the hospital under the successor
demonstration project, as requested by the department.

end insert begin insert

(d) For each successor demonstration year, the reports shall
identify all of the costs incurred in providing hospital services to
uninsured individuals.

end insert begin insert

(e) A nondesignated public hospital, or the governmental entity
with which it is affiliated, that operates nonhospital clinics or
provides physician, nonphysician practitioner, or other health
care services that are not identified as hospital services under the
Special Terms and Conditions for the successor demonstration
project, shall report and certify all of the uncompensated uninsured
costs of the services furnished.

end insert begin insert

(f) Reports submitted under this section shall include all
allowable costs.

end insert begin insert

(g) The appropriate public official shall certify to all of the
following:

end insert begin insert

(1) The accuracy of the reports required under this section.

end insert begin insert

(2) That the expenditures to meet the reported costs comply with
Section 433.51 of Title 42 of the Code of Federal Regulations.

end insert begin insert

(3) That the sources of funds used to make the expenditures
certified under this section do not include impermissible provider
taxes or donations, as defined under Section 1396b(w) of Title 42
of the United States Code, or other federal funds. For this purpose,
federal funds do not include delivery system reform incentive pool
payments or patient care revenue received as payment for services
rendered under programs such as nondesignated state health
programs, the Low Income Health Program, Medicare, or
Medicaid.

end insert begin insert

(h) The certification of public expenditures made pursuant to
this section shall be based on a schedule established by the
department in accordance with federal requirements.

end insert begin insert

(1) The director may require nondesignated public hospitals to
submit quarterly estimates of anticipated expenditures, if these
estimates are necessary to obtain interim payments of federal
Medicaid funds.

end insert begin insert

(2) All reported expenditures shall be subject to reconciliation
to allowable costs, as determined in accordance with applicable
implementing documents for the successor demonstration project.

end insert begin insert

(i) The timeframes for data submission and reporting periods
may be adjusted as necessary in accordance with federal
requirements.

end insert begin insert

(j) (1) Beginning in the 2013-14 fiscal year, safety net care
pool payments for uncompensated care shall be allocated to
nondesignated public hospitals as follows:

end insert begin insert

(A) The department shall determine the maximum amount of
safety net care pool payments for uncompensated care that is
available to nondesignated public hospitals for the successor
demonstration year pursuant to this section. This determination
shall be made solely with respect to allowable uncompensated
care costs incurred by nondesignated public hospitals and reported
pursuant to subdivisions (c) to (i), inclusive.

end insert begin insert

(B) The department shall establish, in consultation with the
nondesignated public hospitals, an allocation methodology to
determine the amount of safety net care pool payments to be made
to the nondesignated public hospitals. The allocation methodology
shall be implemented when the director issues a declaration stating
that the methodology complies with all applicable federal
requirements for federal financial participation.

end insert begin insert

(2) A safety net care pool payment amount may be paid to a
nondesignated public hospital, or governmental entity with which
it is affiliated, pursuant to this section independent of the amount
of uncompensated uninsured costs that is certified as public
expenditures pursuant to subdivisions (c) to (i), inclusive, provided
that, in accordance with the Special Terms and Conditions for the
successor demonstration project, the recipient hospital shall not
return any portion of the funds received to any unit of government,
excluding amounts recovered by the state or federal government.

end insert begin insert

(3) Nondesignated public hospitals, or governmental entities
with which they are affiliated, shall receive the amount established
pursuant to this subdivision, less the 50 percent retained by the
state pursuant to subdivision (l), in quarterly interim payments
during the successor demonstration year. The determination of
the interim payments shall be made on an interim basis prior to
the start of each successor demonstration year. The department
shall use the cost and statistical data that is in subdivisions (c) to
(i), inclusive.

end insert begin insert

(k) (1) No later than April 1 following the end of the relevant
reporting period for the successor demonstration year, the
department shall undertake an interim reconciliation of the
payment amount established pursuant to subdivision (j) for
nondesignated public hospitals using Medicare and other cost,
payment, and statistical data submitted by the hospitals for the
successor demonstration year, and shall adjust payments to the
hospitals accordingly.

end insert begin insert

(2) All payments to nondesignated public hospitals are subject
to a final reconciliation that is subject to final audits of all
applicable Medicare and other cost, payment, discharge, and
statistical data for the successor demonstration year.

end insert begin insert

(l) The process for supplemental payments made in subdivisions
(j) and (k) is a voluntary process the implementation of which is
limited by this subdivision. The department may submit for federal
approval a proposed amendment to the successor demonstration
project to implement this section.

end insert begin insert

(1) If a nondesignated public hospital voluntarily agrees to
participate in a process that, up to the amount of safety net care
pool funds available, allows the certified public expenditures for
uncompensated care under this section to be allocated equally
between the state and the nondesignated public hospital, so that
for every dollar of certified public expenditure used by the
nondesignated public hospital, the nondesignated public hospital
shall voluntarily allow the state to use a corresponding certified
public expenditure amount for claiming purposes. Participation
in the safety net care pool under this section is voluntary on the
part of the nondesignated public hospital for the purposes of all
applicable federal laws. If a nondesignated public hospital does
not voluntarily agree to participate in this process, it shall not be
eligible to receive safety net care pool funds.

end insert begin insert

(2) If the budget neutrality requirements established under
Section XI of the Special Terms and Conditions of the successor
demonstration project are exceeded, payments made under this
section shall be reduced to achieve budget neutrality. The state’s
share of the federal financial participation shall be reduced after
the provider’s share has been exhausted.

end insert begin insert

(3) Notwithstanding any other provision of law, upon the receipt
of a notice of disallowance or deferral from the federal government
related to any certified public expenditures for uncompensated
care incurred by the nondesignated public hospital that are used
for federal claiming under the safety net care pool pursuant to the
successor demonstration project after this section is implemented,
and subject to the processes set forth in this section, the department
and the nondesignated public hospitals shall each be responsible
for one-half of the repayment of the federal portion of any federal
disallowance or deferral for the applicable successor
demonstration year, up to the amount claimed and allocated
pursuant to this section for that particular year beginning with
the 2013-14 fiscal year.

end insert begin insert

(4) This section shall be implemented only to the extent other
federal financial participation is not jeopardized.

end insert begin insert

(m) Eligible providers, as a condition of receiving supplemental
reimbursement pursuant to this section, shall enter into, and
maintain, an agreement with the department for the purposes of
implementing this section and reimbursing the department for the
costs of administering this section, including, but not limited to,
the state personnel costs. No General Fund moneys shall be
expended for the implementation and administration of this section.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 14166.152 of the end insert begin insert Welfare and Institutions Code end insert
begin insert is repealed. end insert

begin delete

14166.152.  

(a) Pursuant to subdivision (b) of Section
14166.151, and notwithstanding any other law, fee-for-service
payments to nondesignated public hospitals for inpatient services
to Medi-Cal beneficiaries shall be governed by this section. The
hospitals’ allowable costs shall be determined, certified, and
claimed in accordance with Section 14166.153. The Medicaid
federal financial participation received by the state for the certified
public expenditures of the hospital, or the governmental entity
with which the hospital is affiliated, for inpatient hospital services
rendered to Medi-Cal beneficiaries shall be paid to the hospital.

(b) With respect to each successor demonstration year, each of
the nondesignated public hospitals shall receive an interim payment
for each day of inpatient hospital services rendered to Medi-Cal
beneficiaries based upon claims filed by the hospital in accordance
with the claiming process set forth in Division 3 (commencing
with Section 50000) of Title 22 of the California Code of
Regulations. The interim per diem payment amount shall be based
on estimated costs, which shall be derived from statistical data
from the following sources and which shall be multiplied by the
federal medical assistance percentage:

(1) For allowable costs reflected in the Medicare cost report,
the cost report most recently audited by the hospital’s Medicare
fiscal intermediary adjusted by a trend factor to reflect increased
costs, as approved by the federal Centers for Medicare and
Medicaid Services for the successor demonstration project.

(2) For allowable costs not reflected in the Medicare cost report,
each hospital shall provide hospital-specific cost data requested
by the department. The department shall adjust the data by a trend
factor as necessary to reflect project year allowable costs.

(c) Until the department commences making payments pursuant
to subdivision (b), the department may continue to make
fee-for-service per diem payments to the nondesignated public
hospitals pursuant to the selective provider contracting program
in accordance with Article 2.6 (commencing with Section 14081),
for services rendered on and after July 1, 2012. Per diem payments
shall be adjusted retroactively to the amounts determined under
the payment methodology prescribed in this section.

(d) No later than April 1 following the end of the relevant
reporting period for the successor demonstration year, the
department shall undertake an interim reconciliation of payments
made pursuant to subdivisions (a) to (c), inclusive, based on
Medicare and other cost and statistical data submitted by the
hospital for the year and shall adjust payments to the hospital
accordingly.

(e) (1) The nondesignated public hospitals shall receive
supplemental reimbursement for the costs incurred for physician
and nonphysician practitioner services provided to Medi-Cal
beneficiaries who are patients of the hospital, to the extent that
those services are not claimed as inpatient hospital services by the
hospital and the costs of those services are not otherwise recognized
under subdivision (a).

(2) Expenditures made by the nondesignated public hospital,
or a governmental entity with which it is affiliated, for the services
identified in paragraph (1) shall be reduced by any payments
received pursuant to Article 7 (commencing with Section 51501)
of Title 22 of the California Code of Regulations. The remainder
shall be certified by the appropriate public official and claimed by
the department in accordance with Section 14166.153. These
expenditures may include any of the following:

(A) Compensation to physicians or nonphysician practitioners
pursuant to contracts with the nondesignated public hospital.

(B) Salaries and related costs for employed physicians and
nonphysician practitioners.

(C) The costs of interns, residents, and related teaching physician
and supervision costs.

(D) Administrative costs associated with the services described
in subparagraphs (A) to (C), inclusive, including billing costs.

(3) Nondesignated public hospitals shall receive federal financial
participation based on the expenditures identified and certified in
paragraph (2).

(4) The federal financial participation received by the department
for the certified public expenditures identified in paragraph (2)
shall be paid to the nondesignated public hospital, or a
governmental entity with which it is affiliated.

(5) Supplemental reimbursement under this subdivision may
be distributed as part of the interim payments under subdivision
(b), on a per-visit basis, on a per-procedure basis, or on any other
federally permissible basis.

(6) The department shall submit for federal approval, by
September 30, 2012, a proposed amendment to the Medi-Cal state
plan to implement this subdivision, retroactive to July 1, 2012, to
the extent permitted by the federal Centers for Medicare and
Medicaid Services. If necessary to obtain federal approval, the
department may limit the application of this subdivision to costs
determined allowable by the federal Centers for Medicare and
Medicaid Services. If federal approval is not obtained, this
subdivision shall not be implemented.

(f) This section shall become operative as provided in
subdivision (f) of Section 14166.151.

end delete

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 14166.153 of the end insert begin insert Welfare and Institutions Code end insert
begin insert is repealed. end insert

begin delete

14166.153.  

(a) Beginning in the 2012-13 fiscal year, within
five months after the end of a successor demonstration year, each
of the nondesignated public hospitals shall submit to the department
all of the following reports:

(1) The hospital’s Medicare cost report for the project year or
successor demonstration year.

(2) Other cost reporting and statistical data necessary for the
determination of amounts due the hospital under the demonstration
project or successor demonstration project, as requested by the
department.

(b) For each project year or successor demonstration year, the
reports shall identify all of the following:

(1) To the extent applicable, the costs incurred in providing
inpatient hospital services to Medi-Cal beneficiaries on a
fee-for-service basis and physician and nonphysician practitioner
services costs, as identified in subdivision (e) of Section 14166.152.

(2) The costs incurred in providing hospital services to uninsured
individuals.

(c) Each nondesignated public hospital, or governmental entity
with which it is affiliated, that operates nonhospital clinics or
provides physician, nonphysician practitioner, or other health care
services that are not identified as hospital services under the Special
Terms and Conditions for the demonstration project and successor
demonstration project, shall report and certify all of the
uncompensated Medi-Cal and uninsured costs of the services
furnished. The amount of these uncompensated costs to be claimed
by the department shall be determined by the department in
consultation with the governmental entity so as to optimize the
level of claimable federal Medicaid reimbursement.

(d) Reports submitted under this section shall include all
allowable costs.

(e) The appropriate public official shall certify to all of the
following:

(1) The accuracy of the reports required under this section.

(2) That the expenditures to meet the reported costs comply
with Section 433.51 of Title 42 of the Code of Federal Regulations.

(3) That the sources of funds used to make the expenditures
certified under this section do not include impermissible provider
taxes or donations as defined under Section 1396b(w) of Title 42
of the United States Code or other federal funds. For this purpose,
federal funds do not include delivery system reform incentive pool
payments or patient care revenue received as payment for services
rendered under programs such as nondesignated state health
programs, the Low Income Health Program, Medicare, or
Medicaid.

(f) The certification of public expenditures made pursuant to
this section shall be based on a schedule established by the
department in accordance with federal requirements.

(1) The director may require the nondesignated public hospitals
to submit quarterly estimates of anticipated expenditures, if these
estimates are necessary to obtain interim payments of federal
Medicaid funds.

(2) All reported expenditures shall be subject to reconciliation
to allowable costs, as determined in accordance with applicable
implementing documents for the demonstration project and
successor demonstration project.

(g) The director shall seek Medicaid federal financial
participation for all certified public expenditures reported by the
nondesignated public hospitals and recognized under the successor
demonstration project.

(h) The timeframes for data submission and reporting periods
may be adjusted as necessary in accordance with federal
requirements.

(i) This section shall become operative as provided in
subdivision (f) of Section 14166.151.

end delete

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 14166.154 of the end insert begin insert Welfare and Institutions Code end insert
begin insert is repealed. end insert

begin delete

14166.154.  

(a)  (1) Beginning in the 2012-13 fiscal year, if
the reimbursement methodology in subdivision (b) of Section
14166.151 is in effect and federal approval is obtained for an
amendment to the successor demonstration project that was
submitted pursuant to subdivision (d), then, with respect to each
successor demonstration year, nondesignated public hospitals, or
governmental entities with which they are affiliated, shall be
eligible to receive safety net care pool payments for uncompensated
care from the Health Care Support Fund established pursuant to
Section 14166.21. Safety net care pool payments for
uncompensated care shall be allocated to nondesignated public
hospitals as follows:

(A) The department shall determine the maximum amount of
safety net care pool payments for uncompensated care that is
available to nondesignated public hospitals for the successor
demonstration year pursuant to paragraph (2) of subdivision (b)
of Section 14166.151. This determination shall be made solely
with respect to allowable uncompensated care costs incurred by
nondesignated public hospitals and reported pursuant to Section
14166.153.

(B) The department shall establish, in consultation with the
nondesignated public hospitals, an allocation methodology to
determine the amount of safety net care pool payments to be made
to each hospital. The allocation methodology shall be implemented
when the director issues a declaration stating that the methodology
complies with all applicable federal requirements for federal
financial participation.

(2) A safety net care pool payment amount may be paid to a
nondesignated public hospital, or governmental entity with which
it is affiliated, pursuant to this section independent of the amount
of uncompensated Medi-Cal and uninsured costs that is certified
as public expenditures pursuant to Section 14166.153, provided
that, in accordance with the Special Terms and Conditions for the
successor demonstration project, the recipient hospital does not
return any portion of the funds received to any unit of government,
excluding amounts recovered by the state or federal government.

(3) In establishing the amount to be paid to each nondesignated
public hospital under this subdivision, the department shall
minimize to the extent possible the redistribution of federal funds
that are based on certified public expenditures as described in
paragraph (2).

(b) Each nondesignated public hospital, or governmental entity
with which it is affiliated, shall receive the amount established
pursuant to subdivision (a) in quarterly interim payments during
the successor demonstration year. The determination of the interim
payments shall be made on an interim basis prior to the start of
each successor demonstration year. The department shall use the
same cost and statistical data that is used in determining the interim
payments for Medi-Cal inpatient hospital services under Section
14166.152.

(c) (1) No later than April 1 following the end of the relevant
reporting period for the successor demonstration year, the
department shall undertake an interim reconciliation of the payment
amount established pursuant to subdivision (a) for each
nondesignated public hospital using Medicare and other cost,
payment, and statistical data submitted by the hospital for the
successor demonstration year, and shall adjust payments to the
hospital accordingly.

(2) The final payment to a nondesignated public hospital, for
purposes of subdivision (b) and paragraph (1) of this subdivision,
shall be subject to final audits of all applicable Medicare and other
cost, payment, discharge, and statistical data for the successor
demonstration year.

(d) The department shall submit for federal approval a proposed
amendment to the successor demonstration project to implement
this section.

(e) This section shall become operative as provided in
subdivision (f) of Section 14166.151.

end delete

begin insert

begin insert SEC. 5. end insert   

end insert

begin insert Section 14166.155 of the end insert begin insert Welfare and Institutions Code end insert
begin insert is repealed. end insert

begin delete

14166.155.  

(a) (1) Beginning in the 2012-13 fiscal year, if
the reimbursement methodology in subdivision (b) of Section
14166.151 is in effect and federal approval is obtained for an
amendment to the successor demonstration project that was
submitted pursuant to subdivision (c), then nondesignated public
hospitals may receive payments pursuant to this section. The
amount of delivery system reform incentive pool funding,
consisting of both the federal and nonfederal share of payments,
that is made available to each nondesignated public hospital system
in the aggregate for the term of the successor demonstration project
shall be based initially on the delivery system reform proposals
that are submitted by the nondesignated public hospitals to the
department for review and submission to the federal Centers for
Medicare and Medicaid Services for final approval. The initial
percentages of delivery system reform incentive pool funding
among the nondesignated public hospitals for each successor
demonstration year shall be determined based on the annual
components as contained in the approved proposals.

(2) The actual receipt of funds shall be conditioned on the
nondesignated public hospital’s progress toward, and achievement
of, the specified milestones and other metrics established in its
approved delivery system reform incentive pool proposal. A
nondesignated public hospital may carry forward available
incentive pool funding associated with milestones and metrics
from one year to a subsequent period as authorized by the Special
Terms and Conditions and the final delivery system reform
incentive pool protocol.

(3) The department may reallocate the incentive pool funding
available under this section pursuant to conditions specified, and
as authorized by, the Special Terms and Conditions and the final
delivery system reform incentive pool protocol.

(b) Each nondesignated public hospital shall be individually
responsible for progress toward, and achievement of, milestones
and other metrics in its proposal, as well as other applicable
requirements specified in the Special Terms and Conditions and
the final delivery system reform incentive pool protocol, in order
to receive its specified allocation of incentive pool funding under
this section.

(1) The nondesignated public hospital shall submit semiannual
reports and requests for payment to the department by March 31
and the September 30 following the end of the second and fourth
quarters of the successor demonstration year, or comply with any
other process as approved by the federal Centers for Medicare and
Medicaid Services.

(2) Within 14 days after the semiannual report due date, the
nondesignated public hospital system or its affiliated governmental
entity shall make an intergovernmental transfer of funds equal to
the nonfederal share that is necessary to claim the federal funding
for the pool payment related to the achievement or progress metric
that is certified. The intergovernmental transfers shall be deposited
into the Public Hospital Investment, Improvement, and Incentive
Fund, established pursuant to Section 14182.4.

(3) The department shall claim the federal funding and pay both
the nonfederal and federal shares of the incentive payment to the
nondesignated public hospital system or other affiliated
governmental provider, as applicable. If the intergovernmental
transfer is made within the appropriate 14-day timeframe, the
incentive payment shall be disbursed within seven days with the
expedited payment process as approved by the federal Centers for
Medicare and Medicaid Services, otherwise the payment shall be
disbursed within 20 days of when the transfer is made.

(4) The nondesignated public hospital system or other affiliated
governmental provider is responsible for any fee or cost required
to implement the expedited payment process in accordance with
Section 8422.1 of the State Administrative Manual.

(c) The department shall submit for federal approval an
amendment to the successor demonstration project to implement
this section.

(d) In the event of a conflict between any provision of this
section and the Special Terms and Conditions for the successor
demonstration project and the final delivery system reform
incentive pool protocol, the Special Terms and Conditions and the
final delivery system reform incentive pool protocol shall control.

(e) This section shall become operative as provided in
subdivision (f) of Section 14166.151.

end delete