BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 498
                                                                  Page  1

          Date of Hearing:   May 15, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                     AB 498 (Chávez) - As Amended:  May 7, 2013 

          Policy Committee:                              HealthVote:18-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              No

           SUMMARY  

          This bill prohibits payments to a nondesignated public hospital  
          (NDPH), pursuant to existing law provisions for inpatient  
          services on or after July 1, 2012, as specified, from being  
          subject to a peer grouping inpatient reimbursement limitation  
          (PIRL) established by the Department of Health Care Services  
          (DHCS), unless required by federal law.    

           FISCAL EFFECT  

          As currently drafted, costs are likely to be negligible as this  
          bill is intended to ensure the state takes advantage of federal  
          funds for district hospital Medi-Cal payments.

           COMMENTS  

           1)Rationale  . This bill, sponsored by the District Hospital  
            Leadership Forum (DHLF) on behalf of district hospitals, seeks  
            to prevent application of an existing statutory or regulatory  
            rate limitation on a NDPH when DHCS converts its Medi-Cal  
            inpatient reimbursement methodology to the Certified Public  
            Expenditures (CPE) system.  DHLF states this bill addresses a  
            technical issue to which NDPHs were subject prior to July 1,  
            2012.  

           2)Background  .  The existing law amended by this bill, AB 1467  
            (Budget Committee), Chapter 23, Statutes of 2012, the Health  
            Omnibus Budget Trailer Bill, revised the reimbursement  
            methodology for NDPHs, effective July 1, 2012.  The new  
            methodology is intended to result in savings to the general  
            fund (GF) and allow NDPHs to be compensated for the loss by  
            drawing down additional federal funds.  Until it is  








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            implemented, NDPHs continue to receive either the California  
            Medical Assistance Commission (CMAC) negotiated per diem rate  
            or a cost-based reimbursement for Medi-Cal fee-for-service  
            (FFS) inpatient services.  These payments are 50% GF and 50%  
            federal funds.  

            With the proposed change in methodology, NDPHs would be  
            reimbursed for their inpatient Medi-Cal FFS days in the same  
            manner as designated public hospitals (DPHs) in that they will  
            use their CPEs to draw down federal funds. DPHs are county  
            hospitals and University of California (UC) hospitals.  This  
            change was estimated to result in $94.4 million GF savings  
            because local governmental funds (CPEs) would be used instead  
            of state GF as a match for federal funds to reimburse NDPHs.  

            In addition, qualified NDPHs were previously receiving  
            supplemental reimbursements from the NDPH Supplemental Fund,  
            which is funded with 50% GF and 50% federal funds.  This  
            supplemental reimbursement will no longer be available,  
            resulting in an additional GF savings of $1.9 million.  

            Finally, NDPHs will no longer be eligible for the supplemental  
            payments authorized by AB 113 (Monning), Chapter 20, Statutes  
            of 2011, which are funded by intergovernmental transfers  
            (IGTs) and federal funds.  The reimbursement changes are  
            contingent upon DHCS receiving federal approval via an  
            amendment to the Section 1115 Medicaid Demonstration Waiver, A  
            Bridge to Reform, which requests increased funding and  
            approval of a state plan amendment (SPA).  Approval of the  
            waiver amendment and SPA are still pending.  The additional  
            funds will be made available to NDPHs to offset their  
            uncompensated care costs and to support their efforts to  
            enhance the quality of care and the health of the patients and  
            families they serve.  NDPHs are currently not eligible for  
            these funds.  
              
           3)PIRL  . The PIRL became effective for Medi-Cal non-contract  
            inpatient FFS acute care services beginning with the state's  
            1993 fiscal period.  It replaced the Medi-Cal Inpatient  
            Reimbursement Limitation that went into effect in the state's  
            1980 fiscal year.  The limit's purpose was to slow down the  
            rate of Medi-Cal inpatient acute care expenditures through two  
            sets of limitations.  Both limitations are based upon a  
            hospital's Medi-Cal cost per discharge.  According to the  
            sponsor of this bill, the District Hospital Leadership Forum  








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            (DHLF), the first is to limit the growth of Medi-Cal  
            expenditures by the hospital from one period to the next,  
            while the other capped the hospital's Medi-Cal cost per  
            discharge at the 60th percentile of its peer group.  These  
            limitations are found in regulations and were intended to  
            control costs for non-contract hospitals, as the CMAC  
            contracting program was created to control costs for contract  
            hospitals through the negotiations process.  The PIRL is the  
            lowest of: a) the all-inclusive rate per discharge limitation;  
            b) the peer grouping rate per discharge limitation; c)  
            customary charges; or, d) allowable costs.  It is applied to  
            the hospitals' FFS charges in calculating the maximum  
            allowable reimbursement rate.

           Analysis Prepared by  :    Debra Roth / APPR. / (916) 319-2081