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
AB 498
Page 2
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
AB 498
Page 3
(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