BILL ANALYSIS Ó
AB 498
Page 1
ASSEMBLY THIRD READING
AB 498 (Chávez)
As Amended May 7, 2013
Majority vote
HEALTH 18-0 APPROPRIATIONS 17-0
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|Ayes:|Pan, Logue, Ammiano, |Ayes:|Gatto, Harkey, Bigelow, |
| |Atkins, Bonta, Chesbro, | |Bocanegra, Bradford, Ian |
| |Gomez, | |Calderon, Campos, |
| |Roger Hernández, | |Donnelly, Eggman, Gomez, |
| |Lowenthal, Maienschein, | |Hall, Rendon, Linder, |
| |Mansoor, Mitchell, | |Pan, Quirk, Wagner, Weber |
| |Nazarian, Nestande, | | |
| |V. Manuel Pérez, Wagner, | | |
| |Wieckowski, Wilk | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Exempts cost-based fee-for-service (FFS) payments to a
non-designated public hospital (NDPH) for inpatient services on
or after July 1, 2012, and supplemental payments from the Safety
Net Care Pool (SNCP) and the Delivery System Reform Incentive
Pool (DSRIP), established in the 2012 Section 1115 Medi-Cal
Waiver, Bridge to Reform, from being subject to a peer grouping
inpatient reimbursement limitation (PIRL) by the Department of
Health Care Services (DHCS), unless otherwise required by
federal law.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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 : According to the author, this bill prohibits DHCS or
the federal Centers for Medicare and Medicaid Services (CMS)
from applying an existing statutory or regulatory rate
limitation on a NDPH when they convert their Medi-Cal inpatient
reimbursement methodology to the Certified Public Expenditures
(CPE) system. The author states the current PIRL is in place
for traditional Medi-Cal providers, specifically non-contract
providers. This bill will prevent the PIRL rate limitation from
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being applied and will allow NDPHs to report their full costs to
CMS.
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
and allow NDPHs to be compensated for the loss by drawing down
additional federal funds. Until it is implemented, NDPHs
continue to receive either the California Medical Assistance
Commission (CMAC) negotiated per diem rate or a cost-based
reimbursement for Medi-Cal FFS inpatient services. These
payments are 50% General Fund (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
county and University of California (UC) hospitals or designated
public hospitals (DPHs) in that they will use their CPEs to draw
down federal funds. This change was estimated to result in
$94.4 million GF savings as local governmental funds or 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 would 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 an increase in the SNCP and the
DSRIP for the supplemental funding, as well as 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.
The Selective Provider Contracting Program (SPCP) was
established by the Legislature in 1982 (AB 3480 (Robinson),
Chapter 329, Statutes of 1982) under a 1915(b) waiver and
allowed CMAC to selectively contract as long as there was
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adequate access to hospital beds to serve the Medi-Cal
population in a Health Facility Planning Area. Except for
emergencies, most FFS Medi-Cal beneficiaries in a closed area
are required to receive inpatient care at a contracting
hospital. Selective contracting allowed CMAC to negotiate a
competitive rate in place of the traditional "cost-based"
reimbursement system used by most states. Since its inception
CMAC has saved the state $12.7 billion in state GF savings.
Hospitals in an open area continue to be reimbursed on a
cost-based system. On July 1, 2012, CMAC was eliminated and the
SPCP was transferred to DHCS for negotiation and administration
until the SPCP is replaced by the implementation of the new
discharge-based diagnosis related group (DRG) hospital inpatient
payment methodology scheduled for July 1, 2013. DHCS is using a
three year transition period to implement DRGs that limits
hospitals' projected change from what they would have received
under the current reimbursement methodology, with full
implementation in year four. The purpose of the transition
period is to allow time for hospitals to make adjustments to
systems of care due to the fundamental change in the payment
system. 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, 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: 1) the all-inclusive rate per discharge
limitation; 2) the peer grouping rate per discharge limitation;
3) customary charges; or, 4) allowable costs. It is applied to
the hospitals' FFS charges in calculating the maximum allowable
reimbursement rate.
In 2005, the State of California sought a five year federal
waiver as a Medicaid demonstration project under the authority
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of Section 1115(a) of the Social Security Act. Under this
waiver, hospital financing was fundamentally restructured. The
waiver created the SNCP to pay for services to the uninsured and
for unreimbursed Medi-Cal expenditures delivered through DPHs,
other governmental entities and state-funded programs.
Contracting through the SPCP program continued in a modified
fashion under the 2005 hospital waiver. CMAC retained authority
to continue negotiating rates under the SPCP for private and
NDPHs for the provision of hospital inpatient services in the
Medi-Cal FFS program. One of the most significant revisions
under the 2005 hospital waiver was to make fundamental changes
in Medi-Cal hospital financing for public hospitals.
Reimbursement for Medi-Cal per diem for the 21 UC and county
DPHs is now based on CPEs, rather than state GF. The inpatient
reimbursement rate was no longer negotiated by CMAC and is
determined by DHCS. The waiver also created the SNCP which
provides a fixed amount of federal funds to cover uncompensated
care. CPEs are the expenditures certified by counties, state
university teaching hospitals, or other public entities as
having been spent on Medi-Cal patients or on the uninsured.
In November 2010, California received federal approval for a new
five year Section 1115 Medi-Cal Demonstration and Pilot Project
Waiver, entitled "A Bridge to Reform." This waiver is a renewal
of the 2005 Hospital Financing and Uninsured Waiver and includes
a continuation of the hospital financing provisions from the
2005 waiver but with modifications to the allocation of SNCP
funds. Hospitals submit CPEs and use IGTs to draw down federal
funds. The DSRIP is a newly created source of funding within
the SNCP to support California's public hospitals' efforts to
enhance the quality of care and health of the patients and
families they serve. Funding is up to $6.5 billion over five
years. Each hospital is individually responsible for progress
towards, and achievement of, milestones and other metrics in its
proposal. There are four areas for which funding is available:
1) infrastructure development; 2) innovation and design; 3)
population-focused improvement; and, 4) urgent improvement in
care, hospital specific.
The District Hospital Leadership Forum (DHLF), sponsor of this
bill, states that this bill addresses a technical issue related
to the PIRL that non-contract district and municipal hospitals
(otherwise known as NDPHs) were subject to prior to July 1,
2012. The 2012-13 State Budget proposed that district and
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municipal hospitals transition to CPEs for Medi-Cal inpatient
FFS reimbursement coupled with accessing supplemental federal
funds as part of the 2010 Medi-Cal 1115 Waiver. DHLF explains
that in other words, the state would have achieved a savings of
approximately $100 million annually and these public hospitals
would have provided the non-federal share of Medi-Cal funds by
certifying their costs of providing care to Medi-Cal FFS
beneficiaries. This transition was slated for implementation on
July 1, 2012, and the state and the NDPHs were awaiting final
approval on the various components by CMS.
The Governor's May 2013 Budget Revision eliminates the assumed
savings because CMS approval has not been received timely and
DHCS is no longer pursing the reimbursement change enacted by AB
1467. NDPHs will continue to receive GF reimbursement through
per diem, contracted rates and supplemental payments.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0000595