BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 498
AUTHOR: Chavez
AMENDED: September 5, 2013
HEARING DATE: September 11, 2013
CONSULTANT: Bain
PURSUANT TO SENATE RULE 29.10
SUBJECT : Medi-Cal.
SUMMARY : Requires the Department of Health Care Services to
allocate payments for uncompensated care to Non-Designated
Public Hospitals (known more commonly as district hospitals or
NDPHs) from the federally funded Safety Net Care Pool (SNCP)
under the state's Medicaid waiver, subject to specified
conditions. Requires NDPHs, or governmental entities with which
they are affiliated, to receive funding from the SNCP, minus 50
percent retained by the state. Requires supplemental
reimbursement under an existing Medi-Cal program that provides
supplemental federal reimbursement to public distinct part
nursing facilities to be subject to a reconciliation process.
Existing law:
1.Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), under which
qualified low-income individuals receive health care services.
Requires inpatient hospital services to be a covered benefit
under the Medi-Cal program.
2.Changes, under the 2012 health budget trailer bill, Medi-Cal
inpatient fee-for-service (FFS) reimbursement methodology for
NDPHs under the state's federal Medicaid hospital financing
waiver, for services on or after July 1, 2012. These changes
switch hospitals to a cost-based Medi-Cal reimbursement based
on certified public expenditures (CPE), allow NDPHs to receive
funds from the SNCP and the Delivery System Reform Incentive
Pool (DSRIP), and discontinue funding from the state General
Fund (GF) and from intergovernmental transfers (IGT) made to
draw down federal matching funds. Makes implementation of the
reimbursement changes contingent on federal approval of all
provisions of the funding changes. (These changes were not
implemented.)
Continued---
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3.Suspends existing law for Medi-Cal inpatient FFS reimbursement
to NDPHs upon implementation of the changes in 2) above.
4.Permits publicly-owned distinct part nursing facilities
(DP-NFs), in addition to the rate of payment that the facility
would otherwise receive for skilled nursing services, to
receive supplemental Medi-Cal reimbursement by certifying its
projected costs and providing the state match to draw down
additional federal Medicaid funds.
This bill:
1.Requires DHCS to allocate payments for uncompensated care to
NDPHs from the federally funded SNCP, subject to specified
conditions. Requires DHCS to establish, in consultation with
the NDPH, an allocation methodology to determine the amount of
SNCP payments to be made.
2.Requires NDPHs, or governmental entities with which they are
affiliated, to receive funding from the SNCP, minus 50 percent
retained by the state.
3.Requires the process established in 1) and 2) to be voluntary
for NDPH, but makes an NDPH that does not voluntarily agree to
participate in this process ineligible to receive SNCP funds.
4.Repeals provisions that would have allowed, under specified
conditions, NDPHs to receive payments from DSRIP, and that
shift FFS Medi-Cal payments to NDPHs to a cost-based system
using CPEs, with the local entities providing the state match.
5.Requires supplemental reimbursement under an existing Medi-Cal
program that provides supplemental federal reimbursement to
public DP-NFs to be subject to a reconciliation process to
ensure that the supplemental federal reimbursement is not made
in excess of allowable costs, and to ensure that the
reimbursement is made up to allowable costs.
6.Prohibits the amount of costs certified that are used to draw
down supplemental federal Medi-Cal reimbursement to public
DP-NFs from exceeding 100 percent of allowable costs, instead
of projected costs in existing law.
FISCAL EFFECT :
According to the Senate Appropriations Committee analysis of the
previous version of this bill:
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One-time cost of about $300,000 to seek federal approvals
by the DHCS (50 percent GF, 50 percent federal funds).
Payments to NDPH of about $25 million in 2013-14 and $27.5
million in 2014-15 (federal funds).
State expenditures for the Medi-Cal program of about $25
million in 2013-14 and $27.5 million in 2014-15 (federal
funds). These federal funds will allow the state to reduce
General Fund expenditures by a similar amount.
PRIOR VOTES :
Assembly Health: 18- 0
Assembly Appropriations:17- 0
Assembly Floor: 74- 0
COMMENTS :
1.Author's statement. AB 498 has two provisions, the first of
which was previously heard and passed by the Senate
Committee on July 11, 2013 and that enabled NDPH to receive
funding from the SNCP. The additional provision added by
floor amendments on September 5, 2013 would provide
clean-up language for AB 430 (Cardenas), Chapter 171,
Statutes of 2001), which allowed public DP-NFs to claim
supplemental federal reimbursement. The September 5th
amendment clarifies that DHCS has audit authority over this
program, and may apply a reconciliation process to seek
collections of overpayments and to make corrective payments
for underpayments. AB 498 would also allow eligible DP-NFs
to receive supplemental federal reimbursement up to
allowable costs, instead of projected costs under existing
law. When actual costs exceed projected costs, eligible
DP-NFs are not able to receive additional supplemental
federal reimbursement for their costs in excess of
projected costs, despite federal Medicaid law allowing
supplemental Medicaid reimbursement up to allowable costs.
2.DP-NF changes. A DP-NF is part of a hospital and is
certified to provide skilled nursing services. The facility
must be physically distinguishable from the hospital and
fiscally separate for cost reporting purposes. AB 430
allows DP-NFs owned or operated by the state, a county, a
city, a city and county, or health care district to receive
supplemental federal Medicaid reimbursement up to projected
costs by certifying their costs (known as CPEs). There are
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31 DP-NFs eligible under the provision of law enacted by AB
430.
An audit performed by the federal Office of Inspector General
(OIG) found the state did not provide adequate instructions
to DP-NFs to properly calculate the CPEs used to support
additional reimbursement amounts, and did not have adequate
monitoring procedures to ensure that the facilities
properly calculated their reported Medicaid days and
expenditures, which resulted in an overpayment of $3.6
million to three facilities audited by OIG.
DHCS requested the changes made by this bill related to the
reconciliation process for DP-NFs in response to the OIG
audit, and to draw down additional federal funds for these
facilities. This bill would require a reconciliation
process for this program, and would allow DHCS to increase
federal reimbursement to eligible DP-NFs. DHCS indicates
that facilities can currently only be reimbursed to the
lesser of DHCS' projected costs or the facility's actual
cost, and this methodology does not align with CPE
methodology. Under AB 430, the supplemental reimbursement
is capped at the facilities' projected cost, and facilities
have to use the lesser of the two (the projected cost or
actual cost), when calculating supplemental amounts. Based
on 2009-10 projected rates and audit reports, 42 percent of
the eligible DP-NF's had costs above their projected rates.
DHCS estimates this provision would generate $3.2 million
in additional federal funds for the federal fiscal year
2013-14.
3.Background on NDPH Medi-Cal reimbursement. NDPHs are
hospitals owned by hospital districts or municipal
entities. There are 46 NDPHs in California.
NDPHs are currently reimbursed by Medi-Cal based on a
negotiated per diem rate if they contract with the state,
or they receive cost-based reimbursement if they do not
(referred to as "non-contract hospitals"). The fund sources
for these Medi-Cal payments are the state GF and federal
funds. In addition to the current per diem or non-contract
payments, NDPHs receive $1.9 million in supplemental
payments (from the NDPH Supplemental Fund, which is funded
by GF and federal funds), and supplemental payments
authorized by AB 113 (Monning), Chapter 20, Statutes of
2011, through the NDPH Intergovernmental Transfer Program
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(which is funded by local governments transferring funds to
the state via an intergovernmental transfer (IGTs), which
is then matched with federal Medicaid funds).
4.AB 1467, (Budget Committee), Chapter 23, Statutes of 2012.
The 2012 health budget trailer bill proposed to change
reimbursement to NDPHs, effective July 1, 2012. These
changes were subject to federal approval, which was not
received. The unapproved methodology proposed by AB 1467
would have eliminated supplemental payments and IGTs to
NDPHs, and would have shifted NDPHs to a cost-based
reimbursement based on CPEs, and would have made NDPHs
eligible to receive payments from the SNCP and the DSRIP,
fund sources under the waiver for which they are not
currently eligible. The funds from the SNCP would be used
to offset NDPH's uncompensated care costs. These changes
were estimated to result in savings of approximately $95
million GF.
The reimbursement changes proposed by AB 1467 were contingent
upon DHCS receiving federal approval via an amendment to
the Section 1115 Medicaid Demonstration Waiver. However,
DHCS indicated these changes were not likely to be approved
by the federal government, and it withdrew the proposal in
the 2013 May Revise. Because AB 1467 required all
components of the NDPH reimbursement changes to be
federally approved, if one component of the proposed
changes was not implemented, the other provisions are not
implemented either. This bill would enable one provision of
the existing proposal (allowing NDPH to receive funds from
the SNCP) to go forward, and would repeal the other
provisions that have not taken effect because they did not
receive federal approval.
5.Prior legislation.
a. AB 1467 (Budget Committee), Chapter 23, Statutes
of 2012 proposed to change the reimbursement methodology
and fund source for reimbursement to NDPHs, as described
above.
b. AB 113 (Monning), Chapter 20, Statutes of 2011,
established the NDPH IGT Program, administered by the
DHCS, under which public entities voluntarily transfer
funds to the state for the purpose of drawing down
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federal funds to make supplemental Medi-Cal payments to
these NDPHs.
c. AB 102 (Budget Committee), Chapter 29, Statutes of
2011, requires DHCS to implement a new inpatient payment
methodology based on diagnosis-related groups (DRGs).
d. SB 853 (Budget and Fiscal Review Committee),
Chapter 717, Statutes of 2010, requires DHCS, subject to
federal approval, to develop and implement a Medi-Cal
payment methodology based on DRGs for private inpatient
hospital services.
e. SB 208 (Steinberg), Chapter 714, Statutes of 2010,
implemented provisions of the 2010 Section 1115 Medicaid
waiver including establishing the DSRIP Fund consisting
of IGTs from counties or other specified governmental
entities, to be matched with federal funds and to be
used for investment, improvement, and incentive payments
for DPHs.
1.Support. This bill is sponsored by the District Hospital
Leadership Forum (DHLF) and supported by individual NDPHs.
Proponents argue this bill will assist in drawing down
additional federal funds for NDPH, would assist these
hospitals financially, would assist low-income uninsured
patients served by these hospitals, and would not divert funds
from designated public hospitals.
SUPPORT AND OPPOSITION :
Support: District Hospital Leadership Forum (sponsor)
Support (prior version): Antelope Valley Hospital
Association of California Healthcare
Districts
City of Alameda Health Care District
Corcoran District Hospital
Eastern Plumas Health Care
El Camino Hospital
Hazel Hawkins Memorial Hospital
Hi-Desert Medical Center
John C. Fremont Healthcare District
Kaweah Delta Health Care District
Lompoc Valley Medical Center
Marin General Hospital
Oak Valley Hospital District
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Palm Drive Hospital
Palomar Health
Pioneers Memorial Healthcare District
Salinas Valley Memorial Healthcare System
San Bernardino Mountains Community Hospital
District
San Gorgonio Memorial Hospital
Sierra View District Hospital
Sonoma Valley Hospital
Surprise Valley Health Care District
Tri-City Medical Center
Tulare Regional Medical Center
Washington Hospital Healthcare System
Oppose: None received.
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