BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 498
Author: Chávez (R), et al.
Amended: 9/5/13 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 9-0, 7/3/13
AYES: Hernandez, Anderson, Beall, De León, DeSaulnier, Monning,
Nielsen, Pavley, Wolk
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SENATE HEALTH COMMITTEE : 7-0, 9/11/13 (Pursuant to Senate Rule
29.10)
AYES: Hernandez, Anderson, Beall, DeSaulnier, Monning, Nielsen,
Wolk
NO VOTES RECORDED: De León, Pavley
SENATE APPROPRIATIONS COMMITTEE : 7-0, 9/11/13 (Pursuant to
Senate Rule 29.10)
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 74-0, 5/23/13 - See last page for vote
SUBJECT : Medi-Cal
SOURCE : District Hospital Leadership Forum
DIGEST : This bill requires the Department of Health Care
CONTINUED
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Services (DHCS) to allocate payments for uncompensated care to
Non-Designated Public Hospitals (known more commonly as district
hospitals or Non-Designated Public Hospitals [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% retained by the
state. Requires supplemental reimbursement under an existing
Medi-Cal program that provides supplemental federal
reimbursement to public distinct part nursing facilities
(DP-NFs) to be subject to a reconciliation process.
Senate Floor Amendments of 9/5/13 require DP-NFs supplemental
federal payments to be subject to a reconciliation process so
that payments are made appropriately and these facilities are
reimbursed up to their allowable costs.
ANALYSIS :
Existing law:
1. Establishes the Medi-Cal program, administered by 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.
3. Suspends existing law for Medi-Cal inpatient FFS
reimbursement to NDPHs upon implementation of the changes in
#2) above.
4. Permits publicly-owned DP-NFs, in addition to the rate of
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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 %
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 % of allowable costs, instead of
projected costs in existing law.
Background
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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
(which is funded by local governments transferring funds to the
state via a IGTs, which is then matched with federal Medicaid
funds).
AB 1467, (Assembly Budget Committee, Chapter 23, Statutes of
2012) . The 2012 trailer bill proposed to change reimbursement
to NDPHs, effective July 1, 2012. These changes were subject to
federal approval. The new methodology under AB 1467 would have
eliminated supplemental payments and IGTs to NDPHs, and would
have shifted NDPHs to a cost-based reimbursement based on CPEs.
This would enable these hospitals to be paid up to the maximum
amount allowable under federal Medicaid law (known as the "upper
payment limit" or UPL). Under this funding shift, hospital
districts would put up the state match (instead of the GF) to
draw down federal Medicaid matching funds. This proposal was
intended to result in savings to the GF and allow NDPHs to draw
down additional federal funds (described below). The proposed
change in methodology would result in NDPHs being reimbursed for
their inpatient Medi-Cal FFS days in the same manner as
designated public hospitals (DPHs,) which are the 19 county and
University of California hospitals, in that they will use their
CPEs to draw down federal funds.
In addition, AB 1467 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
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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 is not implemented, the other provisions
are not implemented either.
This bill enables one provision of the existing proposal
(allowing NDPH to receive funds from the SNCP) to go forward
without shifting NDPHs to CPEs and without allowing these
hospitals to access the DSRIP. Under this bill, NDPHs estimate
they will receive $50 million in 2013-14 from the SNCP and $55
million in 2014-15.
Federal Medicaid waiver . In November 2010, California received
federal approval for a new five year Section 1115 Medi-Cal
Demonstration/Pilot Project Waiver, entitled "A Bridge to
Reform." This waiver is a renewal of the 2005 Hospital Financing
/Uninsured Waiver and includes a continuation of the hospital
financing provisions from the 2005 waiver but with modifications
to the allocation of SNCP funds. Under the waiver, DPHs make
CPEs and use IGTs to draw down federal funds.
Comments
According to the author's office, this bill has two provisions,
the first of which was previously heard and passed by the Senate
Health 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, provides 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. This bill allows
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
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reimbursement up to allowable costs.
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. This bill 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 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 requires a reconciliation process for this program,
and allows 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% 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.
Prior Legislation
AB 1467 (Assembly Budget Committee, Chapter 23, Statutes of
2012) proposed to change the reimbursement methodology and fund
source for reimbursement to NDPHs, as described above.
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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 federal funds to make supplemental Medi-Cal
payments to these NDPHs.
AB 102 (Assembly Budget Committee, Chapter 29, Statutes of 2011)
requires DHCS to implement a new inpatient payment methodology
based on diagnosis-related groups (DRGs).
SB 853 (Senate 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.
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
One-time cost of about $300,000 to seek federal approvals by
DHCS (50% GF, 50% federal funds).
Payments to NDPHs 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 GF
expenditures by a similar amount.
Increased supplemental payments to certain nursing facilities
of about $3.2 million per year (federal funds). DHCS
indicates that changing the criteria for making supplemental
payments from "projected costs" to "allowable costs" (under
federal law) will result in increased payments to certain
nursing facilities that are currently not recovering all their
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allowable costs.
SUPPORT : (Verified 9/6/13)
District Hospital Leadership Forum (source)
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
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
ARGUMENTS IN SUPPORT : This bill is sponsored by the District
Hospital Leadership Forum 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 DPH.
ASSEMBLY FLOOR : 74-0, 5/23/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell,
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Gray, Hagman, Hall, Harkey, Roger Hernández, Jones-Sawyer,
Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel
Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Wagner, Weber, Wieckowski, Wilk, Williams, Yamada, John
A. Pérez
NO VOTE RECORDED: Grove, Holden, Jones, Waldron, Vacancy,
Vacancy
JL:d 9/11/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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