BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 498
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 498 (Chávez)
          As Amended September 5, 2013
          Majority vote
           
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          |ASSEMBLY:  |74-0 |(May 23, 2013)  |SENATE: |33-0 |(September 12, |
          |           |     |                |        |     |2013)          |
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           Original Committee Reference:    HEALTH  

           SUMMARY  :  Requires the Department of Health Care Services (DHCS)  
          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%  
          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.

           The Senate amendments  delete the Assembly-approved version of  
          this bill.

           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 AB 1467 (Budget Committee), Chapter 23,  
            Statutes of 2012, 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.  Provides that designated public hospitals DPH  are  
            reimbursed based on their costs, and use their own funds  
            (instead of state General Fund (GF)) as the state match to  
            draw down federal Medicaid matching funds, pursuant to a  
            Section 1115 waiver.  









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          3)Provides, upon approval of a waiver amendment, and state plan  
            amendment, that NDPH (district hospitals) are to be reimbursed  
            in the same fashion as DPHs based on certified public  
            expenditures (CPE), allows NDPHs to receive funds from the  
            SNCP and the Delivery System Reform Incentive Pool (DSRIP),  
            and discontinue funding from the state GF.  Makes  
            implementation of the reimbursement changes contingent on  
            federal approval of all provisions of the funding changes.   
            (These changes were not implemented.)

          4)Suspends existing law for Medi-Cal inpatient FFS reimbursement  
            to NDPHs upon implementation of the changes in 2) and 3)  
            above.

          5)Permits publicly-owned 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.

           AS PASSED BY THE ASSEMBLY  , this bill exempted cost-based FFS  
          payments to a NDPH for inpatient services on or after July 1,  
          2012, and supplemental payments from the SNCP and DSRIP,  
          established in the 2012 Section 1115 Medi-Cal Waiver, Bridge to  
          Reform, from being subject to a peer grouping inpatient  
          reimbursement limitation by DHCS, unless otherwise required by  
          federal law.  

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee: 

          1)One-time cost of about $300,000 to seek federal approvals by  
            DHCS (50% GF, 50% federal funds).

          2)Payments to NDPHs of about $25 million in 2013-14 and $27.5  
            million in 2014-15 (federal funds).

          3)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.

          4)Increased supplemental payments to certain nursing facilities  
            of about $3.2 million per year (federal funds).  DHCS  








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            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  
            allowable costs.

           COMMENTS  :  According to the author, this bill has two  
          provisions.  The first enables NDPHs to receive funding from the  
          SNCP.  AB 1467 (Budget Committee) 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 allowed  
          supplemental payments and Intergovernmental Transfers 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. 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.

          The second provision is clean-up language for AB 430 (Cardenas),  
          Chapter 171, Statutes of 2001, which allowed public DP-NFs to  
          claim supplemental federal reimbursement.  This second provision  
          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 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.
           Background  :  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  








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          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 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% 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.

          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 designated public hospitals.


           Analysis Prepared by  :    Marjorie Swartz / HEALTH / (916)  
          319-2097 










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          FN: 0002852