BILL ANALYSIS Ó AB 498 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 498 (Chávez) As Amended September 5, 2013 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |74-0 |(May 23, 2013) |SENATE: |33-0 |(September 12, | | | | | | |2013) | ----------------------------------------------------------------- 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. AB 498 Page 2 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 AB 498 Page 3 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 AB 498 Page 4 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 AB 498 Page 5 FN: 0002852