BILL ANALYSIS Ó
AB 900
Page 1
ASSEMBLY THIRD READING
AB 900 (Alejo)
As Amended May 24, 2013
2/3 vote. Urgency
HEALTH 19-0 APPROPRIATIONS 17-0
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|Ayes:|Pan, Logue, Ammiano, |Ayes:|Gatto, Harkey, Bigelow, |
| |Atkins, Bonilla, Bonta, | |Bocanegra, Bradford, Ian |
| |Chesbro, Gomez, Roger | |Calderon, Campos, |
| |Hernández, Lowenthal, | |Donnelly, Eggman, Gomez, |
| |Maienschein, Mansoor, | |Hall, Ammiano, Linder, |
| |Mitchell, Nazarian, | |Pan, Quirk, Wagner, Weber |
| |Nestande, | | |
| |V. Manuel Pérez, Wagner, | | |
| |Wieckowski, Wilk | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires Medi-Cal payments to skilled nursing
facilities that are a distinct part of a general acute care
hospital (DP-SNFs) to be determined without the Medi-Cal rate
reductions and rate roll-back required under existing law,
effective July 1, 2013. Specifically, this bill :
1)Requires the director of the Department of Health Care
Services (DHCS) to make Medi-Cal payments to DP-SNFs without
the rate reductions and rate roll-back required under existing
law and do all of the following if he or she is prevented from
implementing the payment restoration for any dates of service
on or after July 1, 2013:
a) Implement full payment to the maximum extent permitted
by law;
b) Increase payments to DP-SNFs for services provided after
July 1, 2013, or on or after the first date of service
permitted by law for which federal financial participation
(FFP) is available; and,
c) Seek all necessary federal approvals.
2)Authorizes DHCS to implement the provisions of this bill by
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means of provider bulletins or notices, policy letters, or
other similar instructions in lieu of regulatory action.
3)Contains an urgency clause to ensure that the provisions of
this bill go into immediate effect upon enactment.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, approximately $19 million General Fund (GF) annually.
COMMENTS : According to sponsors of this bill, the California
Hospital Association (CHA), this bill is needed to stop the
implementation of the rate cuts contained in AB 97 (Budget
Committee), Chapter 3, Statutes of 2011, the health services
trailer bill to the 2011-12 State Budget. The author points out
that this bill eliminates the state's ability to implement the
10% Medi-Cal provider rate cut that were enacted through AB 97
only with regard to DP-SNFs on a prospective basis. The author
states that AB 97 sought to help balance the state's significant
budget deficit by scoring state 'savings' through a 10%
reduction to Medi-Cal provider payment rates. According to the
author, when the budget was enacted, the assumed revenue
resulting from the rate cut was approximately $623 million
during that budget year (2011-12). The author further points
out that in his proposed 2013-14 Budget released in January,
Governor Brown scored the rate cuts as generating nearly $500
million per year in GF savings.
As the result of the economic downturn in 2008 and in the face
of significant State Budget deficits, the Legislature adopted a
number of rate freezes and/or rate reductions with regard to
Medi-Cal services. In earlier economic downturns, based on
federal Medicaid law that requires care and services to be
available to Medicaid (Medi-Cal in California) beneficiaries at
least to the extent that care and services are available to the
general population in the geographic area, providers had
successfully sued to prevent rate reductions. For instance 16
years ago, in Orthopaedic Hospital v. Belshe 103. F.3d 1491
(1997) the court held that the federal law requires states to
set Medicaid rates based upon a consideration of provider costs,
and precludes rate reductions based solely on state budgetary
concern. The Court recognized that it is impossible for a state
to meet the statutory standards otherwise as the statute
provides that payments for services must be consistent with
efficiency, economy, and quality of care, and that those
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payments must be sufficient to enlist enough providers to
provide access to Medicaid recipients. The court held that the
DHCS (i.e., the state Medicaid agency) cannot know that it is
setting rates that are consistent with efficiency, economy,
quality of care, and access without considering the costs of
providing such services. However, at the time the Orthopaedic
Hospital v. Belshe decision was rendered, the state had not
obtained approval of the rate cuts in the form of a State Plan
Amendment (SPA) from the Secretary of the federal Department of
Health and Human Services (HHS).
In implementing later enacted rate reductions, DHCS began to
seek federal approval first. As additional providers sued to
enjoin the reductions, DHCS also began to collect data to defend
against the arguments that were successful in Orthopaedic
Hospital v. Belshe. Specifically, whether access would be
adversely impacted by the propose rate reduction. In November
of 2008 the Centers for Medicare and Medicaid Services (CMS)
disapproved a set of SPAs seeking reductions because the state
had not provided sufficient information concerning the impact of
the proposed reimbursement reductions on beneficiary access to
services. In addition, CMS was concerned that, given the time
that had elapsed since the SPAs had been submitted, the
cumulative effect of approval of and subsequent implementation
of these reimbursement reductions would exacerbate beneficiary
access concerns. On March 25, 2011, the state submitted
documentation to support a demonstration of compliance with
federal law to demonstrate that reimbursement rates would be
sufficient to enlist enough providers so that care and services
are available at least to the extent that care and services are
available to the general population in the geographic area.
In October 2011, CMS finally approved a number of the rate
reductions, including those from AB 97, stating that from March
25, 2011, through approximately September 30, 2011, CMS had been
working with the state to refine the information initially
submitted and, as a result of this collaborative process, the
state was able to provide metrics that adequately demonstrated
beneficiary access. According to CMS, in general, these metrics
included data which provided: 1) total number of providers by
type and geographic location and participating Medi-Cal
providers by type and geographic area; 2) total number of
Medi-Cal beneficiaries by eligibility type; 3) utilization of
services by eligibility type over time; and, 4) analysis of
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benchmark service utilization where available. CMS also
favorably commented on modifications that had been made that
would ameliorate access problems that may be created due to
recoupment of retroactive reductions. In addition, DHCS
submitted a plan to monitor predetermined metrics on a quarterly
or annual basis in order to ensure that beneficiary access is
comparable to services available to the general population in
the geographic area. Specifically, three proposals were
approved: 1) a 10% provider payment reduction on a number of
outpatient services, including physicians, clinics,
optometrists, therapists, laboratories, dental, durable medical
equipment, and pharmacy; 2) a new 10% provider payment reduction
for freestanding nursing and adult sub-acute facilities; and, 3)
a 10% provider payment reduction and rate freeze for DP-SNF.
In announcing the CMS approval, DHCS explained that it selected
23 measures identified in three key areas (beneficiary measures,
provider availability and service use and outcomes) from a
Medicaid and Children's Health Insurance Program Payment and
Access Commission's report to Congress. Combined, these
measures provide a comprehensive portrayal of health care access
in the Medi-Cal program. The services analyzed included
physician and clinic services, pharmacy, durable medical
equipment, transportation, various long-term care services by
facility type, and other outpatient services. Based upon the
analyses, DHCS concluded there were some areas where an
additional 10% payment reduction was not advisable. Therefore,
DHCS did not move forward with the 10% reduction to physician
and clinic services for children, home health services, or
distinct part sub-acute facilities.
Following CMS' approval of the AB 97 rate cuts, the California
Medical Association, (CMA) the California Dental Association,
the California Pharmacists Association, the National Association
of Chain Drug Stores, the California Association of Medical
Product Suppliers, Aids Healthcare Foundation and American
Medical Response, all filed suit against both DHCS and HHS,
seeking to stop implementation of the cuts. On February 1,
2012, the coalition won an injunction from the court, preventing
the cuts from going into place. The provider coalition is still
in court with the state, and the cuts on the provider types that
sued have not been put into place. The cases were consolidated
in an appeal and an opinion was rendered by the United States
Court of Appeals for the Ninth Circuit on December 13, 2012.
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This time the court distinguished the holding in the Orthopaedic
Hospital v. Belshe case on, among other grounds, the fact that
the SPA had been approved by CMS. The Court gave great
deference to CMS and DHCS stating that the HHS Secretary had
reasonably determined that the state's reimbursement rates
complied with federal law. The Court went on to point to the
DHCS study of the potential impact of rate reductions on many
Medi-Cal services that reviewed data collected and analyzed over
several years in the process. The court also noted that DHCS
submitted an 82-page monitoring plan, which identified 23
different measures DHCS would study on a recurring basis to
ensure the SPAs do not negatively affect beneficiary access.
CMA, CHA, and California Medical Transportation Association et
al. petitioned for rehearing of the December 13, 2012, decision
in January 2013. The petition for rehearing was denied on May
24, 2013. The decision also reversed and vacated the District
Court's preliminary injunctions preventing implementation of a
10% across-the-board cut in Medi-Cal provider payment rates.
Although the lawsuit prevented the state from implementing most
of the Medi-Cal provider rate reductions, it did not stop all of
them from going into place. The injunction had prevented the
state from cutting payments to physicians, dentists,
pharmacists, pharmacies, home medical equipment, durable medical
equipment, orthotics and prosthetics, HIV/AIDS care, nursing
homes, ambulances, and air ambulances. DHCS indicates it has
now obtained federal approval to implement the payment reduction
and the DP-SNF rate freeze. Even though litigation is currently
ongoing, DHCS anticipates a decision by the end of the fiscal
year. Assuming the state prevails, DHCS has indicated that,
once it has authority to implement the payment reductions, it
will do so retroactive to June 1, 2011.
DHCS indicates it has conducted a legal analysis of whether the
state would be required to retroactively recoup payments in
order to repay the federal share of the payments made during the
period of the injunction, once the injunction is overturned.
DHCS indicates rate reductions which were set forth in a SPA
that was approved by CMS were delayed by a federal district
court injunction. During the period that the injunction was in
effect, DHCS has been paying Medi-Cal providers at pre-existing
higher rates and received FFP for those payments. DHCS
indicates the basic federal rule is that a state is entitled to
FFP only to the extent authorized by the state's approved
Medicaid plan. DHCS indicates that when a state pays a provider
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more than what is authorized by the approved state plan, it is
obligated to return to the federal government the FFP associated
with the overpayment.
DHCS notes that there is a federal regulation that allows FFP
for payments "for services provided within the scope of the
Federal Medicaid program and made under a court order."
However, DHCS states the HHS Appeals Board has addressed that
regulation in the context of payments made to providers that
were greater than provided in the state plan pursuant to a court
injunction that was later reversed. The question was whether
the regulation protected the FFP received by the state during
the period the injunction was in effect, and DHCS indicates the
answer was no. DHCS states that it is also not possible to
retroactively amend the state's Medicaid state plan to increase
the payment rates to the levels paid during the period the
injunction was in effect as it has long been a federal rule that
the effective date of a SPA that increases payment amounts for
services covered by a state plan can be no earlier than the
first day of the quarter in which an approvable plan is
submitted to the federal agency. DHCS indicates CMS and its
predecessor agencies have zealously applied that limitation
despite many efforts of states over the years to avoid its
effect, and this rule would preclude reinstating now the former
Medi-Cal reimbursement rates for the period during which the
injunction was in effect.
For DP-SNFs that rely most heavily Medi-Cal, the retroactive
recoupment is particularly onerous. According to CHA, there are
about 60 impacted facilities. For most of them the reduction is
not 10%, but 25% because it is a 10% reduction from the
facility's 2008-09 rates. In addition to this rate reduction,
there is also the 'claw back' that the state intends to collect,
going back to June 1, 2011, which is two years of rate
reductions.
CHA points out that as compared to free-standing facilities,
DP-SNFs care for patients of greater medical complexity and are
often the only option for patients with specialized medical or
behavioral needs or for individuals living in rural areas. CHA
further states in the last five years, approximately one-third
of California's DP-SNFs (approximately 40 facilities) have
closed because of financial pressures. According to CHA, if the
pending cuts are not rescinded, closures will continue and
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increase. CHA argues that if additional facilities close, many
displaced patients and residents will have no place to go.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0000982