BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 900
AUTHOR: Alejo
AMENDED: May 24, 2013
HEARING DATE: June 19, 2013
CONSULTANT: Bain
SUBJECT : Medi-Cal: distinct part nursing facilities.
SUMMARY : Requires Medi-Cal reimbursement for nursing facilities
that are a distinct part of a general acute care hospital to be
determined without the Medi-Cal rate reduction and rate
roll-back required under existing law. Takes effect immediately
as an urgency statute.
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.
Establishes a schedule of benefits for Medi-Cal beneficiaries,
which includes hospital services and nursing facility
services. Defines, in the Medi-Cal state plan, a distinct part
nursing facility (DP-SNF) as any nursing facility which is
licensed together with an acute care hospital.
2.Requires Medi-Cal fee-for-service (FFS) provider payments to
DP-SNFs to be reduced by 5 percent for dates of service on and
after March 1, 2009. Requires payments to Medi-Cal managed
care plans to be reduced by the actuarially equivalent amount
of the 5 percent payment reduction.
3.Requires Medi-Cal FFS provider payments to DP-SNFs to not
exceed the reimbursement rates to DP-SNFs in the 2008-09 rate
year, reduced by 10 percent for dates of service on and after
June 1, 2011. Requires payments to be reduced by 10 percent
for Medi-Cal FFS benefits for dates of service on and after
June 1, 2011. Requires payments to Medi-Cal managed care plans
to be reduced by the actuarial equivalent amount of the 10
percent payment reduction.
4.Requires the payment reductions in 2) above to cease to be
implemented for the same services provided by the same class
of providers when federal approval is obtained for the payment
reductions in 3) above. Requires the payment reductions in 3)
Continued---
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to be implemented retroactively to June 1, 2011, or on any
other date or dates as may be applicable when federal approval
is obtained.
This bill:
1.Requires Medi-Cal reimbursement for services provided by
DP-SNFs to be determined without applying the 10 percent rate
reduction and rate roll-back set forth in existing law, for
dates of service on or after July 1, 2013.
2.Requires the director of DHCS to do all of the following in
the event that he or she is prevented from implementing 1) for
any dates of service on or after July 1, 2013:
a. Implement this bill to the maximum extent permitted
by law;
b. Increase payments DP-SNFs for services provided on
or after July 1, 2013, or on or after the first date of
service permitted by law and for which federal financial
participation is available.
3.Requires the director of DHCS to promptly seek all necessary
federal approvals to implement this bill.
4.Permits DHCS to implement this bill by means of provider
bulletins or notices, policy letters, or other similar
instructions, without taking regulatory action under the
Administrative Procedure Act.
5.Takes effect immediately as an urgency statute.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, approximately $19 million General Fund (GF) annually.
PRIOR VOTES :
Assembly Health: 19- 0
Assembly Appropriations: 17- 0
Assembly Floor: 76- 0
COMMENTS :
1.Author's statement. According to the author, DP-SNFs are
skilled nursing facilities operated in a designated unit
within an acute-care hospital or hospital system. DP-SNFs care
for patients of greater medical complexity and are often the
only option for patients with specialized medical or
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behavioral needs or for individuals living in rural areas.
There are 58 DP-SNFs in California and the proposed cuts to
Medi-Cal reimbursement rates will force a majority of them to
close or reduce services for approximately 3,700 seniors and
Medi-Cal patients. In rural areas, where DP-SNFs often
provide essential infrastructure to the overall hospital
operation, the loss in revenue attributable to these cuts will
undermine the financial viability of the hospital as a whole,
and will result in hospital closures.
2.Federal Medicaid law, the Medi-Cal budget and Medi-Cal rate
litigation. To achieve budget savings in Medi-Cal during the
state's recent fiscal crisis, the state has three principle
policy and fiscal choices: (a) to reduce or restrict who is
eligible for Medi-Cal benefits; (b) to reduce the scope of
benefits provided in the program; and, (c) to reduce the
payments to health care providers and managed care plans for
Medi-Cal services. Federal law has prevented or limited the
state's ability to reduce eligibility, but the state has
eliminated benefits in Medi-Cal, most notably adult dental
services. In addition, the state has attempted several times
to reduce Medi-Cal payments to health plans, health facilities
and health care providers.
However, some of these rate reductions did not, and have not
taken effect because of court injunctions, while other
reductions have expired by their own terms and been replaced
by different rate reductions. DP-SNFs were subject to some of
these reductions for certain periods of time before court
injunctions were issued. The multiple cases challenging the
Medi-Cal 5 percent and 10 percent rate reductions enacted by
the state in 2008 and 2009 were heard by the United States
Supreme Court, and in February 2012, the Supreme Court vacated
the prior Ninth Circuit decisions preventing the reductions
from being implemented and sent the case back to the Ninth
Circuit Court of Appeals to reassess in light of the federal
government's approval of DHCS' State Plan Amendment.
In December 2012, the Ninth Circuit issued a decision that
reversed the injunction concerning the 10 percent Medi-Cal
rate reductions enacted in 2011 in AB 97 (Committee on
Budget), Chapter 3, Statutes of 2011. In January 2012, the
plaintiffs in those cases asked the entire Ninth Circuit to
re-hear the three judge Ninth Circuit court decision in the
case. That petition was denied in May 2013. The plaintiffs
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(California Medical Association, California Hospital
Association, Managed Pharmacy Care, California Medical
Transportation Association) in the case asked the court to
stay its decision until August 22, 2013 in order to allow them
adequate time to file a petition seeking review of the
decision by the United States Supreme Court, and that petition
was denied last week.
DHCS indicates it obtained federal approval to implement the
DP/NF-B payment reduction and rate freeze. DHCS has also
previously indicated that, once it has authority to implement
the payment reductions, it will do so retroactive to June 1,
2011. Assuming the state prevails after all appeals have been
exhausted, DHCS has previously indicated the DP/NF-B Medi-Cal
rates will be reduced from $409.48 to $316.13 (2008-09 rates,
minus 10 percent, for the 2010-11 rate year), effective for
dates of service on and between June 1, 2011, through July 31,
2011, and will be reduced from $416.95 to $318.23 (2008-09
rates minus 10 percent plus applicable add-ons for the 2011-12
rate year), for dates of service on and after August 1, 2011.
However, DP/NF-Bs continued to receive $409.48 until such time
the $416.95 rate was implemented, effective December 28, 2011,
per court injunction.
DHCS has not made an announcement since the May 2013 court
decision on when the rate reduction will be implemented. The
Budget Act did not include funding for a restoration of DP-SNF
Medi-Cal rates.
3.Related legislation. SB 646 (Nielsen), an urgency bill, would
exempt all DP-SNFs from the Medi-Cal rate reduction. SB 646
was held on the Senate Appropriations suspense file.
SB 640 (Lara) would exempt from the Medi-Cal payment reduction
Medi-Cal FFS providers, pharmacy providers, DP-SNFs and
subacute care units that are a distinct part of a general
acute care hospital for dates of service on or after June 1,
2011, and Medi-Cal managed care plans. SB 640 would take
effect immediately as an urgency statute. SB 640 was held on
the Senate Appropriations suspense file.
4.Prior legislation.
a. AB X3 5 (Committee on Budget), Chapter 3, Statutes of
2008 reduced Medi-Cal provider payments by 10 percent for
FFS benefits for dates of service on and after July 1, 2008
and for specified non-Medi-Cal programs. AB X3 5 reduced
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payments to Medi-Cal managed care plans by the actuarial
equivalent amount of 10 percent, effective July 1, 2008.
Exempts specified providers from the payment reductions.
Reduced non-contract hospital payments in Medi-Cal, as
specified.
b. AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008 sunset the AB X3 5 rate reduction February 28, 2009
and applied the payment reductions to small and rural
hospitals only from July 1, 2008 through October 31, 2008.
Instead, AB 1183 reduced Medi-Cal provider payments for
most classes of services by 1 percent for Medi-Cal FFS
benefits for dates of service on and after March 1, 2009,
and reduced Medi-Cal provider payments by 5 percent for
dates of service on and after March 1, 2009 for the
following types of providers: DP-SNFs, intermediate care
facilities (except for ICF-DD), rural swing-bed facilities
and subacute care units that are a distinct part of a
general acute care hospital, pediatric subacute care units
that are a distinct part of a general acute care hospital,
adult day health care centers, and pharmacies. AB 1183
reduced payments to Medi-Cal managed care plans and PACE
plans by the actuarial equivalent amount of 5 percent,
effective July 1, 2008 or thereafter.
c. AB X4 5 (Evans), Chapter 5, Statutes of 2009 froze
Medi-Cal rates for services beginning in the 2009-10 rate
year and each rate year thereafter, by prohibiting the
reimbursement rates from exceeding the rates that were
applicable in the 2008-09 rate year for the following
providers after the 5 percent reduction made by AB 1183:
DP-SNFs, ICF-DD or facilities providing continuous SNF care
to DD individuals under a pilot program (previously exempt
from the AB 1183 reduction), freestanding pediatric
subacute care units.
d. AB 97 (Committee on Budget), Chapter 3, Statutes of 2011
makes the rate reductions enacted by AB 1183 and AB X4 5
inoperative for dates of service on and after June 1, 2011,
with specified exceptions. Reduces Medi-Cal provider
payments by 10 percent for fee-for-service benefits for
dates of service and after June 1, 2011. Requires, for
DP-SNFs and certain other providers, the 10 percent rate
reduction to apply to the rates in effect for those
providers during the 2008-09 Medi-Cal rate year. Requires
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Medi-Cal managed care plan rates be reduced by the
actuarial equivalent amount, effective July 1, 2011.
Reduces payments for non-Medi-Cal programs for services on
and after June 1, 2011, with exceptions. Implements the
payment reductions only if the reductions comply with
federal Medicaid requirements, and prohibits implementation
until federal approval is obtained. Applies the payment
reduction retroactively to June 1, 2011 or on such other
date as may be applicable when federal approval is
obtained. Federal approval of the AB 97 rate reductions
were obtained in October 2011 and thereby made the Medi-Cal
reductions called for in AB 1183 and AB X4 5 inoperative.
e. AB 102 (Committee on Budget), Chapter 29, Statutes of
2011 continues the 1 percent and 5 percent Medi-Cal
reductions that were due to expire for dates of service on
and after June 1, 2011 until a Medi-Cal rate reduction of
up to 10 percent and the AB 97 reduction and adjustment
receive federal approval. Requires, when federal approval
is obtained, the payments to be implemented retroactively
to June 1, 2011 or on any other date or dates as may be
applicable. Exempts pharmacy drug product payments from the
rate reduction when DHCS determines the average acquisition
cost methodology has been fully implemented and DHCS budget
reduction targets have been met
5.Support. This bill, sponsored by the California Hospital
Association (CHA), eliminates pending cuts to reimbursement
for distinct-part skilled-nursing facilities (DP-SNF)
services. CHA argues the rate cuts for DP-SNFs agreed to in
the 2011 budget will have devastating consequences for
patients, communities, and access to essential medical care.
CHA states many facilities will lose millions of dollars each
year, and this bill stops these reductions going forward. CHA
argues DP-SNFs care for patients of greater medical complexity
compared to free-standing SNFs, are often the only option for
patients with specialized medical or behavioral needs or for
individuals living in rural areas. The pending cuts will cause
many DP-SNFs to close or reduce services, as in the last five
years, approximately one-third of California's DP-SNFs
(approximately 40 facilities) have closed because of financial
pressures. CHA states if this bill is not passed, closures
will continue and increase, and the remaining DP-SNFs are
already full to capacity and have long waiting lists. If
additional facilities close, many displaced patients/residents
will have no place to go. In rural counties, many small
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hospitals are able to stay open because of their
skilled-nursing facilities. Unless AB 900 is passed, many of
these hospitals will have to close. Elderly residents will be
relocated far away from home, and community members will have
to travel long distances for essential medical care.
6.Amendment. This bill is intended to apply the rate reduction
prospectively under amendments to the measure when the bill
left the suspense file in the Appropriations Committee.
However, federal law permits State Plan Amendments to be
implemented retroactively, so an amendment is needed to
clarify the language on this point.
In addition, the author would like to amend this bill to clarify
that the Medi-Cal rate freeze for DP-SNFs does not apply.
7.Policy issues:
a. Should Medi-Cal rate reductions be prevented from
taking effect?
This bill addresses an important issue in that provider
payment rates in Medi-Cal are a key factor in
beneficiaries' ability to access program services and the
ability of providers to continue to provide services.
However, has the state's fiscal condition improved enough
to prevent previously enacted Medi-Cal rate reductions
from taking effect?
SUPPORT AND OPPOSITION :
Support: California Hospital Association (sponsor)
Birch Patrick Convalescent Center at Sharp Chula Vista
Medical Center
Catalina Island Medical Center
CenCal Health
Coalinga Regional Medical Center
George L. Mee Memorial Hospital
Lompoc Valley Medical Center
Marshall Medical Center
Palomar Health
San Bernardino Mountains Community Hospital District
San Benito Health Care District
SEIU California
Southern Inyo Healthcare District
St. Mary's Medical Center
Tehachapi Valley Healthcare District
Union of American Physicians and Dentists
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Oppose: None received
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