BILL ANALYSIS Ó AB 1054 Page 1 Date of Hearing: April 2, 2013 ASSEMBLY COMMITTEE ON HEALTH Richard Pan, Chair AB 1054 (Chesbro) - As Introduced: February 22, 2013 SUBJECT : Mental health: skilled nursing facility: reimbursement rate. SUMMARY : Repeals current law requiring counties to provide a 4.7% annual increase to the reimbursement rates of institutions for mental disease (IMDs) licensed as skilled nursing facilities (SNFs) and, instead, requires the rates to be negotiated directly between the IMD and the county in which it is located. EXISTING LAW : 1)Defines, in federal law, an IMD as a hospital, nursing facility, or other institution of 17 or more beds that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care, and related services. 2)Establishes the federal IMD exclusion, which prohibits federal financial participation (FFP) through Medicaid (Medi-Cal in California) for individuals in an IMD between the ages of 22 and 65. These individuals may still be eligible for state-only Medi-Cal. 3)Requires the Department of Health Care Services (DHCS) to contract with SNFs that have been designated as IMDs to provide services to residents. 4)Requires ancillary outpatient services, defined as physician services, prescription drugs, laboratory, X-ray, dental, vision, and psychiatrist and psychologist services, to be covered regardless of the availability of FFP for any eligible patient between the ages of 22 and 65 in an IMD. 5)Imposes a rate freeze on the following long term care facilities: SNFs; intermediate care facilities; rural swing-bed facilities; subacute and pediatric subacute care units that are distinct parts of general acute care hospitals; and, adult day health centers. AB 1054 Page 2 6)Requires IMDs licensed as SNFs (SNF IMDs) to be reimbursed for services at the rate established by DHCS. Mandates, effective July 1, 2008, an annual 4.7% increase in the reimbursement rate for SNF IMDs. FISCAL EFFECT : This bill has not yet been analyzed by a fiscal committee. COMMENTS : 1)PURPOSE OF THIS BILL . The sponsor of this bill, the California Mental Health Directors Association (CMHDA), states that despite the complex history of rate-setting legislation intended to improve the quality of nursing home care in California, counties continue to be required to provide SNF IMDs with an across-the-board 4.7% annual rate increase, regardless of the availability of local resources and without any requirements that providers demonstrate their costs and the quality of care they provide patients. The author notes that, because of the federal IMD exclusion, counties must pay 100% of the cost of services for patients in SNF IMDs and the current 4.7% automatic rate increase is unsustainable for counties in that it represents the only part of the public mental health system that is guaranteed a significant increase each year and diverts funds from other less restrictive community-based outpatient services. CMHDA maintains that this bill is intended to ensure that counties are authorized to pay fair rates to SNF IMDs by eliminating the 4.7% rate increase and enabling the county in which a SNF IMD is located to negotiate a rate directly with the facility. 2)IMDs . IMDs are a type of SNF with 17 or more beds that provide 24-hour nursing care and supervision to mentally ill persons in need of continuous psychiatric and nursing care. Federal law excludes these facilities from eligibility for federal Medicaid funds when serving Medicaid clients. This federal IMD exclusion applies only to adult Medicaid beneficiaries between the ages of 21 and 65. Any one of the following criteria defines an IMD: the facility is licensed as a psychiatric facility; the facility is accredited as a psychiatric facility; the facility specializes in providing psychiatric-psychological care and treatment; or, more than 50% of all the patients-residents in the facility require care because of mental illness. In California, IMDs include AB 1054 Page 3 facilities in the following licensing categories, if the facility has 17 beds or more: acute psychiatric hospitals, psychiatric health facilities, SNFs with a certified special treatment program (STP), and mental health rehabilitation centers. There may be exceptions for individual facilities. For example, a large SNF with a small STP unit (less than 50% of total SNF beds) is not considered an IMD. There are 18 SNF IMDs statewide that would be affected by this bill. These facilities range in size from 43-220 beds. The average length of stay is 12-15 months with more than 70% of patients staying longer than 60 days. 3)RATE HISTORY . According to background information from CMHDA, AB 1629 (Frommer), Chapter 875, Statutes of 2004, established a nursing home rate structure that allows California to receive more federal Medicaid dollars by imposing a quality assurance fee (QAF) on SNFs. AB 1629 put into effect a Medi-Cal rate increase in fiscal year 2004-05 that county mental health departments would have been required to pay freestanding nursing facilities, including SNF IMDs. Since patients under age 65 residing in IMDs are not eligible for federal Medicaid funding like residents of other SNFs, the rate increases for these individuals would have been the sole responsibility of county mental health departments. Since AB 1629 would have had a significant fiscal impact on county mental health departments, AB 360 (Frommer), Chapter 508, Statutes of 2005, was enacted to mitigate the unintended consequences resulting from AB 1629 and excluded SNF IMDs from the QAF and AB 1629 rate structure. However, it also mandated the following rate increase schedule for these facilities: effective July 1, 2005, through June 30, 2008, an annual increase of 6.5% annually, and effective July 1, 2008, an increase of 4.7% annually. CMHDA points out that, due to the state budget crisis, the State Budget Act of 2009 (AB 5 X4 (Evans), Chapter 5, Statutes of 2009-10, Fourth Extraordinary Session), froze nursing home rates for many licensed facilities, including SNFs and intermediate care facilities, at 2008-09 levels, but the rate freeze did not include SNF IMDs, since their costs are borne entirely by counties, leaving counties at continued obligation to pay the mandated annual 4.7% rate increase. In 2010, CMHDA sponsored AB 2645 (Chesbro), Chapter 554, Statutes of 2010, which froze SNF IMD rates for two fiscal years from July 1, AB 1054 Page 4 2010, to June 30, 2012. Effective July 1, 2012, counties began once again providing these facilities with the 4.7% annual increase. This bill eliminates the mandated rate increase and instead allows counties to negotiate rates directly with the IMDs. 4)PRIOR LEGISLATION AND BUDGET ACTION . a) AB 2645 imposes a two-year rate freeze for SNF IMDs from July 1, 2010, to June 30, 2012. b) AB 5 X4 freezes the reimbursement rate paid to SNFs, as well as other long-term care facilities. c) AB 360 exempts SNF IMDs from the requirement to pay a QAF and prescribes a rate-increase schedule for these facilities. d) AB 1629 imposes a QAF on SNFs and provides that the funds assessed be made available to draw down a federal match in Medi-Cal and support facility quality improvement efforts in SNFs. 5)SUPPORT . CMHDA states in support that authorizing a county in which a SNF IMD is located to negotiate a rate directly with the facility is similar to the way in which other providers that contract with county mental health departments are reimbursed and provides counties with the local flexibility and control to manage county resources by negotiating rates for services they purchase in these facilities. The California State Association of Counties writes in support that while counties recognize the important role that SNF IMDs play in the mental health system and want to ensure continued access to SNF IMD services and treatment, the current automatic annual rate increase is forcing difficult fiscal decisions at the local level and counties are now asking to be allowed to negotiate fair rates with SNF IMDs in their counties through passage of this bill. 6)OPPOSE UNLESS AMENDED . The California Association of Health Facilities (CAHF), which represents SNF IMD providers, opposes this bill unless it is amended to set the annual rate increase for these facilities at 3.5%, rather than eliminate the statutory increase entirely and replace it with a requirement for providers to negotiate individual rates with the counties. CAHF suggests that mandating a 3.5% increase would be a more simplistic and predictable approach to protecting SNF IMDs rates at levels that are consistent with operational cost AB 1054 Page 5 increases necessary to comply with SNF regulatory requirements. CAHF asserts that should such protections be eliminated without other mitigation or relief in SNF regulatory requirements, SNF IMDs will fail and clients will suffer. 7)POLICY QUESTION . Would the goal of this bill be more appropriately achieved through the budget process? REGISTERED SUPPORT / OPPOSITION : Support California Mental Health Directors Association (sponsor) California State Association of Counties Opposition None on file. Analysis Prepared by : Cassie Royce / HEALTH / (916) 319-2097