BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1054
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          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. 








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          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  








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            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,  








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            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  








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            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