Amended in Assembly August 14, 2013

Amended in Senate April 17, 2013

Senate BillNo. 239


Introduced by Senators Hernandez and Steinberg

February 12, 2013


An act to amendbegin delete Sectionend deletebegin insert Sections 14164, 14165, andend insert 14167.35 of,begin insert to add Section 14167.37 to,end insert and to addbegin insert and repealend insert Article 5.230 (commencing with Section 14169.51) and Article 5.231 (commencing with Section 14169.71)begin delete toend deletebegin insert ofend insert Chapter 7 of Part 3 of Division 9 of, the Welfare and Institutions Code, relating to Medi-Cal,begin insert making an appropriation therefor,end insert and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 239, as amended, Hernandez. Medi-Cal:begin delete hospitalend deletebegin insert hospitals:end insert quality assurance fee.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid Program provisions. Existing law, subject to federal approval, imposes a quality assurance fee, as specified, on certain general acute care hospitals from July 1, 2011, through December 31, 2013. Existing law, subject to federal approval, requires the fee to be deposited into the Hospital Quality Assurance Revenue Fund, and requires that the moneys in the fund be used, upon appropriation by the Legislature, only for certain purposes, including, among other things, paying for health care coverage for children and making supplemental payments for certain services to private hospitals, increased capitation payments to Medi-Cal managed care plans, and increased payments to mental health plans.begin insert Existing law also establishes the continuously appropriated Distressed Hospital Fund, which consists of moneys transferred to the fund or appropriated by the Legislature and used as the nonfederal share of payments to distressed hospitals.end insert

begin delete

This bill would state the intent of the Legislature to impose a quality assurance fee to be paid by hospitals, which would be used to increase federal financial participation in order to make supplemental Medi-Cal payments to hospitals for the period of January 1, 2014, through December 31, 2015, and to help pay for health care coverage for low-income children. This bill would require the department to make every effort to obtain the necessary federal approvals to implement the quality assurance fee as described.

end delete

This bill would, subject to federal approval, impose a hospital quality assurance fee, as specified, on certain general acute care hospitals from January 1, 2014, through Decemberbegin delete 30end deletebegin insert 31end insert, 2015, to be deposited into the Hospital Quality Assurance Revenue Fund.begin delete This bill would, subject to federal approval, impose a hospital quality assurance fee, as specified, on certain general acute care hospitals from January 1, 2014, through December 30, 2015, to be deposited into the Hospital Quality Assurance Revenue Fund. The bill would, subject to federal approval, require supplemental payments to be made to private hospitals for certain services and increased capitation payments to be made to Medi-Cal managed care plans, as specified. The bill would also make conforming changes.end deletebegin insert This bill would, subject to federal approval, provide that moneys in the Hospital Quality Assurance Revenue Fund shall, upon appropriation by the Legislature, be available only for certain purposes, including paying for health care coverage for children, as specified, and making supplemental payments for certain services to private hospitals, increased capitation payments to Medi-Cal managed care plans, and increased payments to mental health plans. The bill would also authorize the payment of direct grants to designated and nondesignated public hospitals in support of health care expenditures funded by the quality assurance fee. The bill would require the department to make available all public documentation it uses to administer and audit these provisions and would require the department to, upon request, assist hospitals in reconciling payments due and received from Medi-Cal managed care plans. The bill would require the department to post specified documents on its Internet Web site relating to these provisions.end insert

begin insert

The bill would provide that if quality assurance fee payments are remitted to the department after the date determined by the department to be the final date for calculating the final supplemental payments, the fee payments shall be retained in the fund for purposes of funding supplemental payments supported by a hospital quality assurance fee program under subsequent legislation, but if supplemental payments are not implemented under subsequent legislation, then those quality assurance fee payments shall be deposited into the Distressed Hospital Fund. The bill would also provide that if amounts of the quality assurance fees are collected in excess of the funds required to make the payments above and federal rules prohibit the department from refunding the fee payments to the general acute care hospitals, the excess funds shall be deposited into the Distressed Hospital Fund. By increasing the amount of moneys that may be deposited into the Distressed Hospital Fund, this bill would make an appropriation. The bill would make other conforming changes.

end insert
begin insert

Existing law provides that any county, other political subdivision of the state, or governmental entity in the state may elect to transfer funds in the form of cash or loans to the department in support of the Medi-Cal program. Existing law provides the department discretion to accept or not accept any elective transfer from a county, political subdivision, or other governmental entity for purposes of obtaining federal financial participation.

end insert
begin insert

This bill would authorize the Director of Health Care Services to maximize federal financial participation to provide access to services provided by hospitals that are not reimbursed by certified public expenditure, as specified, by authorizing the use of intergovernmental transfers to fund the nonfederal share of supplemental payments as permitted under federal law.

end insert
begin insert

Existing law requires that the California Medical Assistance Commission be dissolved after June 30, 2012, and requires that, upon dissolution of the commission, all powers, duties, and responsibilities of the commission be transferred to the Director of Health Care Services. Existing law provides that upon a determination by the director that a payment system based on diagnosis-related groups, as described, has been developed and implemented, the powers, duties, and responsibilities conferred on the commission and transferred to the director shall no longer be exercised, except as specified.

end insert
begin insert

This bill would add to those exceptions by authorizing the director to continue to administer and distribute payments for the Construction and Renovation Reimbursement Program, which provides supplemental reimbursement to hospitals that contract under the selective provider contracting program or with a county organized health system, as specified. The bill would provide that maintaining or negotiating a selective provider contract shall cease to be a requirement for a hospital’s participation in the Construction and Renovation Reimbursement Program.

end insert

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: 23. Appropriation: begin deleteno end deletebegin insertyesend insert. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P4    1

SECTION 1.  

The Legislature finds and declares both of the
2following:

3(a) The Legislature continues to recognize the essential role that
4hospitals play in serving the state’s Medi-Cal beneficiaries. To
5that end, it has been, and remains, the intent of the Legislature to
6improve funding for hospitals and obtain all available federal funds
7to make supplemental Medi-Cal payments to hospitals.

8(b) It is the intent of the Legislature that funding provided to
9hospitals through a hospital quality assurance fee be explored with
10the goal of increasing access to care and improving hospital
11reimbursement through supplemental Medi-Cal payments to
12hospitals.

13

SEC. 2.  

(a) It is the intent of the Legislature to impose a quality
14assurance fee to be paid by hospitals, which would be used to
15increase federal financial participation in order to make
16supplemental Medi-Cal payments to hospitals for the period of
17January 1, 2014, through December 31, 2015, and to help pay for
18health care coverage for low-income children.

19(b) The State Department of Health Care Services shall make
20every effort to obtain the necessary federal approvals to implement
21the quality assurance fee described in subdivision (a) in order to
22make supplemental Medi-Cal payments to hospitals for the period
23of January 1, 2014, through December 31, 2015.

24(c) It is the intent of the Legislature that the quality assurance
25fee be implemented only if all of the following conditions are met:

P5    1(1) The quality assurance fee is established in consultation with
2the hospital community.

3(2) The quality assurance fee, including any interest earned after
4collection by the department, is deposited into segregated funds
5apart from the General Fund and used exclusively for supplemental
6Medi-Cal payments to hospitals,begin insert direct grants to public hospitals,end insert
7 health care coverage for low-income children, and for the direct
8costs of administering the program by the department.

9(3) No hospital shall be required to pay the quality assurance
10fee to the department unless and until the state receives and
11maintains federal approval of the quality assurance fee and related
12supplemental payments to hospitals.

13(4) The full amount of the quality assurance fee assessed and
14collected remains available only for the purposes specified by the
15Legislature in this act.

16begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 14164 of the end insertbegin insertWelfare and Institutions Codeend insertbegin insert is
17amended to read:end insert

18

14164.  

begin insert(a)end insertbegin insertend insert In addition to the required intergovernmental
19transfers set forth in Section 14163, any county, other political
20subdivision of the state, or governmental entity in the state may
21elect to transfer funds, subject to subdivision (m) of Section 14163,
22to the department in support of the Medi-Cal program. Those
23transfers may consist of cash or loans to the state. The department
24shall have the discretion to accept or not accept any elective transfer
25from a county, political subdivision, or other governmental entity,
26as well as the discretion of whether to deposit the transfer in the
27Medi-Cal Inpatient Payment Adjustment Fund established pursuant
28to Section 14163. If the department accepts a transfer pursuant to
29this section, the department shall obtain federal matching funds to
30the full extent permitted by federal law.

begin insert

31(b) (1) The director may maximize available federal financial
32participation to provide access to services provided by hospitals
33that are not reimbursed by certified public expenditure pursuant
34to Article 5.2 (commencing with Section 14166) by authorizing
35the use of intergovernmental transfers to fund the nonfederal share
36of supplemental payments as permitted under Section 433.51 of
37Title 42 of the Code of Federal Regulations or any other applicable
38federal Medicaid laws. The transferring entity shall certify to the
39department that the funds are in compliance with all federal rules
40and regulations. Any payments funded by intergovernmental
P6    1transfers shall remain with the hospital and shall not be transferred
2back to any county, other political subdivision of the state, or
3governmental entity in the state, except for federal disallowance
4or withhold recovery efforts by the department. Participation in
5intergovernmental transfers under this subdivision is voluntary
6on the part of the transferring entity for purposes of all applicable
7federal laws.

end insert
begin insert

8(2) This subdivision shall be implemented only to the extent
9federal financial participation is not jeopardized.

end insert
10begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 14165 of the end insertbegin insertWelfare and Institutions Codeend insertbegin insert is
11amended to read:end insert

12

14165.  

(a) There is hereby created in the Governor’s office
13the California Medical Assistance Commission, for the purpose
14of contracting with health care delivery systems for the provision
15of health care services to recipients under the California Medical
16Assistance program.

17(b) Notwithstanding any otherbegin delete provision ofend delete law, the commission
18created pursuant to subdivision (a) shall continue through June 30,
192012, after which, it shall be dissolved and the term of any
20commissioner serving at that time shall end.

21(1) Upon dissolution of the commission, all powers, duties, and
22responsibilities of the commission shall be transferred to the
23Director of Health Care Services. These powers, duties, and
24responsibilities shall include, but are not limited to, those exercised
25in the operation of the selective provider contracting program
26pursuant to Article 2.6 (commencing with Section 14081).

27(2) (A) On July 1, 2012, notwithstanding any other law,
28employees of the California Medical Assistance Commission as
29of June 30, 2012, excluding commissioners, shall transfer to the
30State Department of Health Care Services.

31(B) Employees who transfer pursuant to subparagraph (A) shall
32be subject to the same conditions of employment under the
33department as they were under the California Medical Assistance
34Commission, including retention of their exempt status, until the
35diagnosis-related groups payment system described in Section
3614105.28 replaces the contract-based payment system described
37in this article.

38(C) (i) Notwithstanding any other law or rule, persons employed
39by the department who transferred to the department pursuant to
40subparagraph (A) shall be eligible to apply for civil service
P7    1examinations. Persons receiving passing scores shall have their
2names placed on lists resulting from these examinations, or
3otherwise gain eligibility for appointment. In evaluating minimum
4qualifications, related California Medical Assistance Commission
5experience shall be considered state civil service experience in a
6class deemed comparable by the State Personnel Board, based on
7the duties and responsibilities assigned.

8(ii) On the date the diagnosis-related groups payment system
9described in Section 14105.28 replaces the contract-based system
10described in this article, employees who transferred to the
11department pursuant to subparagraph (A) shall transfer to civil
12service classifications within the department for which they are
13eligible.

14(3) Upon a determination by the Director of Health Care
15Services that a payment system based on diagnosis-related groups
16as described in Section 14105.28 that is sufficient to replace the
17contract-based payment system described in this article has been
18developed and implemented, the powers, duties, and responsibilities
19conferred on the commission and transferred to the Director of
20Health Care Services shall no longer be exercised, excludingbegin delete bothend delete
21begin insert allend insert of the following:

22(A) Stabilization payments made or committed from Sections
2314166.14 and 14166.19 for services rendered prior to the director’s
24determination pursuant to this paragraph.

25(B) The ability to negotiate and make payments from the Private
26Hospital Supplemental Fund, established pursuant to Section
2714166.12, and the Nondesignated Public Hospital Supplemental
28Fund, established pursuant to Section 14166.17.

begin insert

29(C) The ability to continue to administer and distribute payments
30for the Construction Renovation Reimbursement Program, in
31accordance with Sections 14085 to 14085.57, inclusive.
32Notwithstanding any other law, maintaining or negotiating a
33selective provider contract pursuant to Article 2.6 (commencing
34with Section 14081) shall cease to be a requirement for a hospital’s
35participation in the Construction Renovation Reimbursement
36Program.

end insert

37(4) Protections afforded to the negotiations and contracts of the
38commission by the California Public Records Act (Chapter 3.5
39(commencing with Section 6250) of Division 7 of Title 1 of the
40Government Code) shall be applicable to the negotiations and
P8    1contracts conducted or entered into pursuant to this section by the
2State Department of Health Care Services.

3(c) Notwithstanding the rulemaking provisions of Chapter 3.5
4(commencing with Section 11340) of Part 1 of Division 3 of Title
52 of the Government Code, or any other provision of law, the State
6Department of Health Care Services may implement and administer
7this section by means of provider bulletins or other similar
8instructions, without taking regulatory action. The authority to
9implement this section as set forth in this subdivision shall include
10the authority to give notice by provider bulletin or other similar
11instruction of a determination made pursuant to paragraph (3) of
12subdivision (b) and to modify or supersede existing regulations in
13Title 22 of the California Code of Regulations that conflict with
14implementation of this section.

15

begin deleteSEC. 3.end delete
16begin insertSEC. 5.end insert  

Section 14167.35 of the Welfare and Institutions Code
17 is amended to read:

18

14167.35.  

(a) The Hospital Quality Assurance Revenue Fund
19is hereby created in the State Treasury.

20(b) (1) All fees required to be paid to the state pursuant to this
21article shall be paid in the form of remittances payable to the
22department.

23(2) The department shall directly transmit the fee payments to
24the Treasurer to be deposited in the Hospital Quality Assurance
25Revenue Fund. Notwithstanding Section 16305.7 of the
26Government Code, any interest and dividends earned on deposits
27in the fund shall be retained in the fund for purposes specified in
28subdivision (c).

29(c) All funds in the Hospital Quality Assurance Revenue Fund,
30together with any interest and dividends earned on money in the
31fund, shall, upon appropriation by the Legislature, be used
32exclusively to enhance federal financial participation for hospital
33services under the Medi-Cal program, to provide additional
34reimbursement to, and to support quality improvement efforts of,
35hospitals, and to minimize uncompensated care provided by
36hospitals to uninsured patients, in the following order of priority:

37(1) To pay for the department’s staffing and administrative costs
38directly attributable to implementing Article 5.21 (commencing
39with Section 14167.1) and this article, including any administrative
40fees that the director determines shall be paid to mental health
P9    1plans pursuant to subdivision (d) of Section 14167.11 and
2repayment of the loan made to the department from the Private
3Hospital Supplemental Fund pursuant to the act that added this
4section.

5(2) To pay for the health care coverage for children in the
6amount of eighty million dollars ($80,000,000) for each subject
7fiscal quarter for which payments are made under Article 5.21
8(commencing with Section 14167.1).

9(3) To make increased capitation payments to managed health
10care plans pursuant to Article 5.21 (commencing with Section
1114167.1).

12(4) To pay funds from the Hospital Quality Assurance Revenue
13Fund pursuant to Section 14167.5 that would have been used for
14grant payments and that are retained by the state, and to make
15increased payments to hospitals, including grants, pursuant to
16Article 5.21 (commencing with Section 14167.1), both of which
17shall be of equal priority.

18(5) To make increased payments to mental health plans pursuant
19to Article 5.21 (commencing with Section 14167.1).

20(d) Any amounts of the quality assurance fee collected in excess
21of the funds required to implement subdivision (c), including any
22funds recovered under subdivision (d) of Section 14167.14 or
23subdivision (e) of Section 14167.36, shall be refunded to general
24acute care hospitals, pro rata with the amount of quality assurance
25fee paid by the hospital, subject to the limitations of federal law.
26If federal rules prohibit the refund described in this subdivision,
27the excess funds shall be deposited in the Distressed Hospital Fund
28to be used for the purposes described in Section 14166.23, and
29shall be supplemental to and not supplant existing funds.

30(e) Any methodology or other provision specified in Article
315.21 (commencing with Section 14167.1) and this article may be
32modified by the department, in consultation with the hospital
33community, to the extent necessary to meet the requirements of
34federal law or regulations to obtain federal approval or to enhance
35the probability that federal approval can be obtained, provided the
36modifications do not violate the spirit and intent of Article 5.21
37(commencing with Section 14167.1) or this article and are not
38inconsistent with the conditions of implementation set forth in
39Section 14167.36.

P10   1(f) The department, in consultation with the hospital community,
2shall make adjustments, as necessary, to the amounts calculated
3pursuant to Section 14167.32 in order to ensure compliance with
4the federal requirements set forth in Section 433.68 of Title 42 of
5the Code of Federal Regulations or elsewhere in federal law.

6(g) The department shall request approval from the federal
7Centers for Medicare and Medicaid Services for the implementation
8of this article. In making this request, the department shall seek
9specific approval from the federal Centers for Medicare and
10Medicaid Services to exempt providers identified in this article as
11exempt from the fees specified, including the submission, as may
12be necessary, of a request for waiver of the broad based
13requirement, waiver of the uniform fee requirement, or both,
14pursuant to paragraphs (e)(1) and (e)(2) of Section 433.68 of Title
1542 of the Code of Federal Regulations.

16(h) (1) For purposes of this section, a modification pursuant to
17this section shall be implemented only if the modification, change,
18or adjustment does not do either of the following:

19(A) Reduces or increases the supplemental payments or grants
20made under Article 5.21 (commencing with Section 14167.1) in
21the aggregate for the 2008-09, 2009-10, and 2010-11 federal
22fiscal years to a hospital by more than 2 percent of the amount that
23would be determined under this article without any change or
24adjustment.

25(B) Reduces or increases the amount of the fee payable by a
26hospital in total under this article for the 2008-09, 2009-10, and
272010-11 federal fiscal years by more than 2 percent of the amount
28that would be determined under this article without any change or
29adjustment.

30(2) The department shall provide the Joint Legislative Budget
31Committee and the fiscal and appropriate policy committees of
32the Legislature a status update of the implementation of Article
335.21 (commencing with Section 14167.1) and this article on
34January 1, 2010, and quarterly thereafter. Information on any
35adjustments or modifications to the provisions of this article or
36Article 5.21 (commencing with Section 14167.1) that may be
37required for federal approval shall be provided coincident with the
38consultation required under subdivisions (f) and (g).

39(i) Notwithstanding Chapter 3.5 (commencing with Section
4011340) of Part 1 of Division 3 of Title 2 of the Government Code,
P11   1the department may implement this article or Article 5.21
2(commencing with Section 14167.1) by means of provider
3bulletins, all plan letters, or other similar instruction, without taking
4regulatory action. The department shall also provide notification
5to the Joint Legislative Budget Committee and to the appropriate
6policy and fiscal committees of the Legislature within five working
7days when the above-described action is taken in order to inform
8the Legislature that the action is being implemented.

9(j) Notwithstanding any law, the Controller may use the funds
10in the Hospital Quality Assurance Revenue Fund for cashflow
11loans to the General Fund as provided in Sections 16310 and 16381
12of the Government Code.

13(k) Notwithstanding Sections 14167.17 and 14167.40,
14subdivisions (b) to (h), inclusive, shall become inoperative on
15January 1, 2013, subdivisions (a), (i), and (j) shall remain operative
16until January 1, 2017, and as of January 1, 2017, this section is
17repealed.

18begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 14167.37 is added to the end insertbegin insertWelfare and
19Institutions Code
end insert
begin insert, to read:end insert

begin insert
20

begin insert14167.37.end insert  

(a) The department shall make available all public
21documentation it uses to administer and audit the program
22authorized under Article 5.230 (commencing with Section
2314169.51) and Article 5.231 (commencing with Section 14169.71)
24pursuant to the Public Records Act (Chapter 3.5 (commencing
25with Section 6250) of Division 7 of Title 1 of the Government
26Code). In addition, upon request, the department shall assist
27hospitals in reconciling payments due and received from Medi-Cal
28managed care plans under Article 5.230 (commencing with Section
2914169.51).

30(b) Notwithstanding subdivision (a), the department shall post
31all of the following on the department’s Internet Web site:

32(1) Within 10 business days after receipt of approval of the
33hospital quality assurance fee program under Article 5.230
34(commencing with Section 14169.51) and Article 5.231
35(commencing with Section 14169.71) from the federal Centers for
36Medicare and Medicaid Services (CMS), the hospital quality
37assurance fee final model and upper payment limit calculations.

38(2) Quarterly updates on payments, fee schedules, and model
39updates when applicable.

P12   1(3) Within 10 business days after receipt, information on
2managed care rate approvals.

3(c) For purposes of this section, the following definitions shall
4apply:

5(1) “Fee schedules” mean the dates on which the hospital
6quality assurance fee will be due from the hospitals and the dates
7on which the department will submit fee-for-service payments to
8the hospitals. “Fee schedules” also include the dates on which
9the department is expected to submit payments to managed care
10plans.

11(2) “Hospital quality assurance fee final model” means the
12spreadsheet calculating the supplemental amounts based on the
13upper payment limit calculation from claims and hospital data
14sources of days and hospital services once CMS approves the
15program under Article 5.230 (commencing with Section 14169.51)
16and Article 5.231 (commencing with Section 14169.71).

17(3) “Upper payment limit calculation” means the determination
18of the federal upper payment limit on the amount of the Medicaid
19payment for which federal financial participation is available for
20a class of service and a class of health care providers, as specified
21in Part 447 of Title 42 of the Code of Federal Regulations and
22that has been approved by CMS.

end insert
23

begin deleteSEC. 4.end delete
24begin insertSEC. 7.end insert  

Article 5.230 (commencing with Section 14169.51) is
25added to Chapter 7 of Part 3 of Division 9 of the Welfare and
26Institutions Code
, to read:

27 

28Article 5.230.  Medi-Cal Hospital Reimbursement Improvement
29Act ofbegin delete 2014end deletebegin insert 2013end insert
30

 

begin delete
31

14169.51.  

For the purposes of this article, the following
32definitions shall apply:

33(a) “General acute care days” means the total number of
34Medi-Cal general acute care days paid by the department to a
35hospital for services in the __ calendar year, as reflected in the
36state paid claims file on ___.

37(b) “Hospital inpatient services” means all services covered
38under Medi-Cal and furnished by hospitals to patients who are
39admitted as hospital inpatients and reimbursed on a fee-for-service
40basis by the department directly or through its fiscal intermediary.
P13   1Hospital inpatient services include outpatient services furnished
2by a hospital to a patient who is admitted to that hospital within
324 hours of the provision of the outpatient services that are related
4to the condition for which the patient is admitted. Hospital inpatient
5services do not include services for which a managed health care
6plan is financially responsible.

7(c) “Hospital outpatient services” means all services covered
8under Medi-Cal furnished by hospitals to patients who are
9registered as hospital outpatients and reimbursed by the department
10on a fee-for-service basis directly or through its fiscal intermediary.
11Hospital outpatient services do not include services for which a
12managed health care plan is financially responsible, or services
13rendered by a hospital-based federally qualified health center for
14which reimbursement is received pursuant to Section 14132.100.

15(d) (1) “Managed health care plan” means a health care delivery
16system that manages the provision of health care and receives
17prepaid capitated payments from the state in return for providing
18services to Medi-Cal beneficiaries.

19(2) (A) Managed health care plans include county organized
20health systems and entities contracting with the department to
21provide services pursuant to two-plan models and geographic
22managed care. Entities providing these services contract with the
23department pursuant to any of the following:

24(i) Article 2.7 (commencing with Section 14087.3).

25(ii) Article 2.8 (commencing with Section 14087.5).

26(iii) Article 2.81 (commencing with Section 14087.96).

27(iv) Article 2.91 (commencing with Section 14089).

28(B) Managed health care plans do not include any of the
29following:

30(i) Mental health plans contracting to provide mental health care
31for Medi-Cal beneficiaries pursuant to Chapter 8.9 (commencing
32with Section 14700).

33(ii) Health plans not covering inpatient services such as primary
34care case management plans operating pursuant to Section
3514088.85.

36(iii) Program for All-Inclusive Care for the Elderly organizations
37operating pursuant to Chapter 8.75 (commencing with Section
3814591).

39(e) “New hospital” means a hospital operation, business, or
40facility functioning under current or prior ownership as a private
P14   1hospital that does not have a days data source or a hospital that
2has a days data source in whole, or in part, from a previous operator
3where there is an outstanding monetary liability owed to the state
4in connection with the Medi-Cal program and the new operator
5did not assume liability for the outstanding monetary obligation.

6(f) “Private hospital” means a hospital that meets all of the
7following conditions:

8(1) Is licensed pursuant to subdivision (a) of Section 1250 of
9the Health and Safety Code.

10(2) Is in the Charitable Research Hospital peer group, as set
11forth in the 1991 Hospital Peer Grouping Report published by the
12department, or is not designated as a specialty hospital in the
13hospital’s Office of Statewide Health Planning and Development
14Annual Financial Disclosure Report for the hospital’s latest fiscal
15year ending in __.

16(3) Does not satisfy the Medicare criteria to be classified as a
17long-term care hospital.

18(4) Is a nonpublic hospital, nonpublic converted hospital, or
19converted hospital as those terms are defined in paragraphs (26)
20to (28), inclusive, respectively, of subdivision (a) of Section
2114105.98.

22(g) “Program period” means the period from January 1, 2014,
23to December 31, 2015, inclusive.

24(h) “Upper payment limit” means a federal upper payment limit
25on the amount of the Medicaid payment for which federal financial
26participation is available for a class of service and a class of health
27care providers, as specified in Part 447 of Title 42 of the Code of
28Federal Regulations. The applicable upper payment limit shall be
29separately calculated for inpatient and outpatient hospital services.

end delete
begin insert
30

begin insert14169.51.end insert  

(a) “Acute psychiatric days” means the total number
31of Medi-Cal specialty mental health service administrative days,
32Medi-Cal specialty mental health service acute care days, acute
33psychiatric administrative days, and acute psychiatric acute days
34identified in the Final Medi-Cal Utilization Statistics for the
352012-13 state fiscal year as calculated by the department as of
36December 17, 2012.

37(b) “Converted hospital” means a private hospital that becomes
38a designated public hospital or a nondesignated public hospital
39on or after January 1, 2014.

P15   1(c) “Days data source” means the hospital’s Annual Financial
2Disclosure Report filed with the Office of Statewide Health
3Planning and Development as of June 6, 2013, for its fiscal year
4ending during 2010, except for Downey Regional Medical Center
5which shall be the Annual Financial Disclosure Report for the
6fiscal year ending during 2011 retrieved from the Office of
7Statewide Health Planning and Development as of July 23, 2013.

8(d) “Designated public hospital” shall have the meaning given
9in subdivision (d) of Section 14166.1 as of January 1, 2014.

10(e) “General acute care days” means the total number of
11Medi-Cal general acute care days paid by the department to a
12hospital for services in the 2010 calendar year, as reflected in the
13state paid claims file on April 26, 2013.

14(f) “High acuity days” means Medi-Cal coronary care unit
15days, pediatric intensive care unit days, intensive care unit days,
16neonatal intensive care unit days, and burn unit days paid by the
17department during the 2010 calendar year, as reflected in the state
18paid claims file prepared by the department on April 26, 2013.

19(g) “Hospital inpatient services” means all services covered
20under Medi-Cal and furnished by hospitals to patients who are
21admitted as hospital inpatients and reimbursed on a fee-for-service
22basis by the department directly or through its fiscal intermediary.
23Hospital inpatient services include outpatient services furnished
24by a hospital to a patient who is admitted to that hospital within
2524 hours of the provision of the outpatient services that are related
26to the condition for which the patient is admitted. Hospital inpatient
27services do not include services for which a managed health care
28plan is financially responsible.

29(h) “Hospital outpatient services” means all services covered
30under Medi-Cal furnished by hospitals to patients who are
31registered as hospital outpatients and reimbursed by the
32department on a fee-for-service basis directly or through its fiscal
33intermediary. Hospital outpatient services do not include services
34for which a managed health care plan is financially responsible,
35or services rendered by a hospital-based federally qualified health
36center for which reimbursement is received pursuant to Section
3714132.100.

38(i) “Individual hospital acute psychiatric supplemental
39payment” means the total amount of acute psychiatric hospital
40supplemental payments to a subject hospital for a quarter for which
P16   1the supplemental payments are made. The “individual hospital
2acute psychiatric supplemental payment” shall be calculated for
3subject hospitals by multiplying the number of acute psychiatric
4days for the individual hospital for which a mental health plan
5was financially responsible by the amount calculated in accordance
6with paragraph (2) of subdivision (b) of Section 14169.53 and
7dividing the result by four.

8(j) (1) “Managed health care plan” means a health care
9delivery system that manages the provision of health care and
10receives prepaid capitated payments from the state in return for
11providing services to Medi-Cal beneficiaries.

12(2) (A) Managed health care plans include county organized
13health systems and entities contracting with the department to
14provide services pursuant to two-plan models and geographic
15managed care. Entities providing these services contract with the
16department pursuant to any of the following:

17(i) Article 2.7 (commencing with Section 14087.3).

18(ii) Article 2.8 (commencing with Section 14087.5).

19(iii) Article 2.81 (commencing with Section 14087.96).

20(iv) Article 2.91 (commencing with Section 14089).

21(B) Managed health care plans do not include any of the
22following:

23(i) Mental health plans contracting to provide mental health
24care for Medi-Cal beneficiaries pursuant to Chapter 8.9
25(commencing with Section 14700).

26(ii) Health plans not covering inpatient services such as primary
27care case management plans operating pursuant to Section
2814088.85.

29(iii) Program for All-Inclusive Care for the Elderly
30organizations operating pursuant to Chapter 8.75 (commencing
31with Section 14591).

32(k) “Medi-Cal managed care days” means the total number of
33general acute care days, including well baby days, listed for the
34county organized health system and prepaid health plans identified
35in the Final Medi-Cal Utilization Statistics for the 2012-13 fiscal
36year, as calculated by the department as of December 17, 2012.

37(l) “Medicaid inpatient utilization rate” means Medicaid
38inpatient utilization rate as defined in Section 1396r-4 of Title 42
39of the United States Code and as set forth in the Final Medi-Cal
P17   1Utilization Statistics for the 2012-13 fiscal year, as calculated by
2the department as of December 17, 2012.

3(m) “Mental health plan” means a mental health plan that
4contracts with the state to furnish or arrange for the provision of
5mental health services to Medi-Cal beneficiaries pursuant to
6Chapter 8.9 (commencing with Section 14700).

7(n) “New hospital” means a hospital operation, business, or
8facility functioning under current or prior ownership as a private
9hospital that does not have a days data source or a hospital that
10has a days data source in whole, or in part, from a previous
11operator when there is an outstanding monetary liability owed to
12the state in connection with the Medi-Cal program and the new
13operator did not assume liability for the outstanding monetary
14obligation.

15(o) “Nondesignated public hospital” means either of the
16following:

17(1) A public hospital that is licensed under subdivision (a) of
18Section 1250 of the Health and Safety Code, is not designated as
19a specialty hospital in the hospital’s most recent publicly available
20Annual Financial Disclosure Report, and satisfies the definition
21in paragraph (25) of subdivision (a) of Section 14105.98, excluding
22designated public hospitals.

23(2) A tax-exempt nonprofit hospital that is licensed under
24subdivision (a) of Section 1250 of the Health and Safety Code, is
25not designated as a specialty hospital in the hospital’s most recent
26publicly available Annual Financial Disclosure Report, is
27operating a hospital owned by a local health care district, and is
28affiliated with the health care district hospital owner by means of
29the district’s status as the nonprofit corporation’s sole corporate
30member.

31(p) “Outpatient base amount” means the total amount of
32payments for hospital outpatient services made to a hospital in
33the 2010 calendar year, as reflected in the state paid claims file
34prepared by the department on April 26, 2013.

35(q) “Private hospital” means a hospital that meets all of the
36following conditions:

37(1) Is licensed pursuant to subdivision (a) of Section 1250 of
38the Health and Safety Code.

39(2) Is in the Charitable Research Hospital peer group, as set
40forth in the 1991 Hospital Peer Grouping Report published by the
P18   1department, or is not designated as a specialty hospital in the
2hospital’s most recent publicly available Office of Statewide Health
3Planning and Development Annual Financial Disclosure Report.

4(3) Does not satisfy the Medicare criteria to be classified as a
5long-term care hospital.

6(4) Is a nonpublic hospital, nonpublic converted hospital, or
7converted hospital as those terms are defined in paragraphs (26)
8to (28), inclusive, respectively, of subdivision (a) of Section
914105.98.

10(r) “Program period” means the period from January 1, 2014,
11to December 31, 2015, inclusive.

12(s) “Subject fiscal quarter” means a state fiscal quarter
13beginning on or after January 1, 2014, and ending before January
141, 2016.

15(t) “Subject fiscal year” means a state fiscal year that ends after
16January 1, 2014, and begins before January 1, 2016.

17(u) “Subject hospital” means a hospital that meets all of the
18following conditions:

19(1) Is licensed pursuant to subdivision (a) of Section 1250 of
20the Health and Safety Code.

21(2) Is in the Charitable Research Hospital peer group, as set
22forth in the 1991 Hospital Peer Grouping Report published by the
23department, or is not designated as a specialty hospital in the
24hospital’s most recent publicly available Office of Statewide Health
25Planning and Development Annual Financial Disclosure Report.

26(3) Does not satisfy the Medicare criteria to be classified as a
27long-term care hospital.

28(v) “Subject month” means a calendar month beginning on or
29after January 1, 2014, and ending before January 1, 2016.

30(w) “Transplant days” means the number of Medi-Cal days for
31MS-DRGs 1, 2, 5 to 10, inclusive, 14, 15 and 652, according to
32the 2010 Patient Discharge file from the Office of Statewide Health
33Planning and Development accessed on June 28, 2011.

34(x) “Upper payment limit” means a federal upper payment limit
35on the amount of the Medicaid payment for which federal financial
36participation is available for a class of service and a class of health
37care providers, as specified in Part 447 of Title 42 of the Code of
38Federal Regulations. The applicable upper payment limit shall be
39separately calculated for inpatient and outpatient hospital services.

end insert
P19   1

14169.52.  

begin insert(a)end insertbegin insertend insert Private hospitals shall be paid supplemental
2amounts for the provision of hospital outpatient services as set
3forth in this section. The supplemental amounts shall be in addition
4to any other amounts payable to hospitals with respect to those
5services and shall not affect any other payments to hospitals. The
6supplemental amounts shall result in payments equal to the
7statewide aggregate upper payment limit for private hospitals for
8each subject fiscal year.

begin insert

9(b) Except as set forth in subdivisions (e) and (f), each private
10hospital shall be paid an amount for each subject fiscal year equal
11to a percentage of the hospital’s outpatient base amount. The
12percentage shall be the same for each hospital for a subject fiscal
13year. The percentage shall result in payments to hospitals that
14equal the applicable federal upper payment limit as it may be
15modified pursuant to Section 14169.68 for a subject fiscal year.
16For purposes of this subdivision the applicable federal upper
17payment limit shall be the federal upper payment limit for hospital
18outpatient services furnished by private hospitals for each subject
19fiscal year.

end insert
begin insert

20(c) In the event federal financial participation for a subject
21fiscal year is not available for all of the supplemental amounts
22payable to private hospitals under subdivision (b) due to the
23application of a federal upper payment limit or for any other
24reason, both of the following shall apply:

end insert
begin insert

25(1) The total amount payable to private hospitals under
26subdivision (b) for the subject fiscal year shall be reduced to the
27amount for which federal financial participation is available.

end insert
begin insert

28(2) The amount payable under subdivision (b) to each private
29hospital for the subject fiscal year shall be equal to the amount
30computed under subdivision (b) multiplied by the ratio of the total
31amount for which federal financial participation is available to
32the total amount computed under subdivision (b).

end insert
begin insert

33(d) The supplemental amounts set forth in this section are
34inclusive of federal financial participation.

end insert
begin insert

35(e) Payments shall not be made under this section to a new
36hospital.

end insert
begin insert

37(f) No payments shall be made under this section to a converted
38hospital.

end insert
39

14169.53.  

begin deletePrivate end deletebegin insert(end insertbegin inserta)end insertbegin insertend insertbegin insertExcept as provided in Section 14169.68,
40private end insert
hospitals shall be paid supplemental amounts for the
P20   1provision of hospital inpatient services for the program period as
2set forth in this section. The supplemental amounts shall be in
3addition to any other amounts payable to hospitals with respect to
4those services and shall not affect any other payments to hospitals.
5The supplemental amounts shall result in payments equal to the
6statewide aggregate upper payment limit for private hospitals for
7each subject fiscal yearbegin insert as it may be modified pursuant to Section
814169.68end insert
.

begin insert

9(b) Except as set forth in subdivisions (g) and (h), each private
10hospital shall be paid the following amounts as applicable for the
11provision of hospital inpatient services for each subject fiscal year:

end insert
begin insert

12(1) Eight hundred ninety-six dollars and forty eight cents
13($896.48) multiplied by the hospital’s general acute care days for
14supplemental payments for the 2014 calendar year, and one
15thousand eighty-one dollars and eighty-four cents ($1,081.84)
16multiplied by the hospital’s general acute care days for
17supplemental payments for the 2015 calendar year.

end insert
begin insert

18(2) For the hospital’s acute psychiatric days that were paid
19directly by the department and were not the financial responsibility
20of a mental health plan, nine hundred sixty-five dollars ($965)
21multiplied by the hospital’s acute psychiatric days for supplemental
22payments for the 2014 calendar year, and nine hundred seventy-five
23dollars ($975) multiplied by the hospital’s acute psychiatric days
24for supplemental payments for the 2015 calendar year.

end insert
begin insert

25(3) (A) For the 2014 and 2015 calendar years, two thousand
26five hundred dollars ($2,500) multiplied by the number of the
27hospital’s high acuity days if the hospital’s Medicaid inpatient
28utilization rate is less than 43 percent and greater than 5 percent
29and at least 5 percent of the hospital’s general acute care days
30are high acuity days.

end insert
begin insert

31(B) The amount under this paragraph shall be in addition to
32the amounts specified in paragraphs (1) and (2).

end insert
begin insert

33(4) (A) For the 2014 and 2015 calendar years, two thousand
34five hundred dollars ($2,500) multiplied by the number of the
35hospital’s high acuity days if the hospital qualifies to receive the
36amount set forth in paragraph (3) and has been designated as a
37Level I, Level II, Adult/Ped Level I, or Adult/Ped Level II trauma
38center by the Emergency Medical Services Authority established
39pursuant to Section 1797.1 of the Health and Safety Code.

end insert
begin insert

P21   1(B) The amount under this paragraph shall be in addition to
2the amounts specified in paragraphs (1), (2), and (3).

end insert
begin insert

3(5) (A) For the 2014 and 2015 calendar years, two thousand
4five hundred dollars ($2,500) multiplied by the number of the
5hospital’s transplant days if the hospital’s Medicaid inpatient
6utilization rate is less than 43 percent and greater than 5 percent.

end insert
begin insert

7(B) The amount under this paragraph shall be in addition to
8the amounts specified in paragraphs (1), (2), (3), and (4).

end insert
begin insert

9(c) A private hospital that provided Medi-Cal subacute services
10during the 2010 calendar year and has a Medicaid inpatient
11utilization rate that is greater than 5 percent and less than 43
12percent shall be paid a supplemental amount equal to 50 percent
13for the 2014 calendar year and 60 percent for the 2015 calendar
14year of the Medi-Cal subacute payments paid by the department
15to the hospital during the 2010 calendar year, as reflected in the
16state paid claims file prepared by the department on April 26,
172013.

end insert
begin insert

18(d) (1) If federal financial participation for a subject fiscal year
19is not available for all of the supplemental amounts payable to
20private hospitals under subdivision (b) due to the application of
21a federal upper payment limit or for any other reason, both of the
22following shall apply:

end insert
begin insert

23(A) The total amount payable to private hospitals under
24subdivision (b) for the subject fiscal year shall be reduced to reflect
25the amount for which federal financial participation is available.

end insert
begin insert

26(B) The amount payable under subdivision (b) to each private
27hospital for the subject fiscal year shall be equal to the amount
28computed under subdivision (b) multiplied by the ratio of the total
29amount for which federal financial participation is available to
30the total amount computed under subdivision (b).

end insert
begin insert

31(2) If federal financial participation for a subject fiscal year is
32not available for all of the supplemental amounts payable to private
33hospitals under subdivision (c) due to the application of a federal
34upper payment limit or for any other reason, both of the following
35shall apply:

end insert
begin insert

36(A) The total amount payable to private hospitals under
37subdivision (c) for the subject fiscal year shall be reduced to reflect
38the amount for which federal financial participation is available.

end insert
begin insert

39(B) The amount payable under subdivision (c) to each private
40hospital for the subject fiscal year shall be equal to the amount
P22   1computed under subdivision (c) multiplied by the ratio of the total
2amount for which federal financial participation is available to
3the total amount computed under subdivision (c).

end insert
begin insert

4(e) If the amount otherwise payable to a hospital under this
5section for a subject fiscal year exceeds the amount for which
6federal financial participation is available for that hospital, the
7amount due to the hospital for that subject fiscal year shall be
8reduced to the amount for which federal financial participation is
9available.

end insert
begin insert

10(f) The amounts set forth in this section are inclusive of federal
11financial participation.

end insert
begin insert

12(g) Payments shall not be made under this section to a new
13hospital.

end insert
begin insert

14(h) Payments shall not be made under this section to a converted
15hospital.

end insert
begin insert

16(i) (1) The department shall increase payments to mental health
17plans for the program period exclusively for the purpose of making
18payments to private hospitals. The aggregate amount of the
19increased payments for a subject fiscal quarter shall be the total
20of the individual hospital acute psychiatric supplemental payment
21amounts for all hospitals for which federal financial participation
22is available.

end insert
begin insert

23(2) The payments described in paragraph (1) may be made
24directly by the department to hospitals when federal law does not
25require that the payments be transmitted to hospitals via mental
26health plans.

end insert
27

14169.54.  

(a) The department shall increase capitation
28payments to Medi-Cal managed health care plans for each subject
29fiscal year as set forth in this section.

30(b) The increased capitation payments shall be made as part of
31the monthly capitated payments made by the department to
32managed health care plans.

33(c) The aggregate amount of increased capitation payments to
34all Medi-Cal managed health care plans for each subject fiscal
35year shall be the maximum amount for which federal financial
36participation is available on an aggregate statewide basis for the
37applicable subject fiscal year.

38(d) The department shall determine the amount of the increased
39capitation payments for each managed health care plan. The
40department shall consider the composition of Medi-Cal enrollees
P23   1in the plan, the anticipated utilization of hospital services by the
2plan’s Medi-Cal enrollees, and other factors that the department
3determines are reasonable and appropriate to ensure access to
4high-quality hospital services by the plan’s enrollees.

5(e) The amount of increased capitation payments to each
6Medi-Cal managed health care plan shall not exceed an amount
7that results in capitation payments that are certified by the state’s
8actuary as meeting federal requirements, taking into account the
9requirement that all of the increased capitation payments under
10this section shall be paid by the Medi-Cal managed health care
11plans to hospitals for hospital services to Medi-Cal enrollees of
12the plan.

13(f) (1) The increased capitation payments to managed health
14care plans under this section shall be made to support the
15availability of hospital services and ensure access to hospital
16services for Medi-Cal beneficiaries. The increased capitation
17payments to managed health care plans shall commence within 90
18days of the date on which all necessary federal approvals have
19been received, and shall include, but not be limited to, the sum of
20the increased payments for all prior months for which payments
21are due.

22(2) To secure the necessary funding for the payment or payments
23made pursuant to paragraph (1), the department may accumulate
24funds in the Hospital Quality Assurance Revenue Fund, established
25pursuant to Section 14167.35, for the purpose of funding managed
26health care capitation payments under this article regardless of the
27date on which capitation payments are scheduled to be paid in
28order to secure the necessary total funding for managed health care
29payments by December 31, 2015.

30(g) Payments to managed health care plans that would be paid
31consistent with actuarial certification and enrollment in the absence
32of the payments made pursuant to this section, including, but not
33limited to, payments described in Section 14182.15, shall not be
34reduced as a consequence of payments under this section.

35(h) (1) Each managed health care plan shall expend 100 percent
36of any increased capitation payments it receives under this section
37on hospital services.

38(2) The department may issue change orders to amend contracts
39with managed health care plans as needed to adjust monthly
40capitation payments in order to implement this section.

P24   1(3) For entities contracting with the department pursuant to
2Article 2.91 (commencing with Section 14089), any incremental
3increase in capitation rates pursuant to this section shall not be
4subject to negotiation and approval by the California Medical
5Assistance Commission.

6(i) begin deleteIn the event end deletebegin insert(1)end insertbegin insertend insertbegin insertIf end insertfederal financial participation is not
7available for all of the increased capitation payments determined
8for a month pursuant to this section for any reason, the increased
9capitation payments mandated by this section for that month shall
10be reduced proportionately to the amount for which federal
11financial participation is available.

begin insert

12(2) The determination under this subdivision for any month in
13the program period shall be made after accounting for all federal
14financial participation necessary for full implementation of Section
1514182.15 for that month.

end insert
16

14169.55.  

(a)  Each managed health care plan receiving
17increased capitation payments under Section 14169.54 shall expend
18the capitation rate increases in a manner consistent with actuarial
19certification, enrollment, and utilization on hospital services. Each
20managed health care plan shall expend increased capitation
21payments on hospital services within 30 days of receiving the
22increased capitation payments to the extent they are made for a
23subject month that is prior to the date on which the payments are
24received by the managed health care plan.

25(b) The sum of all expenditures made by a managed health care
26plan for hospital services pursuant to this section shall equal, or
27approximately equal, all increased capitation payments received
28by the managed health care plan, consistent with actuarial
29certification, enrollment, and utilization, from the department
30pursuant to Section 14169.54.

31(c) Any delegation or attempted delegation by a managed health
32care plan of its obligation to expend the capitation rate increases
33under this section shall not relieve the plan from its obligation to
34expend those capitation rate increases. Managed health care plans
35shall submit the documentation that the department may require
36to demonstrate compliance with this subdivision. The
37documentation shall demonstrate actual expenditure of the
38capitation rate increases for hospital services, and not assignment
39to subcontractors of the managed health care plan’s obligation of
40the duty to expend the capitation rate increases.

P25   1(d) The supplemental hospital payments made by managed
2health care plans pursuant to this section shall reflect the overall
3 purpose of this article and Article 5.231 (commencing with Section
414169.71).

5(e) This article is not intended to create a private right of action
6by a hospital against a managed care plan provided that the
7managed health care plan expends all increased capitation payments
8for hospital services.

begin insert
9

begin insert14169.56.end insert  

(a) Designated public hospitals may be paid direct
10grants in support of health care expenditures, which shall not
11constitute Medi-Cal payments, and which shall be funded by the
12quality assurance fee set forth in Article 5.231 (commencing with
13Section 14169.71).

14(b) Nondesignated public hospitals may be paid direct grants
15in support of health care expenditures, which shall not constitute
16Medi-Cal payments, and which shall be funded by the quality
17assurance fee set forth in Article 5.231 (commencing with Section
1814169.71).

end insert
begin insert
19

begin insert14169.57.end insert  

(a) The amount of any payments made under this
20article to private hospitals, including the amount of payments made
21under Sections 14169.52 and 14169.53 and additional payments
22to private hospitals by managed health care plans pursuant to
23Section 14169.54, shall not be included in the calculation of the
24low-income percent or the OBRA 1993 payment limitation, as
25defined in paragraph (24) of subdivision (a) of Section 14105.98,
26for purposes of determining payments to private hospitals.

27(b) The amount of any payments made to a hospital under this
28article shall not be included in the calculation of stabilization
29funding under Article 5.2 (commencing with Section 14166) or
30any successor legislation, including legislation implementing
31 California’s Bridge to Reform Section 1115(a) Medicaid
32Demonstration (11-W-00193/9).

end insert
begin insert
33

begin insert14169.58.end insert  

The payments to a hospital under this article shall
34not be made for any portion of a subject fiscal year during which
35the hospital is closed. A hospital shall be deemed to be closed on
36the first day of any period during which the hospital has no acute
37inpatients for at least 30 consecutive days. Payments under this
38article to a hospital that is closed during any portion of a subject
39fiscal year shall be reduced by applying a fraction, expressed as
40a percentage, the numerator of which shall be the number of days
P26   1during the applicable subject fiscal year that the hospital is closed
2and the denominator of which shall be 365.

end insert
begin insert
3

begin insert14169.59.end insert  

The department shall make disbursements from the
4Hospital Quality Assurance Revenue Fund consistent with all of
5the following:

6(a) Fund disbursements shall be made periodically within 15
7days of each date on which quality assurance fees are due from
8hospitals.

9(b) The funds shall be disbursed in accordance with the order
10of priority set forth in subdivision (b) of Section 14169.73, except
11that funds may be set aside for increased capitation payments to
12managed care health plans pursuant to subdivision (f) of Section
1314169.54.

14(c) The funds shall be disbursed in each payment cycle in
15accordance with the order of priority set forth in subdivision (b)
16of Section 14169.73 as modified by subdivision (b) so that the
17supplemental payments, direct grants to hospitals, and increased
18capitation payments to managed health care plans are made to
19the maximum extent for which funds are available.

20(d) To the maximum extent possible, consistent with the
21availability of funds in the Hospital Quality Assurance Revenue
22Fund and the timing of federal approvals, the supplemental
23payments, direct grants to hospitals, and increased capitation
24payments to managed health care plans under this article shall be
25made before December 31, 2015.

26(e) The aggregate amount of funds to be disbursed to private
27hospitals shall be determined under Sections 14169.52 and
2814169.53. The aggregate amount of funds to be disbursed to
29managed health care plans shall be determined under Section
3014169.54. The aggregate amount of direct grants to designated
31and nondesignated public hospitals shall be determined under
32Section 14169.56.

end insert
33

begin delete14169.56.end delete
34begin insert14169.60.end insert  

(a) Exclusive of payments made underbegin delete Article ____
35(commencing with Section ____) and Article ____ (commencing
36with Section ____)end delete
begin insert former Article 5.21 (commencing with Section
3714167.1), former Article 5.226 (commencing with Section 14168.1),
38and Article 5.228 (commencing with Section 14169.1)end insert
, payment
39rates for hospital outpatient services, furnished by private hospitals,
40nondesignated public hospitals, and designated public hospitals
P27   1before December 31, 2015, exclusive of amounts payable under
2this article, shall not be reduced below the rates in effect on January
31, 2014.

4(b) Rates payable to hospitals for hospital inpatient services
5furnished before December 31, 2015, under contracts negotiated
6pursuant to the selective provider contracting program under Article
72.6 (commencing with Section 14081), shall not be reduced below
8the contract rates in effect on January 1, 2014. This subdivision
9shall not prohibit changes to the supplemental payments paid to
10individual hospitals under Sections 14166.12, 14166.17, and
1114166.23, provided that the aggregate amount of the payments for
12each subject fiscal year is not less than the minimum amount
13permitted under former Section 14167.13.

14(c) Notwithstanding Section 14105.281, exclusive of payments
15made under former Article 5.21 (commencing with Section
1614167.1)begin delete andend deletebegin insert, formerend insert Article 5.226 (commencing with Section
1714168.1),begin insert and Article 5.228 (commencing with Section 14169.1), end insert
18 payments to private hospitals for hospital inpatient services
19furnished before January 1, 2014, that are not reimbursed under a
20contract negotiated pursuant to the selective provider contracting
21program under Article 2.6 (commencing with Section 14081),
22exclusive of amounts payable under this article, shall not be less
23than the amount of payments that would have been made under
24the payment methodology in effect on the effective date of this
25article.

26(d) Upon the implementation of the new Medi-Cal inpatient
27hospital reimbursement methodology based on diagnosis-related
28groups pursuant to Section 14105.28, the requirements in
29subdivisions (b) and (c) shall be met if the rates paid under the
30new Medi-Cal inpatient hospital reimbursement methodology
31based on diagnosis-related groups result in an average payment
32per discharge to all hospitals subject to the new reimbursement
33methodology, calculated on an aggregate basis per subject fiscal
34year, exclusive of amounts payable under this article, amounts
35payable under Sections 14166.11 and 14166.23, and if amounts
36payable under Sections 14166.12 and 14166.17 are not included
37in the payments under the diagnosis-related group methodology
38and continue to be paid separately to hospitals, exclusive of those
39amounts, that is not less than the average payment per discharge
40to the hospitals, exclusive of amounts payable under this article,
P28   1amounts payable under Sections 14166.11 and 14166.23, and if
2amounts payable under Sections 14166.12 and 14166.17 are not
3included in the payments under the diagnosis-related group
4methodology and continue to be paid separately to hospitals,
5exclusive of those amounts, calculated on an aggregate basis for
6the fiscal year ending June 30, 2012, adjusted, in consultation with
7the hospital community, to reflect the movement of populations
8into managed care under Article 5.4 (commencing with Section
914180).

10(e) Solely for purposes of this article, a rate reduction or a
11change in a rate methodology that is enjoined by a court shall be
12included in the determination of a rate or a rate methodology until
13all appeals or judicial reviews have been exhausted and the rate
14reduction or change in rate methodology has been permanently
15enjoined, denied by the federal government, or otherwise
16permanently prevented from being implemented.

17(f) Disproportionate share replacement payments to private
18hospitals shall be not less than the amount determined pursuant to
19Section 14166.11. For purposes of this subdivision, references to
20Section 14166.11 are to the version of Section 14166.11 in effect
21on the effective date of the act that added this subdivision.

begin insert
22

begin insert14169.61.end insert  

(a) The director shall do all of the following:

23(1) Promptly submit any state plan amendment or waiver request
24that may be necessary to implement this article.

25(2) Promptly seek federal approvals or waivers as may be
26necessary to implement this article and to obtain federal financial
27participation to the maximum extent possible for the payments
28under this article.

29(3) Amend the contracts between the managed health care plans
30and the department as necessary to incorporate the provisions of
31Sections 14169.54 and 14169.55 and promptly seek all necessary
32federal approvals of those amendments. The department shall
33 pursue amendments to the contracts as soon as possible after the
34effective date of this article and Article 5.231 (commencing with
35Section 14169.71), and shall not wait for federal approval of this
36article or Article 5.231 (commencing with Section 14169.71) prior
37to pursuing amendments to the contracts. The amendments to the
38contracts shall, among other provisions, set forth an agreement
39to increase capitation payments to managed health care plans
40under Section 14169.54 and increase payments to hospitals under
P29   1Section 14169.55 in a manner that relates back to January 1, 2014,
2or as soon thereafter as possible, conditioned on obtaining all
3federal approvals necessary for federal financial participation for
4the increased capitation payments to the managed health care
5plans.

6(b) In implementing this article, the department may utilize the
7services of the Medi-Cal fiscal intermediary through a change
8order to the fiscal intermediary contract to administer this
9program, consistent with the requirements of Sections 14104.6,
1014104.7, 14104.8, and 14104.9. Contracts entered into for purposes
11of implementing this article or Article 5.231 (commencing with
12Section 14169.71) shall not be subject to Part 2 (commencing with
13Section 10100) of Division 2 of the Public Contract Code.

14(c) This article shall become inoperative if either of the following
15occurs:

16(1) In the event, and on the effective date, of a final judicial
17 determination made by any court of appellate jurisdiction or a
18final determination by the federal Department of Health and
19Human Services or the federal Centers for Medicare and Medicaid
20Services that Section 14169.52 or Section 14169.53 cannot be
21implemented.

22(2) In the event both of the following conditions exist:

23(A) The federal Centers for Medicare and Medicaid Services
24denies approval for, or does not approve before January 1, 2016,
25the implementation of Section 14169.52, Section 14169.53, or the
26quality assurance fee established pursuant to Article 5.231
27(commencing with Section 14169.71).

28(B) Section 14169.52, Section 14169.53, or Article 5.231
29(commencing with Section 14169.71) cannot be modified by the
30department pursuant to subdivision (e) of Section 14169.73 in
31order to meet the requirements of federal law or to obtain federal
32approval.

33(d) If this article becomes inoperative pursuant to paragraph
34(1) of subdivision (c) and the determination applies to any period
35or periods of time prior to the effective date of the determination,
36the department shall have authority to recoup all payments made
37pursuant to this article during that period or those periods of time.

38(e) If any hospital, or any party on behalf of a hospital, shall
39initiate a case or proceeding in any state or federal court in which
40the hospital seeks any relief of any sort whatsoever, including, but
P30   1not limited to, monetary relief, injunctive relief, declaratory relief,
2or a writ, based in whole or in part on a contention that any or all
3of this article or Article 5.231 (commencing with Section 14169.71)
4is unlawful and may not be lawfully implemented, both of the
5following shall apply:

6(1) Payments shall not be made to the hospital pursuant to this
7article until the case or proceeding is finally resolved, including
8the final disposition of all appeals.

9(2) Any amount computed to be payable to the hospital pursuant
10to this section for a project year shall be withheld by the
11department and shall be paid to the hospital only after the case or
12proceeding is finally resolved, including the final disposition of
13all appeals.

14(f) Subject to Section 14169.74, no payment shall be made under
15this article until all necessary federal approvals for the payment
16and for the fee provisions in Article 5.231 (commencing with
17Section 14169.71) have been obtained and the fee has been
18imposed and collected. Notwithstanding any other law, payments
19under this article shall be made only to the extent that the fee
20established in Article 5.231 (commencing with Section 14169.71)
21is collected and available to cover the nonfederal share of the
22payments.

23(g) A hospital’s receipt of payments under this article for
24services rendered prior to the effective date of this article is
25conditioned on the hospital’s continued participation in Medi-Cal
26for at least 30 days after the effective date of this article.

27(h) All payments made by the department to hospitals and
28managed health care plans under this article shall be made only
29from the following:

30(1) The quality assurance fee set forth in Article 5.231
31(commencing with Section 14169.71) and due and payable on or
32before December 31, 2015, along with any interest or other
33investment income thereon.

34(2) Federal reimbursement and any other related federal funds.

end insert
begin insert
35

begin insert14169.62.end insert  

Notwithstanding any other provision of this article
36or Article 5.231 (commencing with Section 14169.71), the director
37may proportionately reduce the amount of any supplemental
38payments or increased capitation payments under this article to
39the extent that the payment would result in the reduction of other
P31   1amounts payable to a hospital or managed health care plan due
2to the application of federal law.

end insert
begin insert
3

begin insert14169.63.end insert  

The director may, pursuant to Section 14169.80,
4decide not to implement or to discontinue implementation of this
5article and Article 5.231 (commencing with Section 14169.71),
6and to retroactively invalidate the requirements for supplemental
7payments or other payments under this article.

end insert
begin insert
8

begin insert14169.64.end insert  

(a) This article shall remain operative only until
9the later of the following:

10(1) January 1, 2017.

11(2) The date of the last payment of the quality assurance fee
12payments pursuant to Article 5.231 (commencing Section
1314169.71).

14(3) The date of the last payment from the department pursuant
15to this article.

16(b) If this article becomes inoperative under paragraph (1) of
17subdivision (a), this article shall be repealed on January 1, 2017,
18unless a later enacted statute enacted before that date, deletes or
19extends that date.

20(c) If this article becomes inoperative under paragraph (2) or
21(3) of subdivision (a), this article shall be repealed on January 1
22of the year following the date this article becomes inoperative,
23unless a later enacted statute enacted before that date, deletes or
24extends that date.

end insert
begin insert
25

begin insert14169.65.end insert  

Notwithstanding any other law, if federal approval
26or a letter that indicates likely federal approval in accordance
27with Section 14169.74 has not been received on or before
28December 1, 2015, then this article shall become inoperative, and
29as of December 1, 2015, is repealed, unless a later enacted statute,
30that is enacted before December 1, 2015, deletes or extends that
31date.

end insert
begin insert
32

begin insert14169.66.end insert  

Notwithstanding Chapter 3.5 (commencing with
33Section 11340) of Part 1 of Division 3 of Title 2 of the Government
34Code, the department shall implement this article by means of
35policy letters or similar instructions, without taking further
36regulatory action.

end insert
begin insert
37

begin insert14169.67.end insert  

If the director determines that this article has become
38inoperative pursuant to Section 14169.61, 14169.64, 14169.65,
39or 14169.80, the director shall execute a declaration stating that
40this determination has been made and stating the basis for this
P32   1determination. The director shall retain the declaration and
2provide a copy, within five working days of the execution of the
3declaration, to the fiscal and appropriate policy committees of the
4Legislature. In addition, the director shall post the declaration on
5the department’s Internet Web site and the director shall send the
6declaration to the Secretary of State, the Secretary of the Senate,
7the Chief Clerk of the Assembly, and the Legislative Counsel.

end insert
begin insert
8

begin insert14169.68.end insert  

(a) It is the intent of the Legislature to consider
9legislation requiring the director to seek approval to increase
10payments to hospitals in accordance with subdivision (b) of Section
1114169.52, subdivision (a) of Section 14169.53, and subdivision
12(c) of Section 14169.54, and to adopt a corresponding increase in
13the fee imposed pursuant to Article 5.231 (commencing with
14Section 14169.71), consistent with federal law and regulations, if
15the director determines that the maximum available upper payment
16limits in subdivision (b) of Section 14169.52 or subdivision (a) of
17Section 14169.53, or the amount of federal financial participation
18for increased capitation payments to managed care health plans
19in subdivision (c) of Section 14169.54, have increased during the
20program period.

21(b) The legislation described in subdivision (a) shall do both of
22the following:

23(1) Require the director to work in consultation with the hospital
24community in seeking any necessary approvals from the federal
25Centers for Medicare and Medicaid Services to increase payments
26to hospitals and to impose corresponding fee increases.

27(2) Require that, in the event that the director determines that
28the maximum available upper payment limits in subdivision (b) of
29Section 14169.52 or subdivision (a) of Section 14169.53, or the
30amount of federal financial participation for increased capitation
31payments to managed care health plans in subdivision (c) of
32Section 14169.54, have increased during the program period, the
33increases shall first be made available for the purposes of this
34section prior to being used for other purposes.

35(c) Notwithstanding any other provision of this article or Article
365.231 (commencing with Section 14169.71), failure to secure, or
37denial of, any necessary federal approvals required by the
38legislation described in subdivision (a) shall not affect
39implementation of this article or Article 5.231 (commencing with
40Section 14169.71).

end insert
P33   1

begin deleteSEC. 5.end delete
2begin insertSEC. 8.end insert  

Article 5.231 (commencing with Section 14169.71) is
3added to Chapterbegin delete 3 of Partend delete 7 ofbegin delete Division 9end deletebegin insert Part 3end insert ofbegin insert Division 9 ofend insert
4 the Welfare and Institutions Code, to read:

5 

6Article 5.231.  Private Hospital Quality Assurance Fee Act of
7begin delete 2014end deletebegin insert 2013end insert
8

 

begin insert
9

begin insert14169.71.end insert  

For the purposes of this article, the following
10definitions shall apply:

11(a) (1) “Aggregate quality assurance fee” means, with respect
12to a hospital that is not a prepaid health plan hospital, the sum of
13all of the following:

14(A) The annual fee-for-service days for an individual hospital
15multiplied by the fee-for-service per diem quality assurance fee
16rate.

17(B) The annual managed care days for an individual hospital
18multiplied by the managed care per diem quality assurance fee
19rate.

20(C) The annual Medi-Cal days for an individual hospital
21 multiplied by the Medi-Cal per diem quality assurance fee rate.

22(2) “Aggregate quality assurance fee” means, with respect to
23a hospital that is a prepaid health plan hospital, the sum of all of
24the following:

25(A) The annual fee-for-service days for an individual hospital
26multiplied by the fee-for-service per diem quality assurance fee
27rate.

28(B) The annual managed care days for an individual hospital
29multiplied by the prepaid health plan hospital managed care per
30diem quality assurance fee rate.

31(C) The annual Medi-Cal managed care days for an individual
32hospital multiplied by the prepaid health plan hospital Medi-Cal
33managed care per diem quality assurance fee rate.

34(D) The annual Medi-Cal fee-for-service days for an individual
35hospital multiplied by the Medi-Cal per diem quality assurance
36fee rate.

37(3) “Aggregate quality assurance fee after the application of
38the fee percentage” means the aggregate quality assurance fee
39multiplied by the fee percentage for each subject fiscal year.

P34   1(b) “Annual fee-for-service days” means the number of
2fee-for-service days of each hospital subject to the quality
3assurance fee, as reported on the days data source.

4(c) “Annual managed care days” means the number of managed
5care days of each hospital subject to the quality assurance fee, as
6reported on the days data source.

7(d) “Annual Medi-Cal days” means the number of Medi-Cal
8days of each hospital subject to the quality assurance fee, as
9reported on the days data source.

10(e) “Converted hospital” shall mean a hospital described in
11subdivision (b) of Section 14169.51.

12(f) “Days data source” means the hospital’s Annual Financial
13Disclosure Report filed with the Office of Statewide Health
14Planning and Development as of June 6, 2013, for its fiscal year
15ending during 2010.

16(g) “Designated public hospital” shall have the meaning given
17in subdivision (d) of Section 14166.1 as of January 1, 2014.

18(h) “Exempt facility” means any of the following:

19(1) A public hospital, which shall include either of the following:

20(A) A hospital, as defined in paragraph (25) of subdivision (a)
21of Section 14105.98.

22(B) A tax-exempt nonprofit hospital that is licensed under
23subdivision (a) of Section 1250 of the Health and Safety Code and
24operating a hospital owned by a local health care district, and is
25affiliated with the health care district hospital owner by means of
26the district’s status as the nonprofit corporation’s sole corporate
27member.

28(2) With the exception of a hospital that is in the Charitable
29Research Hospital peer group, as set forth in the 1991 Hospital
30Peer Grouping Report published by the department, a hospital
31that is a hospital designated as a specialty hospital in the hospital’s
32most recent publicly available Office of Statewide Health Planning
33and Development Hospital Annual Financial Disclosure Report.

34(3) A hospital that satisfies the Medicare criteria to be a
35long-term care hospital.

36(4) A small and rural hospital as specified in Section 124840
37of the Health and Safety Code designated as that in the hospital’s
38Office of Statewide Health Planning and Development Hospital
39Annual Financial Disclosure Report for the hospital’s fiscal year
40ending in the 2010 calendar year.

P35   1(i) “Federal approval” means the approval by the federal
2government of both the quality assurance fee established pursuant
3to this article and the supplemental payments to private hospitals
4described in Sections 14169.52 and 14169.53.

5(j) (1) “Fee-for-service per diem quality assurance fee rate”
6means a fixed daily fee on fee-for-service days.

7(2) The fee-for-service per diem quality assurance fee rate shall
8be four hundred one dollars and forty-one cents ($401.41) per day
9for the 2014 calendar year and four hundred fifty-two dollars and
10seventy three cents ($452.73) per day for the 2015 calendar year.

11(3) Upon federal approval or conditional federal approval
12described in Section 14169.74, the director shall determine the
13fee-for-service per diem quality assurance fee rate based on the
14funds required to make the payments specified in Article 5.230
15(commencing with Section 14169.51), in consultation with the
16hospital community.

17(k) “Fee-for-service days” means inpatient hospital days when
18the service type is reported as “acute care,” “psychiatric care,”
19and “rehabilitation care,” and the payer category is reported as
20“Medicare traditional,” “county indigent programs-traditional,”
21“other third parties-traditional,” “other indigent,” and “other
22payers,” for purposes of the Annual Financial Disclosure Report
23 submitted by hospitals to the Office of Statewide Health Planning
24and Development.

25(l) “Fee percentage” means a fraction, expressed as a
26percentage, the numerator of which is the amount of payments for
27each subject fiscal year under Sections 14169.52, 14169.53, and
2814169.54, for which federal financial participation is available
29and the denominator of which is____.

30(m) “General acute care hospital” means any hospital licensed
31pursuant to subdivision (a) of Section 1250 of the Health and Safety
32Code.

33(n) “Hospital community” means any hospital industry
34organization or system that represents hospitals.

35(o) “Managed care days” means inpatient hospital days when
36the service type is reported as “acute care,” “psychiatric care,”
37and “rehabilitation care,” and the payer category is reported as
38“Medicare managed care,” “county indigent programs-managed
39care,” and “other third parties-managed care,” for purposes of
P36   1the Annual Financial Disclosure Report submitted by hospitals to
2the Office of Statewide Health Planning and Development.

3(p) “Managed care per diem quality assurance fee rate” means
4a fixed fee on managed care days of one hundred forty dollars
5($140) per day for the 2014 calendar year and one hundred
6sixty-five dollars ($165) per day for the 2015 calendar year.

7(q) “Medi-Cal days” means inpatient hospital days when the
8service type is reported as “acute care,” “psychiatric care,” and
9“rehabilitation care,” and the payer category is reported as
10“Medi-Cal traditional” and “Medi-Cal managed care,” for
11purposes of the Annual Financial Disclosure Report submitted by
12hospitals to the Office of Statewide Health Planning and
13 Development.

14(r) “Medi-Cal fee-for-service days” means inpatient hospital
15days when the service type is reported as “acute care,”
16“psychiatric care,” and “rehabilitation care,” and the payer
17category is reported as “Medi-Cal traditional” for purposes of
18the Annual Financial Disclosure Report submitted by hospitals to
19the Office of Statewide Health Planning and Development.

20(s) “Medi-Cal managed care days” means inpatient hospital
21days as reported on the days data source when the service type is
22reported as “acute care,” “psychiatric care,” and “rehabilitation
23care,” and the payer category is reported as “Medi-Cal managed
24care” for purposes of the Annual Financial Disclosure Report
25submitted by hospitals to the Office of Statewide Health Planning
26and Development.

27(t) “Medi-Cal per diem quality assurance fee rate” means a
28fixed fee on Medi-Cal days of four hundred seventy-four dollars
29and sixty-four cents ($474.64) per day for the 2014 calendar year
30and five hundred forty-two dollars and thirty-six cents ($542.36)
31for the 2015 calendar year.

32(u) “New hospital” means a hospital operation, business, or
33facility functioning under current or prior ownership as a private
34hospital that does not have a days data source or a hospital that
35has a days data source in whole, or in part, from a previous
36operator when there is an outstanding monetary liability owed to
37the state in connection with the Medi-Cal program and the new
38operator did not assume liability for the outstanding monetary
39obligation.

P37   1(v) “Nondesignated public hospital” means either of the
2following:

3(1) A public hospital that is licensed under subdivision (a) of
4Section 1250 of the Health and Safety Code, is not designated as
5a specialty hospital in the hospital’s Annual Financial Disclosure
6Report for the hospital’s latest fiscal year, and satisfies the
7definition in paragraph (25) of subdivision (a) of Section 14105.98,
8excluding designated public hospitals.

9(2) A tax-exempt nonprofit hospital that is licensed under
10subdivision (a) of Section 1250 of the Health and Safety Code, is
11not designated as a specialty hospital in the hospital’s Annual
12Financial Disclosure Report for the hospital’s latest fiscal year,
13is operating a hospital owned by a local health care district, and
14is affiliated with the health care district hospital owner by means
15of the district’s status as the nonprofit corporation’s sole corporate
16member.

17(w) “Prepaid health plan hospital” means a hospital owned by
18a nonprofit public benefit corporation that shares a common board
19 of directors with a nonprofit health care service plan.

20(x) “Prepaid health plan hospital managed care per diem quality
21assurance fee rate” means a fixed fee on non-Medi-Cal managed
22care days for prepaid health plan hospitals of seventy-eight dollars
23and forty cents ($78.40) per day for the 2014 calendar year and
24ninety-two dollars and forty cents ($92.40) for the 2015 calendar
25year.

26(y) “Prepaid health plan hospital Medi-Cal managed care per
27diem quality assurance fee rate” means a fixed fee on Medi-Cal
28managed care days for prepaid health plan hospitals of two
29hundred sixty-five dollars and eighty cents ($265.80) per day for
30the 2014 calendar year and three hundred three dollars and
31seventy-two cents ($303.72) per day for the 2015 calendar year.

32(z) “Prior fiscal year data” means any data taken from sources
33that the department determines are the most accurate and reliable
34at the time the determination is made, or may be calculated from
35the most recent audited data using appropriate update factors.
36The data may be from prior fiscal years, current fiscal years, or
37projections of future fiscal years.

38(aa) “Private hospital” means a hospital that meets all of the
39following conditions:

P38   1(1) Is licensed pursuant to subdivision (a) of Section 1250 of
2the Health and Safety Code.

3(2) Is in the Charitable Research Hospital peer group, as set
4forth in the 1991 Hospital Peer Grouping Report published by the
5department, or is not designated as a specialty hospital in the
6hospital’s most recent publicly available Office of Statewide Health
7Planning and Development Annual Financial Disclosure Report.

8(3) Does not satisfy the Medicare criteria to be classified as a
9long-term care hospital.

10(4) Is a nonpublic hospital, nonpublic converted hospital, or
11converted hospital as those terms are defined in paragraphs (26)
12to (28), inclusive, respectively, of subdivision (a) of Section
1314105.98.

14(ab) “Program period” means the period from January 1, 2014,
15to December 31, 2015, inclusive.

16(ac) “Subject fiscal quarter” means a state fiscal quarter during
17the program period.

18(ad) “Subject fiscal year” means a state fiscal year that ends
19after July 1, 2013, and begins before January 1, 2016.

20(ae) “Upper payment limit” means a federal upper payment
21limit on the amount of the Medicaid payment for which federal
22financial participation is available for a class of service and a
23class of health care providers, as specified in Part 447 of Title 42
24of the Code of Federal Regulations. The applicable upper payment
25limit shall be separately calculated for inpatient and outpatient
26hospital services.

end insert
27

begin delete14169.71.end delete
28begin insert14169.72.end insert  

(a) There shall be imposed on each general acute
29care hospital that is not an exempt facility a quality assurance fee,
30provided that a quality assurance fee under this article shall not be
31imposed on a converted hospital.

32(b) The quality assurance fee shall be computed starting on
33January 1, 2014, and continue through and including December
3431, 2015.

begin insert

35(c) Subject to Section 14169.74, upon receipt of federal
36approval, the following shall become operative:

end insert
begin insert

37(1) Within 10 business days following receipt of the notice of
38federal approval from the federal government, the department
39shall send notice to each hospital subject to the quality assurance
40fee, and publish on its Internet Web site, the following information:

end insert
begin insert

P39   1(A) The date that the state received notice of federal approval.

end insert
begin insert

2(B) The fee percentage for each subject fiscal year.

end insert
begin insert

3(2) The notice to each hospital subject to the quality assurance
4fee shall also state the following:

end insert
begin insert

5(A) The aggregate quality assurance fee after the application
6of the fee percentage for each subject fiscal year.

end insert
begin insert

7(B) The aggregate quality assurance fee.

end insert
begin insert

8(C) The amount of each payment due from the hospital with
9respect to the aggregate quality assurance fee.

end insert
begin insert

10(D) The date on which each payment is due.

end insert
begin insert

11(3) The hospitals shall pay the aggregate quality assurance fee
12after application of the fee percentage for all subject fiscal years
13in eight installments. The department shall establish the date that
14each installment is due, provided that the first installment shall
15be due no earlier than 20 days following the department sending
16the notice pursuant to paragraph (1), and the installments shall
17be paid at least one month apart, but if possible, the installments
18shall be paid on a quarterly basis.

end insert
begin insert

19(4) Notwithstanding any other provision of this section, the
20amount of each hospital’s aggregate quality assurance fee after
21the application of the fee percentage for each subject fiscal year
22that has not been paid by the hospital before December 15, 2015,
23pursuant to paragraphs (3) and (8), shall be paid by the hospital
24no later than December 15, 2015.

end insert
begin insert

25(5) (A) Notwithstanding subdivision (l) of Section 14169.71, for
26the purpose of determining the installments under paragraph (3),
27the department shall use an interim fee percentage as follows:

end insert
begin insert

28(i) One hundred percent for the 2014 calendar year until the
29federal government has approved or disapproved additional
30capitation payments described in Section 14169.54 for that subject
31fiscal year.

end insert
begin insert

32(ii) One hundred percent for the 2015 calendar year until the
33federal government has approved or disapproved additional
34capitation payments described in Section 14169.54 for that subject
35fiscal year.

end insert
begin insert

36(B) The director may use a lower interim fee percentage for
37each subject fiscal year under this paragraph as the director, in
38his or her discretion, determines is reasonable in order to generate
39sufficient but not excessive installment payments to make the
40payments described in subdivision (b) of Section 14169.73.

end insert
begin insert

P40   1(6) The director shall determine the final fee percentage for
2each subject fiscal year within 15 days of the approval or
3disapproval, in whole or in part, by the federal government of all
4changes to the capitation rates of managed health care plans
5requested by the department to implement Section 14169.54 for
6that subject fiscal year, but in no event later than December 1,
72015. At the time the director determines the final fee percentage
8for a subject fiscal year, the director shall also determine the
9amount of future installment payments of the quality assurance
10fee for each hospital subject to the fee, if any are due. The amount
11of each future installment payment shall be established by the
12director with the objective that the total of the installment payments
13of the quality assurance fee due from a hospital shall equal the
14director’s estimate for each subject fiscal year for the hospital of
15the aggregate quality assurance fee after the application of the
16fee percentage.

end insert
begin insert

17(7) The director, within 15 days of determining the final fee
18percentage for a subject fiscal year pursuant to paragraph (6),
19shall send notice to each hospital subject to the quality assurance
20fee of the following information:

end insert
begin insert

21(A) The final fee percentage for each subject fiscal year for
22which the final fee percentage has been determined.

end insert
begin insert

23(B) The fee percentage determined under paragraph (5) for
24each subject fiscal year for which the final fee percentage has not
25been determined.

end insert
begin insert

26(C) The aggregate quality assurance fee after application of
27the fee percentage for each subject fiscal year.

end insert
begin insert

28(D) The director’s estimate of total quality assurance fee
29payments due from the hospital under this article whether or not
30paid. This amount shall be the sum of the aggregate quality
31assurance fee after application of the fee percentage for each
32subject fiscal year using the fee percentages contained in the
33notice.

end insert
begin insert

34(E) The total quality assurance fee payments that the hospital
35has made under this article.

end insert
begin insert

36(F) The amount, if any, by which the total quality assurance fee
37payments due from the hospital under this article as described in
38subparagraph (D) exceed the total quality assurance fee payments
39that the hospital has made under this article.

end insert
begin insert

P41   1(G) The amount of each remaining installment of the quality
2assurance fee, if any, due from the hospital and the date each
3installment is due. This amount shall be the amount described in
4subparagraph (E) divided by the number of installment payments
5remaining.

end insert
begin insert

6(8) Each hospital that is sent a notice under paragraph (7) shall
7pay the additional installments of the quality assurance fee that
8are due, if any, in the amounts and at the times set forth in the
9notice unless superseded by a subsequent notice from the
10department.

end insert
begin insert

11(9) The department shall refund to a hospital paying the quality
12assurance fee the amount, if any, by which the total quality
13assurance fee payments that the hospital has made under this
14article for all subject fiscal years exceed the total quality assurance
15fee payments due from the hospital under this article within 30
16days of the date on which the notice is sent to the hospital under
17paragraph (7).

end insert
begin delete

18(c)

end delete

19begin insert(end insertbegin insertd)end insert The quality assurance fee, as paid pursuant to this section,
20shall be paid by each hospital subject to the fee to the department
21for deposit in the Hospital Quality Assurance Revenue Fund
22begin insert established pursuant to Section 14167.35end insert. Deposits may be
23accepted at any time and will be credited toward the program
24period.

begin delete

25(d)

end delete

26begin insert(end insertbegin inserte)end insert This section shall become inoperative if the federal Centers
27for Medicare and Medicaid Services denies approval for, or does
28not approve before July 1,begin delete 2015,end deletebegin insert 2016,end insert the implementation of the
29quality assurance fee pursuant to this article or the supplemental
30payments to private hospitals described in Sections 14169.52 and
3114169.53.

begin delete

32(e)

end delete

33begin insert(end insertbegin insertf)end insert In no case shall the aggregate fees collected in a federal fiscal
34year pursuant to this section, former Section 14167.32, begin deleteSection
3514168.32, and Sectionend delete
begin insert and Sections 14168.32 andend insert 14169.32 exceed
36the maximum percentage of the annual aggregate net patient
37revenue for hospitals subject to the fee that is prescribed pursuant
38to federal law and regulations as necessary to preclude a finding
39that an indirect guarantee has been created.

begin insert

P42   1(g) (1) Interest shall be assessed on quality assurance fees not
2paid on the date due at the greater of 10 percent per annum or the
3rate at which the department assesses interest on Medi-Cal
4program overpayments to hospitals that are not repaid when due.
5Interest shall begin to accrue the day after the date the payment
6was due and shall be deposited in the Hospital Quality Assurance
7Revenue Fund.

end insert
begin insert

8(2) If any fee payment is more than 60 days overdue, a penalty
9 equal to the interest charge described in paragraph (1) shall be
10assessed and due for each month for which the payment is not
11received after 60 days.

end insert
begin insert

12(h) When a hospital fails to pay all or part of the quality
13assurance fee on or before the date that payment is due, the
14department may immediately begin to deduct the unpaid assessment
15and interest from any Medi-Cal payments owed to the hospital,
16or, in accordance with Section 12419.5 of the Government Code,
17from any other state payments owed to the hospital until the full
18amount is recovered. All amounts, except penalties, deducted by
19the department under this subdivision shall be deposited in the
20Hospital Quality Assurance Revenue Fund. The remedy provided
21to the department by this section is in addition to other remedies
22available under law.

end insert
begin insert

23(i) The payment of the quality assurance fee shall not be
24considered as an allowable cost for Medi-Cal cost reporting and
25reimbursement purposes.

end insert
begin delete

26(f)

end delete

27begin insert(end insertbegin insertj)end insert The department shall work in consultation with the hospital
28community to implement this article and Article 5.230
29(commencing with Section 14169.51).

begin delete

30(g)

end delete

31begin insert(end insertbegin insertk)end insert This subdivision creates a contractually enforceable promise
32on behalf of the state to use the proceeds of the quality assurance
33fee, including any federal matching funds, solely and exclusively
34for the purposes set forth in this article as they existed on the
35effective date of this article, to limit the amount of the proceeds
36of the quality assurance fee to be used to pay for the health care
37coverage of children to the amounts specified in this article, to
38limit any payments for the department’s costs of administration
39to the amounts set forth in this article on the effective date of this
40article, to maintain and continue prior reimbursement levels as set
P43   1forth in Sectionbegin delete ____end deletebegin insert 14169.60end insert on the effective date of thatbegin delete articleend delete
2begin insert sectionend insert, and to otherwise comply with all its obligations set forth
3in Article 5.230 (commencing with Section 14169.51) and this
4article provided that amendments that arise from, or have as a basis
5for, a decision, advice, or determination by the federal Centers for
6Medicare and Medicaid Services relating to federal approval of
7the quality assurance fee or the payments set forth in this article
8or Article 5.230 (commencing with Section 14169.51) shall control
9for the purposes of this subdivision.

begin delete

10(h)

end delete

11begin insert(end insertbegin insertl)end insert (1) Effective January 1,begin delete 2014end deletebegin insert 2016end insert, the rates payable to
12hospitals and managed health care plans under Medi-Cal shall be
13the rates then payable without the supplemental and increased
14capitation payments set forth in Article 5.230 (commencing with
15Section 14169.51).

16(2) The supplemental payments and other payments under
17Article 5.230 (commencing with Section 14169.51) shall be
18regarded as quality assurance payments, the implementation or
19suspension of which does not affect a determination of the
20adequacy of any rates under federal law.

begin insert

21(m) (1) Subject to paragraph (2), the director may waive any
22or all interest and penalties assessed under this article in the event
23that the director determines, in his or her sole discretion, that the
24hospital has demonstrated that imposition of the full quality
25assurance fee on the timelines applicable under this article has a
26high likelihood of creating a financial hardship for the hospital
27or a significant danger of reducing the provision of needed health
28care services.

end insert
begin insert

29(2) Waiver of some or all of the interest or penalties under this
30subdivision shall be conditioned on the hospital’s agreement to
31make fee payments, or to have the payments withheld from
32payments otherwise due from the Medi-Cal program to the hospital,
33on a schedule developed by the department that takes into account
34the financial situation of the hospital and the potential impact on
35 services.

end insert
begin insert

36(3) A decision by the director under this subdivision shall not
37be subject to judicial review.

end insert
begin insert

38(4) If fee payments are remitted to the department after the date
39determined by the department to be the final date for calculating
40the final supplemental payments under this article and Article
P44   15.230 (commencing with Section 14169.51), the fee payments shall
2be retained in the fund for purposes of funding supplemental
3payments supported by a hospital quality assurance fee program
4implemented under subsequent legislation. However, if
5supplemental payments are not implemented under subsequent
6legislation, then those fee payments shall be deposited in the
7Distressed Hospital Fund.

end insert
begin insert

8(5) If during the implementation of this article, fee payments
9that were due under former Article 5.21 (commencing with Section
1014167.1) and former Article 5.22 (commencing with Section
1114167.31), or former Article 5.226 (commencing with Section
1214168.1) and Article 5.227 (commencing with Section 14168.31),
13or Article 5.228 (commencing with Section 14169.1) and Article
145.229 (commencing with Section 14169.31) are remitted to the
15department under a payment plan or for any other reason, and the
16final date for calculating the final supplemental payments under
17those articles has passed, then those fee payments shall be
18deposited in the fund to support the uses established by this article.

end insert
19

begin delete14169.72.end delete
20begin insert14169.73.end insert  

(a) (1) All fees required to be paid to the state
21pursuant to this article shall be paid in the form of remittances
22payable to the department.

23(2) The department shall directly transmit the fee payments to
24the Treasurer to be deposited in the Hospital Quality Assurance
25Revenue Fund, created pursuant to Section 14167.35.
26Notwithstanding Section 16305.7 of the Government Code, any
27interest and dividends earned on deposits in the fund from the
28proceeds of the fee assessed pursuant to this article shall be retained
29in the fund for purposes specified in subdivision (b).

30(b) Notwithstanding subdivision (c) of Section 14167.35,
31subdivision (b) of Section 14168.33, and subdivision (b) of Section
3214169.33, all funds from the proceeds of the fee assessed pursuant
33to this article in the Hospital Quality Assurance Revenue Fund,
34together with any interest and dividends earned on money in the
35fund, shall, upon appropriation by the Legislature, continue to be
36used exclusively to enhance federal financial participation for
37hospital services under the Medi-Cal program, to provide additional
38reimbursement to, and to support quality improvement efforts of,
39hospitals, and to minimize uncompensated care provided by
40hospitals to uninsuredbegin delete patients.end deletebegin insert patients, as well as to pay for the
P45   1state’s administrative costs and to provide funding for children’s
2health coverage, in the following order of priority:end insert

begin insert

3(1) To pay for the department’s staffing and administrative costs
4directly attributable to implementing Article 5.230 (commencing
5with Section 14169.51) and this article, not to exceed two million
6dollars ($2,000,000) for the program period.

end insert
begin insert

7(2) To pay for the health care coverage for children in the
8amount of one hundred fifty-five million dollars ($155,000,000)
9for each subject fiscal quarter during the 2014 and 2015 calendar
10years.

end insert
begin insert

11(3) To make increased capitation payments to managed health
12care plans pursuant to Article 5.230 (commencing with Section
1314169.51).

end insert
begin insert

14(4) To make increased payments or direct grants to hospitals
15pursuant to Article 5.230 (commencing with Section 14169.51).

end insert
begin insert

16(c) Any amounts of the quality assurance fee collected in excess
17of the funds required to implement subdivision (b), including any
18funds recovered under subdivision (d) of Section 14169.61 or
19subdivision (e) of Section 14169.78, shall be refunded to general
20acute care hospitals, pro rata with the amount of quality assurance
21fee paid by the hospital, subject to the limitations of federal law.
22If federal rules prohibit the refund described in this subdivision,
23the excess funds shall be deposited in the Distressed Hospital Fund
24to be used for the purposes described in Section 14166.23, and
25shall be supplemental to and not supplant existing funds.

end insert
begin insert

26(d) Any methodology or other provision specified in Article
275.230 (commencing with Section 14169.51) or this article may be
28modified by the department, in consultation with the hospital
29community, to the extent necessary to meet the requirements of
30federal law or regulations to obtain federal approval or to enhance
31the probability that federal approval can be obtained, provided
32the modifications do not violate the spirit and intent of Article
335.230 (commencing with Section 14169.51) or this article and are
34not inconsistent with the conditions of implementation set forth in
35Section 14169.80.

end insert
begin insert

36(e) The department, in consultation with the hospital community,
37shall make adjustments, as necessary, to the amounts calculated
38pursuant to Section 14169.72 in order to ensure compliance with
39the federal requirements set forth in Section 433.68 of Title 42 of
40the Code of Federal Regulations or elsewhere in federal law.

end insert
begin insert

P46   1(f) The department shall request approval from the federal
2Centers for Medicare and Medicaid Services for the
3implementation of this article. In making this request, the
4department shall seek specific approval from the federal Centers
5for Medicare and Medicaid Services to exempt providers identified
6in this article as exempt from the fees specified, including the
7submission, as may be necessary, of a request for waiver of the
8broad-based requirement, waiver of the uniform fee requirement,
9or both, pursuant to paragraphs (1) and (2) of subdivision (e) of
10Section 433.68 of Title 42 of the Code of Federal Regulations.

end insert
begin insert

11(g) Notwithstanding Chapter 3.5 (commencing with Section
1211340) of Part 1 of Division 3 of Title 2 of the Government Code,
13the department may implement this article or Article 5.230
14(commencing with Section 14169.51) by means of provider
15bulletins, all plan letters, or other similar instruction, without
16taking regulatory action. The department shall also provide
17notification to the Joint Legislative Budget Committee and to the
18appropriate policy and fiscal committees of the Legislature within
19five working days when the above-described action is taken in
20order to inform the Legislature that the action is being
21implemented.

end insert
begin insert
22

begin insert14169.74.end insert  

(a) Notwithstanding any other provision of this
23article or Article 5.230 (commencing with Section 14169.51)
24requiring federal approvals, the department may impose and
25collect the quality assurance fee and may make payments under
26this article and Article 5.230 (commencing with Section 14169.51),
27including increased capitation payments, based upon receiving a
28letter from the federal Centers for Medicare and Medicaid Services
29or the United States Department of Health and Human Services
30that indicates likely federal approval, but only if and to the extent
31that the letter is sufficient as set forth in subdivision (b).

32(b) In order for the letter to be sufficient under this section, the
33director shall find that the letter meets both of the following
34requirements:

35(1) The letter is in writing and signed by an official of the federal
36Centers for Medicare and Medicaid Services or an official of the
37United States Department of Health and Human Services.

38(2) The director, after consultation with the hospital community,
39has determined, in the exercise of his or her sole discretion, that
P47   1the letter provides a sufficient level of assurance to justify advanced
2implementation of the fee and payment provisions.

3(c) Nothing in this section shall be construed as modifying the
4requirement under Section 14169.61 that payments shall be made
5only to the extent a sufficient amount of funds collected as the
6quality assurance fee are available to cover the nonfederal share
7of those payments.

8(d) Upon notice from the federal government that final federal
9approval for the fee model under this article or for the
10supplemental payments to private hospitals under Section 14169.52
11or 14169.53 has been denied, any fees collected pursuant to this
12section shall be refunded and any payments made pursuant to this
13article or Article 5.230 (commencing with Section 14169.51) shall
14be recouped, including, but not limited to, supplemental payments
15and grants, increased capitation payments, payments to hospitals
16by health care plans resulting from the increased capitation
17payments, and payments for the health care coverage of children.
18To the extent fees were paid by a hospital that also received
19payments under this section, the payments may first be recouped
20from fees that would otherwise be refunded to the hospital prior
21to the use of any other recoupment method allowed under law.

22(e) Any payment made pursuant to this section shall be a
23conditional payment until final federal approval has been received.

24(f) The director shall have broad authority under this section
25to collect the quality assurance fee for an interim period after
26receipt of the letter described in subdivision (a) pending receipt
27of all necessary federal approvals. This authority shall include
28discretion to determine both of the following:

29(1) Whether the quality assurance fee should be collected on a
30full or pro rata basis during the interim period.

31(2) The dates on which payments of the quality assurance fee
32are due.

33(g) The department may draw against the Hospital Quality
34Assurance Revenue Fund for all administrative costs associated
35with implementation under this article or Article 5.230
36(commencing with Section 14169.51).

37(h) This section shall be implemented only to the extent federal
38financial participation is not jeopardized by implementation prior
39to the receipt of all necessary final federal approvals.

end insert
begin insert
P48   1

begin insert14169.75.end insert  

(a) Notwithstanding any other law, the director
2shall have discretion to modify any timeline or timelines in this
3article or Article 5.230 (commencing with Section 14169.51) if
4the letter that indicates likely federal approval, as described in
5Section 14169.74, is not secured by December 15, 2015, and the
6director determines that it is impossible from an operational
7perspective to implement a timeline or timelines without the
8modification.

9(b) The department shall notify the fiscal and policy committees
10of the Legislature prior to implementing a modified timeline or
11timelines under subdivision (a).

12(c) The department shall consult with representatives of the
13hospital community in developing a modified timeline or timelines
14pursuant to this section.

15(d) The discretion to modify timelines under this section shall
16include, but not be limited to, discretion to accelerate payments
17to plans or hospitals.

end insert
begin insert
18

begin insert14169.76.end insert  

(a) Upon receipt of a letter that indicates likely
19federal approval that the director determines is sufficient for
20implementation under Section 14169.74, or upon the receipt of
21federal approval, the following shall occur:

22(1) To the maximum extent possible, and consistent with the
23availability of funds in the Hospital Quality Assurance Revenue
24Fund, the department shall make all of the payments under Sections
2514169.52, 14169.53, and 14169.54, including, but not limited to,
26supplemental payments and increased capitation payments, prior
27to January 1, 2016, except that the increased capitation payments
28under Section 14169.54 shall not be made until federal approval
29is obtained for these payments.

30(2) The department shall make supplemental payments to
31hospitals under Article 5.230 (commencing with Section 14169.51)
32consistent with the timeframe described in Section 14169.59 or a
33modified timeline developed pursuant to Section 14169.75.

34(b) Notwithstanding any other provision of this article or Article
355.230 (commencing with Section 14169.51), if the director
36determines, on or after December 15, 2015, that there are
37insufficient funds available in the Hospital Quality Assurance
38Revenue Fund to make all scheduled payments under Article 5.230
39(commencing with Section 14169.51) before January 1, 2016, he
40or she shall consult with representatives of the hospital community
P49   1to develop an acceptable plan for making additional payments to
2hospitals and managed health care plans to maximize the use of
3delinquent fee payments or other deposits or interest projected to
4become available in the fund after December 15, 2015, but before
5June 15, 2016.

6(c) Nothing in this section shall require the department to
7continue to make payments under Article 5.230 (commencing with
8Section 14169.51) if, after the consultation required under
9subdivision (b), the director determines in the exercise of his or
10her sole discretion that a workable plan for the continued payments
11cannot be developed.

12(d) Subdivisions (b) and (c) shall be implemented only if and to
13the extent federal financial participation is available for continued
14supplemental payments and to providers and continued increased
15capitation payments to managed health care plans.

16(e) If any payment or payments made pursuant to this section
17are found to be inconsistent with federal law, the department shall
18recoup the payments by means of withholding or any other
19available remedy.

20(f) Nothing in this section shall be read as affecting the
21department’s ongoing authority to continue, after December 31,
222015, to collect quality assurance fees imposed on or before
23December 31, 2015.

end insert
begin insert
24

begin insert14169.77.end insert  

Notwithstanding any other law, if actual federal
25approval or a letter that indicates likely federal approval in
26accordance with Section 14169.74 has not been received on or
27before December 1, 2015, then this article shall become
28inoperative, and as of December 1, 2015, is repealed, unless a
29later enacted statute, that is enacted before December 1, 2015,
30deletes or extends that date.

end insert
31

begin delete14169.73.end delete
32begin insert14169.78.end insert  

(a) This article shall be implemented only as long
33as all of the following conditions are met:

begin delete

34(1) Subject to Section ____, the quality assurance fee is
35established in a manner that is fundamentally consistent with this
36article.

37(2) The quality assurance fee, including any interest on the fee
38after collection by the department, is deposited in a segregated
39fund apart from the General Fund.

P50   1(3) The proceeds of the quality assurance fee, including any
2interest and related federal reimbursement, may only be used for
3the purposes set forth in this article.

4(b) No hospital shall be required to pay the quality assurance
5fee to the department unless and until the state receives and
6maintains federal approval.

7(c) Hospitals shall be required to pay the quality assurance fee
8to the department as set forth in this article only as long as all of
9the following conditions are met:

10(1) The federal Centers for Medicare and Medicaid Services
11allows the use of the quality assurance fee as set forth in this article
12in accordance with federal approval.

13(2) Article 5.230 (commencing with Section 14169.51) is
14enacted and remains in effect and hospitals are reimbursed the
15increased rates for services during the program period, as defined
16in Section 14169.51.

17(3) The full amount of the quality assurance fee assessed and
18collected pursuant to this article remains available only for the
19purposes specified in this article.

end delete
begin insert

20(1) Subject to Section 14169.73, the quality assurance fee is
21established in a manner that is fundamentally consistent with this
22article.

end insert
begin insert

23(2) The quality assurance fee, including any interest on the fee
24after collection by the department, is deposited in a segregated
25fund apart from the General Fund.

end insert
begin insert

26(3) The proceeds of the quality assurance fee, including any
27interest and related federal reimbursement, may only be used for
28the purposes set forth in this article.

end insert
begin insert

29(b) No hospital shall be required to pay the quality assurance
30fee to the department unless and until the state receives and
31maintains federal approval.

end insert
begin insert

32(c) Hospitals shall be required to pay the quality assurance fee
33to the department as set forth in this article only as long as all of
34the following conditions are met:

end insert
begin insert

35(1) The federal Centers for Medicare and Medicaid Services
36allows the use of the quality assurance fee as set forth in this article
37in accordance with federal approval.

end insert
begin insert

38(2) Article 5.230 (commencing with Section 14169.51) is enacted
39and remains in effect and hospitals are reimbursed the increased
P51   1rates for services during the program period, as defined in Section
214169.51.

end insert
begin insert

3(3) The full amount of the quality assurance fee assessed and
4collected pursuant to this article remains available only for the
5purposes specified in this article.

end insert
begin insert

6(d) This article shall become inoperative if either of the
7following occurs:

end insert
begin insert

8(1) In the event, and on the effective date, of a final judicial
9determination made by any court of appellate jurisdiction or a
10final determination by the United States Department of Health and
11Human Services or the federal Centers for Medicare and Medicaid
12Services that the quality assurance fee established pursuant to this
13article cannot be implemented.

end insert
begin insert

14(2) In the event both of the following conditions exist:

end insert
begin insert

15(A) The federal Centers for Medicare and Medicaid Services
16denies approval for, or does not approve before January 1, 2016,
17the implementation of Sections 14169.52 and 14169.53 or this
18article.

end insert
begin insert

19(B) Section 14169.52, Section 14169.53, or this article cannot
20be modified by the department pursuant to subdivision (d) of
21Section 14169.73 in order to meet the requirements of federal law
22or to obtain federal approval.

end insert
begin insert

23(e) If this article becomes inoperative pursuant to paragraph
24(1) of subdivision (d) and the determination applies to any period
25or periods of time prior to the effective date of the determination,
26the department may recoup all payments made pursuant to Article
275.230 (commencing with Section 14169.51) during that period or
28those periods of time.

end insert
begin insert

29(f) (1) If all necessary final federal approvals are not received
30as described and anticipated under this article or Article 5.230
31(commencing with Section 14169.51), the director shall have the
32discretion and authority to develop procedures for recoupment
33from managed health care plans, and from hospitals under contract
34with managed health care plans, of any amounts received pursuant
35to this article or Article 5.230 (commencing with Section
3614169.51).

end insert
begin insert

37(2) Any procedure instituted pursuant to this subdivision shall
38be developed in consultation with representatives from managed
39health care plans and representatives of the hospital community.

end insert
begin insert

P52   1(3) Any procedure instituted pursuant to this subdivision shall
2be in addition to all other remedies made available under the law,
3pursuant to contracts between the department and the managed
4health care plans, or pursuant to contracts between the managed
5health care plans and the hospitals.

end insert
begin insert
6

begin insert14169.79.end insert  

Notwithstanding any other provision of this article
7or Article 5.230 (commencing with Section 14169.51),
8supplemental payments or other payments under Article 5.230
9(commencing with Section 14169.51) shall only be required and
10payable in any quarter for which a fee payment obligation exists.

end insert
begin insert
11

begin insert14169.80.end insert  

(a) This article and Article 5.230 (commencing with
12Section 14169.51) shall become inoperative and the requirements
13for supplemental payments or other payments under Article 5.230
14(commencing with Section 14169.51) shall be retroactively
15invalidated, on the first day of the first month of the calendar
16quarter following notification to the Joint Legislative Budget
17Committee by the Department of Finance, that any of the following
18have occurred:

19(1) A final judicial determination by the California Supreme
20Court or any California Court of Appeal that the revenues collected
21pursuant to this article that are deposited in the Hospital Quality
22Assurance Revenue Fund are either of the following:

23(A) General Fund proceeds of taxes appropriated pursuant to
24Article XIII B of the California Constitution, as used in subdivision
25(b) of Section 8 of Article XVI of the California Constitution.

26(B) Allocated local proceeds of taxes, as used in subdivision
27(b) of Section 8 of Article XVI of the California Constitution.

28(2) The department has sought but has not received federal
29financial participation for the supplemental payments and other
30costs required by this article for which federal financial
31participation has been sought.

32(3) A lawsuit related to this article or Article 5.230 (commencing
33with Section 14169.51) is filed against the state and a preliminary
34injunction or other order has been issued that results in a financial
35disadvantage to the state.

36(4) The director, in consultation with the Department of Finance,
37determines that the implementation of this article or Article 5.230
38(commencing with Section 14169.51) has resulted in a financial
39disadvantage to the state.

P53   1(b) For purposes of this section, “financial disadvantage to the
2state” means either of the following:

3(1) A loss of federal financial participation.

4(2) A cost to the General Fund, that is equal to or greater than
5one-quarter of 1 percent of the General Fund expenditures
6authorized in the most recent annual Budget Act.

7(c) (1) The director shall have the authority to recoup any
8payments made under Article 5.230 (commencing with Section
914169.51) if any of the following apply:

10(A) Recoupment of payments made under Article 5.230
11(commencing with Section 14169.51) is ordered by a court.

12(B) Federal financial participation is not available for payments
13made under Article 5.230 (commencing with Section 14169.51)
14for which federal financial participation has been sought.

15(C) Recoupment of payments made under Article 5.230
16(commencing with Section 14169.51) is necessary to prevent a
17General Fund cost that is estimated to be equal to or greater than
18one-quarter of 1 percent of the General Fund expenditures
19authorized in the most recent annual Budget Act and that results
20from implementation of a court order or the unavailability of
21federal financial participation.

22(2) In the event payments are recouped for a particular quarter,
23fees paid by a hospital for that quarter pursuant to this article
24shall be refunded to the extent that the hospital meets both of the
25following conditions:

26(A) The hospital has actually paid the fee for the subject quarter
27and for all prior quarters.

28(B) The hospital has returned the payment received pursuant
29to Article 5.230 (commencing with Section 14169.51) for that
30quarter, or has had that payment recouped through a withholding
31of funds owed by Medi-Cal or other state payments, or recouped
32through other means.

33(d) In the event the department determines that recoupment of
34supplemental payments is necessary to implement any provision
35of this section, the department may recoup payments made pursuant
36to Article 5.230 (commencing with Section 14169.51) from fees
37paid by the hospital pursuant to this article.

38(e) Concurrent with invoking any provision of this section, the
39director shall notify the fiscal and appropriate policy committees
P54   1of the Legislature of the intended action and the specific reason
2or reasons for the proposed action.

end insert
begin insert
3

begin insert14169.81.end insert  

Notwithstanding Chapter 3.5 (commencing with
4Section 11340) of Part 1 of Division 3 of Title 2 of the Government
5Code, the department shall implement this article by means of
6policy letters or similar instructions, without taking further
7regulatory action.

end insert
begin insert
8

begin insert14169.82.end insert  

(a) This article shall remain operative only until
9the later of the following:

10(1) January 1, 2017.

11(2) The date of the last payment of the quality assurance fee
12payments pursuant to this article.

13(3) The date of the last payment from the department pursuant
14to Article 5.230 (commencing with Section 14169.51).

15(b) If this article becomes inoperative under paragraph (1) of
16subdivision (a), this article shall be repealed on January 1, 2017,
17unless a later enacted statute enacted before that date, deletes or
18extends that date.

19(c) If this article becomes inoperative under paragraph (2) or
20(3) of subdivision (a), this article shall be repealed on January 1
21of the year following the date this article becomes inoperative,
22unless a later enacted statute enacted before that date, deletes or
23extends that date.

end insert
begin insert
24

begin insert14169.83.end insert  

If the director determines that this article has become
25inoperative pursuant to Section 14169.77, 14169.78, 14169.80,
26or 14169.82, or that Section 14169.72 has become inoperative
27pursuant to subdivision (e) of that section, the director shall
28execute a declaration stating that this determination has been
29made and stating the basis for this determination. The director
30shall retain the declaration and provide a copy, within five working
31days of the execution of the declaration, to the fiscal and
32appropriate policy committees of the Legislature. In addition, the
33director shall post the declaration on the department’s Internet
34Web site and the director shall send the declaration to the
35Secretary of State, the Secretary of the Senate, the Chief Clerk of
36the Assembly, and the Legislative Counsel.

end insert
37

begin deleteSEC. 6.end delete
38begin insertSEC. 9.end insert  

This act is an urgency statute necessary for the
39immediate preservation of the public peace, health, or safety within
P55   1the meaning of Article IV of the Constitution and shall go into
2immediate effect. The facts constituting the necessity are:

3In order to make the necessary changes to increasebegin delete medi-calend delete
4begin insert Medi-Cal end insert payments to hospitals and improve access at the earliest
5time, so as to allow this act to be operative as soon as approval
6from the federalbegin delete centersend deletebegin insert Centersend insert for Medicare and Medicaid
7Services is obtained by the State Department of Health Care
8Services, it is necessary that this act takes effect immediately.



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