Amended in Assembly September 6, 2013

Amended in Assembly August 27, 2013

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 amend Sections 14164, 14165, and 14167.35 of, to add Section 14167.37 to, and to add and repeal Article 5.230 (commencing with Section 14169.51) and Article 5.231 (commencing with Section 14169.71) of Chapter 7 of Part 3 of Division 9 of, the Welfare and Institutions Code, relating to Medi-Cal, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 239, as amended, Hernandez. Medi-Cal: hospitals: quality assurance fee.

(1) 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.

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 31, 2015, to be deposited into the Hospital Quality Assurance Revenue Fund. This bill would, subject to federal approval, provide that moneys in the Hospital Quality Assurance Revenue Fund shall be continuously appropriated and 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 and increased capitation payments to Medi-Cal managed care plans. The bill would alsobegin delete authorizeend deletebegin insert requireend insert 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. The bill would require the department to post specified documents on its Internet Web site relating to these provisions.

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 returned to the private hospitals pro rata, as specified. 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 returned to the private hospitals pro rata, as specified. The bill would make other conforming changes.

(2) 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.

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.

(3) 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.

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 or a contract with a county organized health system shall cease to be a requirement for a hospital’s participation in the Construction and Renovation Reimbursement Program.

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

Vote: 23. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

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

P3    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.

P4    1(b) It is the intent of the Legislature that funding provided to
2hospitals through a hospital quality assurance fee be explored with
3the goal of increasing access to care and improving hospital
4reimbursement through supplemental Medi-Cal payments to
5hospitals.

6

SEC. 2.  

(a) It is the intent of the Legislature to impose a quality
7assurance fee to be paid by hospitals, which would be used to
8increase federal financial participation in order to make
9supplemental Medi-Cal payments to hospitals for the period of
10January 1, 2014, through December 31, 2015, and to help pay for
11health care coverage for low-income children.

12(b) The State Department of Health Care Services shall make
13every effort to obtain the necessary federal approvals to implement
14the quality assurance fee described in subdivision (a) in order to
15make supplemental Medi-Cal payments to hospitals for the period
16of January 1, 2014, through December 31, 2015.

17(c) It is the intent of the Legislature that the quality assurance
18fee be implemented only if all of the following conditions are met:

19(1) The quality assurance fee is established in consultation with
20the hospital community.

21(2) The quality assurance fee, including any interest earned after
22collection by the department, is deposited into segregated funds
23apart from the General Fund and used exclusively for supplemental
24Medi-Cal payments to hospitals, direct grants to public hospitals,
25health care coverage for low-income children, and for the direct
26costs of administering the program by the department.

27(3) No hospital shall be required to pay the quality assurance
28fee to the department unless and until the state receives and
29maintains federal approval of the quality assurance fee and related
30supplemental payments to hospitals.

31(4) The full amount of the quality assurance fee assessed and
32collected remains available only for the purposes specified by the
33Legislature in this act.

34

SEC. 3.  

Section 14164 of the Welfare and Institutions Code is
35amended to read:

36

14164.  

(a) In addition to the required intergovernmental
37transfers set forth in Section 14163, any county, other political
38subdivision of the state, or governmental entity in the state may
39elect to transfer funds, subject to subdivision (m) of Section 14163,
40to the department in support of the Medi-Cal program. Those
P5    1transfers may consist of cash or loans to the state. The department
2shall have the discretion to accept or not accept any elective transfer
3from a county, political subdivision, or other governmental entity,
4as well as the discretion of whether to deposit the transfer in the
5Medi-Cal Inpatient Payment Adjustment Fund established pursuant
6to Section 14163. If the department accepts a transfer pursuant to
7this section, the department shall obtain federal matching funds to
8the full extent permitted by federal law.

9(b) (1) The director may maximize available federal financial
10participation to provide access to services provided by hospitals
11that are not reimbursed by certified public expenditure pursuant
12to Article 5.2 (commencing with Section 14166) by authorizing
13the use of intergovernmental transfers to fund the nonfederal share
14of supplemental payments as permitted under Section 433.51 of
15Title 42 of the Code of Federal Regulations or any other applicable
16federal Medicaid laws. The transferring entity shall certify to the
17department that the funds are in compliance with all federal rules
18and regulations. Any payments funded by intergovernmental
19transfers shall remain with the hospital and shall not be transferred
20back to any county, other political subdivision of the state, or
21governmental entity in the state, except for federal disallowance
22or withhold recovery efforts by the department. Participation in
23intergovernmental transfers under this subdivision is voluntary on
24the part of the transferring entity for purposes of all applicable
25federal laws.

26(2) This subdivision shall be implemented only to the extent
27federal financial participation is not jeopardized.

28

SEC. 4.  

Section 14165 of the Welfare and Institutions Code is
29amended to read:

30

14165.  

(a) There is hereby created in the Governor’s office
31the California Medical Assistance Commission, for the purpose
32of contracting with health care delivery systems for the provision
33of health care services to recipients under the California Medical
34Assistance Program.

35(b) Notwithstanding any other law, the commission created
36pursuant to subdivision (a) shall continue through June 30, 2012,
37after which, it shall be dissolved and the term of any commissioner
38serving at that time shall end.

39(1) Upon dissolution of the commission, all powers, duties, and
40responsibilities of the commission shall be transferred to the
P6    1Director of Health Care Services. These powers, duties, and
2responsibilities shall include, but are not limited to, those exercised
3in the operation of the selective provider contracting program
4pursuant to Article 2.6 (commencing with Section 14081).

5(2) (A) On July 1, 2012, notwithstanding any other law,
6employees of the California Medical Assistance Commission as
7of June 30, 2012, excluding commissioners, shall transfer to the
8State Department of Health Care Services.

9(B) Employees who transfer pursuant to subparagraph (A) shall
10be subject to the same conditions of employment under the
11department as they were under the California Medical Assistance
12Commission, including retention of their exempt status, until the
13diagnosis-related groups payment system described in Section
1414105.28 replaces the contract-based payment system described
15in this article.

16(C) (i) Notwithstanding any other law or rule, persons employed
17by the department who transferred to the department pursuant to
18subparagraph (A) shall be eligible to apply for civil service
19examinations. Persons receiving passing scores shall have their
20names placed on lists resulting from these examinations, or
21otherwise gain eligibility for appointment. In evaluating minimum
22qualifications, related California Medical Assistance Commission
23experience shall be considered state civil service experience in a
24class deemed comparable by the State Personnel Board, based on
25the duties and responsibilities assigned.

26(ii) On the date the diagnosis-related groups payment system
27described in Section 14105.28 replaces the contract-based system
28described in this article, employees who transferred to the
29department pursuant to subparagraph (A) shall transfer to civil
30service classifications within the department for which they are
31eligible.

32(3) Upon a determination by the Director of Health Care
33Services that a payment system based on diagnosis-related groups
34as described in Section 14105.28 that is sufficient to replace the
35contract-based payment system described in this article has been
36developed and implemented, the powers, duties, and responsibilities
37conferred on the commission and transferred to the Director of
38Health Care Services shall no longer be exercised, excluding all
39of the following:

P7    1(A) Stabilization payments made or committed from Sections
214166.14 and 14166.19 for services rendered prior to the director’s
3determination pursuant to this paragraph.

4(B) The ability to negotiate and make payments from the Private
5Hospital Supplemental Fund, established pursuant to Section
614166.12, and the Nondesignated Public Hospital Supplemental
7Fund, established pursuant to Section 14166.17.

8(C) The ability to continue to administer and distribute payments
9for the Construction Renovation Reimbursement Program, in
10accordance with Sections 14085 to 14085.57, inclusive.
11Notwithstanding any other law, maintaining or negotiating a
12selective provider contract pursuant to Article 2.6 (commencing
13with Section 14081) or a contract with a county organized health
14system shall cease to be a requirement for a hospital’s participation
15in the Construction Renovation Reimbursement Program.

16(4) Protections afforded to the negotiations and contracts of the
17commission by the California Public Records Act (Chapter 3.5
18(commencing with Section 6250) of Division 7 of Title 1 of the
19Government Code) shall be applicable to the negotiations and
20contracts conducted or entered into pursuant to this section by the
21State Department of Health Care Services.

22(c) Notwithstanding the rulemaking provisions of Chapter 3.5
23(commencing with Section 11340) of Part 1 of Division 3 of Title
242 of the Government Code, or any other provision of law, the State
25Department of Health Care Services may implement and administer
26this section by means of provider bulletins or other similar
27instructions, without taking regulatory action. The authority to
28implement this section as set forth in this subdivision shall include
29the authority to give notice by provider bulletin or other similar
30instruction of a determination made pursuant to paragraph (3) of
31subdivision (b) and to modify or supersede existing regulations in
32Title 22 of the California Code of Regulations that conflict with
33implementation of this section.

34

SEC. 5.  

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

36

14167.35.  

(a) The Hospital Quality Assurance Revenue Fund
37is hereby created in the State Treasury.

38(b) (1) All fees required to be paid to the state pursuant to this
39article shall be paid in the form of remittances payable to the
40department.

P8    1(2) The department shall directly transmit the fee payments to
2the Treasurer to be deposited in the Hospital Quality Assurance
3Revenue Fund. Notwithstanding Section 16305.7 of the
4Government Code, any interest and dividends earned on deposits
5in the fund shall be retained in the fund for purposes specified in
6subdivision (c).

7(c) All funds in the Hospital Quality Assurance Revenue Fund,
8 together with any interest and dividends earned on money in the
9fund, shall, upon appropriation by the Legislature, be used
10exclusively to enhance federal financial participation for hospital
11services under the Medi-Cal program, to provide additional
12reimbursement to, and to support quality improvement efforts of,
13hospitals, and to minimize uncompensated care provided by
14hospitals to uninsured patients, in the following order of priority:

15(1) To pay for the department’s staffing and administrative costs
16directly attributable to implementing Article 5.21 (commencing
17with Section 14167.1) and this article, including any administrative
18fees that the director determines shall be paid to mental health
19plans pursuant to subdivision (d) of Section 14167.11 and
20repayment of the loan made to the department from the Private
21Hospital Supplemental Fund pursuant to the act that added this
22section.

23(2) To pay for the health care coverage for children in the
24amount of eighty million dollars ($80,000,000) for each subject
25fiscal quarter for which payments are made under Article 5.21
26(commencing with Section 14167.1).

27(3) To make increased capitation payments to managed health
28care plans pursuant to Article 5.21 (commencing with Section
2914167.1).

30(4) To pay funds from the Hospital Quality Assurance Revenue
31Fund pursuant to Section 14167.5 that would have been used for
32grant payments and that are retained by the state, and to make
33increased payments to hospitals, including grants, pursuant to
34Article 5.21 (commencing with Section 14167.1), both of which
35shall be of equal priority.

36(5) To make increased payments to mental health plans pursuant
37to Article 5.21 (commencing with Section 14167.1).

38(d) Any amounts of the quality assurance fee collected in excess
39of the funds required to implement subdivision (c), including any
40funds recovered under subdivision (d) of Section 14167.14 or
P9    1subdivision (e) of Section 14167.36, shall be refunded to general
2acute care hospitals, pro rata with the amount of quality assurance
3fee paid by the hospital, subject to the limitations of federal law.
4If federal rules prohibit the refund described in this subdivision,
5the excess funds shall be deposited in the Distressed Hospital Fund
6to be used for the purposes described in Section 14166.23, and
7shall be supplemental to and not supplant existing funds.

8(e) Any methodology or other provision specified in Article
95.21 (commencing with Section 14167.1) and this article may be
10modified by the department, in consultation with the hospital
11community, to the extent necessary to meet the requirements of
12federal law or regulations to obtain federal approval or to enhance
13the probability that federal approval can be obtained, provided the
14modifications do not violate the spirit and intent of Article 5.21
15(commencing with Section 14167.1) or this article and are not
16inconsistent with the conditions of implementation set forth in
17Section 14167.36.

18(f) The department, in consultation with the hospital community,
19shall make adjustments, as necessary, to the amounts calculated
20pursuant to Section 14167.32 in order to ensure compliance with
21the federal requirements set forth in Section 433.68 of Title 42 of
22the Code of Federal Regulations or elsewhere in federal law.

23(g) The department shall request approval from the federal
24Centers for Medicare and Medicaid Services for the implementation
25of this article. In making this request, the department shall seek
26specific approval from the federal Centers for Medicare and
27Medicaid Services to exempt providers identified in this article as
28exempt from the fees specified, including the submission, as may
29be necessary, of a request for waiver of the broad based
30requirement, waiver of the uniform fee requirement, or both,
31pursuant to paragraphs (e)(1) and (e)(2) of Section 433.68 of Title
3242 of the Code of Federal Regulations.

33(h) (1) For purposes of this section, a modification pursuant to
34this section shall be implemented only if the modification, change,
35or adjustment does not do either of the following:

36(A) Reduces or increases the supplemental payments or grants
37made under Article 5.21 (commencing with Section 14167.1) in
38the aggregate for the 2008-09, 2009-10, and 2010-11 federal
39fiscal years to a hospital by more than 2 percent of the amount that
P10   1would be determined under this article without any change or
2adjustment.

3(B) Reduces or increases the amount of the fee payable by a
4hospital in total under this article for the 2008-09, 2009-10, and
52010-11 federal fiscal years by more than 2 percent of the amount
6that would be determined under this article without any change or
7adjustment.

8(2) The department shall provide the Joint Legislative Budget
9Committee and the fiscal and appropriate policy committees of
10the Legislature a status update of the implementation of Article
115.21 (commencing with Section 14167.1) and this article on
12January 1, 2010, and quarterly thereafter. Information on any
13adjustments or modifications to the provisions of this article or
14Article 5.21 (commencing with Section 14167.1) that may be
15required for federal approval shall be provided coincident with the
16consultation required under subdivisions (f) and (g).

17(i) Notwithstanding Chapter 3.5 (commencing with Section
1811340) of Part 1 of Division 3 of Title 2 of the Government Code,
19the department may implement this article or Article 5.21
20(commencing with Section 14167.1) by means of provider
21 bulletins, all plan letters, or other similar instruction, without taking
22regulatory action. The department shall also provide notification
23to the Joint Legislative Budget Committee and to the appropriate
24policy and fiscal committees of the Legislature within five working
25days when the above-described action is taken in order to inform
26the Legislature that the action is being implemented.

27(j) Notwithstanding any law, the Controller may use the funds
28in the Hospital Quality Assurance Revenue Fund for cashflow
29loans to the General Fund as provided in Sections 16310 and 16381
30of the Government Code.

31(k) Notwithstanding Sections 14167.17 and 14167.40,
32subdivisions (b) to (h), inclusive, shall become inoperative on
33January 1, 2013, subdivisions (a), (i), and (j) shall remain operative
34until January 1, 2017, and as of January 1, 2017, this section is
35repealed.

36

SEC. 6.  

Section 14167.37 is added to the Welfare and
37Institutions Code
, to read:

38

14167.37.  

(a) (1) The department shall make available all
39public documentation it uses to administer and audit the program
40authorized under Article 5.230 (commencing with Section
P11   114169.51) and Article 5.231 (commencing with Section 14169.71)
2pursuant to the Public Records Act (Chapter 3.5 (commencing
3with Section 6250) of Division 7 of Title 1 of the Government
4Code).

5(2) In addition, upon request from a hospital, the department
6shall require Medi-Cal managed care plans to furnish hospitals
7with the amounts the plan intends to pay to the hospital pursuant
8to Article 5.230 (commencing with Section 14169.51). Nothing
9in this paragraph shall require the department to reconcile payments
10made to individual hospitals from Medi-Cal managed care plans.

11(b) Notwithstanding subdivision (a), the department shall post
12all of the following on the department’s Internet Web site:

13(1) Within 10 business days after receipt of approval of the
14hospital quality assurance fee program under Article 5.230
15(commencing with Section 14169.51) and Article 5.231
16(commencing with Section 14169.71) from the federal Centers for
17Medicare and Medicaid Services (CMS), the hospital quality
18 assurance fee final model and upper payment limit calculations.

19(2) Quarterly updates on payments, fee schedules, and model
20updates when applicable.

21(3) Within 10 business days after receipt, information on
22managed care rate approvals.

23(c) For purposes of this section, the following definitions shall
24apply:

25(1) “Fee schedules” mean the dates on which the hospital quality
26assurance fee will be due from the hospitals and the dates on which
27the department will submit fee-for-service payments to the
28hospitals. “Fee schedules” also include the dates on which the
29department is expected to submit payments to managed care plans.

30(2) “Hospital quality assurance fee final model” means the
31 spreadsheet calculating the supplemental amounts based on the
32upper payment limit calculation from claims and hospital data
33sources of days and hospital services once CMS approves the
34program under Article 5.230 (commencing with Section 14169.51)
35and Article 5.231 (commencing with Section 14169.71).

36(3) “Upper payment limit calculation” means the determination
37of the federal upper payment limit on the amount of the Medicaid
38payment for which federal financial participation is available for
39a class of service and a class of health care providers, as specified
P12   1in Part 447 of Title 42 of the Code of Federal Regulations and that
2has been approved by CMS.

3

SEC. 7.  

Article 5.230 (commencing with Section 14169.51)
4is added to Chapter 7 of Part 3 of Division 9 of the Welfare and
5Institutions Code
, to read:

6 

7Article 5.230.  Medi-Cal Hospital Reimbursement Improvement
8Act of 2013
9

 

10

14169.51.  

For purposes of this article, the following definitions
11shall apply:

12(a) “Acute psychiatric days” means the total number of Medi-Cal
13specialty mental health service administrative days, Medi-Cal
14specialty mental health service acute care days, acute psychiatric
15administrative days, and acute psychiatric acute days identified in
16the Final Medi-Cal Utilization Statistics for the 2012-13 state
17fiscal year as calculated by the department as of December 17,
182012.

19(b) “Converted hospital” means a private hospital that becomes
20a designated public hospital or a nondesignated public hospital on
21or after January 1, 2014.

22(c) “Days data source” means the hospital’s Annual Financial
23Disclosure Report filed with the Office of Statewide Health
24Planning and Development as of June 6, 2013, for its fiscal year
25ending during 2010.

26(d) “Department” means the State Department of Health Care
27Services.

28(e) “Designated public hospital” shall have the meaning given
29in subdivision (d) of Section 14166.1.

30(f) “Director” means the Director of Health Care Services.

31(g) “General acute care days” means the total number of
32Medi-Cal general acute care days, including well baby days, less
33any acute psychiatric inpatient days, paid by the department to a
34hospital for services in the 2010 calendar year, as reflected in the
35state paid claims file on April 26, 2013.

36(h) “High acuity days” means Medi-Cal coronary care unit days,
37pediatric intensive care unit days, intensive care unit days, neonatal
38intensive care unit days, and burn unit days paid by the department
39during the 2010 calendar year, as reflected in the state paid claims
40file prepared by the department on April 26, 2013.

P13   1(i) “Hospital community” means any general acute care hospital
2and any hospital industry organization that represents general acute
3care hospitals.

4(j) “Hospital inpatient services” means all services covered
5under Medi-Cal and furnished by hospitals to patients who are
6admitted as hospital inpatients and reimbursed on a fee-for-service
7basis by the department directly or through its fiscal intermediary.
8Hospital inpatient services include outpatient services furnished
9by a hospital to a patient who is admitted to that hospital within
1024 hours of the provision of the outpatient services that are related
11to the condition for which the patient is admitted. Hospital inpatient
12services do not include services for which a managed health care
13plan is financially responsible.

14(k) “Hospital outpatient services” means all services covered
15under Medi-Cal furnished by hospitals to patients who are
16registered as hospital outpatients and reimbursed by the department
17on a fee-for-service basis directly or through its fiscal intermediary.
18Hospital outpatient services do not include services for which a
19managed health care plan is financially responsible, or services
20rendered by a hospital-based federally qualified health center for
21which reimbursement is received pursuant to Section 14132.100.

22(l) (1) “Managed health care plan” means a health care delivery
23system that manages the provision of health care and receives
24prepaid capitated payments from the state in return for providing
25services to Medi-Cal beneficiaries.

26(2) (A) Managed health care plans include county organized
27health systems and entities contracting with the department to
28provide services pursuant to two-plan models and geographic
29managed care. Entities providing these services contract with the
30department pursuant to any of the following:

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

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

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

34(iv) Article 2.82 (commencing with Section 14087.98).

35(v) Article 2.91 (commencing with Section 14089).

36(B) Managed health care plans do not include any of the
37following:

38(i) Mental health plans contracting to provide mental health care
39for Medi-Cal beneficiaries pursuant to Chapter 8.9 (commencing
40with Section 14700).

P14   1(ii) Health plans not covering inpatient services such as primary
2care case management plans operating pursuant to Section
314088.85.

4(iii) Program for All-Inclusive Care for the Elderly organizations
5operating pursuant to Chapter 8.75 (commencing with Section
614591).

7(m) “Medi-Cal managed care days” means the total number of
8general acute care days, including well baby days, listed for the
9county organized health system and prepaid health plans identified
10in the Final Medi-Cal Utilization Statistics for the 2012-13 fiscal
11year, as calculated by the department as of December 17, 2012.

12(n) “Medicaid inpatient utilization rate” means Medicaid
13inpatient utilization rate as defined in Section 1396r-4 of Title 42
14of the United States Code and as set forth in the Final Medi-Cal
15Utilization Statistics for the 2012-13 fiscal year, as calculated by
16the department as of December 17, 2012.

17(o) “New hospital” means a hospital operation, business, or
18facility functioning under current or prior ownership as a private
19hospital that does not have a days data source or a hospital that
20has a days data source in whole, or in part, from a previous operator
21where there is an outstanding monetary obligation owed to the
22state in connection with the Medi-Cal program and the hospital is
23not, or does not agree to become, financially responsible to the
24department for the outstanding monetary obligation in accordance
25with subdivision (d) of Section 14169.58.

26(p) “Nondesignated public hospital” means either of the
27following:

28(1) A public hospital that is licensed under subdivision (a) of
29Section 1250 of the Health and Safety Code, is not designated as
30a specialty hospital in the hospital’s most recently filed Annual
31Financial Disclosure Report as of January 1, 2014, and satisfies
32the definition in paragraph (25) of subdivision (a) of Section
3314105.98, excluding designated public hospitals.

34(2) A tax-exempt nonprofit hospital that is licensed under
35subdivision (a) of Section 1250 of the Health and Safety Code, is
36not designated as a specialty hospital in the hospital’s most recently
37filed Annual Financial Disclosure Report as of January 1, 2014,
38is operating a hospital owned by a local health care district, and
39is affiliated with the health care district hospital owner by means
P15   1of the district’s status as the nonprofit corporation’s sole corporate
2member.

3(q) “Outpatient base amount” means the total amount of
4payments for hospital outpatient services made to a hospital in the
52010 calendar year, as reflected in the state paid claims file
6prepared by the department on April 26, 2013.

7(r) “Private hospital” means a hospital that meets all of the
8following conditions:

9(1) Is licensed pursuant to subdivision (a) of Section 1250 of
10the Health and Safety Code.

11(2) Is in the Charitable Research Hospital peer group, as set
12forth in the 1991 Hospital Peer Grouping Report published by the
13department, or is not designated as a specialty hospital in the
14hospital’s most recently filed Office of Statewide Health Planning
15and Development Annual Financial Disclosure Report as of January
161, 2014.

17(3) Does not satisfy the Medicare criteria to be classified as a
18long-term care hospital.

19(4) Is a nonpublic hospital, nonpublic converted hospital, or
20converted hospital as those terms are defined in paragraphs (26)
21to (28), inclusive, respectively, of subdivision (a) of Section
2214105.98.

23(5) Is not a nondesignated public hospital or a designated public
24hospital.

25(s) “Program period” means the period from January 1, 2014,
26to December 31, 2015, inclusive.

27(t) “Subject fiscal quarter” means a state fiscal quarter beginning
28on or after January 1, 2014, and ending before January 1, 2016.

29(u) “Subject fiscal year” means a state fiscal year that ends after
30January 1, 2014, and begins before January 1, 2016.

31(v) “Subject month” means a calendar month beginning on or
32after January 1, 2014, and ending before January 1, 2016.

33(w) “Transplant days” means the number of Medi-Cal days, as
34defined in subdivision (q) of Section 14169.71, for MS-DRGs 1,
352, 5 to 10, inclusive, 14, 15begin insert,end insert and 652, according to the 2010 Patient
36Discharge file from the Office of Statewide Health Planning and
37Development accessed on June 28, 2011.

38(x) “Upper payment limit” means a federal upper payment limit
39on the amount of the Medicaid payment for which federal financial
40participation is available for a class of service and a class of health
P16   1care providers, as specified in Part 447 of Title 42 of the Code of
2Federal Regulations. The applicable upper payment limit shall be
3separately calculated for inpatient and outpatient hospital services.

4

14169.52.  

(a) Private hospitals shall be paid supplemental
5amounts for the provision of hospital outpatient services for each
6subject fiscal quarter as set forth in this section. The supplemental
7amounts shall be in addition to any other amounts payable to
8hospitals with respect to those services and shall not affect any
9other payments to hospitals. The supplemental amounts shall result
10in payments equal to the statewide aggregate upper payment limit
11for private hospitals for each subject fiscal year, except that with
12respect to a subject fiscal year that begins before the start of the
13program period or that ends after the end of the program period,
14the outpatient supplemental amounts shall result in payments to
15hospitals that equal a percentage of the applicable upper payment
16limit where the percentage equals the percentage of the subject
17fiscal year that occurs during the program period.

18(b) Except as set forth in subdivisions (e) and (f), each private
19hospital shall be paid an amount for each subject fiscal year equal
20to a percentage of the hospital’s outpatient base amount, which
21payments shall be made on a quarterly basis. The percentage shall
22be the same for each hospital for a subject fiscal year, or portion
23thereof in the program period. The percentage shall result in
24payments to hospitals that equal the applicable federal upper
25payment limit as it may be modified pursuant to Section 14169.68
26for a subject fiscal year, or any portion thereof in the program
27period. For purposes of this subdivision the applicable federal
28upper payment limit shall be the federal upper payment limit for
29hospital outpatient services furnished by private hospitals for each
30subject fiscal year, or portion thereof.

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

36(1) The total amount payable to private hospitals under
37subdivision (b) for the subject fiscal year shall be reduced to the
38amount for which federal financial participation is available.

39(2) The amount payable under subdivision (b) to each private
40hospital for the subject fiscal year shall be equal to the amount
P17   1computed under subdivision (b) multiplied by the ratio of the total
2amount for which federal financial participation is available to the
3total amount computed under subdivision (b).

4(d) The supplemental amounts set forth in this section are
5inclusive of federal financial participation.

6(e) Payments shall not be made under this section to a new
7hospital for the periods when the hospital is a new hospital.

8(f) Payments shall be made to a converted hospital that converts
9during a subject fiscal quarter by multiplying the hospital’s
10outpatient supplemental payment as calculated in subdivision (b)
11by the number of days that the hospital was a private hospital in
12the subject fiscal quarter, divided by the number of days in the
13subject fiscal quarter. Payments shall not be made to a converted
14hospital in any subsequent subject fiscal quarter.

15

14169.53.  

(a) Except as provided in Section 14169.68, private
16hospitals shall be paid supplemental amounts for the provision of
17hospital inpatient services for each subject fiscal quarter as set
18forth in this section. The supplemental amounts shall be in addition
19to any other amounts payable to hospitals with respect to those
20services and shall not affect any other payments to hospitals. The
21supplemental amounts shall result in payments equal to the
22statewide aggregate upper payment limit for private hospitals for
23each subject fiscal year as it may be modified pursuant to Section
2414169.68, except that with respect to a subject fiscal year that
25begins before the start of the program period or that ends after the
26end of the program period, the inpatient supplemental amounts
27shall result in payments to hospitals that equal a percentage of the
28applicable upper payment limit where the percentage equals the
29percentage of the subject fiscal year that occurs during the program
30period.

31(b) Except as set forth in subdivisions (f) and (g), each private
32hospital shall be paid the sum of all of the following amounts as
33applicable for the provision of hospital inpatient services for each
34subject fiscal quarter:

35(1) One thousand two dollars ($1,002) multiplied by the
36hospital’s general acute care days for supplemental payments for
37the 2014 calendar year, divided by four, and one thousand two
38hundred five dollars ($1,205) multiplied by the hospital’s general
39acute care days for supplemental payments for the 2015 calendar
40year, divided by four.

P18   1(2) Nine hundred seventy dollars ($970) multiplied by the
2hospital’s acute psychiatric days for supplemental payments for
3the 2014 calendar year, divided by four, and nine hundred
4seventy-five dollars ($975) multiplied by the hospital’s acute
5psychiatric days for supplemental payments for the 2015 calendar
6year, divided by four.

7(3) Two thousand five hundred dollars ($2,500) multiplied by
8the number of the hospital’s high acuity days for the respective
9calendar year for 2014 or 2015, divided by four, if the hospital’s
10Medicaid inpatient utilization rate is less than 43 percent and
11 greater than 5 percent and at least 5 percent of the hospital’s general
12acute care days are high acuity days.

13(4) Two thousand five hundred dollars ($2,500) multiplied by
14the number of the hospital’s high acuity days for the respective
15calendar year for 2014 and 2015, divided by four, if the hospital
16qualifies to receive the amount set forth in paragraph (3) and has
17been designated as a Level I, Level II, Adult/Ped Level I, or
18Adult/Ped Level II trauma center by the Emergency Medical
19Services Authority established pursuant to Section 1797.1 of the
20Health and Safety Code.

21(5) Two thousand five hundred dollars ($2,500) multiplied by
22the number of the hospital’s transplant days for the respective
23calendar year for 2014 and 2015, divided by four, if the hospital’s
24 Medicaid inpatient utilization rate is less than 43 percent and
25greater than 5 percent.

26(6) A payment for hospital inpatient services for private hospitals
27that provided Medi-Cal subacute services during the 2010 calendar
28year and have a Medicaid inpatient utilization rate that is greater
29than 5 percent and less than 43 percent equal to 55 percent for the
302014 calendar year of the Medi-Cal subacute payments paid by
31the department to the hospital during the 2010 calendar year, as
32reflected in the state paid claims file prepared by the department
33on April 26, 2013, divided by four, and 60 percent for the 2015
34calendar year of the Medi-Cal subacute payments paid by the
35department to the hospital during the 2010 calendar year, as
36reflected in the state paid claims file prepared by the department
37on April 26, 2013, divided by four.

38(c) If federal financial participation for a subject fiscal year is
39not available for all of the supplemental amounts payable to private
40hospitals under subdivision (b) due to the application of a federal
P19   1upper payment limit or for any other reason, both of the following
2shall apply:

3(1) The total amount payable to private hospitals under
4subdivision (b) for the subject fiscal year shall be reduced to reflect
5the amount for which federal financial participation is available.

6(2) The amount payable under subdivision (b) to each private
7hospital for the subject fiscal year shall be equal to the amount
8computed under subdivision (b) multiplied by the ratio of the total
9amount for which federal financial participation is available to the
10total amount computed under subdivision (b).

11(d) If the amount otherwise payable to a hospital under this
12section for a subject fiscal year exceeds the amount for which
13federal financial participation is available for that hospital, the
14amount due to the hospital for that subject fiscal year shall be
15reduced to the amount for which federal financial participation is
16available.

17(e) The amounts set forth in this section are inclusive of federal
18financial participation.

19(f) Payments shall not be made under this section to a new
20hospital for the periods when the hospital is a new hospital.

21(g) Payments shall be made to a converted hospital that converts
22during a subject fiscal quarter by multiplying the hospital’s
23inpatient supplemental payment as calculated in subdivision (b)
24by the number of days that the hospital was a private hospital in
25the subject fiscal quarter, divided by the number of days in the
26subject fiscal quarter. Payments shall not be made to a converted
27hospital in any subsequent subject fiscal quarter.

28

14169.54.  

(a) The department shall increase capitation
29payments to Medi-Cal managed health care plans for each subject
30month as set forth in this section.

31(b) The increased capitation payments shall be made as part of
32the monthly capitated payments made by the department to
33managed health care plans.

34(c) The aggregate amount of increased capitation payments to
35all Medi-Cal managed health care plans for each subject fiscal
36year, or portion thereof in the program period, shall be the
37maximum amount for which federal financial participation is
38available on an aggregate statewide basis for the applicable subject
39fiscal year, or portion thereof in the program period.

P20   1(d) The department shall determine the amount of the increased
2capitation payments for each managed health care plan. The
3department shall consider the composition of Medi-Cal enrollees
4in the plan, the anticipated utilization of hospital services by the
5plan’s Medi-Cal enrollees, and other factors that the department
6determines are reasonable and appropriate to ensure access to
7high-quality hospital services by the plan’s enrollees.

8(e) The amount of increased capitation payments to each
9Medi-Cal managed health care plan shall not exceed an amount
10that results in capitation payments that are certified by the state’s
11actuary as meeting federal requirements, taking into account the
12requirement that all of the increased capitation payments under
13this section shall be paid by the Medi-Cal managed health care
14plans to hospitals for hospital services to Medi-Cal enrollees of
15the plan.

16(f) (1) The increased capitation payments to managed health
17care plans under this section shall be made to support the
18availability of hospital services and ensure access to hospital
19services for Medi-Cal beneficiaries. The increased capitation
20payments to managed health care plans shall commence within 90
21days of the date on which all necessary federal approvals have
22been received, and shall include, but not be limited to, the sum of
23the increased payments for all prior months for which payments
24are due.

25(2) To secure the necessary funding for the payment or payments
26made pursuant to paragraph (1), the department may accumulate
27 funds in the Hospital Quality Assurance Revenue Fund, established
28pursuant to Section 14167.35, for the purpose of funding managed
29health care capitation payments under this article regardless of the
30date on which capitation payments are scheduled to be paid in
31order to secure the necessary total funding for managed health care
32payments by December 31, 2015.

33(g) Payments to managed health care plans that would be paid
34consistent with actuarial certification and enrollment in the absence
35of the payments made pursuant to this section, including, but not
36limited to, payments described in Section 14182.15, shall not be
37reduced as a consequence of payments under this section.

38(h) (1) Each managed health care plan shall expend 100 percent
39of any increased capitation payments it receives under this section
40on hospital services.

P21   1(2) The department may issue change orders to amend contracts
2with managed health care plans as needed to adjust monthly
3capitation payments in order to implement this section.

4(3) For entities contracting with the department pursuant to
5Article 2.91 (commencing with Section 14089), any incremental
6increase in capitation rates pursuant to this section shall not be
7subject to negotiation and approval by the department.

8(i) (1) If federal financial participation is not available for all
9of the increased capitation payments determined for a month
10pursuant to this section for any reason, the increased capitation
11payments mandated by this section for that month shall be reduced
12proportionately to the amount for which federal financial
13participation is available.

14(2) The determination under this subdivision for any subject
15month shall be made after accounting for all federal financial
16participation necessary for full implementation of Section 14182.15
17for that month.

18

14169.55.  

(a) Each managed health care plan receiving
19increased capitation payments under Section 14169.54 shall expend
20the capitation rate increases in a manner consistent with actuarial
21certification, enrollment, and utilization on hospital services. Each
22managed health care plan shall expend increased capitation
23payments on hospital services within 30 days of receiving the
24increased capitation payments to the extent they are made for a
25subject month that is prior to the date on which the payments are
26received by the managed health care plan.

27(b) The sum of all expenditures made by a managed health care
28plan for hospital services pursuant to this section shall equal, or
29approximately equal, all increased capitation payments received
30by the managed health care plan, consistent with actuarial
31certification, enrollment, and utilization, from the department
32pursuant to Section 14169.54.

33(c) Any delegation or attempted delegation by a managed health
34care plan of its obligation to expend the capitation rate increases
35under this section shall not relieve the plan from its obligation to
36expend those capitation rate increases. Managed health care plans
37shall submit the documentation that the department may require
38to demonstrate compliance with this subdivision. The
39documentation shall demonstrate actual expenditure of the
40capitation rate increases for hospital services, and not assignment
P22   1to subcontractors of the managed health care plan’s obligation of
2the duty to expend the capitation rate increases.

3(d) The supplemental hospital payments made by managed
4health care plans pursuant to this section shall reflect the overall
5purpose of this article and Article 5.231 (commencing with Section
614169.71).

7(e) This article is not intended to create a private right of action
8by a hospital against a managed care plan provided that the
9managed health care plan expends all increased capitation payments
10for hospital services.

11

14169.56.  

(a) Designated public hospitals shall be paid direct
12grants in support of health care expenditures, which shall not
13constitute Medi-Cal payments, and which shall be funded by the
14quality assurance fee set forth in Article 5.231 (commencing with
15Section 14169.71).

16(1) The aggregate amount of the grants to designated public
17hospitals shall be forty-five million dollars ($45,000,000) in the
18aggregate for the subject fiscal quarters in subject fiscal year
192013-14, ninety-three million dollars ($93,000,000) for subject
20fiscal year 2014-15, and forty-eight million dollars ($48,000,000)
21in the aggregate for the subject fiscal quarters in the subject fiscal
22year 2015-16. For each subject fiscal year, the director shall
23allocate the aggregate grant amounts in accordance with paragraph
24(2).

25(2) (A) Of the direct grant amounts set forth in paragraph (1),
26the director shall allocate twenty-four million five hundred
27thousand dollars ($24,500,000) in the aggregate for the subject
28fiscal quarters in subject fiscal year 2013-14, fifty million five
29hundred thousand dollars ($50,500,000) for subject fiscal year
302014-15, and twenty-six million dollars ($26,000,000) in the
31aggregate for the subject fiscal quarters in subject fiscal year
322015-16, among the designated public hospitals pursuant to a
33methodology developed in consultation with the designated public
34hospitals.

35(i) Of the direct grant amounts set forth in this subparagraph,
36the director shall distribute six million one hundred twenty-five
37thousand dollars ($6,125,000) for each subject fiscal quarter in
38subject fiscal year 2013-14, six million three hundred twelve
39thousand five hundred dollars ($6,312,500) for each subject fiscal
40quarter in subject fiscal year 2014-15, and six million five hundred
P23   1thousand dollars ($6,500,000) for each subject fiscal quarter in
2subject fiscal year 2015-16 in accordance with the timeframes
3specified in subdivision (a) of Section 14169.59.

4(ii) Of the direct grant amounts set forth in this subparagraph,
5the director shall distribute six million one hundred twenty-five
6thousand dollars ($6,125,000) for each subject fiscal quarter in
7subject fiscal year 2013-14, six million three hundred twelve
8thousand five hundred dollars ($6,312,500) for each subject fiscal
9 quarter in subject fiscal year 2014-15, and six million five hundred
10thousand dollars ($6,500,000) for each subject fiscal quarter in
11subject fiscal year 2015-16 only upon 100 percent of the rate range
12increases under subparagraph (B) being distributed to managed
13health care plans pursuant to subparagraph (B) for the respective
14subject fiscal quarter. If the rate range increases under subparagraph
15(B) are distributed to managed health care plans, the direct grant
16amounts described in this clause shall be distributed to designated
17public hospitals no later than 30 days after the rate range increases
18have been distributed to managed health care plans pursuant to
19subparagraph (B).

20(B) Of the direct grant amounts set forth in paragraph (1), twenty
21million five hundred thousand dollars ($20,500,000) in the
22aggregate for the subject fiscal quarters in subject fiscal year
232013-14, forty-two million five hundred thousand dollars
24($42,500,000) for subject fiscal year 2014-15, and twenty-two
25million dollars ($22,000,000) in the aggregate for the subject fiscal
26quarters in subject fiscal year 2015-16 shall be withheld from
27payment to the designated public hospitals by the director, and
28shall be used as the nonfederal share for rate range increases, as
29defined in paragraph (4) of subdivision (b) of Section 14301.4, to
30risk-based payments to managed care health plans that contract
31with the department to serve counties where a designated public
32hospital is located. The rate range increases shall apply to managed
33care rates for beneficiaries other than newly eligible beneficiaries,
34as defined in subdivision (s) of Section 17612.2, and shall enable
35plans to compensate hospitals for Medi-Cal health services and to
36support the Medi-Cal program. Each managed health care plan
37shall expend 100 percent of the rate range increases on hospital
38services within 30 days of receiving the increased payments. Rate
39range increases funded under this subparagraph shall be allocated
P24   1among plans pursuant to a methodology developed in consultation
2with the hospital community.

3(3) Notwithstanding any other law, any amounts withheld from
4payment to the designated public hospitals by the director as the
5nonfederal share for rate range increases, including those described
6in subparagraph (B) of paragraph (2), shall not be considered
7hospital fee direct grants as defined under subdivision (k) of
8Section 17612.2 and shall not be included in the determination
9under paragraph (1) of subdivision (a) of Section 17612.3.

10(b) Nondesignated public hospitals shall be paid direct grants
11in support of health care expenditures, which shall not constitute
12Medi-Cal payments, and which shall be funded by the quality
13assurance fee set forth in Article 5.231 (commencing with Section
1414169.71).

15(1) The aggregate amount of the grants to nondesignated public
16hospitals shall be twelve million five hundred thousand dollars
17($12,500,000) in the aggregate for the subject fiscal quarters in
18subject fiscal year 2013-14, twenty-five million dollars
19($25,000,000) for subject fiscal year 2014-15, and twelve million
20five hundred thousand dollars ($12,500,000) in the aggregate for
21the subject fiscal quarters in subject fiscal year 2015-16. For each
22subject fiscal year, the director shall allocate the aggregate grant
23amounts in accordance with paragraph (2).

24(2) (A) Of the direct grant amounts set forth in paragraph (1),
25the director shall allocate two million five hundred thousand dollars
26($2,500,000) in the aggregate for the subject fiscal quarters in
27subject fiscal year 2013-14, five million dollars ($5,000,000) for
28subject fiscal year 2014-15, and two million five hundred thousand
29dollars ($2,500,000) in the aggregate for the subject fiscal quarters
30in subject fiscal year 2015-16 among the nondesignated public
31hospitals pursuant to a methodology developed in consultation
32with the nondesignated public hospitals.

33(B) Of the direct grant amounts set forth in paragraph (1), ten
34million dollars ($10,000,000) in the aggregate for the subject fiscal
35quarters in subject fiscal year 2013-14, twenty million dollars
36($20,000,000) for subject fiscal year 2014-15, and ten million
37dollars ($10,000,000) in the aggregate for the subject fiscal quarters
38in subject fiscal year 2015-16 shall be withheld from payment to
39the nondesignated public hospitals by the director, and shall be
40used as the nonfederal share for rate range increases, as defined
P25   1in paragraph (4) of subdivision (b) of Section 14301.4, to risk-based
2payments to managed care health plans that contract with the
3department. The rate range increases shall enable plans to
4compensate hospitals for Medi-Cal health services and to support
5the Medi-Cal program. Each managed health care plan shall expend
6100 percent of the rate range increases on hospital services within
730 days of receiving the increased payments. Rate range increases
8funded under this subparagraph shall be allocated among plans
9pursuant to a methodology developed in consultation with the
10hospital community.

11(c) If the amounts set forth in this section for rate range increases
12are not actually used for rate range increases as described in this
13section, the direct grant amounts set forth in this section that are
14withheld pursuant to clause (ii) of subparagraph (A) of paragraph
15(1) of subdivision (a) or as the nonfederal share for rate range
16increases for rate range increases pursuant to subparagraph (B) of
17paragraph (2) of subdivision (a) or subparagraph (B) of paragraph
18(2) of subdivision (b) shall be returned to the Hospital Quality
19Assurance Revenue Fund subject to subdivision (c) of Section
2014169.73.

21

14169.57.  

(a) The amount of any payments made under this
22article to private hospitals, including the amount of payments made
23under Sections 14169.52 and 14169.53 and additional payments
24to private hospitals by managed health care plans pursuant to
25Section 14169.54, shall not be included in the calculation of the
26low-income percent or the OBRA 1993 payment limitation, as
27defined in paragraph (24) of subdivision (a) of Section 14105.98,
28for purposes of determining payments to private hospitals.

29(b) The amount of any payments made to a hospital under this
30article shall not be included in the calculation of stabilization
31funding under Article 5.2 (commencing with Section 14166) or
32 any successor legislation, including legislation implementing
33California’s Bridge to Reform Section 1115(a) Medicaid
34Demonstration (11-W-00193/9).

35

14169.58.  

(a) (1) Except as provided in this section, all data
36and other information relating to a hospital that are used for the
37purposes of this article, including, without limitation, the days data
38source, shall continue to be used to determine the payments to that
39hospital pursuant to this article, regardless of whether the hospital
40has undergone one or more changes of ownership.

P26   1(2) All supplemental payments to a hospital under this article
2shall be made to the licensee of a hospital on the date the
3supplemental payment is made.

4(b) The data of separate facilities prior to a consolidation shall
5be aggregated for the purposes of this article if: (1) a private
6 hospital consolidates with another private hospital, (2) the facilities
7operate under a consolidated hospital license, (3) data for a period
8prior to the consolidation is used for purposes of this article, and
9(4) neither hospital has had a change of ownership on or after the
10effective date of this article unless paragraph (2) of subdivision
11(d) has been satisfied by the new owner. Data of a facility that was
12a separately licensed hospital prior to the consolidation shall not
13be included in the data, including the days data source, for the
14purpose of determining payments to the facility under this article
15for any time period during which the facility is closed. A facility
16shall be deemed to be closed for purposes of this subdivision on
17the first day of any period during which the facility has no general
18acute, psychiatric, or rehabilitation inpatients for at least 30
19consecutive days. A facility that has been deemed to be closed
20under this subdivision shall no longer be deemed to be closed on
21the first subsequent day on which it has general acute, psychiatric,
22or rehabilitation inpatients.

23(c) The payments to a hospital under this article shall not be
24made for any period during which the hospital is closed. A hospital
25shall be deemed to be closed on the first day of any period during
26which the hospital has no general acute, psychiatric, or
27rehabilitation inpatients for at least 30 consecutive days. A hospital
28that has been deemed to be closed under this subdivision shall no
29longer be deemed to be closed on the first subsequent day on which
30it has general acute, psychiatric, or rehabilitation inpatients.
31Payments under this article to a hospital that is closed during any
32portion of a subject fiscal quarter shall be reduced by applying a
33fraction, expressed as a percentage, the numerator of which shall
34be the number of days during the applicable subject fiscal quarter
35that the hospital is closed during the subject fiscal year and the
36 denominator of which shall be the number of days in the subject
37fiscal quarter.

38(d) The following provisions shall apply only for purposes of
39this article and Article 5.231 (commencing with Section 14169.71),
40and shall have no application outside of this article and Article
P27   15.231 (commencing with Section 14169.71) nor shall they affect
2the assumption of any outstanding monetary obligation to the
3Medi-Cal program:

4(1) The director shall develop and describe in provider bulletins
5and on the department’s Internet Web site a process by which the
6new operator of a hospital that has a days data source in whole or
7in part from a previous operator may enter into an agreement with
8the department to confirm that it is financially responsible or to
9become financially responsible to the department for the
10outstanding monetary obligation to the Medi-Cal program of the
11previous operator in order to avoid being classified as a new
12hospital for purposes of this article. This process shall be available
13for changes of ownership that occur before, on, or after January
141, 2014.

15(2) The outstanding monetary obligation referred to in
16subdivision (o) of Section 14169.51 and subdivision (u) of Section
1714169.71 shall include liabilities for all of the following:

18(A) Payment of the quality assurance fee established pursuant
19to Article 5.231 (commencing with Section 14169.71).

20(B) Known overpayments that have been asserted by the
21department or its fiscal intermediary by sending a written
22communication that is received by the hospital prior to the date
23that the new operator becomes the licensee of the hospital.

24(C) Overpayments that are asserted after that date and arise from
25customary reconciliations of payments, such as cost report
26settlements, and, with the exception of overpayments described in
27subparagraph (B), shall exclude liabilities arising from the
28fraudulent or intentionally criminal act of a prior operator if the
29new operator did not knowingly participate in or continue that
30fraudulent or criminal act after becoming the licensee.

31(3) The department shall have the discretion to determine
32whether the new owner properly and fully agreed to be financially
33responsible for the outstanding monetary obligation in connection
34with the Medi-Cal program and seek additional assurances as the
35department deems necessary. However, a new owner that executes
36an agreement with the department as described in paragraph (1)
37shall be conclusively deemed to have agreed to be financially
38responsible for the outstanding monetary obligation in connection
39with the Medi-Cal program. The department may establish the
40terms for satisfying the outstanding monetary obligation in
P28   1connection with the Medi-Cal program, including, but not limited
2to, recoupment from amounts payable to the hospital under this
3section.

4

14169.59.  

The department shall make disbursements from the
5Hospital Quality Assurance Revenue Fund consistent with all of
6the following:

7(a) Fund disbursements shall be made periodically within 15
8days of each date on which quality assurance fees are due from
9hospitals.

10(b) The funds shall be disbursed in accordance with the order
11of priority set forth in subdivision (b) of Section 14169.73, except
12that funds may be set aside for increased capitation payments to
13managed care health plans pursuant to subdivision (f) of Section
1414169.54.

15(c) The funds shall be disbursed in each payment cycle in
16accordance with the order of priority set forth in subdivision (b)
17of Section 14169.73 as modified by subdivision (b) so that the
18supplemental payments, direct grants to hospitals, and increased
19capitation payments to managed health care plans are made to the
20maximum extent for which funds are available.

21(d) To the maximum extent possible, consistent with the
22availability of funds in the Hospital Quality Assurance Revenue
23Fund and the timing of federal approvals, the supplemental
24payments, direct grants to hospitals, and increased capitation
25payments to managed health care plans under this article shall be
26made before December 31, 2015.

27(e) The aggregate amount of funds to be disbursed to private
28hospitals shall be determined under Sections 14169.52 and
2914169.53. The aggregate amount of funds to be disbursed to
30managed health care plans shall be determined under Section
3114169.54. The aggregate amount of direct grants to designated
32 and nondesignated public hospitals shall be determined under
33Section 14169.56.

34

14169.60.  

(a) Exclusive of payments made under former
35Article 5.21 (commencing with Section 14167.1), former Article
365.226 (commencing with Section 14168.1), and Article 5.228
37(commencing with Section 14169.1), payment rates for hospital
38outpatient services, furnished by private hospitals, nondesignated
39public hospitals, and designated public hospitals before December
P29   131, 2015, exclusive of amounts payable under this article, shall
2not be reduced below the rates in effect on January 1, 2014.

3(b) Rates payable to hospitals for hospital inpatient services
4furnished before December 31, 2015, under contracts negotiated
5pursuant to the selective provider contracting program under Article
62.6 (commencing with Section 14081), shall not be reduced below
7the contract rates in effect on January 1, 2014. This subdivision
8shall not prohibit changes to the supplemental payments paid to
9individual hospitals under Sections 14166.12, 14166.17, and
1014166.23, provided that the aggregate amount of the payments for
11each subject fiscal year is not less than the minimum amount
12permitted under former Section 14167.13.

13(c) Notwithstanding Section 14105.281, exclusive of payments
14made under former Article 5.21 (commencing with Section
1514167.1), former Article 5.226 (commencing with Section
1614168.1), and Article 5.228 (commencing with Section 14169.1),
17payments to private hospitals for hospital inpatient services
18furnished before January 1, 2014, that are not reimbursed under a
19contract negotiated pursuant to the selective provider contracting
20program under Article 2.6 (commencing with Section 14081),
21exclusive of amounts payable under this article, shall not be less
22than the amount of payments that would have been made under
23the payment methodology in effect on the effective date of this
24article.

25(d) The requirements in subdivisions (b) and (c) shall be met
26with respect to the inpatient hospital reimbursement methodology
27based on diagnosis-related groups pursuant to Section 14105.28
28if the rates paid under the Medi-Cal inpatient hospital
29reimbursement methodology based on diagnosis-related groups
30result in an average payment per discharge to all hospitals subject
31to the new reimbursement methodology, calculated on an aggregate
32basis per subject fiscal year, exclusive of amounts payable under
33this article, amounts payable under Sections 14166.11 and
3414166.23, and if amounts payable under Sections 14166.12 and
3514166.17 are not included in the payments under the
36diagnosis-related group methodology and continue to be paid
37separately to hospitals, exclusive of those amounts, that is not less
38than the average payment per discharge to the hospitals, exclusive
39of amounts payable under this article, amounts payable under
40Sections 14166.11 and 14166.23, and if amounts payable under
P30   1Sections 14166.12 and 14166.17 are not included in the payments
2under the diagnosis-related group methodology and continue to
3be paid separately to hospitals, exclusive of those amounts,
4calculated on an aggregate basis for the six months ending
5December 31, 2013, adjusted, in consultation with the hospital
6community, to reflect the movement of populations into managed
7care under Article 5.4 (commencing with Section 14180).

8(e) Solely for purposes of this article, a rate reduction or a
9change in a rate methodology that is enjoined by a court shall be
10included in the determination of a rate or a rate methodology until
11all appeals or judicial reviews have been exhausted and the rate
12reduction or change in rate methodology has been permanently
13enjoined, denied by the federal government, or otherwise
14permanently prevented from being implemented.

15(f) Disproportionate share replacement payments to private
16hospitals shall be not less than the amount determined pursuant to
17Section 14166.11. For purposes of this subdivision, references to
18Section 14166.11 are to the version of Section 14166.11 in effect
19on the effective date of the act that added this subdivision.

20

14169.61.  

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

21(1) Promptly submit any state plan amendment or waiver request
22that may be necessary to implement this article.

23(2) Promptly seek federal approvals or waivers as may be
24necessary to implement this article and to obtain federal financial
25participation to the maximum extent possible for the payments
26under this article.

27(3) Amend the contracts between the managed health care plans
28and the department as necessary to incorporate the provisions of
29Sections 14169.54 and 14169.55 and promptly seek all necessary
30federal approvals of those amendments. The department shall
31 pursue amendments to the contracts as soon as possible after the
32effective date of this article and Article 5.231 (commencing with
33Section 14169.71), and shall not wait for federal approval of this
34article or Article 5.231 (commencing with Section 14169.71) prior
35to pursuing amendments to the contracts. The amendments to the
36contracts shall, among other provisions, set forth an agreement to
37increase capitation payments to managed health care plans under
38Section 14169.54 and increase payments to hospitals under Section
3914169.55 in a manner that relates back to January 1, 2014, or as
40soon thereafter as possible, conditioned on obtaining all federal
P31   1approvals necessary for federal financial participation for the
2increased capitation payments to the managed health care plans.

3(b) In implementing this article, the department may utilize the
4services of the Medi-Cal fiscal intermediary through a change
5order to the fiscal intermediary contract to administer this program,
6consistent with the requirements of Sections 14104.6, 14104.7,
714104.8, and 14104.9. Contracts entered into for purposes of
8implementing this article or Article 5.231 (commencing with
9Section 14169.71) shall not be subject to Part 2 (commencing with
10Section 10100) of Division 2 of the Public Contract Code.

11(c) This article shall become inoperative if either of the
12following occurs:

13(1) In the event, and on the effective date, of a final judicial
14determination made by any court of appellate jurisdiction or a final
15determination by the federal Department of Health and Human
16Services or the federal Centers for Medicare and Medicaid Services
17that Section 14169.52 orbegin delete Sectionend delete 14169.53 cannot be implemented.
18This paragraph shall not apply to a final judicial determination
19made by any court of appellate jurisdiction in a case brought by
20hospitals located outside the State of California.

21(2) In the event both of the following conditions exist:

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

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

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

37(e) In the event any hospital, or any party on behalf of a hospital,
38initiates a case or proceeding in any state or federal court in which
39the hospital seeks any relief of any sort whatsoever, including, but
40not limited to, monetary relief, injunctive relief, declaratory relief,
P32   1or a writ, based in whole or in part on a contention that any or all
2of this article or Article 5.231 (commencing with Section 14169.71)
3is unlawful and may not be lawfully implemented, both of the
4following shall apply:

5(1) Payments shall not be made to the hospital pursuant to this
6article until the case or proceeding is finally resolved, including
7the final disposition of all appeals.

8(2) Any amount computed to be payable to the hospital pursuant
9to this article shall be withheld by the department and shall be paid
10to the hospital only after the case or proceeding is finally resolved,
11including the final disposition of all appeals.

12(f) Subject to Section 14169.74, no payment shall be made under
13this article until all necessary federal approvals for the payment
14and for the fee provisions in Article 5.231 (commencing with
15Section 14169.71) have been obtained and the fee has been
16imposed and collected. Notwithstanding any other law, payments
17under this article shall be made only to the extent that the fee
18established in Article 5.231 (commencing with Section 14169.71)
19is collected and available to cover the nonfederal share of the
20payments.

21(g) A hospital’s receipt of payments under this article for
22services rendered prior to the effective date of this article is
23conditioned on the hospital’s continued participation in Medi-Cal
24for at least 30 days after the effective date of this article.

25(h) All payments made by the department to hospitals and
26managed health care plans under this article shall be made only
27from the following:

28(1) The quality assurance fee set forth in Article 5.231
29(commencing with Section 14169.71) and due and payable on or
30before December 31, 2015, along with any interest or other
31investment income thereon.

32(2) Federal reimbursement and any other related federal funds.

33(i) In order to ensure access to care for hospital services, the
34director shall seek federal approval for supplemental payments for
35hospital services provided to all Medi-Cal populations, including
36the optional and expansion populations.

37

14169.62.  

Notwithstanding any other provision of this article
38or Article 5.231 (commencing with Section 14169.71), the director
39may proportionately reduce the amount of any supplemental
40payments or increased capitation payments under this article to
P33   1the extent that the payment would result in the reduction of other
2amounts payable to a hospital or managed health care plan due to
3the application of federal law.

4

14169.63.  

The director may, pursuant to Section 14169.80,
5decide not to implement or to discontinue implementation of this
6article and Article 5.231 (commencing with Section 14169.71),
7and to retroactively invalidate the requirements for supplemental
8payments or other payments under this article.

9

14169.64.  

(a) This article shall remain operative only until the
10later of the following:

11(1) January 1, 2017.

12(2) The date of the last payment of the quality assurance fee
13payments pursuant to Article 5.231 (commencing Section
1414169.71).

15(3) The date of the last payment from the department pursuant
16to this article.

17(b) If this article becomes inoperative under paragraph (1) of
18subdivision (a), this article shall be repealed on January 1, 2017,
19unless a later enacted statute enacted before that date, deletes or
20extends that date.

21(c) If this article becomes inoperative under paragraph (2) or
22(3) of subdivision (a), this article shall be repealed on January 1
23of the year following the date this article becomes inoperative,
24unless a later enacted statute enacted before that date, deletes or
25extends that date.

26

14169.65.  

Notwithstanding any other law, if federal approval
27or a letter that indicates likely federal approval in accordance with
28Section 14169.74 has not been received on or before December
291, 2015, then this article shall become inoperative, and as of
30December 1, 2015, is repealed, unless a later enacted statute, that
31is enacted before December 1, 2015, deletes or extends that date.

32

14169.66.  

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.

37

14169.67.  

If the director determines that this article has become
38inoperative pursuant to Section 14169.61, 14169.64, 14169.65, or
3914169.80, the director shall execute a declaration stating that this
40determination has been made and stating the basis for this
P34   1determination. The director shall retain the declaration and provide
2a 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.

8

14169.68.  

(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 Section 14169.52, Section
1114169.53, and Section 14169.54, and to adopt a corresponding
12increase in the fee imposed pursuant to Article 5.231 (commencing
13with Section 14169.71), consistent with federal law and regulations,
14if the director determines that the maximum available upper
15payment limits described in subdivision (a) of Section 14169.52
16or subdivision (a) of Section 14169.53, or the amount of federal
17financial participation for increased capitation payments to
18managed care health plans in subdivision (c) of Section 14169.54,
19have increased during the program period.

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

22(1) Require the director to work in consultation with the hospital
23community in seeking any necessary approvals from the federal
24Centers for Medicare and Medicaid Services to increase payments
25to hospitals and to impose corresponding fee increases.

26(2) Require that, in the event that the director determines that
27the maximum available upper payment limits in subdivision (a)
28of Section 14169.52 or subdivision (a) of Section 14169.53, or the
29amount of federal financial participation for increased capitation
30payments to managed care health plans in subdivision (c) of Section
3114169.54, have increased during the program period, the increases
32shall first be made available for the purposes of this section prior
33to being used for other purposes.

34(c) Notwithstanding any other provision of this article or Article
355.231 (commencing with Section 14169.71), failure to secure, or
36denial of, any necessary federal approvals required by the
37legislation described in subdivision (a) shall not affect
38implementation of this article or Article 5.231 (commencing with
39Section 14169.71).

P35   1

14169.69.  

To the extent permitted by federal law and other
2federal requirements, the director shall develop and describe in
3provider bulletins and on the department’s Internet Web site a
4process by which a private general acute care hospital located
5outside the state that serves Medi-Cal beneficiaries may opt in to
6pay the quality assurance fee pursuant to Article 5.231
7(commencing with Section 14169.71) and receive supplemental
8payments pursuant to this article, in the same manner that the
9hospital could participate if it were located in the state.
10Notwithstanding Section 14169.51 and Section 14169.71, the
11department shall rely on reliable data to make reasonable estimates
12or projections made with respect to the hospital as to the data,
13including, but not limited to, the days data source, used to calculate
14the fees due under Article 5.231 (commencing with Section
1514169.71) and the supplemental payments under this article.
16Hospitals located outside the state that would meet the definition
17of a small and rural hospital if they were located in the state shall
18be deemed a small and rural hospital for the purposes of Article
195.231 (commencing with Section 14169.71) and this article.

20

14169.70.  

(a) Notwithstanding any provision of this article or
21Article 5.231 (commencing with Section 14169.71), the director
22may correct any identified material and egregious errors in the
23data, including, but not limited to, the days data source, used in
24this article or Article 5.231 (commencing with Section 14169.71).
25An error is material and egregious if the error is clear to the
26director, based on information the director finds to be reliable, and
27results in an increase or decrease to a hospital’s supplemental
28payment under Sections 14169.52 and 14169.53, or an increase
29or decrease to a hospital’s quality assurance fee payments under
30Article 5.231 (commencing with Section 14169.71), of at least one
31million dollars ($1,000,000) for any subject fiscal year. The
32director’s determination whether to exercise his or her discretion
33under this section and any determination made by the director
34under this section shall not be subject to judicial review, except
35that a hospital may bring a writ of mandate under Section 1085 of
36the Code of Civil Procedure to rectify an abuse of discretion by
37the department in correcting that hospital’s data when that
38correction results in lower supplemental payments under Sections
3914169.52 and 14169.53 in the aggregate or higher quality assurance
P36   1fees for that hospital pursuant to Article 5.231 (commencing with
2Section 14169.71).

3(b) Notwithstanding any other law, with respect to a hospital
4described in subdivision (f) of Section 14165.50, both of the
5following shall apply:

6(1) The hospital shall not be considered a new hospital, as
7defined in subdivision (o) of Section 14169.51 for purposes of this
8article and subdivision (u) of Section 14169.71 for purposes of
9 Article 5.231 (commencing with Section 14169.71).

10(2) To the extent permitted by federal law and other federal
11requirements, the department shall use the best available and
12reasonable estimates or projections made with respect to the
13hospital for an annual period as the data, including, but not limited
14to, the days data source, used in this article or Article 5.231
15(commencing with Section 14169.71).

16

SEC. 8.  

Article 5.231 (commencing with Section 14169.71)
17is added to Chapter 7 of Part 3 of Division 9 of the Welfare and
18Institutions Code
, to read:

19 

20Article 5.231.  Private Hospital Quality Assurance Fee Act of
212013
22

 

23

14169.71.  

For purposes of this article, the following definitions
24shall apply:

25(a) “Annual fee-for-service days” means the number of
26fee-for-service days of each hospital subject to the quality assurance
27fee, as reported on the days data source.

28(b) “Annual managed care days” means the number of managed
29care days of each hospital subject to the quality assurance fee, as
30reported on the days data source.

31(c) “Annual Medi-Cal days” means the number of Medi-Cal
32days of each hospital subject to the quality assurance fee, as
33reported on the days data source.

34(d) “Converted hospital” means a hospital described in
35subdivision (b) of Section 14169.51.

36(e) “Days data source” means the hospital’s Annual Financial
37Disclosure Report filed with the Office of Statewide Health
38Planning and Development as of June 6, 2013, for its fiscal year
39ending during 2010.

P37   1(f) “Department” means the State Department of Health Care
2Services.

3(g) “Designated public hospital” shall have the meaning given
4in subdivision (d) of Section 14166.1 as of January 1, 2014.

5(h) “Director” means the Director of Health Care Services.

6(i) “Exempt facility” means any of the following:

7(1) A public hospital, which shall include either of the following:

8(A) A hospital, as defined in paragraph (25) of subdivision (a)
9of Section 14105.98.

10(B) A tax-exempt nonprofit hospital that is licensed under
11subdivision (a) of Section 1250 of the Health and Safety Code and
12operating a hospital owned by a local health care district, and is
13affiliated with the health care district hospital owner by means of
14the district’s status as the nonprofit corporation’s sole corporate
15member.

16(2) With the exception of a hospital that is in the Charitable
17Research Hospital peer group, as set forth in the 1991 Hospital
18Peer Grouping Report published by the department, a hospital that
19is a hospital designated as a specialty hospital in the hospital’s
20most recently filed Office of Statewide Health Planning and
21Development Hospital Annual Financial Disclosure Report as of
22January 1, 2014.

23(3) A hospital that satisfies the Medicare criteria to be a
24long-term care hospital.

25(4) A small and rural hospital as specified in Section 124840
26of the Health and Safety Code designated as that in the hospital’s
27most recently filed Office of Statewide Health Planning and
28Development Hospital Annual Financial Disclosure Report as of
29January 1, 2014.

30(j) “Federal approval” means the approval by the federal
31government of both the quality assurance fee established pursuant
32to this article and the payments to private hospitals described in
33Article 5.230 (commencing with Section 14169.51).

34(k) (1) “Fee-for-service per diem quality assurance fee rate”
35means a fixed daily fee on fee-for-service days.

36(2) The fee-for-service per diem quality assurance fee rate shall
37be three hundred ninety-nine dollars and thirty-six cents ($399.36)
38per day for the 2014 calendar year and four hundred fifty-four
39dollars and seventy-nine cents ($454.79) per day for the 2015
40calendar year.

P38   1(3) Upon federal approval or conditional federal approval
2described in Section 14169.74, the director shall determine the
3fee-for-service per diem quality assurance fee rate based on the
4funds required to make the payments specified in Article 5.230
5(commencing with Section 14169.51), in consultation with the
6hospital community.

7(l) “Fee-for-service days” means inpatient hospital days where
8the service type is reported as “acute care,” “psychiatric care,” and
9“rehabilitation care,” and the payer category is reported as
10“Medicare traditional,” “county indigent programs-traditional,”
11“other third parties-traditional,” “other indigent,” and “other
12payers,” for purposes of the Annual Financial Disclosure Report
13submitted by hospitals to the Office of Statewide Health Planning
14and Development.

15(m) “General acute care hospital” means any hospital licensed
16pursuant to subdivision (a) of Section 1250 of the Health and Safety
17Code.

18(n) “Hospital community” means any general acute care hospital
19and any hospital industry organization that represents general acute
20care hospitals.

21(o) “Managed care days” means inpatient hospital days where
22the service type is reported as “acute care,” “psychiatric care,” and
23“rehabilitation care,” and the payer category is reported as
24“Medicare managed care,” “county indigent programs-managed
25care,” and “other third parties-managed care,” for purposes of the
26Annual Financial Disclosure Report submitted by hospitals to the
27Office of Statewide Health Planning and Development.

28(p) “Managed care per diem quality assurance fee rate” means
29a fixed fee on managed care days of one hundred forty-five dollars
30($145) per day for the 2014 calendar year and one hundred seventy
31dollars ($170) per day for the 2015 calendar year.

32(q) “Medi-Cal days” means inpatient hospital days where the
33service type is reported as “acute care,” “psychiatric care,” and
34“rehabilitation care,” and the payer category is reported as
35“Medi-Cal traditional” and “Medi-Cal managed care,” for purposes
36of the Annual Financial Disclosure Report submitted by hospitals
37to the Office of Statewide Health Planning and Development.

38(r) “Medi-Cal fee-for-service days” means inpatient hospital
39days where the service type is reported as “acute care,” “psychiatric
40care,” and “rehabilitation care,” and the payer category is reported
P39   1as “Medi-Cal traditional” for purposes of the Annual Financial
2Disclosure Report submitted by hospitals to the Office of Statewide
3Health Planning and Development.

4(s) “Medi-Cal managed care days” means inpatient hospital
5days as reported on the days data source when the service type is
6reported as “acute care,” “psychiatric care,” and “rehabilitation
7care,” and the payer category is reported as “Medi-Cal managed
8care” for purposes of the Annual Financial Disclosure Report
9submitted by hospitals to the Office of Statewide Health Planning
10and Development.

11(t) “Medi-Cal per diem quality assurance fee rate” means a fixed
12fee on Medi-Cal days of four hundred seventy-six dollars and
13twenty-three cents ($476.23) per day for the 2014 calendar year
14and five hundred forty-seven dollars and sixty-eight cents ($547.68)
15for the 2015 calendar year.

16(u) “New hospital” means a hospital operation, business, or
17facility functioning under current or prior ownership as a private
18hospital that does not have a days data source or a hospital that
19has a days data source in whole, or in part, from a previous operator
20 where there is an outstanding monetary obligation owed to the
21state in connection with the Medi-Cal program and the hospital is
22not, or does not agree to become, financially responsible to the
23department for the outstanding monetary obligation in accordance
24with subdivision (d) of Section 14169.58.

25(v) “Nondesignated public hospital” means either of the
26following:

27(1) A public hospital that is licensed under subdivision (a) of
28Section 1250 of the Health and Safety Code, is not designated as
29a specialty hospital in the hospital’s most recently filed Annual
30Financial Disclosure Report as of January 1, 2014, and satisfies
31the definition in paragraph (25) of subdivision (a) of Section
3214105.98, excluding designated public hospitals.

33(2) A tax-exempt nonprofit hospital that is licensed under
34subdivision (a) of Section 1250 of the Health and Safety Code, is
35not designated as a specialty hospital in the hospital’s most recently
36filed Annual Financial Disclosure Report as of January 1, 2014,
37is operating a hospital owned by a local health care district, and
38is affiliated with the health care district hospital owner by means
39of the district’s status as the nonprofit corporation’s sole corporate
40member.

P40   1(w) “Prepaid health plan hospital” means a hospital owned by
2a nonprofit public benefit corporation that shares a common board
3of directors with a nonprofit health care service plan, which
4exclusively contracts with no more than two medical groups in the
5 state to provide or arrange for professional medical services for
6the enrollees of the plan.

7(x) “Prepaid health plan hospital managed care per diem quality
8assurance fee rate” means a fixed fee on non-Medi-Cal managed
9care days for prepaid health plan hospitals of eighty-one dollars
10and twenty cents ($81.20) per day for the 2014 calendar year and
11ninety-five dollars and twenty cents ($95.20) per day for the 2015
12calendar year.

13(y) “Prepaid health plan hospital Medi-Cal managed care per
14diem quality assurance fee rate” means a fixed fee on Medi-Cal
15managed care days for prepaid health plan hospitals of two hundred
16sixty-six dollars and sixty-nine cents ($266.69) per day for the
172014 calendar year and three hundred six dollars and seventy cents
18($306.70) per day for the 2015 calendar year.

19(z) “Private hospital” means a hospital that meets all of the
20following conditions:

21(1) Is licensed pursuant to subdivision (a) of Section 1250 of
22the Health and Safety Code.

23(2) Is in the Charitable Research Hospital peer group, as set
24forth in the 1991 Hospital Peer Grouping Report published by the
25department, or is not designated as a specialty hospital in the
26hospital’s most recently filed Office of Statewide Health Planning
27and Development Annual Financial Disclosure Report as of January
281, 2014.

29(3) Does not satisfy the Medicare criteria to be classified as a
30long-term care hospital.

31(4) Is a nonpublic hospital, nonpublic converted hospital, or
32converted hospital as those terms are defined in paragraphs (26)
33to (28), inclusive, respectively, of subdivision (a) of Section
3414105.98.

35(5) Is not a nondesignated public hospital or a designated
36hospital.

37(aa) “Program period” means the period from January 1, 2014,
38to December 31, 2015, inclusive.

P41   1(ab) “Quality assurance fee” means the quality assurance fee
2assessed pursuant to Section 14169.72 and collected on the basis
3of the quarterly quality assurance fee.

4(ac) (1) “Quarterly quality assurance fee” means, with respect
5to a hospital that is not a prepaid health plan hospital, the sum of
6all of the following:

7(A) The annual fee-for-service days for an individual hospital
8multiplied by the fee-for-service per diem quality assurance fee
9rate, divided by four.

10(B) The annual managed care days for an individual hospital
11multiplied by the managed care per diem quality assurance fee
12rate, divided by four.

13(C) The annual Medi-Cal days for an individual hospital
14multiplied by the Medi-Cal per diem quality assurance fee rate,
15divided by four.

16(2) “Quarterly quality assurance fee” means, with respect to a
17hospital that is a prepaid health plan hospital, the sum of all of the
18following:

19(A) The annual fee-for-service days for an individual hospital
20multiplied by the fee-for-service per diem quality assurance fee
21rate, divided by four.

22(B) The annual managed care days for an individual hospital
23multiplied by the prepaid health plan hospital managed care per
24diem quality assurance fee rate, divided by four.

25(C) The annual Medi-Cal managed care days for an individual
26hospital multiplied by the prepaid health plan hospital Medi-Cal
27managed care per diem quality assurance fee rate, divided by four.

28(D) The annual Medi-Cal fee-for-service days for an individual
29hospital multiplied by the Medi-Cal per diem quality assurance
30fee rate, divided by four.

31(ad) “Subject fiscal quarter” means a state fiscal quarter during
32the program period.

33(ae) “Subject fiscal year” means a state fiscal year that ends
34after July 1, 2013, and begins before January 1, 2016.

35(af) “Upper payment limit” means a federal upper payment limit
36on the amount of the Medicaid payment for which federal financial
37participation is available for a class of service and a class of health
38care providers, as specified in Part 447 of Title 42 of the Code of
39Federal Regulations. The applicable upper payment limit shall be
40separately calculated for inpatient and outpatient hospital services.

P42   1

14169.72.  

(a) There shall be imposed on each general acute
2care hospital that is not an exempt facility a quality assurance fee,
3provided that a quality assurance fee under this article shall not be
4imposed on a converted hospital for the periods when the hospital
5is a public hospital or a new hospital.

6(b) The department shall compute the quarterly quality assurance
7fee for each subject fiscal quarter starting on January 1, 2014, and
8through and including December 31, 2015.

9(c) Subject to Section 14169.74, upon receipt of federal
10approval, the following shall become operative:

11(1) Within 10 business days following receipt of the notice of
12federal approval from the federal government, the department shall
13send notice to each hospital subject to the quality assurance fee
14the following information:

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

16(B) The quarterly quality assurance fee for each subject fiscal
17year.

18(C) The date on which each payment is due.

19(2) The hospitals shall pay the quarterly quality assurance fees,
20based on a schedule developed by the department. The department
21shall establish the date that each payment is due, provided that the
22 first payment shall be due no earlier than 20 days following the
23date the department sends the notice pursuant to paragraph (1),
24and the payments shall be paid at least one month apart, but if
25possible, the payments shall be paid on a quarterly basis.

26(3) Notwithstanding any other provision of this section, the
27amount of each hospital’s quarterly quality assurance fees for the
28program period that have not been paid by the hospital before
29December 15, 2015, shall be paid by the hospital no later than
30December 15, 2015.

31(4) Each hospital described in subdivision (a) shall pay the
32quarterly quality assurance fees that are due, if any, in the amounts
33and at the times set forth in the notice unless superseded by a
34subsequent notice from the department.

35(d) The quality assurance fee, as paid pursuant to this section,
36shall be paid by each hospital subject to the fee to the department
37for deposit in the Hospital Quality Assurance Revenue Fund
38established pursuant to Section 14167.35. Deposits may be
39accepted at any time and will be credited toward the program
40period.

P43   1(e) This section shall become inoperative if the federal Centers
2for Medicare and Medicaid Services denies approval for, or does
3not approve before July 1, 2016, the implementation of the quality
4assurance fee pursuant to this article or the supplemental payments
5to private hospitals described in Sections 14169.52 and 14169.53.

6(f) In no case shall the aggregate fees collected in a federal fiscal
7year pursuant to this section, former Section 14167.32, and Sections
814168.32 and 14169.32 exceed the maximum percentage of the
9annual aggregate net patient revenue for hospitals subject to the
10fee that is prescribed pursuant to federal law and regulations as
11necessary to preclude a finding that an indirect guarantee has been
12created.

13(g) (1) Interest shall be assessed on quality assurance fees not
14paid on the date due at the greater of 10 percent per annum or the
15rate at which the department assesses interest on Medi-Cal program
16overpayments to hospitals that are not repaid when due. Interest
17shall begin to accrue the day after the date the payment was due
18and shall be deposited in the Hospital Quality Assurance Revenue
19Fund.

20(2) If any fee payment is more than 60 days overdue, a penalty
21equal to the interest charge described in paragraph (1) shall be
22assessed and due for each month for which the payment is not
23received after 60 days.

24(h) When a hospital fails to pay all or part of the quality
25assurance fee on or before the date that payment is due, the
26department may immediately begin to deduct the unpaid assessment
27and interest from any Medi-Cal payments owed to the hospital,
28or, in accordance with Section 12419.5 of the Government Code,
29from any other state payments owed to the hospital until the full
30amount is recovered. All amounts, except penalties, deducted by
31the department under this subdivision shall be deposited in the
32Hospital Quality Assurance Revenue Fund. The remedy provided
33to the department by this section is in addition to other remedies
34available under law.

35(i) The payment of the quality assurance fee shall not be
36considered as an allowable cost for Medi-Cal cost reporting and
37reimbursement purposes.

38(j) The department shall work in consultation with the hospital
39community to implement this article and Article 5.230
40(commencing with Section 14169.51).

P44   1(k) This subdivision creates a contractually enforceable promise
2on behalf of the state to use the proceeds of the quality assurance
3fee, including any federal matching funds, solely and exclusively
4for the purposes set forth in this article as they existed on the
5effective date of this article, to limit the amount of the proceeds
6of the quality assurance fee to be used to pay for the health care
7coverage of children to the amounts specified in this article, to
8limit any payments for the department’s costs of administration
9to the amounts set forth in this article on the effective date of this
10article, to maintain and continue prior reimbursement levels as set
11forth in Section 14169.60 on the effective date of that section, and
12to otherwise comply with all its obligations set forth in Article
135.230 (commencing with Section 14169.51) and this article
14provided that amendments that arise from, or have as a basis for,
15a decision, advice, or determination by the federal Centers for
16Medicare and Medicaid Services relating to federal approval of
17the quality assurance fee or the payments set forth in this article
18or Article 5.230 (commencing with Section 14169.51) shall control
19for the purposes of this subdivision.

20(l) (1) Effective January 1, 2016, the rates payable to hospitals
21and managed health care plans under Medi-Cal shall be the rates
22then payable without the supplemental and increased capitation
23payments set forth in Article 5.230 (commencing with Section
2414169.51).

25(2) The supplemental payments and other payments under
26Article 5.230 (commencing with Section 14169.51) shall be
27regarded as quality assurance payments, the implementation or
28suspension of which does not affect a determination of the
29adequacy of any rates under federal law.

30(m) (1) Subject to paragraph (2), the director may waive any
31or all interest and penalties assessed under this article in the event
32that the director determines, in his or her sole discretion, that the
33hospital has demonstrated that imposition of the full quality
34assurance fee on the timelines applicable under this article has a
35high likelihood of creating a financial hardship for the hospital or
36a significant danger of reducing the provision of needed health
37care services.

38(2) Waiver of some or all of the interest or penalties under this
39subdivision shall be conditioned on the hospital’s agreement to
40make fee payments, or to have the payments withheld from
P45   1payments otherwise due from the Medi-Cal program to the hospital,
2on a schedule developed by the department that takes into account
3the financial situation of the hospital and the potential impact on
4services.

5(3) A decision by the director under this subdivision shall not
6be subject to judicial review.

7(4) If fee payments are remitted to the department after the date
8determined by the department to be the final date for calculating
9the final supplemental payments under this article and Article
105.230 (commencing with Section 14169.51), the fee payments
11shall be retained in the fund for purposes of funding supplemental
12payments supported by a hospital quality assurance fee program
13implemented under subsequent legislation. However, if
14supplemental payments are not implemented under subsequent
15legislation, then those fee payments shall be returned to the private
16hospitals pro rata based on each hospital’s total fee payments under
17this article to the extent consistent with federal law.

18(5) If during the implementation of this article, fee payments
19that were due under former Article 5.21 (commencing with Section
2014167.1) and former Article 5.22 (commencing with Section
2114167.31), or former Article 5.226 (commencing with Section
2214168.1) and Article 5.227 (commencing with Section 14168.31),
23or Article 5.228 (commencing with Section 14169.1) and Article
245.229 (commencing with Section 14169.31) are remitted to the
25department under a payment plan or for any other reason, and the
26final date for calculating the final supplemental payments under
27those articles has passed, then those fee payments shall be
28deposited in the fund to support the uses established by this article.

29

14169.73.  

(a) (1) All fees required to be paid to the state
30pursuant to this article shall be paid in the form of remittances
31payable to the department.

32(2) The department shall directly transmit the fee payments to
33the Treasurer to be deposited in the Hospital Quality Assurance
34Revenue Fund, created pursuant to Section 14167.35.
35Notwithstanding Section 16305.7 of the Government Code, any
36interest and dividends earned on deposits in the fund from the
37proceeds of the fee assessed pursuant to this article shall be retained
38in the fund for purposes specified in subdivision (b).

39(b) (1) Notwithstanding subdivision (c) of Section 14167.35,
40subdivision (b) of Section 14168.33, and subdivision (b) of Section
P46   114169.33, all funds from the proceeds of the fee assessed pursuant
2to this article in the Hospital Quality Assurance Revenue Fund,
3together with any interest and dividends earned on money in the
4fund, shall continue to be used exclusively to enhance federal
5financial participation for hospital services under the Medi-Cal
6program, to provide additional reimbursement to, and to support
7quality improvement efforts of, hospitals, and to minimize
8uncompensated care provided by hospitals to uninsured patients,
9as well as to pay for the state’s administrative costs and to provide
10funding for children’s health coverage, in the following order of
11priority:

12(A) To pay for the department’s staffing and administrative
13 costs directly attributable to implementing Article 5.230
14(commencing with Section 14169.51) and this article, not to exceed
15begin delete two million dollars ($2,000,000)end deletebegin insert three million dollars ($3,000,000)end insert
16 for the program period.

17(B) To pay for the health care coverage for children in the
18amount of one hundred fifty-five million dollars ($155,000,000)
19for each subject fiscal quarter during the 2014 and 2015 calendar
20years.

21(C) To make increased capitation payments to managed health
22care plans pursuant to Article 5.230 (commencing with Section
2314169.51).

24(D) To make increased payments and direct grants to hospitals
25pursuant to Article 5.230 (commencing with Section 14169.51).

26(2) Notwithstanding subdivision (c) of Section 14167.35,
27subdivision (b) of Section 14168.33, and subdivision (b) of Section
2814169.33, and notwithstanding Section 13340 of the Government
29Code, the moneys in the Hospital Quality Assurance Revenue
30Fund shall be continuously appropriated without regard to fiscal
31year for the purposes of this article, Article 5.230 (commencing
32with Section 14169.51), Article 5.229 (commencing with Section
3314169.31), Article 5.228 (commencing with Section 14169.1),
34Article 5.227 (commencing with Section 14168.31), former Article
355.226 (commencing with Section 14168.1), former Article 5.22
36(commencing with Section 14167.31) and former Article 5.21
37(commencing with Section 14167.1).

38(c) Any amounts of the quality assurance fee collected in excess
39of the funds required to implement subdivision (b), including any
40funds recovered under subdivision (d) of Section 14169.61 or
P47   1subdivision (e) of Section 14169.78, shall be refunded to general
2acute care hospitals, pro rata with the amount of quality assurance
3fee paid by the hospital, subject to the limitations of federal law.
4If federal rules prohibit the refund described in this subdivision,
5the excess funds shall be returned to the private hospitals pro rata
6based on each hospital’s total fee payments under this article to
7the extent consistent with federal law.

8(d) Any methodology or other provision specified in Article
95.230 (commencing with Section 14169.51) or this article may be
10modified by the department, in consultation with the hospital
11community, to the extent necessary to meet the requirements of
12federal law or regulations to obtain federal approval or to enhance
13the probability that federal approval can be obtained, provided the
14modifications do not violate the spirit and intent of Article 5.230
15(commencing with Section 14169.51) or this article and are not
16inconsistent with the conditions of implementation set forth in
17 Section 14169.80.

18(e) The department, in consultation with the hospital community,
19shall make adjustments, as necessary, to the amounts calculated
20pursuant to Section 14169.72 in order to ensure compliance with
21the federal requirements set forth in Section 433.68 of Title 42 of
22the Code of Federal Regulations or elsewhere in federal law.

23(f) The department shall request approval from the federal
24Centers for Medicare and Medicaid Services for the implementation
25of this article. In making this request, the department shall seek
26specific approval from the federal Centers for Medicare and
27Medicaid Services to exempt providers identified in this article as
28exempt from the fees specified, including the submission, as may
29be necessary, of a request for waiver of the broad-based
30requirement, waiver of the uniform fee requirement, or both,
31pursuant to paragraphs (1) and (2) of subdivision (e) of Section
32433.68 of Title 42 of the Code of Federal Regulations.

33(g) Notwithstanding Chapter 3.5 (commencing with Section
3411340) of Part 1 of Division 3 of Title 2 of the Government Code,
35the department may implement this article or Article 5.230
36(commencing with Section 14169.51) by means of provider
37bulletins, all plan letters, or other similar instruction, without taking
38regulatory action. The department shall also provide notification
39to the Joint Legislative Budget Committee and to the appropriate
40policy and fiscal committees of the Legislature within five working
P48   1days when the above-described action is taken in order to inform
2the Legislature that the action is being implemented.

3

14169.74.  

(a) Notwithstanding any other provision of this
4article or Article 5.230 (commencing with Section 14169.51)
5requiring federal approvals, the department may impose and collect
6the quality assurance fee and may make payments under this article
7and Article 5.230 (commencing with Section 14169.51), including
8increased capitation payments, based upon receiving a letter from
9the federal Centers for Medicare and Medicaid Services or the
10United States Department of Health and Human Services that
11indicates likely federal approval, but only if and to the extent that
12the letter is sufficient as set forth in subdivision (b).

13(b) In order for the letter to be sufficient under this section, the
14director shall find that the letter meets both of the following
15requirements:

16(1) The letter is in writing and signed by an official of the federal
17Centers for Medicare and Medicaid Services or an official of the
18United States Department of Health and Human Services.

19(2) The director, after consultation with the hospital community,
20has determined, in the exercise of his or her sole discretion, that
21the letter provides a sufficient level of assurance to justify advanced
22implementation of the fee and payment provisions.

23(c) Nothing in this section shall be construed as modifying the
24requirement under Section 14169.61 that payments shall be made
25only to the extent a sufficient amount of funds collected as the
26 quality assurance fee are available to cover the nonfederal share
27of those payments.

28(d) Upon notice from the federal government that final federal
29approval for the fee model under this article or for the supplemental
30payments to private hospitals under Section 14169.52 or 14169.53
31has been denied, any fees collected pursuant to this section shall
32be refunded and any payments made pursuant to this article or
33Article 5.230 (commencing with Section 14169.51) shall be
34recouped, including, but not limited to, supplemental payments
35and grants, increased capitation payments, payments to hospitals
36by health care plans resulting from the increased capitation
37payments, and payments for the health care coverage of children.
38To the extent fees were paid by a hospital that also received
39payments under this section, the payments may first be recouped
P49   1from fees that would otherwise be refunded to the hospital prior
2to the use of any other recoupment method allowed under law.

3(e) Any payment made pursuant to this section shall be a
4conditional payment until final federal approval has been received.

5(f) The director shall have broad authority under this section to
6collect the quality assurance fee for an interim period after receipt
7of the letter described in subdivision (a) pending receipt of all
8necessary federal approvals. This authority shall include discretion
9to determine both of the following:

10(1) Whether the quality assurance fee should be collected on a
11full or pro rata basis during the interim period.

12(2) The dates on which payments of the quality assurance fee
13are due.

14(g) The department may draw against the Hospital Quality
15Assurance Revenue Fund for all administrative costs associated
16with implementation under this article or Article 5.230
17(commencing with Section 14169.51).

18(h) This section shall be implemented only to the extent federal
19 financial participation is not jeopardized by implementation prior
20to the receipt of all necessary final federal approvals.

21

14169.75.  

(a) Notwithstanding any other law, the director shall
22have discretion to modify any timeline or timelines in this article
23or Article 5.230 (commencing with Section 14169.51) if the letter
24that indicates likely federal approval, as described in Section
2514169.74, is not secured by December 15, 2015, and the director
26determines that it is impossible from an operational perspective
27to implement a timeline or timelines without the modification.

28(b) The department shall notify the fiscal and policy committees
29of the Legislature prior to implementing a modified timeline or
30timelines under subdivision (a).

31(c) The department shall consult with representatives of the
32hospital community in developing a modified timeline or timelines
33pursuant to this section.

34(d) The discretion to modify timelines under this section shall
35include, but not be limited to, discretion to accelerate payments to
36plans or hospitals.

37

14169.76.  

(a) Upon receipt of a letter that indicates likely
38federal approval that the director determines is sufficient for
39implementation under Section 14169.74, or upon the receipt of
40federal approval, the following shall occur:

P50   1(1) To the maximum extent possible, and consistent with the
2availability of funds in the Hospital Quality Assurance Revenue
3Fund, the department shall make all of the payments under Sections
414169.52, 14169.53, and 14169.54, including, but not limited to,
5supplemental payments and increased capitation payments, prior
6to January 1, 2016, except that the increased capitation payments
7under Section 14169.54 shall not be made until federal approval
8is obtained for these payments.

9(2) The department shall make supplemental payments to
10hospitals under Article 5.230 (commencing with Section 14169.51)
11consistent with the timeframe described in Section 14169.59 or a
12modified timeline developed pursuant to Section 14169.75.

13(b) Notwithstanding any other provision of this article or Article
145.230 (commencing with Section 14169.51), if the director
15determines, on or after December 15, 2015, that there are
16insufficient funds available in the Hospital Quality Assurance
17Revenue Fund to make all scheduled payments under Article 5.230
18(commencing with Section 14169.51) before January 1, 2016, he
19or she shall consult with representatives of the hospital community
20to develop an acceptable plan for making additional payments to
21hospitals and managed health care plans to maximize the use of
22delinquent fee payments or other deposits or interest projected to
23become available in the fund after December 15, 2015, but before
24June 15, 2016.

25(c) Nothing in this section shall require the department to
26continue to make payments under Article 5.230 (commencing with
27Section 14169.51) if, after the consultation required under
28subdivision (b), the director determines in the exercise of his or
29her sole discretion that a workable plan for the continued payments
30cannot be developed.

31(d) Subdivisions (b) and (c) shall be implemented only if and
32to the extent federal financial participation is available for
33continued supplemental payments and to providers and continued
34increased capitation payments to managed health care plans.

35(e) If any payment or payments made pursuant to this section
36are found to be inconsistent with federal law, the department shall
37recoup the payments by means of withholding or any other
38available remedy.

39(f) Nothing in this section shall be read as affecting the
40department’s ongoing authority to continue, after December 31,
P51   12015, to collect quality assurance fees imposed on or before
2December 31, 2015.

3

14169.77.  

Notwithstanding any other law, if actual federal
4approval or a letter that indicates likely federal approval in
5accordance with Section 14169.74 has not been received on or
6before December 1, 2015, then this article shall become
7inoperative, and as of December 1, 2015, is repealed, unless a later
8enacted statute, that is enacted before December 1, 2015, deletes
9or extends that date.

10

14169.78.  

(a) This article shall be implemented only as long
11as all of the following conditions are met:

12(1) Subject to Section 14169.73, the quality assurance fee is
13established in a manner that is fundamentally consistent with this
14article.

15(2) The quality assurance fee, including any interest on the fee
16after collection by the department, is deposited in a segregated
17fund apart from the General Fund.

18(3) The proceeds of the quality assurance fee, including any
19interest and related federal reimbursement, may only be used for
20the purposes set forth in this article.

21(b) No hospital shall be required to pay the quality assurance
22fee to the department unless and until the state receives and
23maintains federal approval.

24(c) Hospitals shall be required to pay the quality assurance fee
25to the department as set forth in this article only as long as all of
26the following conditions are met:

27(1) The federal Centers for Medicare and Medicaid Services
28allows the use of the quality assurance fee as set forth in this article
29in accordance with federal approval.

30(2) Article 5.230 (commencing with Section 14169.51) is
31enacted and remains in effect and hospitals are reimbursed the
32increased rates for services during the program period, as defined
33in Section 14169.51.

34(3) The full amount of the quality assurance fee assessed and
35collected pursuant to this article remains available only for the
36purposes specified in this article.

37(d) This article shall become inoperative if either of the
38following occurs:

39(1) In the event, and on the effective date, of a final judicial
40determination made by any court of appellate jurisdiction or a final
P52   1determination by the United States Department of Health and
2Human Services or the federal Centers for Medicare and Medicaid
3Services that the quality assurance fee established pursuant to this
4article cannot be implemented. This paragraph shall not apply to
5a final judicial determination made by any court of appellate
6jurisdiction in a case brought by hospitals located outside the state.

7(2) In the event both of the following conditions exist:

8(A) The federal Centers for Medicare and Medicaid Services
9denies approval for, or does not approve before January 1, 2016,
10the implementation of Sections 14169.52 and 14169.53 or this
11article.

12(B) Section 14169.52, Section 14169.53, or this article cannot
13be modified by the department pursuant to subdivision (d) of
14Section 14169.73 in order to meet the requirements of federal law
15or to obtain federal approval.

16(e) If this article becomes inoperative pursuant to paragraph (1)
17of subdivision (d) and the determination applies to any period or
18periods of time prior to the effective date of the determination, the
19department may recoup all payments made pursuant to Article
205.230 (commencing with Section 14169.51) during that period or
21those periods of time.

22(f) (1) If all necessary final federal approvals are not received
23as described and anticipated under this article or Article 5.230
24(commencing with Section 14169.51), the director shall have the
25discretion and authority to develop procedures for recoupment
26from managed health care plans, and from hospitals under contract
27with managed health care plans, of any amounts received pursuant
28to this article or Article 5.230 (commencing with Section
2914169.51).

30(2) Any procedure instituted pursuant to this subdivision shall
31be developed in consultation with representatives from managed
32health care plans and representatives of the hospital community.

33(3) Any procedure instituted pursuant to this subdivision shall
34be in addition to all other remedies made available under the law,
35pursuant to contracts between the department and the managed
36health care plans, or pursuant to contracts between the managed
37health care plans and the hospitals.

38

14169.79.  

Notwithstanding any other provision of this article
39or Article 5.230 (commencing with Section 14169.51),
40supplemental payments or other payments under Article 5.230
P53   1(commencing with Section 14169.51) shall only be required and
2payable in any quarter for which a fee payment obligation exists.

3

14169.80.  

(a) This article and Article 5.230 (commencing with
4Section 14169.51) shall become inoperative and the requirements
5for supplemental payments or other payments under Article 5.230
6(commencing with Section 14169.51) shall be retroactively
7invalidated, on the first day of the first month of the calendar
8quarter following notification to the Joint Legislative Budget
9Committee by the Department of Finance, that any of the following
10have occurred:

11(1) A final judicial determination by the California Supreme
12Court or any California Court of Appeal that the revenues collected
13pursuant to this article that are deposited in the Hospital Quality
14Assurance Revenue Fund are either of the following:

15(A) General Fund proceeds of taxes appropriated pursuant to
16Article XIII B of the California Constitution, as used in subdivision
17(b) of Section 8 of Article XVI of the California Constitution.

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

20(2) The department has sought but has not received federal
21financial participation for the supplemental payments and other
22costs required by this article for which federal financial
23participation has been sought.

24(3) A lawsuit related to this article or Article 5.230 (commencing
25with Section 14169.51) is filed against the state and a preliminary
26injunction or other order has been issued that results in a financial
27disadvantage to the state.

28(4) The director, in consultation with the Department of Finance,
29determines that the implementation of this article or Article 5.230
30(commencing with Section 14169.51) has resulted in a financial
31disadvantage to the state.

32(b) For purposes of this section, “financial disadvantage to the
33state” means either of the following:

34(1) A loss of federal financial participation.

35(2) A cost to the General Fund, that is equal to or greater than
36one-quarter of 1 percent of the General Fund expenditures
37authorized in the most recent annual Budget Act.

38(c) (1) The director shall have the authority to recoup any
39payments made under Article 5.230 (commencing with Section
4014169.51) if any of the following apply:

P54   1(A) Recoupment of payments made under Article 5.230
2(commencing with Section 14169.51) is ordered by a court.

3(B) Federal financial participation is not available for payments
4made under Article 5.230 (commencing with Section 14169.51)
5for which federal financial participation has been sought.

6(C) Recoupment of payments made under Article 5.230
7(commencing with Section 14169.51) is necessary to prevent a
8General Fund cost that is estimated to be equal to or greater than
9one-quarter of 1 percent of the General Fund expenditures
10authorized in the most recent annual Budget Act and that results
11from implementation of a court order or the unavailability of
12federal financial participation.

13(2) In the event payments are recouped for a particular quarter,
14fees paid by a hospital for that quarter pursuant to this article shall
15be refunded to the extent that the hospital meets both of the
16following conditions:

17(A) The hospital has actually paid the fee for the subject quarter
18and for all prior quarters.

19(B) The hospital has returned the payment received pursuant to
20Article 5.230 (commencing with Section 14169.51) for that quarter,
21or has had that payment recouped through a withholding of funds
22owed by Medi-Cal or other state payments, or recouped through
23other means.

24(d) In the event the department determines that recoupment of
25supplemental payments is necessary to implement any provision
26of this section, the department may recoup payments made pursuant
27to Article 5.230 (commencing with Section 14169.51) from fees
28paid by the hospital pursuant to this article.

29(e) Concurrent with invoking any provision of this section, the
30director shall notify the fiscal and appropriate policy committees
31of the Legislature of the intended action and the specific reason
32or reasons for the proposed action.

33

14169.81.  

Notwithstanding Chapter 3.5 (commencing with
34Section 11340) of Part 1 of Division 3 of Title 2 of the Government
35Code, the department shall implement this article by means of
36policy letters or similar instructions, without taking further
37regulatory action.

38

14169.82.  

(a) This article shall remain operative only until the
39later of the following:

40(1) January 1, 2017.

P55   1(2) The date of the last payment of the quality assurance fee
2payments pursuant to this article.

3(3) The date of the last payment from the department pursuant
4to Article 5.230 (commencing with Section 14169.51).

5(b) If this article becomes inoperative under paragraph (1) of
6subdivision (a), this article shall be repealed on January 1, 2017,
7unless a later enacted statute enacted before that date, deletes or
8extends that date.

9(c) If this article becomes inoperative under paragraph (2) or
10(3) of subdivision (a), this article shall be repealed on January 1
11of the year following the date this article becomes inoperative,
12unless a later enacted statute enacted before that date, deletes or
13extends that date.

14

14169.83.  

If the director determines that this article has become
15inoperative pursuant to Section 14169.77, 14169.78, 14169.80, or
1614169.82, or that Section 14169.72 has become inoperative
17pursuant to subdivision (e) of that section, the director shall execute
18a declaration stating that this determination has been made and
19stating the basis for this determination. The director shall retain
20the declaration and provide a copy, within five working days of
21the execution of the declaration, to the fiscal and appropriate policy
22committees of the Legislature. In addition, the director shall post
23the declaration on the department’s Internet Web site and the
24director shall send the declaration to the Secretary of State, the
25Secretary of the Senate, the Chief Clerk of the Assembly, and the
26Legislative Counsel.

27

14169.84.  

(a) (1) Except as provided in this section, all data
28and other information relating to a hospital that are used for the
29purposes of this article, including, without limitation, the days data
30source, shall continue to be used to determine the quality assurance
31fees due from that hospital pursuant to this article, regardless of
32whether the hospital has undergone one or more changes of
33ownership.

34(2) All quality assurance fee payments under this article shall
35be paid by the licensee of a hospital on the date the quarterly
36quality assurance fee payment is due.

37(b) The data of separate facilities prior to a consolidation shall
38be aggregated for the purposes of this article if: (1) a private
39hospital consolidates with another private hospital, (2) the facilities
40operate under a consolidated hospital license, (3) data for a period
P56   1prior to the consolidation is used for purposes of this article, and
2(4) neither hospital has had a change of ownership on or after the
3effective date of this article unless paragraph (2) of subdivision
4(d) has been satisfied by the new owner. Data of a facility that was
5a separately licensed hospital prior to the consolidation shall not
6be included in the data, including the days data source, for the
7purpose of determining the quality assurance fees due from the
8facility under the article for any time period during which such
9facility is closed. A facility shall be deemed to be closed for
10purposes of this subdivision on the first day of any period during
11which the facility has no general acute, psychiatric, or rehabilitation
12inpatients for at least 30 consecutive days. A facility that has been
13deemed to be closed under this subdivision shall no longer be
14deemed to be closed on the first subsequent day on which it has
15general acute, psychiatric, or rehabilitation inpatients.

16(c) The quality assurance fees under this article shall not be due,
17for any period during which the hospital is closed. A hospital shall
18be deemed to be closed on the first day of any period during which
19the hospital has no general acute, psychiatric, or rehabilitation
20inpatients for at least 30 consecutive days. A hospital that has been
21deemed to be closed under this subdivision shall no longer be
22deemed to be closed on the first subsequent day on which it has
23general acute, psychiatric, or rehabilitation inpatients. Payments
24of the quality assurance fee under this article due from a hospital
25that is closed during any portion of a subject fiscal quarter shall
26be reduced by applying a fraction, expressed as a percentage, the
27numerator of which shall be the number of days during the
28applicable subject fiscal quarter that the hospital is closed during
29the subject fiscal year and the denominator of which shall be the
30number of days in the subject fiscal quarter.

31(d) The procedure established by the director pursuant to
32subdivision (d) of Section 14169.58 shall apply to this article.

33

SEC. 9.  

This act is an urgency statute necessary for the
34immediate preservation of the public peace, health, or safety within
35the meaning of Article IV of the Constitution and shall go into
36immediate effect. The facts constituting the necessity are:

37In order to make the necessary changes to increase Medi-Cal
38payments to hospitals and improve access at the earliest time, so
39as to allow this act to be operative as soon as approval from the
40federal Centers for Medicare and Medicaid Services is obtained
P57   1by the State Department of Health Care Services, it is necessary
2that this act takes effect immediately.



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