BILL ANALYSIS Ó
SB 239
Page 1
SENATE THIRD READING
SB 239 (Ed Hernandez and Steinberg)
As Amended August 27, 2013
2/3 vote. Urgency
SENATE VOTE :36-0
HEALTH 19-0 APPROPRIATIONS 16-0
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|Ayes:|Pan, Logue, Ammiano, |Ayes:|Gatto, Harkey, Bigelow, |
| |Atkins, Bonilla, Bonta, | |Bocanegra, Bradford, Ian |
| |Chesbro, Gomez, Roger | |Calderon, Campos, Eggman, |
| |Hernández, Lowenthal, | |Gomez, Hall, Holden, |
| |Maienschein, Mansoor, | |Linder, Pan, Quirk, |
| |Mitchell, Nazarian, | |Wagner, Weber |
| |Nestande, | | |
| |V. Manuel Pérez, Wagner, | | |
| |Wieckowski, Wilk | | |
| | | | |
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SUMMARY : Enacts the Medi-Cal Hospital Reimbursement Improvement Act
of 2013 to provide supplemental Medi-Cal payments to private
hospitals; increased payments to Medi-Cal managed care plans (MCPs)
for hospital services to Medi-Cal managed care (MCMC) enrollees;
direct grants to designated public hospitals (DPHs) (hospitals owned
or operated by counties or the University of California (UC));
direct grants to nondesignated public hospitals (NDPHs) (hospitals
owned or operated by hospital districts); and, funding for
children's health care coverage. Enacts the Private Hospital
Quality Assurance Fee (QAF) Act of 2013 requiring all private acute
care hospitals to pay a specified fee. Provides for matching the
fee with federal funds to make supplemental payments. Provides that
the QAF and supplemental payments are for the period between January
1, 2014, and December 31, 2015. Specifically, this bill :
PRIVATE HOSPITAL QAF PROVISIONS
1)Establishes a per diem fee assessed on every private acute care
hospital for every acute, psychiatric, and rehabilitation
inpatient day as follows:
a) A rate of $145 per day for calendar year 2014 and $170 per
day for calendar year 2015 for in-patient managed care days
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that are acute care, psychiatric care, or rehabilitation care
and the payer is Medicare managed care, county indigent
programs-managed care, or other third party managed care;
b) A rate of $476.23 per fee-for-service (FFS) Medi-Cal
in-patient day for calendar year 2014 and $574. 68 per day for
calendar year 2015;
c) A rate of $81.20 per prepaid health plan hospital non-MCMC
day for calendar year 2014 and $95.20 per day for calendar year
2015;
d) A rate of $266.69 per prepaid health plan hospital MCMC day
for calendar year 2014 and $306.70 per day for calendar year
2015;
e) A rate of $399.36 per day for calendar year 2014 and $454.79
per day for calendar year 2015 for FFS inpatient days that are
acute care, psychiatric care, or rehabilitative care and the
payer is Medicare, county indigent programs-traditional, other
third party-traditional, other indigent, or other payers.
2)Imposes the requirement to pay the fee on all private general
acute care hospitals from January 1, 2014, to December 31, 2015,
exempts DPHs, NDPHs, long term care hospitals, specified specialty
hospitals, and small and rural hospitals. Also exempts any
hospital that has been converted from a private hospital to a
public hospital after January 1, 2014, for the period the hospital
is a public hospital or qualifies as a new hospital.
3)Requires the Department of Health Care Services (DHCS), to compute
the quarterly QAF amount and within 10 business days of receipt of
federal approval, notify each hospital of the amount due, the date
of the approval and the date payment is due. Requires the
hospitals to pay the QAF, quarterly if possible, based on a
schedule established by DHCS and requires all fees to be paid no
later than December 15, 2015.
4)Prohibits the fee from exceeding the maximum aggregate net patient
revenue percentage that is allowed under federal law, as
necessary, to preclude a finding of an indirect guarantee.
5)Authorizes DHCS to deduct fee payments owed by a hospital from
other payments due to the hospital, to assess interest and
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penalties, and to waive the penalties, as specified, and provides
that such determination is not subject to judicial review.
6)Prohibits the fee from being considered as an allowable cost for
Medi-Cal cost reporting.
7)Requires QAF payments, remittances, interest and dividends, but
not penalties, or the amount allocated to DHCS, to be for deposit
in the Hospital Quality Assurance Revenue Fund (HQARF). Provides
for excess funds to be refunded pro rata. Provides for excess
funds remitted after the final date to be refunded to hospitals on
a pro rata basis, unless subsequent legislation implements a new
QAF program.
8)Provides that the fee is inoperative if the federal Centers for
Medicare and Medicaid Services (CMS) denies approval before July
1, 2016, and that the provisions cannot be modified as provided
for, in consultation with the hospital community, in order to meet
federal requirements.
9)Creates a contractually enforceable promise on behalf of the state
to use the proceeds of the fee and the HQARF only for the purposes
and in the amounts authorized by this bill, to limit the proceeds
to be used to pay for health care coverage of children up to the
amounts specified, to limit any payments to DHCS for
administrative costs to the amounts specified, and to comply with
all obligations imposed pursuant to this bill.
10)Establishes a timeline for disbursements, continuously
appropriates the HQARF, and requires all proceeds of the fee to be
used, exclusively to enhance federal financial participation (FFP)
for hospital services under the Medi-Cal program, to provide
additional reimbursement to, and to support quality improvement
efforts of, hospitals and to minimize uncompensated care provided
by hospitals to uninsured patients, as well as to pay for the
state's administrative costs and to provide funding for children's
health coverage, as specified, in the following order of priority:
a) To pay for staffing and administrative costs of DHCS in
administering the QAF and payments, up to $2 million;
b) To pay for health care coverage for children in the amount
of $155 million quarterly, for calendar years 2014 and 2015;
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c) To make increased capitation payments to Medi-Cal MCPs; and,
d) To make increased payments and direct grants to DPHs and
NDPHs.
SUPPLEMENTAL PAYMENT PROVISIONS
11)Requires private hospitals to be paid a supplemental payment for
Medi-Cal outpatient services, on a quarterly basis, based on the
hospital's percentage of all Medi-Cal FFS outpatient services up
to a total amount equal to the maximum amount allowable under
federal upper payment limits (UPL) for the period between January
1, 2014, and January 1, 2016.
12)Requires DHCS to make supplemental payments to private hospitals
for Medi-Cal FFS inpatient services from the proceeds of the fees,
other funds established by this bill, plus matching federal funds,
in addition to payments otherwise payable to these hospitals, up
to the maximum amount allowed under federal UPL and other law, as
follows:
a) For each general acute care day, $1002 for calendar year
2014; and $1,205 for calendar year 2015;
b) For each acute psychiatric day, $970 for calendar year 2014;
and $975 for calendar year 2015;
c) For calendar years 2014 and 2015, $2,500 for each high
acuity day, as defined, if at least 5% of the hospital's
general acute care days are high acuity days and the hospital's
Medi-Cal inpatient utilization rate is between 5% and 43%;
d) For calendar years 2014 and 2015, an additional $2,500 for
each high acuity day for hospitals qualifying for 2) c) above
that also have specified designated trauma centers;
e) For calendar years 2014 and 2015, an additional $2,500 for
each transplant day if the hospital's Medi-Cal inpatient
utilization rate is between 5% and 43%; and,
f) If a hospital provided Medi-Cal sub-acute services during
the 2010 calendar year and had a Medi-Cal inpatient utilization
rate between 5% and 43%; for calendar year 2014, an amount
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equal to 55% of the amount of Medi-Cal sub-acute payments made
to the hospitals in 2010; and, for calendar year 2015, an
amount equal to 60% of the amount of Medi-Cal sub-acute
payments made to the hospitals in calendar year 2010.
13)Defines acute psychiatric days as the total number of Medi-Cal
specialty mental health service administrative days, Medi-Cal
specialty mental health service acute care days, acute psychiatric
administrative days, and acute psychiatric acute days identified
from the Final Medi-Cal Utilization Statistics for fiscal year
(FY) 2012-13.
14)Defines general acute care days as the number of Medi- Cal
general acute care, including well baby days and excluding acute
psychiatric inpatient days, paid by DHCS on a FFS basis for
service provided in the 2010 calendar year.
15)Defines high acuity days as Medi-Cal coronary care unit days,
pediatric intensive care unit (ICU) days, ICU days, neonatal ICU
days, and burn unit days paid by DHCS during the 2010 calendar
year, as reflected in the state paid claims file prepared by DHCS
on April 26, 2013.
16)Defines hospital community as any general acute care hospital and
any hospital industry organization that represents general acute
care hospitals.
17)Excludes specified new or converted hospitals from receipt of
payments, depending on the date of conversion, whether there is a
days data source, as defined, for the hospital, and whether the
new ownership assumes financial obligations to the Medi-Cal
program. Allows the hospital that will be opening on the site of
the former Los Angeles County Martin Luther King Jr.,-Harbor
Hospital to participate, notwithstanding this exclusion and
requires the use of the best available data for this hospital.
Provides for payments to converted hospitals, proportionate to the
period in which it was a qualifying private hospital. Establishes
a process by which a hospital with a days data source may assume
financial responsibility of outstanding obligations in the
Medi-Cal program and not be classified as a new hospital.
18)Requires DHCS to increase monthly capitation payments to Med-Cal
MCPs to the maximum total amount allowable under federal law; to
determine the amount for each Medi-Cal MCP by considering the
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composition of Medi-Cal enrollees in each Medi-Cal MCP,
anticipated hospital utilization, and other factors related to
ensuring access to high-quality hospital services, but in no event
to exceed an amount certified by the state's actuary as meeting
federal requirements, taking into account the requirement that all
of the increased capitation payments are to be paid to hospitals
for hospital services to Medi-Cal MCP enrollees. Authorizes DHCS
to set aside fee revenue, as specified, in order to accumulate the
required amounts and issue change orders or amend contracts as
needed.
19)Requires the increased capitation payments to be for the purpose
of supporting the availability of hospital services and ensuring
access for Medi-Cal enrollees; requires each plan to expend 100%
of the increased capitation on hospital services; requires that
payments are to commence within 90 days of the receipt of federal
approval; and, provides that payments made to Medi-Cal MCPs in the
absence of these payments are not to be reduced as a consequences
of these payments.
20)Requires the Medi-Cal MCPs receiving the increased capitation
payments under this bill to make payments to hospitals consistent
with actuarial certification, enrollment, and hospital utilization
within 30 days of receipt in a total amount that equals the
increased capitation amount, to document the payments, and
specifies that these provisions are not intended to create a
private right of action by a hospital.
21)Provides direct grants in support of health care expenditures to
DPHs in the amount of $45 million in FY 2013-14; $93 million in FY
2013-14; and, $48 million in FY 2014-15. Requires the Director of
DHCS to allocate a portion of the funds on a quarterly basis in
equal amounts among the DPHs pursuant to a methodology developed
in consultation with the DPHs in the following amounts:
a) For FY 2013-14, $24.5 million;
b) For FY 2014-15, $50.5 million; and,
c) For FY 2015-16, $26 million.
22)Provides that a portion of the direct grants to DPHs in 21) above
are to be distributed for the purpose of increased payments to
Medi-Cal MCPs, provided they are within the actuarially sound rate
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range, for distribution to DPHs in the following amounts:
a) For FY 2103-14, $6,125,000 per quarter;
b) For FY 2014-15, $6,312,500 per quarter; and,
c) For FY 2015-16, $6,500,000 per quarter.
23)Requires the withholding of additional amounts of the direct
grants to DPHs in 21) above and requires them to be used to match
federal funds to provide rate increases to Medi-Cal MCPs, within
the actuarially sound rate range, in counties with a DPH and
pursuant to a methodology developed in consultation with the
hospital community. Provides that the withheld funds are not to
be considered revenue for purposes of specified realignment
determinations. Provides that the capitated rate range increase
is to be for enrollees other than those considered "newly
eligible" under the federal Patient Protection and Affordable Care
Act (ACA) for the purpose of enabling plans to compensate
hospitals for Medi-Cal services, requires each plan to expend 100%
on hospital services within 30 days and provides for the
withholding as follows:
a) For FY 2013-14, $20.5 million;
b) For FY 2014-15, $42.5 million; and,
c) For FY 2015-16, $22 million.
24)Provides that a portion of the direct grants to DPHs in 21) above
are to be distributed for the purpose of increased payments to
Medi-Cal MCPs, provided they are within the actuarially sound rate
range, for distribution to DPHs in the following amounts:
a) For FY 2103-14, $6,125,000 per quarter;
b) For FY 2014-15, $6,312,500 per quarter; and,
c) For FY 2015-16, $6,500,000 per quarter.
25)Provides direct grants in support of health care expenditures to
NDPHs in the amount of $12.5 million the aggregate for fiscal
quarters in FY 2013-14, $25 million in FY 2013-14, and $12.5
million in FY 2014-15.
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26)Provides that a portion of the direct grants to NDPHs in 25)
above are to be distributed for the purpose of increased payments
to NDPHs pursuant to a methodology developed in consultation with
the NDPHs in the following amounts:
a) For FY 2103-14, $2.5 million;
b) For FY 2014-15, $5 million; and,
c) For FY 2015-16, $2.5 million.
27)Requires the withholding of additional amounts of the direct
grants to NDPHs in 25) above and requires them to be used to match
federal funds to provide rate increases to Medi-Cal MCPs, within
the actuarially sound rate range, pursuant to a methodology
developed in consultation with the hospital community. Provides
for the return to the HQARF of any funds that are not used.
Provides that the capitated rate range increase is to be for
enrollees for the purpose of enabling plans to compensate
hospitals for Medi-Cal services, requires each plan to expend 100%
on hospital services within 30 days and provides for the
withholding as follows:
a) For FY 2013-14, $10 million;
b) For FY 2014-15, $20 million; and,
c) For FY 2015-16, $10 million.
28)Ensures that payments made to hospitals or reimbursement rates
set pursuant to other provisions of existing law are not affected
or reduced as a result of the supplemental payments established by
this bill.
29)Provides that supplemental payments under this bill are in
addition to Disproportionate Share Hospital (DSH) replacement
supplemental payments, do not impact eligibility for DSH payments,
DSH replacement payments, or stabilization payments under the 2005
hospital waiver or the 2010 Medi-Cal Bridge to Reform waiver, and
are not to be considered in the determination of adequacy of any
rate under federal law.
30)Provides that no payments are to be made until all necessary
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federal approvals have been obtained and the fee has been imposed
and collected. Provides that payments are to be made only to the
extent the fee is collected and available to cover the nonfederal
share. Requires that all payments to hospitals, Medi-Cal MCPs,
and mental health plans be solely from the QAF authorized by this
bill and the federal matching reimbursement.
31)Conditions a hospital's receipt of payments on continued
participation in the Medi-Cal program.
32)Requires, upon receipt of federal approval or a letter indicating
likely federal approval, as specified, DHCS to make all payments,
with the exception of increased capitation payments until federal
approval is received.
33)Provides for a process in the event there are insufficient funds
after December 15, 2015, and requires DHCS to develop a plan for
making additional payments if FFP is available.
34)Provides that no hospital is to be required to pay the QAF
unless, and until the state receives and maintains federal
approval, and only as long as all of the following conditions are
met:
a) CMS allows the use of the QAF as set forth in this bill;
b) The payment provisions are enacted and remain in effect, and
hospitals are reimbursed the increased rates for services
during the program period; and,
c) The full amount of the QAF assessed and collected remains
available only for the purposes specified in this bill.
GENERAL PROVISIONS
35)Prohibits payment rates for hospital outpatient services
furnished before December 31, 2015, by private hospitals, NDPHs,
or DPHs from being reduced below those in effect on January 1,
2014.
36)Prohibits payment rates for hospital inpatient services furnished
before December 31, 2015, under contracts negotiated under the
Selective Provider Contracting Program (SPCP) from being reduced
below those in effect on January 1, 2014, allows changes to
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supplemental payments, as long as the aggregate is not reduced, as
specified, and establishes a methodology to measure this
requirement when diagnosis-related groups (DRG) hospital
reimbursement methodology is implemented.
37)Prohibits payments to private hospitals for inpatient services
furnished before January 1, 2014, that are not under contracts
negotiated under the SPCP from being reduced below the amount that
would have been made under the methodology in effect on the
effective date of this bill, and establishes a methodology to
measure this requirement with respect to the new DRG hospital
reimbursement methodology.
38)Provides methodologies for proportionate reductions or
recalculations of all fees, hospital payments, and increased
capitation payments in the event:
a) FFP is different than estimated under this bill;
b) Amounts allowable as payments for specified categories must
be adjusted due to the application of the UPL under federal
law;
c) A hospital is closed for part of a year; or,
d) Any supplemental payment would result in the reduction of
other amounts payable to a hospital or MCP.
39)Provides that effective January 1, 2016, rates payable to
hospitals and MCPs are to be the rates payable without the
supplemental and increased capitation payments under this bill.
40)Provides that supplemental payments made pursuant to this bill
are not to affect a determination of rate adequacy under federal
law.
41)Authorizes DHCS to make modifications to the QAF, payment
methodologies, and other adjustments as necessary, in consultation
with the hospital community, to the extent necessary to obtain
federal approval.
42)Requires DHCS to make available all public documentation used to
administer and audit the QAF and supplemental payment program, and
upon request, require Medi-Cal MCPs to furnish hospitals the
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amount the plan intends to pay to the hospital. Requires DHCS to
post on its Web site, within 10 days of federal approval, the QAF
model and the UPL calculations, quarterly updates on payments, fee
schedules, model updates, and information on managed care rate
approvals.
43)Provides for the use of data for, and payment of, supplemental
payments to a new licensee and other contingencies in the event of
a change of ownership, closure, or consolidation of a hospital.
Provides that no payments are to be made for the period a hospital
is closed.
44)Authorizes the Director of DHCS to correct identified egregious
errors in data sources.
45)Requires the Director of DHCS to promptly submit any state plan
amendment or waiver request and seek any other federal approval
for implementation as necessary, including approval to exempt
specific providers, approval for supplemental payments for
hospital services to all Medi-Cal populations including optional
expansion populations, to seek to amend contracts with Medi-Cal
MCPs without waiting for federal approval, and requires the
amendments to set forth an agreement to increase capitation
payments and payments to hospitals relating back to January 1,
2014.
46)Allows for implementation based on receipt of a letter from CMS
indicating likely federal approval, if it is determined to be
sufficient, as specified; authorizes the Director of DHCS, to the
extent FFP is not jeopardized, to have broad collection authority
pending final approval, specifies that payments made prior to
final approval are conditional, and provides for refunds if final
approval is denied. Authorizes the DHCS Director to modify
timelines if a letter of approval or likely approval is not
secured by December 15, 2015.
47)Makes this bill inoperative if a court of appellate jurisdiction
or CMS determines that any element cannot be implemented and the
provisions cannot be modified consistent with the terms of this
bill, or if it is not approved by CMS before January 1, 2016, and
the provisions cannot be modified to meet the requirements of
federal law, except for a case brought by a hospital located
outside of the state.
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48)Establishes a process by which an acute care hospital that is
outside the state, but provides services to Medi-Cal enrollees may
opt in to the QAF program.
49)Authorizes the Director of DHCS to recoup funds from hospitals in
the event of inoperability, pursuant to court order,
unavailability of FFP, or as necessary to prevent General Fund
(GF) cost; to refund fees in the event of recoupment; and, to
withhold payment to any hospital that sues to enjoin
implementation. Requires notice to the Legislature of this
occurrence.
50)Makes this bill inoperative and retroactively invalidated, on the
first day of the month of the calendar quarter following
notification to the Joint Legislative Budget Committee by the
Department of Finance that one of the following conditions has
occurred:
a) A final determination of a court that the fee proceeds are
GF revenue or local proceeds of taxes;
b) Federal financial approval has been sought, but not
received;
c) A lawsuit related to this bill has been filed and a court
order has been issued that results in financial disadvantage to
the state; or,
d) The Director of DHCS determines that implementation would
result in a financial disadvantage to the state, as specified.
51)Authorizes the Director of DHCS not to implement or discontinue
implementation of supplemental payments pursuant to 48) above.
Requires the DHCS Director to execute a declaration, as specified,
if a determination of inoperability is made.
52)Deletes the January 1, 2015, sunset on the existing HQARF and
extends the HQARF, as modified by this bill, to January 1, 2017.
53)Sunsets all provisions on January 1, 2017, or the date of the
last payment, whichever is later.
.
54)Authorizes DHCS to implement this bill by means of policy
letters, provider bulletins, or all plan letters in lieu of
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regulatory action under the Administrative Procedures Act, and
requires notice to the appropriate committees of the Legislature.
55)Specifies legislative intent to consider legislation requiring
the Director of DHCS to seek approval for an increase in the fees
and increased payments if there is a determination that additional
FFP is available within the UPL or the limits on managed care
payments and specifies that these increases have priority over any
other purposes, and requires consultation with the hospital
community.
56)Authorizes DHCS to maximize FFP in order to provide access to
services provided by hospitals that are not reimbursed by
certified public expenditures (CPEs) by means of Intergovernmental
transfers (IGTs).
57)Authorizes DHCS to continue to administer and distribute payments
for the Construction Renovation Reimbursement Program, which was
previously administered by the California Medical Assistance
Commission under the SPCP, and eliminates the requirement that a
hospital have a selective provider contract or a contract with a
County Organized Health System in order to participate.
58)Establishes legislative findings, declarations, and intent:
recognizing the role hospitals play in serving Medi-Cal enrollees;
that the intent is to impose a QAF to be paid by hospitals to be
used to increase FFP in order to make supplemental Medi-Cal
payments to hospitals for the period of January 1, 2014, through
December 31, 2015, with the goal of increasing access to care and
improving hospital reimbursement and to help pay for health care
coverage for low-income children; and, that the QAF is to be
deposited into segregated funds apart from the GF and used
exclusively for supplemental Medi-Cal payments to hospitals,
direct grants to public hospitals, health care coverage for
low-income children, and for the direct costs of administering the
program by DHCS.
59)Contains an urgency clause so as to become effective immediately
upon enactment.
FISCAL EFFECT : According to the Assembly Appropriations Committee:
1)An increase of $13.9 billion total (hospital QAF/federal funds)
paid to private hospitals through December 2015 in the form of
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supplemental Medi-Cal payments for hospital services. This
estimate assumes hospitals subject to the QAF will contribute $7.6
billion; that this funding is matched with FFP at the rate of 50%
and paid as supplemental payments, except for those funds set
aside to the state and for other purposes as explained below; and,
that the portion related to the Medi-Cal expansion population is
paid at 100% FFP.
2)Estimated administrative costs to the DHCS of approximately $2
million annually (offset by hospital QAF revenue in this amount)
for calendar years 2014 and 2015.
3)Total estimated net GF savings of $1.24 billion over two years,
associated with $155 million in QAF revenue per quarter allocated
to the state for children's coverage. QAF revenue to the state
for children's coverage can directly offset GF for this purpose.
4)The 2013-14 Budget assumes $310 million in savings associated with
the QAF extension, as the funds are to be used in lieu of GF for
children's health coverage. This bill provides $310 million for
FY 2013-14, consistent with the budget assumption. Failure to
extend the QAF program would result in $310 million in additional
GF costs in the current fiscal year.
5)Direct grants to designated public hospitals in the aggregate net
amount of $24.5 million in 2013-14, $50.5 million in 2014-15, and
$26 million in 2015-16.
6)Direct grants to non-designated public hospitals in the aggregate
net amount of $2.5 million in 2013-14, $5 million in 2014-15, and
$2.5 million in 2015-16.
7)Upon the expiration of this program in 2014, GF cost pressure is
created to maintain the higher level of payments to hospitals and
the children's health care coverage programs funded by the QAF
COMMENTS : According to the author, this bill is needed to enact the
Private Hospital Quality Assurance Fee Act of 2013, to continue to
impose, subject to federal approval, a QAF on certain general acute
care hospitals from January 1, 2014, through December 30, 2015, with
the resulting revenue to be deposited into the HQARF. The current
QAF will sunset without this bill. The author states, this bill
also enacts the Medi-Cal Hospital Reimbursement Improvement Act of
2013, which requires, subject to federal approval, supplemental
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payments to be made to private hospitals and increased capitation
payments to be made to Medi-Cal MCPs for hospital services. The
author further points out that this bill would enact a hospital QAF
for two additional years to draw down increased federal funds for
hospital services, and to provide millions of dollars in additional
revenue for children's health coverage. It also provides grants to
public county and district hospitals. Federal law authorizes states
to levy fees on health care providers if the fees meet federal
requirements. This bill provides increased federal funding to
hospitals without using state GF dollars, and would enable the state
to achieve GF savings by using revenue from the QAF to help fund
children's health coverage.
Many states (including California) fund a portion of their share of
Medicaid program costs through a fee on health care providers.
Under these funding methods, states collect funds (through fees,
taxes, or other means) from providers, which are then matched to
allow increased Medicaid reimbursement to providers. To prevent
states from levying an assessment on only Medicaid providers,
federal law requires provider fees to be "broad based" and uniformly
applied to all providers within specified classes of provider, and
states are prohibited from having a provision that would ensure
providers are "held harmless" from the impact of the fee. Health
care related provider fees may only be imposed on 19 particular
classes of health care items or services. Federal approval through
CMS is required. First enacted in 2009, this bill is the third
extension of a hospital-specific QAF.
This bill and the predecessors enact a methodology to increase
funding for hospitals serving Medi-Cal patients through supplemental
payments. The payments are calculated based on hospital outpatient,
inpatient days, sub-acute, high-acute, and acute psychiatric days.
Hospitals that provide a moderate level of Medi-Cal services receive
a supplement for Medi-Cal high acuity days, sub-acute services, and
trauma care days. This bill adds a supplemental payment for
hospitals for transplant patient days. There is also an increase in
the capitation rate that is paid to Medi-Cal MCPs that is to be
passed on to hospitals for hospital services to Medi-Cal enrollees.
It is anticipated that hospitals will receive increased payments
from Medi-Cal MCPs for both inpatient and outpatient services from
this bill.
Under federal law, there are various limits on the payment rate to
Medi-Cal providers. The supplemental payments and the formulas
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specified in this bill are consistent with those limits. For
instance, the federal UPL for private hospitals is based on the rate
paid by Medicare for similar services. The total supplemental
payments in this bill are calculated to stay within these limits.
This bill includes authority for DHCS to make adjustments within
hospital categories in order to assure compliance with federal
requirements. DPHs and NDPHs are currently at the federal UPL under
the terms of the current federal hospital waiver and not eligible
for federally matched supplemental payments, except through managed
care. For this reason, the payments to DPHs and NDPHs are in the
form of direct grants or managed care payments.
The distribution methodology also provides for supplemental payments
to hospitals that contract with Medi-Cal MCPs. Payments made to
hospitals through a MCMC contract are not subject to the UPL, but
the payment to the plan must be actuarially sound. An actuarially
sound rate is established as a rate range. If DHCS reimburses at
the lower level of the rate range, supplemental payments are
permissible as long as the total does not exceed the upper level of
the rate range. This is referred to as room in the rate range.
Payments to MCPs from the fee must be within this rate range.
This bill, similar to prior bills, excludes DPHs and NDPHs from
supplemental payments, because as a group they have reached their
UPL and no additional matched FFS payments are allowed under federal
law. They are eligible for increased payments financed by the QAF
through this bill as Medi-Cal MCP payments, plus this bill
authorizes direct grants to both categories. This bill also
provides for the public entities that own or operate these
hospitals, such as counties or hospital districts to transfer funds
by means of IGTs that will be used to fund supplemental payments to
hospitals that are not funded by means of CPEs.
In 2005, California received federal approval for a five year
Section 1115(a) Medi-Cal Hospital Financing/Uninsured Waiver. One
of the most significant revisions under the 2005 hospital waiver was
to make fundamental changes in Medi-Cal hospital financing for DPHs
(hospitals owned or operated by counties or the UC). Reimbursement
for Medi-Cal per diem for DPHs was based on CPEs, rather than GF.
The inpatient reimbursement rate was no longer a negotiated rate and
is instead cost-based. In November 2010, California received
federal approval for a new five year Section 1115(a) Medi-Cal
Demonstration/Pilot Project Waiver, entitled "A Bridge to Reform"
which, among other provisions, continued the use of CPEs. IGTs are
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transfers of public funds from one level of government to another.
The agreement among the hospital industry reflected in this bill
includes use of QAF revenues for IGTs that will be used to increase
payments to MCPs for private and NDPH hospital services to Medi-Cal
enrollees.
The California Hospital Association (CHA), sponsor of this bill,
writes in support that the creation and implementation of the
hospital fee program in California has been extremely successful.
According to CHA, the program has been critical for hospitals to
bolster their ability to preserve health care services for the
state's most vulnerable patients. CHA reports that the first two
hospital fee programs are essentially completed and have reached
their goals of providing nearly $3.5 billion in critical funding to
California's hospitals that provide services to Medi-Cal patients.
In addition, the first two programs fulfilled a commitment to
provide the state with $770 million in funding for children's health
care coverage. CHA states that this bill reflects a
work-in-progress for a final proposal that will be completed soon.
According to CHA, they are working with DHCS to resolve these open
issues. Due to the added complexity of an expanding, yet shifting
population, several details remain open, most of them technical in
nature such as calculating the maximum amount of room available in
the UPL and determining the actuarially certified rate room in the
managed care program.
Other supporters such as Adventist Health, Loma Linda University
Medical Center, the Alliance of Catholic Health Care, and Private
Essential Access Community Hospitals write that the hospital fee
program is crucial to the preservation of California's entire safety
net and that it has been the only way for community safety net
hospitals to survive billions of dollars in Medi-Cal payment
shortfalls; ongoing multi-million dollar Medi-Cal DSH cuts to safety
net hospitals; and, compensate for the current Medi-Cal waiver that
provides no support to help transform their hospital delivery
systems. These supporters further state that as California prepares
for 1.4 million new Medi-Cal enrollees in 2014 under the ACA,
Medi-Cal rates to hospitals must continue to be
stabilized-especially for community safety net hospitals which will
have an integral role in serving the three to four million remaining
uninsured in 2014.
Michelle Steel, Vice Chair of the State Board of Equalization,
writes in opposition that the cost of healthcare is continually
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rising year after year, and there is considerable concern that costs
are going to get even higher with the new federal rules coming into
place. According to this opposition, adding more fees and taxes on
healthcare providers has the end effect of raising these rates even
more, as these additional costs will be passed on to the consumers.
Ms. Steel also asserts in opposition that this bill opens the door
to insolvency of the fund for which it is intended by allowing the
State Controller to divert money away to the GF.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916) 319-2097
FN: 0002201