BILL ANALYSIS Ó
SB 239
Page 1
Date of Hearing: September 11, 2013
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 239 (Ed Hernandez and Steinberg) - As Amended: September 6,
2013
As Proposed to be Amended by RN:1326636
SENATE VOTE : 36-0
SUBJECT : Medi-Cal: hospitals: quality assurance fee.
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.
Requires private acute care hospitals to pay a quality assurance
fee (QAF), as specified, until December 31, 2016, in order to
provide funding for federal matching funds for supplemental
payments, children's coverage, and direct grants. Establishes
Intergovernmental Transfer (IGT) programs. Eliminates a
Medi-Cal rate reduction that applies to distinct part nursing
facilities (DP-NFs). Specifically, this bill :
1)Imposes a requirement on all private general acute care
hospitals to pay a QAF for the first program period of from
January 1, 2014 to December 31, 2016. Exempts DPHs, NDPHs,
long-term care hospitals, specified specialty hospitals, and
small and rural hospitals. 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.
2)Specifies the first program period as from January 1, 2014 to
December 31, 2016, the second program period as January 1,
2017 to June 30, 2019 and each subsequent program period as
beginning on the last day of the prior program period and
ending on the last day of the state fiscal year, as determined
by the Department of Health Care Services (DHCS).
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3)Requires DHCS within 10 business days of receipt of federal
approval to compute the quarterly QAF amount for each program
period, are to notify each hospital. 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 the end of each program period.
4)Provides that the QAF is inoperative for the first program
period if the federal Centers for Medicare and Medicaid
Services (CMS) does not approve the program before December 1,
2016.
5)Creates a contractually enforceable promise on behalf of the
state to use the proceeds of the fee and the Hospital Quality
Assurance Revenue Fund (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, to continue
reimbursement levels that are not less than the aggregate
fee-for-service (FFS) amounts paid under rates and
methodologies in effect on December 31, 2013, and to comply
with all obligations imposed pursuant to this bill.
6)For the first program period, requires private hospitals to be
paid supplemental payments for hospital outpatient services
that are based on the amount of Medi-Cal outpatient services
provided by that hospital up to the amount allowed under the
upper payment limit (UPL), except for the period of time a
hospital qualifies as new or has converted from a private to a
public hospital.
7)Requires DHCS to make the necessary determinations to
calculate and collect fees and 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 that is a sum of a rate that
is based on the following:
a) The amount of general acute care Medi-Cal days;
b) The amount of acute psychiatric Medi-Cal days;
c) The amount of high acuity Medi-Cal days if the
hospital's Medi-Cal inpatient utilization rate is between
5% and rate needed to qualify for DSH replacement funds;
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d) The amount of high acuity Medi-Cal trauma days, if the
hospital qualifies under 7) c) above, and has specified
designated trauma centers;
e) The amount of transplant Medi-Cal days if the hospital's
Medi-Cal inpatient utilization rate is between 5% and rate
needed to qualify for DSH replacement funds; and,
f) The amount of Medi-Cal sub-acute services provided in
the base calendar year.
8)For the program period beginning January 1, 2014, and ending
December 31, 2016, specifies:
a) The quarterly dollar amount of the acute psychiatric per
diem supplemental Medi-Cal payments and the data source;
b) The specific dollar rate and data source for the FFS
inpatient per diem fee that on 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;
c) The quarterly dollar amount of the general acute care
per diem supplemental Medi-Cal payments and the data
source;
d) The specific dollar amount for the per diem supplemental
Medi-Cal payment rate for high acuity days and high acuity
trauma days for qualifying hospitals and the data source;
e) The specific dollar rate and data source of the managed
care per diem fee on inpatient managed care days 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;
f) The specific dollar rate and data source for the
Medi-Cal per diem fee;
g) The specific percentage of the outpatient supplemental
Medi-Cal payment rate and the data source;
h) The specific dollar rate of the prepaid health plan
hospital managed care per diem fee rate and the MCMC per
diem fee rate;
i) The sub-acute supplemental Medi-Cal payment percentage
based on payments to the hospital in 2010; and,
j) The specific dollar amount of the per diem supplemental
Medi-Cal payment rate for transplant inpatient days and the
data source.
9)Establishes timelines and a methodology for rebasing each base
year and the data, updating the data sources, recalculating
the net benefit and other dollar amounts necessary to
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subsequent program years. Provides that these calculations
for subsequent program periods are to be specified in the
annual Budget Act.
10)After the first program period, requires DHCS to determine,
based on the rebased calculations, the new specific dollar
amounts for each supplemental payment and fee rate, in
consultation with the hospital community, as close as possible
to the UPL and in relative values as close to the first
program period as possible. Requires these rates to be
specified in the annual Budget Act. Requires, commencing
January 1, 2016, for the second program period and all
subsequent program periods that all calculations made by DHCS
in implementing fees, supplemental payments, net benefits, and
grants, if any, to be submitted to the Legislature in January
and May along with the Medi-Cal program fiscal detail.
11)Authorizes the Director of DHCS, upon federal approval or
conditional federal approval, to have the discretion to revise
the FFS per diem QAF rate, the managed care per diem QAF rate,
the Medi-Cal per diem QAF rate, the prepaid health plan
hospital managed care and MCMC per diem QAF based on the funds
required to make the payments specified, in consultation with
the hospital community.
12)Authorizes DHCS to deduct fee payments owed by a hospital
from other payments due to the hospital, to assess interest
and penalties, and to waive the penalties, as specified, and
provides that such determination is not subject to judicial
review.
13)Requires QAF payments, including payments from prior QAF
programs, remittances, interest and dividends, but not
penalties, or the amount allocated to DHCS, to be for deposit
in the 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
federal rules allow the funds to be applied to the next
program period.
14)Establishes a timeline for disbursements, continuously
appropriates the HQARF for the first program period 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
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reimbursement to, and to support quality improvement efforts
of, hospitals and 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) Staffing and administrative costs of DHCS in
administering the QAF and payments, up to $250 million per
quarter;
b) Health care coverage for children in the amount of $155
million per quarter for the last two quarters of fiscal
year 2013-14 and in the amount of 24% of the net benefit
thereafter;
c) Increased capitation payments to Medi-Cal MCPs,
including up to 10% the nonfederal share of payments to
hospitals for Medi-Cal enrollees considered newly eligible
under the federal Patient Protection and Affordable Care
Act (ACA); and,
d) Increased payments to hospitals for Medi-Cal services,
including up to 10% of the nonfederal share of payments to
hospitals for Medi-Cal enrollees considered newly eligible
under the ACA and for direct grants to hospitals.
15)Requires DHCS to establish a preliminary and actual net
benefit based on the aggregate payments minus the aggregate
fees and establishes a process to reconcile upon a final
determination. Provides that the amount of funding provided
to children's health coverage shall be equal to 24% of the net
benefit after July 1, 2014.
16)Provides methodologies for proportionate reductions or
recalculations of all fees, hospital payments, and increased
capitation payments in the event of the following:
a) If FFP is different than estimated under this bill; or,
b) If amounts allowable as payments for specified
categories must be adjusted due to the application of the
UPL under federal law.
17)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 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
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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. Limits the amount of payments if FFP
falls below 90% for the newly eligible childless adult
category. Authorizes DHCS to set aside fee revenue, as
specified, in order to accumulate the required amounts.
18)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. Authorizes DHCS to issue change orders to amend
contracts and provides that the increase shall not be subject
to negotiation.
19)Requires 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.
20)Provides direct grants in support of health care expenditures
to DPHs in the amount of $45 million in fiscal year (FY)
2013-14, $93 million in FY 2014-15, $110.5 million in FY
2015-16; and, $62.5 million in FY 2016-17. 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;
c) For FY 2015-16, $60.5 million; and,
d) For FY 2016-17, $34.5 million.
21)Provides that a portion of the grants are to be withheld and
used for the nonfederal share of rate range increases for
Medi-Cal MCPs that service counties with DPHs, further
provides that half of the portion that is distributed is to be
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conditioned on the distribution of the rate range increase
(the amount of increase in rate that is 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 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.
22)Provides direct grants in support of health care expenditures
to NDPHs in the amount of $12.5 million for two quarters in FY
2013-14; $25 million in FY 2014-15; $30 million in FY 2015-16;
and, $17.5 million for two quarters in FY 2016-17. Requires
the Director of DHCS to allocate a portion of the funds among
the NDPHs pursuant to a methodology developed in consultation
with the NDPHs. Requires the remainder to be withheld and
used as matching funds to increase MCMC capitated rates.
Provides that if the funds are not used for increase managed
care capitated rates that are within the actuarially sound
rate range, the funds shall be returned to the HQARF.
23)For subsequent program periods, requires the Director of DHCS
to determine the amounts, and if any, allocations methods of
direct grants and any withholds of direct grants to DPHs and
NDPHs. Requires the amounts and allocations to be specified
in the annual Budget Act.
24)Authorizes DHCS to modify any methodology or other provision,
in consultation with the hospital community, to the extent
necessary to meet federal requirements, provided the
modifications are consistent with the provisions and do not
violate the spirit, intent, and purpose, and allows
adjustments as necessary to comply with federal law.
25)Provides that supplemental payments under this bill are in
addition to DSH replacement supplemental payments, do not
impact eligibility for DSH payments, DSH replacement payments
made under the 2010 Medi-Cal Bridge to Reform Section 1115
waiver, and are not to be considered in the determination of
adequacy of any rate under federal law.
26)Prohibits the QAF from exceeding the maximum aggregate net
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patient revenue percentage that is allowed under federal law,
as necessary, to preclude a finding of an indirect guarantee.
27)Prohibits the QAF from being considered as an allowable cost
for Medi-Cal cost reporting.
28)Provides that supplemental payments made pursuant to this
bill are not to affect a determination of rate adequacy under
federal law.
29)Prohibits payments for the period of time a hospital
qualifies as new or has converted from a private to a public
hospital 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, as specified. 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 day's data source may assume
financial responsibility of outstanding obligations in the
Medi-Cal program and not be classified as a new hospital.
30)Provides for data adjustments and supplemental payment
adjustments in the event of hospital consolidations, license
consolidations, or changes in ownership. Provides that no
payments shall be made if a hospital is closed.
31)Authorizes the Director of DHCS to correct identified
egregious errors in data sources, as specified; to modify
timelines, upon consultation with the hospital community and
with notice to the Legislature, upon a determination of
operational impossibility.
32)Requires the Director of DHCS to promptly submit any state
plan amendment (SPA) 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
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agreement to increase capitation payments and payments to
hospitals relating back to the beginning of each program
period.
33)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.
34)Authorizes the Director of DHCS to recoup and refund fees or
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 of denial by CMS, and to withhold payment to any
hospital that sues to enjoin implementation. Requires notice
to the Legislature of this occurrence.
35)Provides that payments shall be made only to the extent the
QAF is established, collected, and available to cover the
nonfederal share of payments and provides that payments shall
only be made from the QAF proceeds, interest, and federal
reimbursements.
36)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
the last day of a program period, and the provisions cannot be
modified to meet the requirements of federal law, or a lawsuit
or other order related to the QAF and payments is determined
to result in financial disadvantage to the state, except for a
case brought by a hospital located outside of the state.
Authorizes the Director of DHCS not to implement or
discontinue implementation of supplemental payments in the
event of inoperability. Requires the DHCS Director to execute
a declaration, as specified, if a determination of
inoperability is made and implement a plan to wind down the
program.
37)Authorizes DHCS to implement the QAF and payment program by
means of policy letters, provider bulletins, or all plan
letters in lieu of regulatory action under the Administrative
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Procedures Act, and requires notice to the appropriate
committees of the Legislature.
38)Deletes the January 1, 2015 sunset on the existing HQARF and
extends the HQARF, as modified by this bill, to January 1,
2018.
39)Requires DHCS to make available all public documentation used
to administer and audit the QAF and supplemental payment
program, and upon request, requires Medi-Cal MCPs to furnish
hospitals the amount the plan intends to pay to the hospital.
Requires DHCS to post on its Website, 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.
40)Defines hospital community as including, but not limited to,
the statewide hospital industry organization and systems
representing general acute care hospitals.
41)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 with the goal of
increasing access to care and improving hospital reimbursement
and to help pay for health care coverage for low-income
children; to recognize the fundamental structure of the
components used to develop a successful QAF program; 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; that no hospital be
required to pay the QAF unless federal approval is received
and that the full amount remains available only for the
purposes specified by the Legislature in these provisions.
42)Provides that beginning with the proposed budget for 2014-15,
and each year thereafter, the Department of Finance shall
report in the Governor's proposed budget and the May Revision
the difference in GF benefit for the upcoming fiscal year
resulting from the QAF program and what was anticipated at the
time the Budget Act of 2013 was enacted. It is the intent of
the Legislature that additional GF benefit be appropriated to
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supplement, and not supplant, funding for health and human
service programs, which may include the cost of medical
interpreters.
43)Sunsets the provisions of the QAF and supplemental payment
provisions on January 1, 2017.
44)Revises an IGT program authority to allow DHCS to authorize
the funds for use by hospitals that are not reimbursed by
means of certified public expenditures.
45)Requires DHCS to design and implement an IGT program to
increase capitation payments to MCMC plans for the purpose of
increasing reimbursement to NDPHs. Requires implementation no
later than January 1, 2014, or when all federal approvals have
been received.
46)Requires DHCS to develop a proposed modification to the QAF
as established by this bill to collect additional fees to be
used for IGTs from NDPHs to be used for increased payments for
Medi-Cal MCPs for increased payment within the capitated rate
range for the purpose of increased payments to private
hospitals and NDPHs in counties that do not have a DPH.
47)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 Selective Provider
Contracting Program, and eliminates the requirement that a
hospital have a selective provider contract or a contract with
a county organized health system (COHS) in order to
participate.
48)Effective October 1, 2013, requires Medi-Cal payments to
skilled nursing facilities that are a distinct part of a
general acute care hospital (DP-SNFs) to be determined without
the Medi-Cal rate reductions and rate roll-back required under
existing law.
49)Contains an urgency clause so as to become effective
immediately upon enactment.
EXISTING LAW :
1)Establishes, under federal law, the Medicaid program (Medi-Cal
in California, administered by DHCS) to provide comprehensive
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health care services and long-term care to low-income
populations such as pregnant women, children, and seniors and
people with disabilities (SPDs).
2)Effective January 1, 2014, adopts the ACA state option to
expand Medi-Cal to provide coverage to childless adults,
between ages 19 and 65 who are not otherwise eligible for
Medi-Cal; conforms to the ACA by expanding coverage for
parents and caretaker relatives with family income up to 138%
of the federal poverty level and eliminates assets and
resources limits.
3)Establishes a schedule of benefits under the Medi-Cal program,
which includes hospital inpatient and outpatient services,
subject to utilization controls, and establishes Medi-Cal
hospital reimbursement requirements.
4)Defines, under federal law, the UPL for hospital reimbursement
as the reasonable estimate of what Medicare would pay to all
hospitals within a class.
5)Authorizes DHCS to contract with qualified individuals,
entities, or organizations to provide services to, arrange
for, or case manage, the care of Medi-Cal beneficiaries,
including hospital inpatient services.
6)Defines a Medi-Cal MCP as any entity that enters into one of
several types of contracts with DHCS including COHS,
geographic managed care plans, and local initiatives.
7)Requires, under federal law, payments to Medi-Cal MCPs to be
set at a capitation rate that is actuarially sound.
FISCAL EFFECT : This bill, as amended, has not been analyzed by
a fiscal committee.
COMMENTS :
1)PURPOSE OF THIS BILL . As proposed to be amended, this bill
enacts the Medi-Cal Hospital Reimbursement Improvement Act of
2013. It represents an agreement between the sponsors, the
California Hospital Association (CHA) and the Brown
Administration and (if passed by the Legislature), the
Legislature to enact a three-year continuation of the hospital
QAF that would expire on January 1, 2014, and to establish the
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framework for an ongoing and permanent fee. The fee could be
made permanent by means of initiative that deletes the sunset
clause or by further act of the Legislature to delete the
sunset clause. This is a significant departure from previous
bills in that it would not require reauthorization by the
Legislature, if accomplished by initiative. This framework
also simplifies legislative reauthorization as specific dollar
amounts would not be specified for each period. Instead, the
bill gives authority to DHCS to calculate the rates, payments
and other calculations necessary to operate an ongoing fee
program. However, this bill does require that, in the event
there are subsequent program periods, the allocations,
calculations, and planned distributions are to be made through
the annual Budget Act.
With regard to the three year extension, from January 1, 2014 to
December 31, 2016, the fee provisions and payments are similar
to prior QAF periods. 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, 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. This bill, as in
prior bills, there is 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.
The current estimate is that this bill will raise nearly $13
billion in Medi-Cal fee dollars over a three year period. Of
that, it is estimated that $2.4 billion will be allocated to
children's coverage, $170 million will be paid as grants to
DPHs, and $17 million will be paid in grants to NDPHs. Of the
remainder, $10.6 billion is matched with federal funds at a
50% matching rate and distributed as supplemental payments.
This yields an estimated $10 billion in supplemental Medi-Cal
payments to private hospitals for FFS inpatient services, $3.6
billion for FFS outpatient services, $9.2 billion for private
hospital MCMC services, and $274 million for public hospital
managed care services. The net benefit to the hospital
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industry is calculated as $10 billion. The net benefit is
based on the amount of proceeds of the fee revenue plus
federal matching funds, plus direct grants are paid to
hospitals minus the allocations to the state
Another significant difference is the concept of "net benefit"
instead of a fixed dollar amount for children's health care
coverage. The first QAF set the amount as $80 million per
quarter which was equal to 21% of the net benefit to the
hospitals. The second QAF provided a total of $372 million or
23% of the net benefit. The current fee authorized $85
million per quarter in 2011-12 ($340 million or 19%) and $96.8
million per quarter for 2012-13 and 2013-14 (approximately
$390 million). However the amount was increased to $538
million or (31%) for 2012-13 and 2013-14 in the 2012 budget.
This bill provides $155 million per quarter for the last two
quarters of FY 2013-14 and limits the amount to 24% of the net
benefit going forward. This bill also requires that the
difference in GF benefit for the upcoming fiscal year
resulting from the QAF program and what was anticipated be
reported at the time the Budget Act of 2013 was enacted.
This bill also eliminates a Medi-Cal reimbursement rate freeze
as of October 1, 2013, as it applies to DP-NFs that was
contained in AB 97 (Budget Committee), Chapter 3, Statutes of
2011, the health services trailer bill to the 2011-12 State
Budget. It does not prevent the retroactive recoupment of
payments in order to repay the federal share of the payments
made during the period of that an injunction was in effect.
2)BACKGROUND . The costs of the Medicaid (Medi-Cal in
California) program are generally shared between states and
the federal government based on a set formula. The federal
government's contribution toward reimbursement for Medicaid
expenditures is known as FFP or federal matching funds. The
specified percentage of Medicaid costs paid by the federal
government is known as the federal medical assistance
percentage (FMAP). In general, the FMAP for Medi-Cal has been
set at 50%. However, for certain populations and certain
administrative activities the state receives a higher FMAP.
Federal Medicaid law permits states to finance the nonfederal
share of Medicaid costs through the following sources:
a) State GF. State GFs are revenues collected primarily
through personal income, sales, and corporate income taxes.
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b) Certified public expenditures (CPEs). The CPEs are a
funding mechanism in which public agencies (in California,
primarily counties and the UC system) certify that they
have made expenditures eligible for FFP, and then are
reimbursed by the federal government for part of these
expenditures, generally at the state's FMAP rate.
c) IGTs. The IGTs are transfers of public funds between
government entities, such as from counties to states.
d) Charges on Health Care Providers. Certain charges
levied on health care providers generate revenue. Federal
Medicaid law permits states to levy various types of
charges-including taxes, fees, or assessments-on health
care providers and use the proceeds to draw down federal
matching funds to support their Medicaid programs and/or
offset some state costs. These charges must meet certain
requirements and be approved by CMS for revenues from these
charges to be eligible for FFP. A number of different
types of providers can be subject to these charges,
including hospitals, certain skilled nursing facilities,
and certain intermediate care facilities for the
developmentally disabled.
3)QAF PROVISIONS . Under federal law, there are various limits
on the payment rate to Medi-Cal providers. The supplemental
payments and the formulas 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
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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.
4)Medi-Cal reimbursement for DP-NFs . This bill repeals the rate
freeze and 10% rate reductions that apply to DP-NFs for dates
of service on and after October 1, 2013. Existing law
requires Medi-Cal fee-FFS provider payments to DP-NFs to not
exceed the reimbursement rates to DP-NFs in the 2008-09 rate
year, reduced by 10% for dates of service on and after June 1,
2011. Effectively, this means rates are frozen at the 2008-09
levels and then further reduced by 10% for dates of service on
and after June 1, 2011. These rate reductions were blocked by
court action until recently. These Medi-Cal rate reductions
are retroactive, meaning the amounts DP-NFs have been paid
since June 1, 2011 above the rates contained in the SPA (which
contains the 10% reduction) are going to have be returned to
the state (because they have been "overpaid" during the time
the rate reduction was blocked by court action). The state
will recoup the overpayment by reducing providers' Medi-Cal
payments in the future to offset the overpayment amounts.
On August 14, 2013, DHCS announced its implementation plan for
the Medi-Cal provider payment reductions. DHCS also announced
that, in order to preserve and protect access to care for
Medi-Cal members, Medi-Cal provider payment reduction
exemptions, subject to federal approval of SPAs for DP-NF
facilities classified as rural or frontier, based upon the
California Medical Service Study Area's definitions, would be
exempted prospectively from the 10% payment reductions and
would not be subject to the rate freeze at the 2008-09 levels
on a prospective basis. DHCS had previously announced that it
exempted from the AB 97 reductions and rate freeze any DP-NF
which has a census of at least 90% pediatric patients,
effective February 18, 2012. The recently announced DHCS
exemption applies to 27 DP-NFs, but leaves 53 DP-NFs subject
to the rate reduction, and disproportionately affects DP-NFs
located in urban areas of the state, such as Los Angeles, San
Diego, Sacramento, San Francisco, and Alameda Counties.
5)SUPPORT . 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,
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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.
6)RELATED LEGISLATION .
a) AB 900 (Alejo), would have required Medi-Cal
reimbursement for DP-NFs to be determined without the
Medi-Cal rate reduction and rate roll-back required under
existing law, and would have taken effect immediately as an
urgency statute. AB 900 was held on the Senate suspense
file.
b) SB 640 (Lara) would have exempted from the Medi-Cal
payment reduction Medi-Cal FFS providers, pharmacy
providers, DP-NFs and subacute care units that are a
distinct part of a general acute care hospital for dates of
service on or after June 1, 2011, and MCMC plans. SB 640
would have taken effect immediately as an urgency statute.
SB 640 was held on the Senate Appropriations suspense file.
c) SB 646 (Nielsen) would have exempted all DP-SNFs from
the Medi-Cal rate reduction. SB 646 was held on the Senate
Appropriations suspense file.
7)PREVIOUS LEGISLATION .
a) AB 1383 (Jones), Chapter 627, Statutes of 2009, and AB
188 (Jones), Chapter 645, Statutes of 2009, enacted the
original framework for a Medi-Cal hospital provider fee;
established fee payment amounts; a methodology for
calculating and paying supplemental payments to private and
district hospitals; supplemental payments to Medi-Cal MCPs
for hospital services; allocated funds for children's
health care coverage; DHCS administrative costs; and,
grants to public hospitals from the funds collected by the
fee. AB 1383 was to become effective upon receipt of CMS
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approval and become inoperative on January 1, 2011.
b) AB 1653 (Jones), Chapter 218, Statutes of 2010, revised
the fee enacted in AB 1383 to reflect CMS requested
modifications necessary to obtain federal approval.
c) SB 90 (Steinberg), Chapter 19, Statutes of 2011 and AB
113 (Monning), Chapter 20, Statutes of 2011, enacted a QAF
and supplemental Medi-Cal payments for private hospitals
for the April to June 2011 period and established an IGT
program that allows the 48 NDPHs and 21 DPHs to use IGTs to
increase the Medi-Cal capitation rate to Medi-Cal MCPs with
which they contract and for supplemental payments.
d) SB 335 (Ed Hernandez and Steinberg), Chapter 286,
Statutes of 2011, extended a fee similar in structure to
that enacted by SB 90 and AB 1383 (as revised by AB 1653).
REGISTERED SUPPORT / OPPOSITION :
Support
California Hospital Association (sponsor)
Adventist Health
Alliance of Catholic Health Care
Dignity Health
District Hospital Leadership Forum
Private Essential Access Community Hospitals
Providence Health & Services Southern California
Tenet Healthcare Corporation
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097