BILL ANALYSIS Ó
SB 239
Page 1
SENATE THIRD READING
SB 239 (Ed Hernandez and Steinberg)
As Amended September 11, 2013
2/3 vote. Urgency
SENATE VOTE :36-0
HEALTH 16-0
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|Ayes:|Pan, Logue, Ammiano, |
| |Atkins, Bonilla, Bonta, |
| |Roger Hernández, |
| |Maienschein, Mansoor, |
| |Mitchell, Nazarian, |
| |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; directs grants to designated public hospitals (DPHs)
(hospitals owned or operated by counties or the University of
California); directs grants to nondesignated public hospitals
(NDPHs) (hospitals owned or operated by hospital districts);
and, provides 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 from
January 1, 2014, to December 31, 2016, as specified. 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
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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).
3)Requires DHCS to compute the quarterly QAF for subsequent
program periods pursuant to a specified methodology based on
specified data and requires the rate to be specified in the
provisions of the annual Budget Act. 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)Requires, for the first program period, 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.
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7)Specifies, for the program period beginning January 1, 2014,
and ending December 31, 2016, that:
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.
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8)Establishes timelines and a methodology for rebasing each base
year and updating and revising the data, recalculating the net
benefit and other dollar amounts necessary to subsequent
program years. Provides that these calculations for
subsequent program periods are to be specified in the annual
Budget Act.
9)Requires, after the first program period, 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.
10)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.
11)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.
12)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 and specifies the distribution of excess funds.
13)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.
14)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.
15)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.
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16)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
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.
17)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.
18)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.
19)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:
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20)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
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.
21)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.
22)Requires, 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.
23)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.
24)Provides that supplemental payments under this bill are in
addition to DSH replacement supplemental payments, do not
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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.
25)Prohibits the QAF from:
a) Exceeding the maximum aggregate net patient revenue
percentage that is allowed under federal law, as necessary,
to preclude a finding of an indirect guarantee;
b) Considered an allowable cost for Medi-Cal cost
reporting.
26)Provides that supplemental payments made pursuant to this
bill are not to affect a determination of rate adequacy under
federal law.
27)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.
28)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.
29)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.
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30)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
agreement to increase capitation payments and payments to
hospitals relating back to the beginning of each program
period.
31)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.
32)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.
33)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.
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34)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
Procedures Act, and requires notice to the appropriate
committees of the Legislature.
35)Deletes the January 1, 2015, sunset on the existing HQARF and
extends the HQARF, as modified by this bill, to January 1,
2018.
36)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 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.
37)Defines hospital community as including, but not limited to,
the statewide hospital industry organization and systems
representing general acute care hospitals.
38)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.
39)Provides that beginning with the proposed budget for 2014-15,
and each year thereafter, the Department of Finance shall
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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
supplement, and not supplant, funding for health and human
service programs, which may include the cost of medical
interpreters.
40)Sunsets the provisions of the QAF and supplemental payment
provisions on January 1, 2017.
41)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.
42)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.
43)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.
44)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 in order to participate.
45)Requires, effective October 1, 2013, Medi-Cal payments to
skilled nursing facilities that are a distinct part of a
general acute care hospital to be determined without the
Medi-Cal rate reductions and rate roll-back required under
existing law.
46)Contains an urgency clause so as to become effective
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immediately upon enactment.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, assuming federal approval is granted, the fiscal
impact of the three-year QAF program period from January 1, 2014
to December 31, 2016 is as follows:
1)An estimated increase of $23.2 billion total (hospital
QAF/federal funds) paid to private hospitals through December
2016 in the form of supplemental Medi-Cal payments for
hospital services. This estimate assumes hospitals subject to
the QAF will contribute $13.2 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. The net benefit to the hospital industry is expected to
be $10 billion over three years.
2)Administrative costs to DHCS of $1 million per year, $3
million total, through December 2016 (hospital QAF funds).
3)Total estimated GF savings of $2.4 billion over three years,
associated with QAF revenue allocated to the state for
children's coverage. QAF revenue to the state for children's
coverage can directly offset GF for this purpose.
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 the 2013-14 fiscal year, 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.
For the period from July 1, 2014 through December 1, 2017, the
bill establishes funding for children's coverage as 24% of the
net benefit to the hospital industry, accounting for the other
estimated $2.1 billion in savings. Current estimates for GF
savings associated with funding for children's coverage are
$682 million total in the 2014 calendar year ($310 in fiscal
year 2013-14 plus an additional $372 million), $803 million
for 2015, and $891 million for 2016.
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4)Increased GF costs of up to $73.8 million annually associated
with the prospective repeal of a current-law rate reduction
and rate freeze for DP-NFs, effective October 1, 2013. The
actual increase may be lower than this amount, given DHCS has
already exempted certain facilities from these lower rates in
order to preserve access to services.
5)Direct grants to DPHs in the aggregate net amount of $170
million, and to NDPHs in the aggregate net amount of $17
million, over the three years of this QAF program.
6)Upon the expiration of this program in 2017, 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 : 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
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
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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, contains 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 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
A significant difference from prior bills 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 Act. 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.
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
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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 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 Budget
Act. 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. 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. The Medi-Cal rate reductions are
retroactive, meaning the amounts DP-NFs that have been paid
since June 1, 2011, above the rates contained in the SPA (which
contains the 10% reduction) are going to have to be recouped by
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
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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.
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.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
FN: 0002798