BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 239
AUTHOR: Hernandez and Steinberg
AMENDED: September 11, 2013
HEARING DATE: September 12, 2013
CONSULTANT: Bain
PURSUANT TO SENATE RULE 29.10.
SUBJECT : Medi-Cal: hospital quality assurance fee:
distinct part skilled nursing facilities. (Urgency)
SUMMARY : Enacts the Medi-Cal Hospital Reimbursement
Improvement Act of 2013 (the Act), which imposes a hospital
quality assurance fee, as specified, on certain general
acute care hospitals from January 1, 2014, through December
30, 2016, and which requires supplemental payments to be
made to private hospitals for certain services, direct
grants to public hospitals, increased capitation payments
to Medi-Cal managed care plans for hospital services, and
for children's health coverage and Department of Health
Care Services administration. Sunsets the Act on January 1,
2017. Requires Medi-Cal reimbursement for nursing
facilities that are a distinct part of a general acute care
hospital to be determined without the Medi-Cal rate
reduction and rate roll-back required under existing law
for dates of services on and after October 1, 2013.
Establishes Intergovernmental Transfer programs. Takes
effect immediately as an urgency statute.
Existing law:
1.Establishes the Medi-Cal program, administered by
Department of Health Care Services (DHCS), under which
health care services are provided to qualified low-income
persons. Establishes a schedule of benefits for Medi-Cal
beneficiaries, which includes inpatient and outpatient
hospital services and nursing facility services. Defines,
in the Medi-Cal state plan, a distinct part nursing
facility (DP-NF) as any nursing facility which is
licensed together with an acute care hospital.
2.Enacts the Medi-Cal Hospital Provider Rate Improvement
Act of 2011 (Prior Rate Act) to provide supplemental
payments from July 1, 2011, to December 31, 2013 to
Continued---
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private hospitals for inpatient and outpatient services
in Medi-Cal fee-for-service (FFS), managed care and acute
psychiatric days, and to make direct grants to designated
public hospitals in support of health care expenditures.
3.Establishes the Private Hospital Quality Assurance Fee
Act of 2011 (Prior Fee Act), which levies a hospital
quality assurance fee (QAF), from July 1, 2011 to January
1, 2014, on each hospital that is not an exempt hospital,
with varying fee amounts by payor source and type of
payment.
4.Requires all funds from the QAF to be used exclusively to
enhance federal financial participation (FFP) for
hospital services under Medi-Cal, to provide additional
reimbursement to hospitals, to pay DHCS staffing and
administrative costs, to make increased payments to
managed care health plans, and to fund children's health
coverage, in a specified order of priority.
5.Requires Medi-Cal FFS provider payments to DP-NFs to be
reduced by 5 percent for dates of service on and after
March 1, 2009. Requires payments to Medi-Cal managed care
plans to be reduced by the actuarially equivalent amount
of the 5 percent payment reduction.
6.Requires Medi-Cal FFS provider payments to DP-NFs to not
exceed the reimbursement rates to DP-NFs in the 2008-09
rate year, reduced by 10 percent for dates of service on
and after June 1, 2011. Requires payments to be reduced
by 10 percent for Medi-Cal FFS benefits for dates of
service on and after June 1, 2011. Requires payments to
Medi-Cal managed care plans to be reduced by the
actuarial equivalent amount of the 10 percent payment
reduction.
7.Requires the payment reductions in 5) above to cease to
be implemented for the same services provided by the same
class of providers when federal approval is obtained for
the payment reductions in 6) above. Requires the payment
reductions in 6) to be implemented retroactively to June
1, 2011, or on any other date or dates as may be
applicable when federal approval is obtained.
This bill:
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Medi-Cal Hospital Reimbursement Improvement Act of 2013
1.Enacts the Medi-Cal Hospital Reimbursement Improvement
Act of 2013, which imposes a QAF on each general acute
care hospital that is not an exempt facility or a
converted hospital, computed starting on January 1, 2014,
and continuing through and including December 31, 2016,
for deposit in the Hospital Quality Assurance Revenue
Fund (Fund).
2.Imposes on hospitals that are not exempt a QAF. Exempts
DPHs, non-designated public hospitals (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.
3.Establishes an order of priority for funds from the
proceeds of the QAF of paying for DHCS' staffing and
administrative costs, to pay for health coverage of
children, to make increased capitation payments to
managed health plans, and to make increased payments to
and direct grants to hospitals.
4.Continuously appropriates money in the Fund for the
purposes of this bill for the first program period (for
the first 3 years, until December 31, 2016).
5.Establishes under this bill a contractually enforceable
promise on behalf of the state to use the proceeds of the
QAF, including any federal matching funds, solely and
exclusively for the purposes in this bill, to limit the
amount of the proceeds of the QAF to be used to pay for
the health care coverage of children as provided in this
bill, to limit any payments for DHCS' costs of
administration to the amounts set forth in this bill on
the effective date of this bill, to maintain and continue
prior reimbursement levels, and to otherwise comply with
all its obligations set forth in this bill, except that
amendments that arise from, or have as a basis for, a
decision, advice, or determination by the federal Centers
for Medicare and Medicaid Services (CMS) relating to
federal approval of the QAF or the payments set forth in
this bill are required to control.
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6.Permits DHCS to modify any methodology or other provision
in the hospital fee related provisions of this bill to
meet the requirements of federal law or regulations, to
obtain federal approval, or to enhance the probability of
federal approval, provided the modifications do not
violate the spirit, purposes, and intent of this bill and
are not inconsistent with the conditions of
implementation.
7.Requires, after July 1, 2014, the amount of funding for
children's health coverage to equal 24 percent of the net
benefit to hospitals from the fee (aggregate payments for
a net benefit period minus aggregate fees for that
period).
8.Requires private hospitals to be paid supplemental
amounts from the QAF that result in payments equal to the
statewide aggregate upper payment limit (UPL) for private
hospitals for each year of the fee.
9.Requires private hospitals to be paid supplemental
amounts for inpatient services that result in payments to
hospitals that equal the applicable federal UPL. Requires
hospitals to be paid additional amounts for general acute
care days, acute psychiatric days, high acuity days, high
acuity trauma days, transplant days, and for subacute
supplemental services.
10. Requires DHCS to increase capitation payments to
Medi-Cal managed care plans, requires the aggregate
amount of increased capitation payments to be the maximum
amount for which FFP is available on an aggregate basis.
Requires DHCS to determine the amount of the increased
capitation payments for each plan for each year, taking
into account specified factors, and requires the
increased capitation payment under this bill to be paid
by the plans to hospitals for hospital services to
Medi-Cal enrollees of the plan, and requires plans to
expend 100 percent of any increased capitation payments
it receives on hospital services.
11. Requires designated public hospitals DPHs and NDPH to
be paid direct grants of specified amounts for the first
3 years, sets aside a portion of the direct grant is set
aside to draw down FFP to make increased payments to
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managed care plans for rate range room increases for
managed care payments. Authorizes, for subsequent
programs, DPH and NDPHs to be paid direct grants upon
appropriation in the annual Budget Act. Requires the
director to determine the direct grant amounts, if any,
and allocation methodology after the first three years,
and requires these amounts to be specified in provisional
language in the Budget Act.
12. Requires, for the first program period (January 1,
2014 to December 31, 2016), specific QAF rates, payment
amounts and data sources. Requires, for program years
after January 1, 2017, provisions for rebasing the fee,
including requiring DHCS to retrieve data, determine rate
amounts, requires the rates to meet the requirements of
federal law, to require DHCS to consult with the hospital
community in determining the rates, and to require
payment rates to equal as close as possible the
applicable federal upper payment limit, and to require
payment to Medi-Cal managed care plans to result in the
maximum payments to plans permitted by federal law.
Requires rates to be specified in provisional language in
the Budget Act.
13. Requires DHCS to provide a clear narrative description
along with fiscal detail in the Medi-Cal estimate package
of all the calculations made by DHCS for the second and
subsequent program periods.
14. Grants the director of DHCS the discretion to revise
specified fee rates, upon federal approval, based on the
funds required to make payments, in consultation with the
hospital community. Permits the director of DHCS to
correct any identified material and egregious errors in
data. Permits the director to modify and the timeline
related to the assessment of the QAF or Medi-Cal payments
if it is impossible to implement a timeline.
15. Prohibits payments for the period of time a hospital
qualifies as a new hospital 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. Makes, notwithstanding the aforementioned
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exclusion, the private non-profit replacement hospital
for Los Angeles County Martin Luther King, Jr.-Harbor
Hospital eligible for funding from the QAF, and requires
DHCS to use the best available and reasonable data in
determining supplemental payments and the QAF for this
facility.
16. Establishes a funding maintenance of effort in order
to ensure that the proceeds of the QAF and federal
matching funds are used to supplement existing funding
for hospital services provided to Medi-Cal patients, and
not supplant such funding.
17. Requires the director of DHCS to take specified
actions to obtain federal approval for and implement the
QAF-related provisions. Makes the QAF-related provisions
inoperative if specified actions occur, such as specified
court actions, failure to receive federal approval, and
FFP not being available, among other requirements.
18. Requires the Department of Finance, in the Governor's
Budget and May Revision, to report the difference in
General Fund benefit for the upcoming fiscal year
resulting from this bill and what was anticipated at the
time the Budget Act of 2013 was enacted. States
legislative intent that additional General Fund (GF)
benefit be appropriated to supplement and not supplant
funding for health and human services programs, which may
include the cost of medical interpreters.
19. Requires DHCS to make available all public
documentation it uses to administer and audit the fee
program, and requires DHCS to require Medi-Cal managed
care plans to furnish hospitals with the amounts the plan
intends to pay to the hospital, upon request of a
hospital. Requires DHCS to post specified QAF related
information on DHCS' web site, including the fee model,
payments, fee schedules and information on managed care
rate approvals.
20. Makes legislative findings and declarations regarding
the roles of hospitals, the QAF, and the purpose of the
fee.
21. Sunsets the Medi-Cal Hospital Reimbursement
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Improvement Act of 2013 on January 1, 2017.
Medi-Cal Rates for Distinct Part-Nursing Facilities
22. Requires Medi-Cal reimbursement for nursing facilities
that are a distinct part of a general acute care hospital
to be determined without the Medi-Cal rate reduction and
rate roll-back required under existing law, for dates of
service on and after October 1, 2013.
Intergovernmental Transfers
23. Permits DHCS to maximize available FFP to provide
access to services provided by hospitals that are not
reimbursed by certified public expenditures by
authorizing the use of intergovernmental transfers (IGTs)
to fund the non-federal share of supplemental payments to
private hospitals. IGTs are where governmental entities
transfer funds to another governmental entity to serve as
the state match to draw down additional federal Medicaid
matching funds.
24. Requires DHCS to design and implement, in consultation
with NDPH an IGT program for NDPHs related to Medi-Cal
managed care services provided by NDPHs in order to
increase capitation payments for the purpose of
increasing NDPH reimbursement.
25. Requires DHCS to develop proposed modifications to the
QAF established by this bill to collect additional fees
to pay Medi-Cal managed care plans rate range increases
for the purpose of increasing payments to private
hospitals and NDPHs in counties that do not have DPHs.
Requires DHCS to consult with the hospital community to
enable IGTs from NDPHs solely for use for this purpose.
Requires NDPH to be given priority relative to accessing
rate range funds in counties where a NDPH is the only
public hospital. Conditions payments to Medi-Cal managed
care plans on the managed care plan paying all of the
rate range increases as additional payments to private
hospitals and NDPH for providing and making available
services to Medi-Cal enrollees of the plans, and limits
the amount of increases to Medi-Cal managed care plans to
the total amount of payments possible, including federal
financial participation, based on the amount of fees
actually collected and IGTs actually provided.
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Out-of-state hospitals
26. Requires the director of DHCS to develop and prescribe
in provider bulletins and on DHCS' web site a process by
which a private general acute care hospital located
outside of the state that services Medi-Cal beneficiaries
may opt in to pay the QAF on all applicable categories of
patient days, and receive supplemental payments for the
Medi-Cal program under this bill in the same manner that
the hospital could participate if it were located in the
state, to the extent permitted by federal law and federal
requirements. Requires DHCS to rely on reliable data to
make reasonable estimates or projections to calculate the
fees due and the supplemental payments.
Construction Renovation Reimbursement Program
27. Permits DHCS to administer and distribute payments for
the Construction Renovation Reimbursement Program (known
as the SB 1732 program or CRRP), but eliminates the
requirement that a hospital maintain or negotiate a
selective provider contract or a contract with a county
organized health system in order for the hospital to
participate in the CRRP.
Hospital Quality Assurance Revenue Fund
28. Extends the sunset date of the Fund from January 1,
2015 to January 1, 2018, and extends the authority of the
Controller to use the Fund for cash flow loans to the GF
until that date.
FISCAL IMPACT : 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 percent 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 percent FFP. The net benefit to the hospital
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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 percent 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.
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 designated public hospitals in the
aggregate net amount of $170 million, and to
non-designated public hospitals 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
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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 :
1.Author's statement. This bill would enact a hospital QAF
for three additional years to provide a net benefit to
hospitals over of three years of nearly $10 billion in
funds for hospital services, and to provide over $2
billion dollars in additional revenue for children's
health coverage. Federal law authorizes states to levy
fees on health care providers if the fees meet federal
requirements. The author argues this bill provide
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. In addition, this bill would
prospectively eliminate the DP-NF rate freeze and rate
rollback, which has threatened the financial viability of
many of these facilities.
2.Assembly amendments. Major changes made in amendments
taken in the Assembly a) extend the duration of the fee
and related provisions by an additional year (from 2 to 3
years) and sunset the fee January 1, 2017; b) require,
instead of authorize, direct grants to DPHs and NDPHs and
specify the amounts of the grants; c) require children's
health coverage to receive 24 percent of the net benefit
to the hospital industry of the fee, beginning July 1,
2014; d) establish new IGT provisions to fund hospital
services; e) allow DHCS to administer and distribute
payments for the CRRP, and eliminate the requirement that
a hospital maintain or negotiate a selective provider
contract or a contract with a county organized health
system in order for the hospital to participate in the
CRRP; f) establish a new structure for the fee and
payments by placing these provisions in one article of
law (rather than two as in prior fee bills), and require
subsequent fee amounts be determined by DHCS, in
consultation with the hospital community, and included in
provisional language in the annual Budget Act (this
provision would apply if the sunset date in the bill is
extended).
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3.Background. Federal Medicaid law authorizes states to
levy fees on health care providers if the fees meet
federal requirements. 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. The Legislature enacted a series of bills
establishing a time-limited hospital QAF in 2009, and an
additional six-month QAF for the first six months of
2011. The current QAF sunsets at the end of this calendar
year. In addition to the hospital QAF, California
currently has a QAF for intermediate care facilities for
the developmentally disabled, and a separate QAF for
skilled nursing facilities.
4.Benefit to hospital industry from hospital fee. As part
of the establishment of the fee and related payment
provisions, the California Hospital Association (CHA, the
bill's sponsor) developed a model that estimates the
revenue generated by the fee, payments made to hospitals,
payments made to the state for program administration and
children's health coverage, and the net benefit to the
hospital industry. CHA's model uses 2010 data to
determine the payment amounts each hospital will receive
under the bill. CHA estimates that over the three year
period the bill is in effect (January 1, 2014 through
December 31, 2016), $13.1 billion dollars in revenue
would be raised from the fee, which would provide total
payments to hospitals (after federal matching funds are
drawn down) of $23.1 billion. The state would receive
nearly $2.4 billion for children's coverage and
administration, and the fee would provide a net benefit
to the hospital industry of $9.9 billion (total payments
to hospitals minus fees paid).
The primary beneficiaries of the fee program are private
hospitals (which pay the fee to draw down federal funds)
as they receive $22.6 billion from the fee (this is a
gross amount and does not deduct the amounts paid in fees
by these facilities). Public and district hospitals are
exempt from paying the QAF. DPHs are reimbursed at the
maximum amount for which federal Medicaid matching funds
are available and are thus not able to draw down
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additional matching funds from the QAF. However, DPHs and
NDPHs do receive direct grants under this bill, and DPHs
receive $274 million in payments from Medi-Cal managed
care plans that are funded by the hospital fees paid by
private hospitals and federal funds.
5.Funding for children's health coverage. In prior QAF
bills, the state has received a fixed amount per quarter
from the fee, which is used to offset GF spending on
children's health coverage. As part of this year's
budget, the state assumed it would $310 million for the
first two quarters of 2014. This bill contains funding
for this purpose for the first two fiscal quarters (till
June 30, 2014).
Under this bill, beginning July 1, 2014, the state would
receive 24 percent of the net benefit received by
hospitals from the fee (total payments to hospitals minus
fees paid by hospitals). This results in an increase in
funding to the state to offset GF spending on children's
health coverage. The amount of funding for children's
health coverage the state is estimated to receive is
nearly $2.4 billion over the three years the bill is in
effect. The policy rationale for having the state receive
a percentage of the net benefit (rather than a fixed
dollar amount) is both the state and the hospitals have
an interest in maximizing the net benefit to hospitals.
The hospitals' incentive is to receive more money back
above what they pay in fees (through federal matching
funds), thus maximizing their net benefit. The state
benefits because additional GF savings are generated when
a greater net benefit is provided to hospitals.
6.Medi-Cal reimbursement for DP-NFs. This bill repeals the
rate freeze and 10 percent rate reduction that apply to
DP-NFs for dates of service on and after October 1, 2013.
Existing law requires Medi-Cal FFS provider payments to
DP-NFs to not exceed the reimbursement rates to DP-NFs in
the 2008-09 rate year, reduced by 10 percent 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 percent for dates of service on and
after June 1, 2011. These rate reductions were blocked by
court action until recently.
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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 State Plan Amendment (which
contains the 10 percent 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
State Plan Amendments (SPA) 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 percent
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 percent 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.
7.Framework for future fees. The QAF enacted by this bill
sunsets January 1, 2017. However, this bill establishes a
framework for an ongoing fee if the sunset date in this
bill is extended or repealed. After January 1, 2017, this
bill requires DHCS to determine the rates based on data
retrieved by DHCS (rather than having those amount places
in policy legislation, as has been past practice with QAF
bills). To ensure legislative oversight and public
transparency, this bill requires that future
appropriations be made in the annual Budget Act (rather
than be continuously appropriated), that the amount of
the rates be contained in provisional language in the
annual Budget Act, and establishes a new requirement that
DHCS provide a clear narrative description along with
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fiscal detail in the Medi-Cal Estimate submitted to the
Legislature twice each year of all the calculations made
by DHCS.
8.Out-of-state hospital provisions. On August 27, 2010, 15
hospitals from outside California (Oregon, Arizona and
Nevada) filed a complaint seeking injunctive relief in
federal court against DHCS. The plaintiffs argued that
distribution of the fee money to hospitals only located
in California would violate the Commerce Clause, the
Fourteenth Amendment Equal Protection clause, and the
Supremacy Clause of the U.S. Constitution. The CHA
intervened in the case, a confidential settlement was
reached, and the plaintiffs dismissed the complaint
against DHCS. This bill establishes a process by which a
private general acute care hospital located outside of
the state that serves Medi-Cal beneficiaries may opt in
to pay the QAF on all applicable categories of patient
days, and receive supplemental payments for the Medi-Cal
program under this bill in the same manner that the
hospital could participate if it were located in the
state. This language is intended to address any potential
legal challenges to this bill.
9.Ballot initiative filed. In July 2013, an attorney for
CHA filed a ballot initiative for title and summary with
the Attorney General's (AG) office. The proposed
initiative would amend the State Constitution to prohibit
the Legislature from imposing a new fee or continuing the
imposition of an existing fee on community hospitals for
the purpose of obtaining FFP in the Medicaid Program or
any other similar program unless a series of requirements
are met. The measure also dictates the use of the
proceeds from such a fee. That measure is awaiting title
and summary from the AG. CHA has indicated it will
re-file a different ballot initiative if this measure
becomes law.
10.Prior legislation. AB 1383 (Jones), Chapter 627,
Statutes of 2009 and AB 188 (Jones), Chapter 645,
Statutes of 2009, enacted the original Medi-Cal hospital
QAF and a methodology for making supplemental payments to
hospitals, and provided funds for children's health care
coverage and grants to public hospitals. In response to
the state's request for federal approval, the CMS in June
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of 2010 sent a letter raising objections and concerns
about the methodology which concluded that the fee
enacted by AB 1383 did not meet federal standards. CMS
also suggested modifications, which were made by AB 1653
(Jones), Chapter 218, Statutes of 2010. AB 1653 also
established an alternative mechanism for funding
supplemental grants to public hospitals and allowed the
state to retain the funds that were previously allocated
to these hospitals.
SB 90 (Steinberg), Chapter 19, Statutes of 2010, repealed
specified Medi-Cal hospital rate freezes and rate
reductions enacted in health budget trailer bills in
2008, 2010 and 2011. SB 90 also imposed a QAF on
hospitals for six months (January 1, 2011, until June 30,
2011), and used the resulting revenue to draw down
federal funds to provide supplemental payments to private
hospitals in fee-for-service Medi-Cal, Medi-Cal managed
care, and for acute psychiatric days, to provide $210
million for children's health coverage, and to pay for
DHCS administrative costs in administering the hospital
fee and supplemental payment provisions of this bill. SB
90 also reduced disproportionate share GF payments to
private hospitals by $105 million GF over two fiscal
years. SB 90 also required DHCS to design and implement
an inter-governmental transfer program for Medi-Cal
managed care services provided by designated public
hospitals (DPH) and NDPH for the purpose of increasing
reimbursement to NDPHs and DPHs.
In addition, SB 90 allows hospitals that have received
extensions to January 1, 2013, of the January 1, 2008,
seismic deadline, for their Structural Performance
Category 1 buildings, to request an additional extension
of up to seven years.
Last session, SB 335 (Hernandez) Chapter 286, Statutes
2011, imposed a QAF on hospitals for 30 months (from June
30, 2011, until December 31, 2013). SB 335 uses the
resulting revenue to draw down federal funds to provide
supplemental payments to private hospitals in
fee-for-service Medi-Cal, Medi-Cal managed care, and to
provide specified funding amounts from the QAF per
quarter for children's health coverage until December 31,
2013. In addition, SB 335 requires DPH to be paid direct
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grants (not Medi-Cal payments), funded from the QAF. SB
335 also reduced disproportionate share hospital
replacement payments and supplemental payments from the
Private Hospital Supplemental Fund to hospitals by
specified amounts in 2012-13 and 2013-14. Finally, SB
335 appropriates $13.6 billion to DHCS for purposes of
that measure. SB 335 took effect as an urgency statute
upon signature by the Governor in September 2011.
11.Support. This bill is sponsored by the CHA, which argues
the creation and implementation of the hospital fee
program in California has been extremely successful. CHA
states the program has been critical for hospitals to
bolster their ability to preserve health care services
for the state's most vulnerable patients. 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. The hospital provider fee program remains
crucial to the preservation of California's entire safety
net, and without this program the number of hospitals
forced to restrict or end services to Medi-Cal patients
will continue to increase. CHA concludes that the
provider fee will not solve the state's Medi-Cal
shortfall, but it will continue to be the largest
programmatic action taken since the founding of the
program to mitigate the lack of sufficient funding, and
it is vital to California hospitals that the provider fee
be approved and implemented.
12.Opposition. Michelle Steel, Vice Chair of the State
Board of Equalization, wrote in opposition to a prior
version of this bill that the cost of healthcare is
continually 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. Ms.
Steel argues 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
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divert money away to the General Fund.
13.Related legislation. SB 646 (Nielsen), an urgency bill,
would exempt all DP-SNFs from the Medi-Cal rate
reduction. SB 646 was held on the Senate Appropriations
suspense file.
SB 640 (Lara) would exempt from the Medi-Cal payment
reduction Medi-Cal FFS providers, pharmacy providers,
DP-SNFs 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 Medi-Cal managed care plans.
SB 640 would take effect immediately as an urgency
statute. SB 640 was held on the Senate Appropriations
suspense file.
AB 900 (Alejo) requires Medi-Cal reimbursement for DP-NFs
to be determined without the Medi-Cal rate reduction and
rate roll-back required under existing law. Takes effect
immediately as an urgency statute. AB 900 was held on the
Senate Appropriations suspense file.
SUPPORT AND OPPOSITION :
Support: California Hospital Association (sponsor)
Adventist Health
Alliance of Catholic Health Care
Dignity Health
Private Essential Access Community Hospitals
Support (prior version):
The Children's Partnership
Children Now
Children's Defense Fund-California
California Coverage & Health Initiatives
PICO California
Oppose:Michelle Steel, Member of the Board of Equalization
-- END --
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