Amended in Senate June 11, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 119


Introduced by Committee on Budget (Weber (Chair), Bloom, Bonta, Campos, Chiu, Cooper, Gordon, Jones-Sawyer, McCarty, Mullin, Nazarian, O'Donnell, Rodriguez, Thurmond, Ting, and Williams)

January 9, 2015


An actbegin delete relating to the Budget Act of 2015.end deletebegin insert end insertbegin insertto amend Sections 1324.23, 1324.29, and 1324.30 of the Health and Safety Code, and to amend Sections 14126.022, 14126.027, 14126.033, and 14126.036 of the Welfare and Institutions Code, relating to public health, and making an appropriation therefor, to take effect immediately, bill related to the budget.end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 119, as amended, Committee on Budget. begin deleteBudget Act of 2015. end deletebegin insertPublic health: Medi-Cal: nursing facilities.end insert

begin insert

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid Program provisions.

end insert
begin insert

Existing law requires the department to impose a uniform quality assurance fee on each skilled nursing facility, with certain exceptions, in accordance with a prescribed formula. Existing law requires that the fee be based on the entire net revenue of all skilled nursing facilities subject to the fee. Under existing law, the fee may not be assessed after July 31, 2015, and these provisions will be repealed on January 1, 2016.

end insert
begin insert

Existing law, the Medi-Cal Long-Term Care Reimbursement Act, requires the department to implement a facility-specific reimbursement ratesetting system for certain skilled nursing facilities. Reimbursement rates for freestanding skilled nursing facilities are funded by a combination of federal funds and moneys collected pursuant to the skilled nursing uniform quality assurance fee. Existing law also establishes the Skilled Nursing Facility Quality and Accountability Special Fund in the State Treasury, which is a continuously appropriated fund that contains moneys from the assessment of specified administrative penalties and set asides of General Fund moneys, for the purposes of making quality and accountability payments. Under existing law, the rate methodology will become inoperative after July 31, 2015, and these provisions will be repealed on January 1, 2016.

end insert
begin insert

This bill would modify the calculation of rates under the above-referenced rate methodology, and would extend the assessment of the quality assurance fee, implementation of the rate methodology, as modified, and implementation of related provisions until July 31, 2020. By extending the period of time during which transfers are made to the Skilled Nursing Facility Quality and Accountability Special Fund, the bill would make an appropriation. The bill would also make changes to the amount of set-asides to be transferred to the fund. The bill would require the department, in coordination with the State Department of Public Health, to report specified information to the relevant Assembly and Senate budget subcommittees by May 1, 2016.

end insert
begin insert

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.

end insert
begin insert

This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.

end insert
begin delete

This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2015.

end delete

Vote: begin deletemajority end deletebegin insert23end insert. Appropriation: begin deleteno end deletebegin insertyesend insert. Fiscal committee: begin deleteno end deletebegin insertyesend insert. State-mandated local program: no.

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

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 1324.23 of the end insertbegin insertHealth and Safety Codeend insert
2begin insert is amended to read:end insert

P3    1

1324.23.  

(a) The Director of Health Care Services, or his or
2her designee, shall administer this article.

3(b) The director may adopt regulations as are necessary to
4implement this article. These regulations may be adopted as
5emergency regulations in accordance with the rulemaking
6provisions of the Administrative Procedure Act (Chapter 3.5
7(commencing with Section 11340) of Part 1 of Division 3 of Title
82 of the Government Code). For purposes of this article, the
9adoption of regulations shall be deemed an emergency and
10necessary for the immediate preservation of the public peace, health
11and safety, or general welfare. The regulations shall include, but
12need not be limited to, any regulations necessary for any of the
13following purposes:

14(1) The administration of this article, including the proper
15imposition and collection of the quality assurance fee not to exceed
16amounts reasonably necessary for purposes of this article.

17(2) The development of any forms necessary to obtain required
18information from facilities subject to the quality assurance fee.

19(3) To provide details, definitions, formulas, and other
20requirements.

21(c) As an alternative to subdivision (b), and notwithstanding
22the rulemaking provisions of Chapter 3.5 (commencing with
23Section 11340) of Part 1 of Division 3 of Title 2 of the Government
24Code, the director may implement this article, in whole or in part,
25by means of a provider bulletin or other similar instructions,
26without taking regulatory action, provided that no such bulletin or
27other similar instructions shall remain in effect after July 31,begin delete 2015.end delete
28begin insert 2020.end insert It is the intent of the Legislature that the regulations adopted
29pursuant to subdivision (b) shall be adopted on or before July 31,
30begin delete 2015.end deletebegin insert 2020.end insert

31begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 1324.29 of the end insertbegin insertHealth and Safety Codeend insertbegin insert is
32amended to read:end insert

33

1324.29.  

(a) The quality assurance fee shall cease to be
34assessed after July 31,begin delete 2015.end deletebegin insert 2020.end insert

35(b) Notwithstanding subdivision (a) and Section 1324.30, the
36department’s authority and obligation to collect all quality
37assurance fees and penalties, including interest, shall continue in
38effect and shall not cease until the date that all amounts are paid
39or recovered in full.

P4    1(c) This section shall remain operative until the date that all fees
2and penalties, including interest, have been recovered pursuant to
3subdivision (b), and as of that date is repealed.

4begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 1324.30 of the end insertbegin insertHealth and Safety Codeend insertbegin insert is
5amended to read:end insert

6

1324.30.  

This article shall become inoperative after July 31,
7begin delete 2015,end deletebegin insert 2020,end insert and, as of January 1,begin delete 2016,end deletebegin insert 2021,end insert is repealed, unless
8a later enacted statute, that becomes operative on or before January
91,begin delete 2016,end deletebegin insert 2021,end insert deletes or extends the dates on which it becomes
10inoperative and is repealed.

11begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 14126.022 of the end insertbegin insertWelfare and Institutions Codeend insert
12begin insert is amended to read:end insert

13

14126.022.  

(a) (1) By August 1, 2011, the department shall
14develop the Skilled Nursing Facility Quality and Accountability
15Supplemental Payment System, subject to approval by the federal
16Centers for Medicare and Medicaid Services, and the availability
17of federal, state, or other funds.

18(2) (A) The system shall be utilized to provide supplemental
19payments to skilled nursing facilities that improve the quality and
20accountability of care rendered to residents in skilled nursing
21facilities, as defined in subdivision (c) of Section 1250 of the
22Health and Safety Code, and to penalize those facilities that do
23not meet measurable standards.

24(B) A freestanding pediatric subacute care facility, as defined
25in Section 51215.8 of Title 22 of the California Code of
26Regulations, shall be exempt from the Skilled Nursing Facility
27Quality and Accountability Supplemental Payment System.

28(3) The system shall be phased in, beginning with the 2010-11
29rate year.

30(4) The department may utilize the system to do all of the
31following:

32(A) Assess overall facility quality of care and quality of care
33improvement, and assign quality and accountability payments to
34skilled nursing facilities pursuant to performance measures
35described in subdivision (i).

36(B) Assign quality and accountability payments or penalties
37relating to quality of care, or direct care staffing levels, wages, and
38benefits, or both.

P5    1(C) Limit the reimbursement of legal fees incurred by skilled
2nursing facilities engaged in the defense of governmental legal
3actions filed against the facilities.

4(D) Publish each facility’s quality assessment and quality and
5accountability payments in a manner and form determined by the
6director, or his or her designee.

7(E) Beginning with the 2011-12 fiscal year, establish a base
8year to collect performance measures described in subdivision (i).

9(F) Beginning with the 2011-12 fiscal year, in coordination
10with the State Department of Public Health, publish the direct care
11staffing level data and the performance measures required pursuant
12to subdivision (i).

begin insert

13(5) The department, in coordination with the State Department
14of Public Health, shall report to the relevant Assembly and Senate
15budget subcommittees by May 1, 2016, information regarding the
16quality and accountability supplemental payments, including, but
17not limited to, its assessment of whether the payments are adequate
18to incentivize quality care and to sustain the program.

end insert

19(b) (1) There is hereby created in the State Treasury, the Skilled
20Nursing Facility Quality and Accountability Special Fund. The
21fund shall contain moneys deposited pursuant to subdivisions (g)
22and (j) tobegin delete (l),end deletebegin insert (m),end insert inclusive. Notwithstanding Section 16305.7 of
23the Government Code, the fund shall contain all interest and
24dividends earned on moneys in the fund.

25(2) Notwithstanding Section 13340 of the Government Code,
26the fund shall be continuously appropriated without regard to fiscal
27year to the department for making quality and accountability
28payments, in accordance with subdivisionbegin delete (m),end deletebegin insert (n),end insert to facilities
29that meet or exceed predefined measures as established by this
30section.

31(3) Upon appropriation by the Legislature, moneys in the fund
32may also be used for any of the following purposes:

33(A) To cover the administrative costs incurred by the State
34Department of Public Health for positions and contract funding
35required to implement this section.

36(B) To cover the administrative costs incurred by the State
37Department of Health Care Services for positions and contract
38funding required to implement this section.

P6    1(C) To provide funding assistance for the Long-Term Care
2 Ombudsman Program activities pursuant to Chapter 11
3(commencing with Section 9700) of Division 8.5.

4(c) No appropriation associated with this bill is intended to
5implement the provisions of Section 1276.65 of the Health and
6Safety Code.

7(d) (1) There is hereby appropriated for the 2010-11 fiscal year,
8one million nine hundred thousand dollars ($1,900,000) from the
9Skilled Nursing Facility Quality and Accountability Special Fund
10to the California Department of Aging for the Long-Term Care
11Ombudsman Program activities pursuant to Chapter 11
12(commencing with Section 9700) of Division 8.5. It is the intent
13of the Legislature for the one million nine hundred thousand dollars
14($1,900,000) from the fund to be in addition to the four million
15one hundred sixty-eight thousand dollars ($4,168,000) proposed
16in the Governor’s May Revision for the 2010-11 Budget. It is
17 further the intent of the Legislature to increase this level of
18appropriation in subsequent years to provide support sufficient to
19carry out the mandates and activities pursuant to Chapter 11
20(commencing with Section 9700) of Division 8.5.

21(2) The department, in partnership with the California
22Department of Aging, shall seek approval from the federal Centers
23for Medicare and Medicaid Services to obtain federal Medicaid
24reimbursement for activities conducted by the Long-Term Care
25Ombudsman Program. The department shall report to the fiscal
26committees of the Legislature during budget hearings on progress
27being made and any unresolved issues during the 2011-12 budget
28deliberations.

29(e) There is hereby created in the Special Deposit Fund
30established pursuant to Section 16370 of the Government Code,
31the Skilled Nursing Facility Minimum Staffing Penalty Account.
32The account shall contain all moneys deposited pursuant to
33subdivision (f).

34(f) (1) Beginning with the 2010-11 fiscal year, the State
35Department of Public Health shall use the direct care staffing level
36data it collects to determine whether a skilled nursing facility has
37met the nursing hours per patient per day requirements pursuant
38to Section 1276.5 of the Health and Safety Code.

39(2) (A) Beginning with the 2010-11 fiscal year, the State
40Department of Public Health shall assess a skilled nursing facility,
P7    1licensed pursuant to subdivision (c) of Section 1250 of the Health
2and Safety Code, an administrative penalty if the State Department
3of Public Health determines that the skilled nursing facility fails
4to meet the nursing hours per patient per day requirements pursuant
5to Section 1276.5 of the Health and Safety Code as follows:

6(i) Fifteen thousand dollars ($15,000) if the facility fails to meet
7the requirements for 5 percent or more of the audited days up to
849 percent.

9(ii) Thirty thousand dollars ($30,000) if the facility fails to meet
10the requirements for over 49 percent or more of the audited days.

11(B) (i) If the skilled nursing facility does not dispute the
12determination or assessment, the penalties shall be paid in full by
13the licensee to the State Department of Public Health within 30
14days of the facility’s receipt of the notice of penalty and deposited
15into the Skilled Nursing Facility Minimum Staffing Penalty
16Account.

17(ii) The State Department of Public Health may, upon written
18notification to the licensee, request that the department offset any
19 moneys owed to the licensee by the Medi-Cal program or any other
20payment program administered by the department to recoup the
21penalty provided for in this section.

22(C) (i) If a facility disputes the determination or assessment
23made pursuant to this paragraph, the facility shall, within 15 days
24of the facility’s receipt of the determination and assessment,
25simultaneously submit a request for appeal to both the department
26and the State Department of Public Health. The request shall
27include a detailed statement describing the reason for appeal and
28include all supporting documents the facility will present at the
29hearing.

30(ii) Within 10 days of the State Department of Public Health’s
31receipt of the facility’s request for appeal, the State Department
32of Public Health shall submit, to both the facility and the
33department, all supporting documents that will be presented at the
34hearing.

35(D) The department shall hear a timely appeal and issue a
36decision as follows:

37(i) The hearing shall commence within 60 days from the date
38of receipt by the department of the facility’s timely request for
39appeal.

P8    1(ii) The department shall issue a decision within 120 days from
2the date of receipt by the department of the facility’s timely request
3for appeal.

4(iii) The decision of the department’s hearing officer, when
5issued, shall be the final decision of the State Department of Public
6Health.

7(E) The appeals process set forth in this paragraph shall be
8exempt from Chapter 4.5 (commencing with Section 11400) and
9Chapter 5 (commencing with Section 11500), of Part 1 of Division
103 of Title 2 of the Government Code. The provisions of Section
11100171 and 131071 of the Health and Safety Code shall not apply
12to appeals under this paragraph.

13(F) If a hearing decision issued pursuant to subparagraph (D)
14is in favor of the State Department of Public Health, the skilled
15nursing facility shall pay the penalties to the State Department of
16Public Health within 30 days of the facility’s receipt of the
17decision. The penalties collected shall be deposited into the Skilled
18Nursing Facility Minimum Staffing Penalty Account.

19(G) The assessment of a penalty under this subdivision does not
20supplant the State Department of Public Health’s investigation
21process or issuance of deficiencies or citations under Chapter 2.4
22(commencing with Section 1417) of Division 2 of the Health and
23Safety Code.

24(g) The State Department of Public Health shall transfer, on a
25monthly basis, all penalty payments collected pursuant to
26subdivision (f) into the Skilled Nursing Facility Quality and
27Accountability Special Fund.

28(h) Nothing in this section shall impact the effectiveness or
29utilization of Section 1278.5 or 1432 of the Health and Safety Code
30relating to whistleblower protections, or Section 1420 of the Health
31and Safety Code relating to complaints.

32(i) (1) Beginning in the 2010-11 fiscal year, the department,
33in consultation with representatives from the long-term care
34industry, organized labor, and consumers, shall establish and
35publish quality and accountability measures, benchmarks, and data
36submission deadlines by November 30, 2010.

37(2) The methodology developed pursuant to this section shall
38include, but not be limited to, the following requirements and
39performance measures:

40(A) Beginning in the 2011-12 fiscal year:

P9    1(i) Immunization rates.

2(ii) Facility acquired pressure ulcer incidence.

3(iii) The use of physical restraints.

4(iv) Compliance with the nursing hours per patient per day
5requirements pursuant to Section 1276.5 of the Health and Safety
6Code.

7(v) Resident and family satisfaction.

8(vi) Direct care staff retention, if sufficient data is available.

9(B) If this act is extended beyond the dates on which it becomes
10inoperative and is repealed, in accordance with Section 14126.033,
11the department, in consultation with representatives from the
12 long-term care industry, organized labor, and consumers, beginning
13in the 2013-14 rate year, shall incorporate additional measures
14into the system, including, but not limited to, quality and
15accountability measures required by federal health care reform
16that are identified by the federal Centers for Medicare and Medicaid
17Services.

18(C) The department, in consultation with representatives from
19the long-term care industry, organized labor, and consumers, may
20incorporate additional performance measures, including, but not
21limited to, the following:

22(i) Compliance with state policy associated with the United
23States Supreme Court decision in Olmstead v. L.C. ex rel. Zimring
24(1999) 527 U.S. 581.

25(ii) Direct care staff retention, if not addressed in the 2012-13
26rate year.

27(iii) The use of chemical restraints.

begin insert

28(D) Beginning with the 2015-16 fiscal year, the department, in
29consultation with representatives from the long-term care industry,
30organized labor, and consumers, shall incorporate direct care
31staff retention as a performance measure in the methodology
32developed pursuant to this section.

end insert

33(j) (1) Beginning with the 2010-11 rate year, and pursuant to
34subparagraph (B) of paragraph (5) of subdivision (a) of Section
3514126.023, the department shall set aside savings achieved from
36setting the professional liability insurance cost category, including
37any insurance deductible costs paid by the facility, at the 75th
38percentile. From this amount, the department shall transfer the
39General Fund portion into the Skilled Nursing Facility Quality and
40Accountability Special Fund. A skilled nursing facility shall
P10   1provide supplemental data on insurance deductible costs to
2facilitate this adjustment, in the format and by the deadlines
3determined by the department. If this data is not provided, a
4facility’s insurance deductible costs will remain in the
5administrative costs category.

6(2) Notwithstanding paragraph (1), for the 2012-13 rate year
7only, savings from capping the professional liability insurance cost
8category pursuant to paragraph (1) shall remain in the General
9Fund and shall not be transferred to the Skilled Nursing Facility
10Quality and Accountability Special Fund.

11(k) begin delete Beginning withend deletebegin insert Forend insert the 2013-14 rate year, if there is a rate
12increase in the weighted average Medi-Cal reimbursement rate,
13the department shall set aside the first 1 percent of the weighted
14average Medi-Cal reimbursement rate increase for the Skilled
15Nursing Facility Quality and Accountability Special Fund.

16(l) If this act is extended beyond the dates on which it becomes
17inoperative and is repealed,begin delete in accordance with Section 14126.033,
18beginning withend delete
begin insert forend insert the 2014-15 rate year, in addition to the amount
19set aside pursuant to subdivision (k), if there is a rate increase in
20the weighted average Medi-Cal reimbursement rate, the department
21shall set aside at least one-third of the weighted average Medi-Cal
22reimbursement rate increase, up to a maximum of 1 percent, from
23which the department shall transfer the General Fund portion of
24this amount into the Skilled Nursing Facility Quality and
25Accountability Special Fund.

begin insert

26(m) Beginning with the 2015-16 rate year, and each subsequent
27rate year thereafter for which this article is operative, an amount
28equal to the amount deposited in the fund pursuant to subdivisions
29(k) and (l) for the 2014-15 rate year shall be deposited into the
30Skilled Nursing Facility Quality and Accountability Special Fund,
31for the purposes specified in this section.

end insert
begin delete

32(m)

end delete

33begin insert(n)end insert (1) (A) Beginning with the 2013-14 rate year, the
34department shall pay a supplemental payment, by April 30, 2014,
35to skilled nursing facilities based on all of the criteria in subdivision
36(i), as published by the department, and according to performance
37measure benchmarks determined by the department in consultation
38with stakeholders.

39(B) (i) The department may convene a diverse stakeholder
40group, including, but not limited to, representatives from consumer
P11   1groups and organizations, labor, nursing home providers, advocacy
2organizations involved with the aging community, staff from the
3Legislature, and other interested parties, to discuss and analyze
4alternative mechanisms to implement the quality and accountability
5payments provided to nursing homes for reimbursement.

6(ii) The department shall articulate in a report to the fiscal and
7appropriate policy committees of the Legislature the
8implementation of an alternative mechanism as described in clause
9(i) at least 90 days prior to any policy or budgetary changes, and
10seek subsequent legislation in order to enact the proposed changes.

11(2) Skilled nursing facilities that do not submit required
12performance data by the department’s specified data submission
13deadlines pursuant to subdivision (i) shall not be eligible to receive
14supplemental payments.

15(3) Notwithstanding paragraph (1), if a facility appeals the
16performance measure of compliance with the nursing hours per
17patient per day requirements, pursuant to Section 1276.5 of the
18Health and Safety Code, to the State Department of Public Health,
19and it is unresolved by the department’s published due date, the
20department shall not use that performance measure when
21determining the facility’s supplemental payment.

22(4) Notwithstanding paragraph (1), if the department is unable
23to pay the supplemental payments by April 30, 2014, then on May
241, 2014, the department shall use the funds available in the Skilled
25Nursing Facility Quality and Accountability Special Fund as a
26result of savings identified in subdivisions (k) and (l), less the
27administrative costs required to implement subparagraphs (A) and
28(B) of paragraph (3) of subdivision (b), in addition to any Medicaid
29funds that are available as of December 31, 2013, to increase
30provider rates retroactively to August 1, 2013.

begin delete

31(n)

end delete

32begin insert(o)end insert The department shall seek necessary approvals from the
33federal Centers for Medicare and Medicaid Services to implement
34this section. The department shall implement this section only in
35a manner that is consistent with federal Medicaid law and
36regulations, and only to the extent that approval is obtained from
37the federal Centers for Medicare and Medicaid Services and federal
38financial participation is available.

begin delete

39(o)

end delete

P12   1begin insert(p)end insert In implementing this section, the department and the State
2Department of Public Health may contract as necessary, with
3California’s Medicare Quality Improvement Organization, or other
4entities deemed qualified by the department or the State
5Department of Public Health, not associated with a skilled nursing
6facility, to assist with development, collection, analysis, and
7reporting of the performance data pursuant to subdivision (i), and
8with demonstrated expertise in long-term care quality, data
9collection or analysis, and accountability performance measurement
10models pursuant to subdivision (i). This subdivision establishes
11an accelerated process for issuing any contract pursuant to this
12section. Any contract entered into pursuant to this subdivision shall
13be exempt from the requirements of the Public Contract Code,
14through December 31,begin delete 2013.end deletebegin insert 2020.end insert

begin delete

15(p)

end delete

16begin insert(q)end insert Notwithstanding Chapter 3.5 (commencing with Section
1711340) of Part 1 of Division 3 of Title 2 of the Government Code,
18the following shall apply:

19(1) The director shall implement this section, in whole or in
20part, by means of provider bulletins, or other similar instructions
21without taking regulatory action.

22(2) The State Public Health Officer may implement this section
23by means of all facility letters, or other similar instructions without
24taking regulatory action.

begin delete

25(q)

end delete

26begin insert(r)end insert Notwithstanding paragraph (1) of subdivisionbegin delete (m),end deletebegin insert (n),end insert if a
27final judicial determination is made by any state or federal court
28that is not appealed, in any action by any party, or a final
29determination is made by the administrator of the federal Centers
30for Medicare and Medicaid Services, that any payments pursuant
31to subdivisions (a) andbegin delete (m),end deletebegin insert (n),end insert are invalid, unlawful, or contrary
32to any provision of federal law or regulations, or of state law, these
33subdivisions shall become inoperative, and for the 2011-12 rate
34year, the rate increase provided under subparagraph (A) of
35paragraph (4) of subdivision (c) of Section 14126.033 shall be
36reduced by the amounts described in subdivision (j). For the
372013-14begin delete rate year,end delete andbegin delete for each subsequentend deletebegin insert 2014-15end insert ratebegin delete year,end delete
38begin insert years,end insert any rate increase shall be reduced by the amounts described
39in subdivisions (j) to (l), inclusive.

P13   1begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 14126.027 of the end insertbegin insertWelfare and Institutions Codeend insert
2begin insert is amended to read:end insert

3

14126.027.  

(a) (1) The Director of Health Care Services, or
4his or her designee, shall administer this article.

5(2) The regulations and other similar instructions adopted
6pursuant to this article shall be developed in consultation with
7representatives of the long-term care industry, organized labor,
8seniors, and consumers.

9(b) (1) The director may adopt regulations as are necessary to
10implement this article. The adoption, amendment, repeal, or
11readoption of a regulation authorized by this section is deemed to
12be necessary for the immediate preservation of the public peace,
13health and safety, or general welfare, for purposes of Sections
1411346.1 and 11349.6 of the Government Code, and the department
15is hereby exempted from the requirement that it describe specific
16facts showing the need for immediate action.

17(2) The regulations adopted pursuant to this section may include,
18but need not be limited to, any regulations necessary for any of
19the following purposes:

20(A) The administration of this article, including the specific
21analytical process for the proper determination of long-term care
22rates.

23(B) The development of any forms necessary to obtain required
24cost data and other information from facilities subject to the
25ratesetting methodology.

26(C) To provide details, definitions, formulas, and other
27requirements.

28(c) As an alternative to the adoption of regulations pursuant to
29subdivision (b), and notwithstanding Chapter 3.5 (commencing
30with Section 11340) of Part 1 of Division 3 of Title 2 of the
31Government Code, the director may implement this article, in
32whole or in part, by means of a provider bulletin or other similar
33instructions, without taking regulatory action, provided that no
34such bulletin or other similar instructions shall remain in effect
35after July 31,begin delete 2015.end deletebegin insert 2020.end insert It is the intent of the Legislature that
36regulations adopted pursuant to subdivision (b) shall be in place
37on or before July 31,begin delete 2015.end deletebegin insert 2020.end insert

38begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 14126.033 of the end insertbegin insertWelfare and Institutions Codeend insert
39begin insert is amended to read:end insert

P14   1

14126.033.  

(a) The Legislature finds and declares all of the
2following:

3(1) Costs within the Medi-Cal program continue to grow due
4to the rising cost of providing health care throughout the state and
5also due to increases in enrollment, which are more pronounced
6during difficult economic times.

7(2) In order to minimize the need for drastically cutting
8enrollment standards or benefits during times of economic crisis,
9it is crucial to find areas within the program where reimbursement
10levels are higher than required under the standard provided in
11Section 1902(a)(30)(A) of the federal Social Security Act and can
12be reduced in accordance with federal law.

13(3) The Medi-Cal program delivers its services and benefits to
14Medi-Cal beneficiaries through a wide variety of health care
15providers, some of which deliver care via managed care or other
16contract models while others do so through fee-for-service
17arrangements.

18(4) The setting of rates within the Medi-Cal program is complex
19and is subject to close supervision by the United States Department
20of Health and Human Services.

21(5) As the single state agency for Medicaid in California, the
22State Department of Health Care Services has unique expertise
23that can inform decisions that set or adjust reimbursement
24methodologies and levels consistent with the requirements of
25federal law.

26(b) Therefore, it is the intent of the Legislature for the
27department to analyze and identify where reimbursement levels
28can be reduced consistent with the standard provided in Section
291902(a)(30)(A) of the federal Social Security Act and also
30consistent with federal and state law and policies, including any
31exemptions contained in the act that added this section, provided
32that the reductions in reimbursement shall not exceed 10 percent
33on an aggregate basis for all providers, services, and products.

34(c) This article, including Section 14126.031, shall be funded
35as follows:

36(1) General Fund moneys appropriated for purposes of this
37article pursuant to Section 6 of the act adding this section shall be
38used for increasing rates, except as provided in Section 14126.031,
39for freestanding skilled nursing facilities, and shall be consistent
40with the approved methodology required to be submitted to the
P15   1federal Centers for Medicare and Medicaid Services pursuant to
2Article 7.6 (commencing with Section 1324.20) of Chapter 2 of
3Division 2 of the Health and Safety Code.

4(2) (A) Notwithstanding Section 14126.023, for the 2005-06
5rate year, the maximum annual increase in the weighted average
6Medi-Cal rate required for purposes of this article shall not exceed
78 percent of the weighted average Medi-Cal reimbursement rate
8for the 2004-05 rate year as adjusted for the change in the cost to
9the facility to comply with the nursing facility quality assurance
10fee for the 2005-06 rate year, as required under subdivision (b) of
11Section 1324.21 of the Health and Safety Code, plus the total
12projected Medi-Cal cost to the facility of complying with new state
13or federal mandates.

14(B) Beginning with the 2006-07 rate year, the maximum annual
15increase in the weighted average Medi-Cal reimbursement rate
16required for purposes of this article shall not exceed 5 percent of
17the weighted average Medi-Cal reimbursement rate for the prior
18fiscal year, as adjusted for the projected cost of complying with
19new state or federal mandates.

20(C) Beginning with the 2007-08 rate year and continuing
21through the 2008-09 rate year, the maximum annual increase in
22the weighted average Medi-Cal reimbursement rate required for
23purposes of this article shall not exceed 5.5 percent of the weighted
24average Medi-Cal reimbursement rate for the prior fiscal year, as
25adjusted for the projected cost of complying with new state or
26federal mandates.

27(D) For the 2009-10 rate year, the weighted average Medi-Cal
28reimbursement rate required for purposes of this article shall not
29be increased with respect to the weighted average Medi-Cal
30reimbursement rate for the 2008-09 rate year, as adjusted for the
31projected cost of complying with new state or federal mandates.

32(3) (A) For the 2010-11 rate year, if the increase in the federal
33medical assistance percentage (FMAP) pursuant to the federal
34American Recovery and Reinvestment Act of 2009 (ARRA)
35(Public Law 111-5) is extended for the entire 2010-11 rate year,
36the maximum annual increase in the weighted average Medi-Cal
37reimbursement rate for the purposes of this article shall not exceed
383.93 percent, or 3.14 percent, if the increase in the FMAP pursuant
39to ARRA is not extended for that period of time, plus the projected
40cost of complying with new state or federal mandates. If the
P16   1increase in the FMAP pursuant to ARRA is extended at a different
2rate, or for a different time period, the rate adjustment for facilities
3shall be adjusted accordingly.

4(B) The weighted average Medi-Cal reimbursement rate increase
5specified in subparagraph (A) shall be adjusted by the department
6for the following reasons:

7(i) If the federal Centers for Medicare and Medicaid Services
8does not approve exemption changes to the facilities subject to the
9quality assurance fee.

10(ii) If the federal Centers for Medicare and Medicaid Services
11does not approve any proposed modification to the methodology
12for calculation of the quality assurance fee.

13(iii) To ensure that the state does not incur any additional
14General Fund expenses to pay for the 2010-11 weighted average
15Medi-Cal reimbursement rate increase.

16(C) If the maximum annual increase in the weighted average
17Medi-Cal rate is reduced pursuant to subparagraph (B), the
18department shall recalculate and publish the final maximum annual
19increase in the weighted average Medi-Cal reimbursement rate.

20(4) (A) Subject to the following provisions, for the 2011-12
21rate year, the increase in the Medi-Cal reimbursement rate for the
22purpose of this article, for each skilled nursing facility as defined
23in subdivision (c) of Section 1250 of the Health and Safety Code,
24shall not exceed 2.4 percent of the rate on file that was applicable
25on May 31, 2011, plus the projected cost of complying with new
26state or federal mandates. The percentage increase shall be applied
27equally to each rate on file as of May 31, 2011.

28(B) The weighted average Medi-Cal reimbursement rate increase
29specified in subparagraph (A) shall be adjusted by the department
30for the following reasons:

31(i) If the federal Centers for Medicare and Medicaid Services
32does not approve exemption changes to the facilities subject to the
33quality assurance fee.

34(ii) If the federal Centers for Medicare and Medicaid Services
35does not approve any proposed modification to the methodology
36for calculation of the quality assurance fee.

37(iii) To ensure that the state does not incur any additional
38General Fund expenses to pay for the 2011-12 weighted average
39Medi-Cal reimbursement rate increase.

P17   1(C) The department may recalculate and publish the weighted
2average Medi-Cal reimbursement rate increase for the 2011-12
3rate year if the difference in the projected quality assurance fee
4collections from the 2011-12 rate year, compared to the projected
5quality assurance fee collections for the 2010-11 rate year, would
6result in any additional General Fund expense to pay for the
72011-12 rate year weighted average reimbursement rate increase.

8(5) To the extent that rates are projected to exceed the adjusted
9limits calculated pursuant to subparagraphs (A) to (D), inclusive,
10of paragraph (2) and, as applicable, paragraphs (3) and (4), the
11department shall adjust each skilled nursing facility’s projected
12rate for the applicable rate year by an equal percentage.

13(6) (A) (i) Notwithstanding any other provision of law, and
14except as provided in subparagraph (B), payments resulting from
15the application of paragraphs (3) and (4), the provisions of
16paragraph (5), and all other applicable adjustments and limits as
17required by this section, shall be reduced by 10 percent for dates
18of service on and after June 1, 2011, through July 31, 2012. This
19is a one-time reduction evenly distributed across all facilities to
20ensure long-term stability of nursing homes serving the Medi-Cal
21 population.

22(ii) Notwithstanding any other provision of law, the director
23may adjust the percentage reductions specified in clause (i), as
24long as the resulting reductions, in the aggregate, total no more
25than 10 percent.

26(iii) The adjustments authorized under this subparagraph shall
27be implemented only if the director determines that the payments
28resulting from the adjustments comply with paragraph (7).

29(B) Payments to facilities owned or operated by the state shall
30be exempt from the payment reduction required by this paragraph.

31(7) (A) Notwithstanding any other provision of this section,
32the payment reductions and adjustments required by paragraph (6)
33shall be implemented only if the director determines that the
34payments that result from the application of paragraph (6) will
35comply with applicable federal Medicaid requirements and that
36federal financial participation will be available.

37(B) In determining whether federal financial participation is
38available, the director shall determine whether the payments
39comply with applicable federal Medicaid requirements, including
P18   1those set forth in Section 1396a(a)(30)(A) of Title 42 of the United
2States Code.

3(C) To the extent that the director determines that the payments
4do not comply with applicable federal Medicaid requirements or
5that federal financial participation is not available with respect to
6any payment that is reduced pursuant to this section, the director
7retains the discretion to not implement the particular payment
8reduction or adjustment and may adjust the payment as necessary
9to comply with federal Medicaid requirements.

10(8) For managed care health plans that contract with the
11department pursuant to this chapter and Chapter 8 (commencing
12with Section 14200), except for contracts with the Senior Care
13Action Network and AIDS Healthcare Foundation, and to the
14extent that these services are provided through any of those
15contracts, payments shall be reduced by the actuarial equivalent
16amount of the reduced provider reimbursements specified in
17paragraph (6) pursuant to contract amendments or change orders
18effective on July 1, 2011, or thereafter.

19(9) (A) For the 2012-13 rate year, all of the following shall
20apply:

21(i) The department shall determine the amounts of reduced
22payments for each skilled nursing facility, as defined in subdivision
23(c) of Section 1250 of the Health and Safety Code, resulting from
24the 10-percent reduction imposed pursuant to clause (i) of
25subparagraph (A) of paragraph (6) for the period beginning on
26June 1, 2011, through July 31, 2012.

27(ii) For claims adjudicated through October 1, 2012, each skilled
28nursing facility as defined in subdivision (c) of Section 1250 of
29the Health and Safety Code that is reimbursed under the Medi-Cal
30fee-for-service program, shall receive the total payments calculated
31by the department in clause (i), not later than December 31, 2012.

32(iii) For managed care plans that contract with the department
33pursuant to this chapter or Chapter 8 (commencing with Section
3414200), except contracts with Senior Care Action Network and
35AIDS Healthcare Foundation, and to the extent that skilled nursing
36services are provided through any of those contracts, payments
37shall be adjusted by the actuarial equivalent amount of the
38reimbursements calculated in clause (i) pursuant to contract
39amendments or change orders effective on July 1, 2012, or
40thereafter.

P19   1(B) Notwithstanding subparagraph (A), beginning on August
21, 2012, through July 31, 2013, the department shall pay the facility
3specific Medi-Cal reimbursement rate that was on file and
4applicable to the specific skilled nursing facility on August 1, 2011,
5prior to and excluding any rate reduction implemented pursuant
6to clause (i) of subparagraph (A) of paragraph (6) for the period
7beginning on June 1, 2011, to July 31, 2012, inclusive, and adjusted
8for the projected costs of complying with new state or federal
9mandates. These rates are deemed to be sufficient to meet operating
10expenses.

11(C) The weighted average Medi-Cal reimbursement rate increase
12specified in subparagraph (B) shall be adjusted by the department
13if the federal Centers for Medicare and Medicaid Services does
14not approve any proposed modification to the methodology for
15calculation of the skilled nursing quality assurance fee pursuant
16to Article 7.6 (commencing with Section 1324.20) of Chapter 2
17of Division 2 of the Health and Safety Code.

18(D) Notwithstanding any other provision of law, beginning on
19January 1, 2013, Article 7.6 (commencing with Section 1324.20)
20of Chapter 2 of Division 2 of the Health and Safety Code, which
21imposes a skilled nursing facility quality assurance fee, shall not
22be enforceable against any skilled nursing facility unless each
23skilled nursing facility is paid the rate provided for in
24subparagraphs (A) and (B). Any amount collected during the
252012-13 rate year by the department pursuant to Article 7.6
26(commencing with Section 1324.20) of Chapter 2 of Division 2
27of the Health and Safety Code shall be refunded to each facility
28not later than February 1, 2013.

29(E) The provisions of this paragraph shall also be included as
30part of a state plan amendment implementing the 2011-12 and
312012-13 Medi-Cal reimbursement rates authorized under this
32article.

33(10) (A) Subject to the following provisions, for the 2013-14
34and 2014-15 rate years, the annual increase in the weighted average
35Medi-Cal reimbursement rate for the purpose of this article, for
36each skilled nursing facility as defined in subdivision (c) of Section
371250 of the Health and Safety Code, shall be 3 percent for each
38rate year, respectively, plus the projected cost of complying with
39new state or federal mandates.

P20   1(B) (i) For the 2013-14 rate year, if there is a rate increase in
2the weighted average Medi-Cal reimbursement rate, the department
3shall set aside 1 percent of the increase in the weighted average
4Medi-Cal reimbursement rate, from which the department shall
5transfer the nonfederal portion into the Skilled Nursing Facility
6Quality and Accountability Special Fund, to be used for the
7supplemental rate pool.

8(ii) For the 2014-15 rate year, if there is a rate increase in the
9weighted average Medi-Cal reimbursement rate, the department
10shall set aside at least one-third of the weighted average Medi-Cal
11reimbursement rate increase, up to a maximum of 1 percent, from
12which the department shall transfer the nonfederal portion of this
13amount into the Skilled Nursing Facility Quality and Accountability
14Special Fund.

15(C) The weighted average Medi-Cal reimbursement rate increase
16specified in subparagraph (A) shall be adjusted by the department
17for the following reasons:

18(i) If the federal Centers for Medicare and Medicaid Services
19does not approve exemption changes to the facilities subject to the
20quality assurance fee.

21(ii) If the federal Centers for Medicare and Medicaid Services
22does not approve any proposed modification to the methodology
23for calculation of the quality assurance fee.

24(11) The director shall seek any necessary federal approvals for
25the implementation of this section. This section shall not be
26implemented until federal approval is obtained. When federal
27approval is obtained, the payments resulting from the application
28of paragraph (6) shall be implemented retroactively to June 1,
292011, or on any other date or dates as may be applicable.

begin insert

30(12) (A) Beginning with the 2015-16 rate year, the annual
31increase in the weighted average Medi-Cal reimbursement rate,
32 required for the purposes of this article, shall be 3.62 percent, plus
33the projected cost of complying with new state or federal mandates.

end insert
begin insert

34(B) The weighted average Medi-Cal reimbursement rate
35increase specified in subparagraph (A) may be adjusted by the
36department as it deems necessary to obtain any applicable federal
37approval.

end insert

38(d) The rate methodology shall cease to be implemented after
39July 31,begin delete 2015.end deletebegin insert 2020.end insert

P21   1(e) (1) It is the intent of the Legislature that the implementation
2of this article result in individual access to appropriate long-term
3care services, quality resident care, decent wages and benefits for
4nursing home workers, a stable workforce, provider compliance
5with all applicable state and federal requirements, and
6administrative efficiency.

7(2) Not later than December 1, 2006, the Bureau of State Audits
8shall conduct an accountability evaluation of the department’s
9progress toward implementing a facility-specific reimbursement
10system, including a review of data to ensure that the new system
11is appropriately reimbursing facilities within specified cost
12categories and a review of the fiscal impact of the new system on
13the General Fund.

14(3) Not later than January 1, 2007, to the extent information is
15available for the three years immediately preceding the
16implementation of this article, the department shall provide baseline
17information in a report to the Legislature on all of the following:

18(A) The number and percent of freestanding skilled nursing
19facilities that complied with minimum staffing requirements.

20(B) The staffing levels prior to the implementation of this article.

21(C) The staffing retention rates prior to the implementation of
22this article.

23(D) The numbers and percentage of freestanding skilled nursing
24facilities with findings of immediate jeopardy, substandard quality
25of care, or actual harm, as determined by the certification survey
26of each freestanding skilled nursing facility conducted prior to the
27implementation of this article.

28(E) The number of freestanding skilled nursing facilities that
29received state citations and the number and class of citations issued
30during calendar year 2004.

31(F) The average wage and benefits for employees prior to the
32implementation of this article.

33(4) Not later than January 1, 2009, the department shall provide
34a report to the Legislature that does both of the following:

35(A) Compares the information required in paragraph (2) to that
36same information two years after the implementation of this article.

37(B) Reports on the extent to which residents who had expressed
38a preference to return to the community, as provided in Section
391418.81 of the Health and Safety Code, were able to return to the
40community.

P22   1(5) The department may contract for the reports required under
2this subdivision.

3begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 14126.036 of the end insertbegin insertWelfare and Institutions Codeend insert
4begin insert is amended to read:end insert

5

14126.036.  

This article shall become inoperative on August 1,
6begin delete 2015,end deletebegin insert 2020,end insert and as of January 1,begin delete 2016,end deletebegin insert 2021,end insert is repealed, unless a
7later enacted statute that is enacted before January 1,begin delete 2016,end deletebegin insert 2021,end insert
8 deletes or extends that date.

9begin insert

begin insertSEC. 8.end insert  

end insert
begin insert

This act is a bill providing for appropriations related
10to the Budget Bill within the meaning of subdivision (e) of Section
1112 of Article IV of the California Constitution, has been identified
12as related to the budget in the Budget Bill, and shall take effect
13immediately.

end insert
begin delete
14

SECTION 1.  

It is the intent of the Legislature to enact statutory
15changes relating to the Budget Act of 2015.

end delete


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