BILL ANALYSIS Ó
AB 344
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Date of Hearing: April 21, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
AB 344
(Chávez) - As Introduced February 13, 2015
SUBJECT: Medi-Cal.
SUMMARY: Provides that if a payment is made to a non-designated
public hospital (NDPH), as specified, the payment is not be
subject to a peer group inpatient reimbursement limitation
established by the Department of Health Care Services (DHCS),
unless otherwise required under federal law.
EXISTING LAW:
1)Establishes the Medi-Cal program, administered by DHCS, under
which qualified low-income individuals receive health care
services. Includes inpatient hospital services as a covered
benefit under the Medi-Cal program.
2)Provides for the payment of hospital services in the Medi-Cal
program, including fee-for-service (FFS) or with Medi-Cal
managed care (MCMC) health plans.
3)Requires DHCS to develop and implement a new Medi-Cal
reimbursement methodology for private inpatient general acute
care hospitals based upon diagnosis related groups (DRGs),
subject to federal approval, that reflects the costs and
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staffing levels associated with quality of care for patients
in all general acute care hospitals in state and out-of-state.
4)Requires the DRG payment methodology to be implemented on July
1, 2012, or on the date upon which the Director of the
Department of Managed Health Care executes a declaration
certifying that all necessary federal approvals have been
obtained and the methodology is sufficient for formal
implementation, whichever is later. Exempts county hospitals
and University of California hospitals (designated public
hospitals or DPHs) and NDPHs from the DRG payment methodology.
5)Provides that designated public hospitals (DPHs) are
reimbursed based on their costs, and use their own funds
[instead of state General Fund] as the state match to draw
down federal Medicaid matching funds, pursuant to a Section
1115 waiver.
6)Upon approval of a waiver amendment, and state plan amendment,
provides that NDPHs, which are defined as district hospitals,
are to be reimbursed in the same fashion as DPHs.
FISCAL EFFECT: This bill has not been analyzed by a fiscal
committee.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the sponsor, the District
Hospital Leadership Forum, this bill addresses a technical
issue related to the Peer Grouping Inpatient Reimbursement
Limitation (PIRL) that non-contract district/municipal
hospitals (otherwise known as NDPHs) were subject to prior to
January 1, 2014. The PIRL is, as it sounds a reimbursement
limitation that in certain circumstances could restrict
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Medi-Cal payment to hospitals. The sponsor states that this
bill seeks to prevent application of an existing statutory or
regulatory rate limitation on a NDPH when DHCS converts its
Medi-Cal inpatient reimbursement methodology to the AP-DRG.
The purpose of the above regulation was to control costs for
non-contract hospitals (about two-thirds of district/municipal
hospitals were non-contract on January 1, 2014). The
transition the DRG reimbursement methodology for these
hospitals means that there no longer a need for this
limitation, according to the sponsor and tis bill ensures this
technical correction is in place.
2)BACKGROUND. SB 853 (Committee on Budget and Fiscal Review,
Chapter 717, Statutes of 2010, added Section 14105.28 to the
Welfare and Institutions Code which mandated the design and
implementation of a new payment methodology for hospital
inpatient services provided to Medi-Cal beneficiaries based
upon DRGs. DRGs measures case mix for inpatient admissions.
One question is how to define a more severe case. Six
dimensions along which case mix could be measured include,
severity of illness, risk of mortality, prognosis, treatment
difficulty, need for intervention and resource intensity. The
initial motivation for developing the DRGs was to create an
effective framework for monitoring the quality of care and the
utilization of services in a hospital setting. AP-DRGs are
similar to DRGs, but also include a more detailed DRG
breakdown for non-Medicare patients, particularly newborns and
children.
The DRG reimbursement methodology replaced the previous payment
method for all NDPHs with admissions on or after January 1,
2014. Under previous payment method, non-contract hospitals
were reimbursed based on Medi-Cal allowable, audited costs.
Hospitals were paid interim rates using a cost-to-charge ratio
based on the most recently submitted cost report. A cost
settlement process reconciled the difference between interim
payments and the allowable costs of providing services and
costs were limited by the PIRL.
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The PIRL's purpose was to slow down the rate of Medi-Cal
inpatient acute care expenditures through two sets of
limitations. Both limitations are based upon a hospital's
Medi-Cal cost per discharge. The first is to limit the growth
of Medi-Cal expenditures by the hospital from one period to
the next, while the other capped the hospital's Medi-Cal cost
per discharge at the 60th percentile of its peer group.
DHCS is using a three year transition period to implement DRGs
that limits hospitals' projected change from what they would
have received under the current reimbursement methodology,
with full implementation in year four. The purpose of the
transition period is to allow time for hospitals to make
adjustments to systems of care due to the fundamental change
in the payment system.
3)SUPPORT. This bill, sponsored by the District Hospital
Leadership Forum (DHLF) on behalf of district hospitals, seeks
to prevent application of an existing statutory or regulatory
rate limitation on a NDPH when DHCS converts its Medi-Cal
inpatient reimbursement methodology to the AP-DRG which would
make the PIRL regulation obsolete. However, to ensure there
are not unintended consequences resulting in the application
of the PIRL after the transition to certified public
expenditures, this bill is necessary.
4)PREVIOUS LEGISLATION.
a) AB 1467 (Budget Committee), Chapter 23, Statutes of
2012, creates a transition plan for the staff California
Medical Assistance Commission (CMAC) and redirects
positions to DHCS on July 1, 2012. Changes the
reimbursement methodology of NDPHs from the current CMAC
negotiated per diem rates or cost-based reimbursement for
inpatient Medi-Cal FFS. The additional funds would be made
available to NDPHs to offset their uncompensated care costs
and to support their efforts to enhance the quality of care
and the health of the patients and families they serve.
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b) AB 102 (Budget Committee), Chapter 29, Statutes of 2011,
requires DHCS to implement the DRG payment methodology by
July 1, 2012.
REGISTERED SUPPORT / OPPOSITION:
Support
District Hospital Leadership Forum
Opposition
None on file.
Analysis Prepared by:Roger Dunstan / HEALTH / (916) 319-2097
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