California Legislature—2015–16 Regular Session

Assembly BillNo. 366


Introduced by Assembly Member Bonta

(Principal coauthor: Senator Hernandez)

February 17, 2015


An act to amend Section 14105.28 of, and to add Sections 14105.194, 14105.196, and 14301.6 to, the Welfare and Institutions Code, relating to Medi-Cal and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

AB 366, as introduced, Bonta. Medi-Cal: reimbursement: provider rates.

(1) Existing law establishes the Medi-Cal program, administered by the State Department of Health Care Services, under which health care services are provided to qualified, low-income persons. The Medi-Cal program is, in part, governed and funded by federal Medicaid provisions. Existing law requires the department to develop and implement a Medi-Cal inpatient hospital reimbursement payment methodology based on diagnosis-related groups, subject to federal approval, that reflects the costs and staffing levels associated with quality of care for patients in all general acute care hospitals, as specified. Existing law generally requires the diagnosis-related group-based payments to apply to all claims.

This bill would require claims for payments pursuant to the inpatient hospital reimbursement methodology described above to be increased by ___ percent for the 2015-16 fiscal year, and would require, commencing July 1, 2016, and annually thereafter, the department to increase each diagnosis-related group payment claim amount based on increases in the medical component of the California Consumer Price Index.

(2) Existing law requires, except as otherwise provided, Medi-Cal provider payments to be reduced by 1% or 5%, and provider payments for specified non-Medi-Cal programs to be reduced by 1%, for dates of service on and after March 1, 2009, and until June 1, 2011. Existing law requires, except as otherwise provided, Medi-Cal provider payments and payments for specified non-Medi-Cal programs to be reduced by 10% for dates of service on and after June 1, 2011.

This bill would, instead, prohibit the application of those reductions for payments to providers for dates of service on or after June 1, 2011. The bill would also require payments for managed care health plans for dates of service following the effective date of the bill to be determined without application of some of those reductions. The bill would require the Director of Health Care Services to implement this provision to the maximum extent permitted by federal law and for the maximum time period for which the director obtains federal approval for federal financial participation for those payments.

(3) Prior law required, beginning January 1, 2013, through and including December 31, 2014, that payments for primary care services provided by specified physicians be no less than 100% of the payment rate that applies to those services and physicians as established by the Medicare Program, for both fee-for-service and managed care plans.

This bill, commencing January 1, 2016, would require, only to the extent permitted by federal law and that federal financial participation is available, payments for specified medical care services to not be less than 100% of the payment rate that applies to those services as established by the Medicare Program, for both fee-for-service and managed care plans. The bill would authorize the department to implement those provisions through provider bulletins without taking regulatory action until regulations are adopted, and would require the department to adopt those regulations by July 1, 2018. The bill would require, commencing July 1, 2016, the department to provide a status report to the Legislature on a semiannual basis until regulations have been adopted.

(4) Under existing law, one of the methods by which Medi-Cal services are provided is pursuant to contracts with various types of managed care plans.

This bill would require, to the extent federal financial participation is not jeopardized, the department to pay Medi-Cal managed care plans rate range increases at a minimum level of 100% of the rate range available with respect to all enrollees who are not subject to the rate range payment requirements that are applicable to all enrollees who are newly eligible beneficiaries assigned to county public hospital health systems.

(5) This bill would declare that it is to take effect immediately as an urgency statute.

Vote: 23. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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

P3    1

SECTION 1.  

Section 14105.28 of the Welfare and Institutions
2Code
is amended to read:

3

14105.28.  

(a) It is the intent of the Legislature to design a new
4Medi-Cal inpatient hospital reimbursement methodology based
5on diagnosis-related groups that more effectively ensures all of
6the following:

7(1) Encouragement of access by setting higher payments for
8patients with more serious conditions.

9(2) Rewards for efficiency by allowing hospitals to retain
10savings from decreased length of stays and decreased costs per
11day.

12(3) Improvement of transparency and understanding by defining
13the “product” of a hospital in a way that is understandable to both
14clinical and financial managers.

15(4) Improvement of fairness so that different hospitals receive
16similar payment for similar care and payments to hospitals are
17adjusted for significant cost factors that are outside the hospital’s
18control.

19(5) Encouragement of administrative efficiency and minimizing
20administrative burdens on hospitals and the Medi-Cal program.

21(6) That payments depend on data that has high consistency and
22credibility.

23(7) Simplification of the process for determining and making
24payments to the hospitals.

25(8) Facilitation of improvement of quality and outcomes.

26(9) Facilitation of implementation of state and federal provisions
27related to hospital acquired conditions.

P4    1(10) Support of provider compliance with all applicable state
2and federal requirements.

3(b) (1) (A) (i) The department shall develop and implement
4a payment methodology based on diagnosis-related groups, subject
5to federal approval, that reflects the costs and staffing levels
6associated with quality of care for patients in all general acute care
7hospitals in state and out of state, including Medicare critical access
8hospitals, but excluding public hospitals, psychiatric hospitals,
9and rehabilitation hospitals, which include alcohol and drug
10rehabilitation hospitals.

11(ii) The payment methodology developed pursuant to this section
12shall be implemented on July 1, 2012, or on the date upon which
13the director executes a declaration certifying that all necessary
14federal approvals have been obtained and the methodology is
15sufficient for formal implementation, whichever is later.

begin insert

16(iii) Claims for payments pursuant to the payment methodology
17based on diagnosis-related groups established under this section
18shall be increased by ___ percent for the 2015-16 fiscal year.

end insert
begin insert

19(iv) Commencing July 1, 2016, and annually thereafter, the
20department shall increase each diagnosis-related group payment
21claim amount based on increases in the medical component of the
22California Consumer Price Index.

end insert

23(B) The diagnosis-related group-based payments shall apply to
24all claims, except claims for psychiatric inpatient days,
25rehabilitation inpatient days, managed care inpatient days, and
26swing bed stays for long-term care services, provided, however,
27that psychiatric and rehabilitation inpatient days shall be excluded
28regardless of whether the stay was in a distinct-part unit. The
29department may exclude or include other claims and services as
30may be determined during the development of the payment
31methodology.

32(C) Implementation of the new payment methodology shall be
33coordinated with the development and implementation of the
34replacement Medicaid Management Information System pursuant
35to the contract entered into pursuant to Section 14104.3, effective
36on May 3, 2010.

37(2) The department shall evaluate alternative diagnosis-related
38group algorithms for the new Medi-Cal reimbursement system for
39the hospitals to which paragraph (1) applies. The evaluation shall
P5    1include, but not be limited to, consideration of all of the following
2factors:

3(A) The basis for determining diagnosis-related group base
4price, and whether different base prices should be used taking into
5account factors such as geographic location, hospital size, teaching
6status, the local hospital wage area index, and any other variables
7that may be relevant.

8(B) Classification of patients based on appropriate acuity
9classification systems.

10(C) Hospital case mix factors.

11(D) Geographic or regional differences in the cost of operating
12facilities and providing care.

13(E) Payment models based on diagnosis-related groups used in
14other states.

15(F) Frequency of grouper updates for the diagnosis-related
16groups.

17(G) The extent to which the particular grouping algorithm for
18the diagnosis-related groups accommodates ICD-10 diagnosis and
19procedure codes, and applicable requirements of the federal Health
20Insurance Portability and Accountability Act of 1996.

21(H) The basis for calculating relative weights for the various
22diagnosis-related groups.

23(I) Whether policy adjusters should be used, for which care
24categories they should be used, and the frequency of updates to
25the policy adjusters.

26(J) The extent to which the payment system is budget neutral
27and can be expected to result in state budget savings in future
28years.

29(K) Other factors that may be relevant to determining payments,
30including, but not limited to, add-on payments, outlier payments,
31capital payments, payments for medical education, payments in
32the case of early transfers of patients, and payments based on
33performance and quality of care.

34(c) The department shall submit to the Legislature a status report
35on the implementation of this section on April 1, 2011, April 1,
362012, April 1, 2013, and April 1, 2014.

37(d) The alternatives for a new system described in paragraph
38(2) of subdivision (b) shall be developed in consultation with
39recognized experts with experience in hospital reimbursement,
P6    1economists, the federal Centers for Medicare and Medicaid
2Services, and other interested parties.

3(e) In implementing this section, the department may contract,
4as necessary, on a bid or nonbid basis, for professional consulting
5services from nationally recognized higher education and research
6institutions, or other qualified individuals and entities not
7associated with a particular hospital or hospital group, with
8demonstrated expertise in hospital reimbursement systems. The
9rate setting system described in subdivision (b) shall be developed
10with all possible expediency. This subdivision establishes an
11accelerated process for issuing contracts pursuant to this section
12and contracts entered into pursuant to this subdivision shall be
13exempt from the requirements of Chapter 1 (commencing with
14Section 10100) and Chapter 2 (commencing with Section 10290)
15of Part 2 of Division 2 of the Public Contract Code.

16(f) (1) The department may adopt emergency regulations to
17implement the provisions of this section in accordance with
18rulemaking provisions of the Administrative Procedure Act
19(Chapter 3.5 (commencing with Section 11340) of Part 1 of
20Division 3 of Title 2 of the Government Code). The initial adoption
21of emergency regulations and one readoption of the initial
22regulations shall be deemed to be an emergency and necessary for
23the immediate preservation of the public peace, health and safety,
24or general welfare. Initial emergency regulations and the one
25readoption of those regulations shall be exempt from review by
26the Office of Administrative Law. The initial emergency
27regulations and the one readoption of those regulations authorized
28by this section shall be submitted to the Office of Administrative
29Law for filing with the Secretary of State and publication in the
30California Code of Regulations.

31(2) As an alternative to paragraph (1), and notwithstanding the
32rulemaking provisions of Chapter 3.5 (commencing with Section
3311340) of Part 1 of Division 3 of Title 2 of the Government Code,
34or any otherbegin delete provision ofend delete law, the department may implement and
35administer this section by means of provider bulletins, all-county
36letters, manuals, or other similar instructions, without taking
37regulatory action. The department shall notify the fiscal and
38appropriate policy committees of the Legislature of its intent to
39issue a provider bulletin, all-county letter, manual, or other similar
40instruction, at least five days prior to issuance. In addition, the
P7    1department shall provide a copy of any provider bulletin, all-county
2letter, manual, or other similar instruction issued under this
3paragraph to the fiscal and appropriate policy committees of the
4Legislature.

5

SEC. 2.  

Section 14105.194 is added to the Welfare and
6Institutions Code
, to read:

7

14105.194.  

(a) Notwithstanding Sections 14105.07, 14105.191,
814105.192, and 14105.193, payments to providers for dates of
9service on or after June 1, 2011, shall be determined without
10application of the reductions in Sections 14105.07, 14105.191,
1114105.192, and 14105.193, except as otherwise provided in this
12section.

13(b) Notwithstanding Sections 14105.07 and 14105.192, and
14except as otherwise provided in this section, for managed care
15health plans that contract with the department pursuant to this
16chapter or Chapter 8 (commencing with Section 14200), payments
17for dates of service following the effective date of the act adding
18this section shall be determined without application of the
19reductions, limitations, and adjustments in Sections 14105.07 and
20 14105.192.

21(c) The director shall implement this section to the maximum
22extent permitted by federal law and for the maximum time period
23for which the director obtains federal approval for federal financial
24participation for the payments provided for in this section.

25(d) The director shall promptly seek all necessary federal
26approvals to implement this section.

27

SEC. 3.  

Section 14105.196 is added to the Welfare and
28Institutions Code
, to read:

29

14105.196.  

(a) It is the intent of the Legislature to:

30(1) Maintain the increased reimbursement rates for primary care
31providers in the Medi-Cal program upon expiration of the
32temporary increase provided for under Chapter 23 of the Statutes
33of 2012, as amended by Chapter 438 of the Statutes of 2012, in
34order to ensure adequate access to these providers.

35(2) To increase reimbursement rates for other Medi-Cal
36providers to the amounts reimbursed by the federal Medicare
37program in order to ensure access to medically necessary health
38care services, and to comply with federal Medicaid requirements
39that care and services are available to Medi-Cal enrollees at least
P8    1to the extent that care and services are available to the general
2population in the geographic area.

3(b) Beginning January 1, 2016, to the extent permitted by federal
4law and regulations, payments for medical care services shall not
5be less than 100 percent of the payment rate that applies to those
6services as established by the Medicare program, for both
7fee-for-service and managed care plans.

8(c) Notwithstanding any other law, to the extent permitted by
9federal law and regulations, the payments for medical care services
10made pursuant to this section shall be exempt from the payment
11reductions under Sections 14105.191 and 14105.192.

12(d) Payment increases made pursuant to this section shall not
13apply to provider rates of payment described in Section 14105.18
14for services provided to individuals not eligible for Medi-Cal or
15the Family Planning, Access, Care and Treatment (Family PACT)
16Program.

17(e) For purposes of this section, “medical care services” means
18the services identified in subdivisions (a), (h), (i), (n), and (q) of
19Section 14132.

20(f) Notwithstanding any other law, the payment increase
21implemented pursuant to this section shall apply to managed care
22health plans that contract with the department pursuant to Chapter
238.75 (commencing with Section 14591) and to contracts with the
24Senior Care Action Network and the AIDS Healthcare Foundation,
25and to the extent that the services are provided through any of
26these contracts, payments shall be increased by the actuarial
27equivalent amount of the payment increases pursuant to contract
28amendments or change orders effective on or after January 1, 2016.

29(g) Notwithstanding Chapter 3.5 (commencing with Section
30 11340) of Part 1 of Division 3 of Title 2 of the Government Code,
31the department shall implement, clarify, make specific, and define
32the provisions of this section by means of provider bulletins or
33similar instructions, without taking regulatory action until the time
34regulations are adopted. The department shall adopt regulations
35by July 1, 2018, in accordance with the requirements of Chapter
363.5 (commencing with Section 11340) of Part 1 of Division 3 of
37Title 2 of the Government Code. Beginning July 1, 2016, and
38notwithstanding Section 10231.5 of the Government Code, the
39department shall provide a status report to the Legislature on a
P9    1semiannual basis, in compliance with Section 9795 of the
2Government Code, until regulations have been adopted.

3(h) This section shall be implemented only if and to the extent
4that federal financial participation is available and any necessary
5federal approvals have been obtained.

6

SEC. 4.  

Section 14301.6 is added to the Welfare and
7Institutions Code
, to read:

8

14301.6.  

To the extent federal financial participation is not
9jeopardized and consistent with federal law, the department shall
10pay Medi-Cal managed care plans rate range increases, as defined
11by paragraph (4) of subdivision (b) of Section 14301.4, at a
12minimum level of 100 percent of the rate range available with
13 respect to all enrollees who are not subject to the rate range
14payment requirements described in Section 14301.5.

15

SEC. 5.  

This act is an urgency statute necessary for the
16immediate preservation of the public peace, health, or safety within
17the meaning of Article IV of the Constitution and shall go into
18immediate effect. The facts constituting the necessity are:

19In order to ensure, at the earliest possible time, access to
20medically necessary care for Medi-Cal beneficiaries, it is necessary
21that this act take effect immediately.



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