BILL ANALYSIS Ó
AB 2213
Page 1
Date of Hearing: April 19, 2016
ASSEMBLY COMMITTEE ON HEALTH
Jim Wood, Chair
AB 2213
(Dahle) - As Amended March 18, 2016
SUBJECT: Medi-Cal: nondesignated public hospitals.
SUMMARY: Requires the Department of Health Care Services
(DHCS), in collaboration with the Office of Statewide Health
Planning and Development (OSHPD) to administer and implement a
demonstration under which the audits of nondesignated public
hospitals (NDPHs) for reporting periods beginning on and after
July 1, 2016, are evaluated to determine the reimbursement
relevancy of cost report data. Specifically, this bill:
1)Requires, in order to determine the reimbursement relevancy of
existing data collected and what additional data would be
useful, the demonstration to include an evaluation of all of
the following:
a) Data currently being collected through OSHPD;
b) Annual and quarterly financial and utilization data;
c) Annual report of hospitals and other relevant reports;
and,
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d) Data currently being collected by DHCS through the
annual Medi-Cal cost report.
2)Requires the goals for the demonstration project to include
all of the following:
a) Design a combined reporting form to collect relevant and
useful data for policymaking purposes;
b) Eliminate the date report audit function, if
appropriate, and utilize desk audits to ensure that
reported data is as accurate as possible; and,
c) Determine the appropriate agency to administer the
reporting and data collection function.
3)Authorizes NDPHs upon attainment of the goals in 2) above, to
participate in a three-year demonstration project to evaluate
whether the goals under the initial demonstration are met.
4)Requires DHCS, in collaboration with OSHPD, within one year of
the completion date of the three year demonstration project
specified in 3) above, to prepare and submit a report to the
Legislature that includes an evaluation regarding the
effectiveness of the three-year demonstration project and
recommendations regarding the continuation and expansion of
the demonstration project to all hospitals.
EXISTING LAW:
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1)Establishes Medi-Cal, administered by DHCS, to provide
comprehensive health care services and long-term care to
pregnant women, children, and people who are aged, blind, and
disabled.
2)Requires DHCS to develop and implement a payment methodology
based on diagnosis related groups (DRGs) subject to federal
approval, that reflects the costs and staffing level
associated with quality of care for patients in all general
acute care hospitals in state and out of state, including
Medicare critical access hospitals, but excluding designated
public hospitals, psychiatric hospitals, and rehabilitation
hospitals, which include alcohol and drug rehabilitation
hospitals.
3)Requires DHCS to audit amounts paid for services provided to
Medi-Cal beneficiaries, including cost reports that must be
submitted by hospitals for purposes of reimbursement.
4)Requires, under federal law, providers receiving payment on
the basis of reimbursable cost to provide adequate cost data.
Applies this requirement to providers such as hospitals,
skilled nursing facilities, rural health clinics, federally
qualified health clinics, and community mental health centers.
FISCAL EFFECT: This bill has not yet been analyzed by a fiscal
committee.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, since the
inception of the Medi-Cal DRG-based inpatient fee-for-service
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(FFS) payment system in July 2013 and January 2014, the
Medi-Cal cost report is no longer used as a reimbursement
tool. FFS payments and Medi-Cal managed care payments are not
paid based upon the filing of the Medi-Cal cost report. Prior
to the implementation of DRGs, some hospitals were reimbursed
allowable costs for providing services to Medi-Cal
beneficiaries, requiring the use of extensive cost report data
filed with and audited by the state. This bill allows
district and municipal hospitals to work with DHCS, OSHPD, and
other stakeholders to determine the appropriate data needed.
2)BACKGROUND. NDPHs are hospitals owned by hospital districts
or municipal entities. There are 40 NDPHs in California (39
district hospitals and one municipal hospital). NDPHs have
publicly elected board of directors and local governments are
responsible for providing for the healthcare needs of their
communities. NDPHs have licensed acute beds that range from
three to more than 400. Many NDPHs are in rural and medically
underserved areas and some are critical access hospitals.
SB 853 (Committee on Budget and Fiscal Review), Chapter 717,
Statutes of 2010, mandates the design and implementation of a
new payment methodology for hospital inpatient services
provided to Medi-Cal beneficiaries based upon the DRGs. This
new DRG payment mechanism applied to all private hospitals
with admissions on or after July 1, 2013 and for NDPHs with
admissions on or after January 1, 2014.
According to DHCS, under the previous reimbursement methodology,
these 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. Per diem rates for contract hospitals were
negotiated by the former Office of the California Medical
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Assistance Commission under the Selective Provider Contracting
Program. Simply put, prior to DRGs, NDPHs were paid on a per
diem basis, regardless of the procedure or diagnosis.
Under DRG, every complete inpatient stay is assigned to a single
DRG using a computerized algorithm that takes into account the
patient's diagnosis, age, procedures performed, and discharge
status. Each DRG has a relative weight that reflects the
typical hospital resources needed to care a patient in that
DRG relative to the hospital resources needed to take care of
the average patient. The change in DRG reimbursement
methodology is applied as follows
a) Programs: DRGs applied to Medi-Cal FFS, California
Children's Services, or the Genetically Handicapped Persons
Program;
b) Hospitals: DRGs applied to general acute care
hospitals, including out-of-state, Medicare-designated
critical access hospitals, and Medicare-designated long
term acute care hospitals;
c) Excluded Hospitals: designated public hospitals,
psychiatric hospitals (county); and,
d) Excluded Services: rehabilitation (per diem),
administrative days (per diem), psychiatric services
(counties).
According to DHCS, the goals of the project are to: a) engage
in payment reform to help drive California towards the goals
of health care reform, including driving payment towards
quality and reducing the cost trend; b) Promote efficiency,
improve transparency, and improve fairness by paying similarly
across hospitals for similar care; c) Promote access to care
by paying more for patients who require more care; and, d)
simplify the payment process, encourage administrative
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efficiency and base payments on consistent and credible data.
3)SUPPORT. According to the District Hospital Leadership Forum,
the sponsor of this bill, and the Association of California
Healthcare Districts, the demonstration project under this
bill would reduce the administrative costs and burdens
associated with the outdated cost report process that is
currently in place.
4)POLICY COMMENT. DHCS points out that cost reports are
federally required to capture allowable Medicaid costs and as
such, its elimination may require federal change. The
Committee may wish to ask the author or the sponsor to address
this issue.
REGISTERED SUPPORT / OPPOSITION:
Support
District Hospital Leadership Forum
Association of California Healthcare Districts
Opposition
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None on file.
Analysis Prepared by:Rosielyn Pulmano / HEALTH / (916) 319-2097