Amended in Assembly June 11, 2015

Senate BillNo. 92


Introduced by Committee on Budget and Fiscal Review

January 9, 2015


An actbegin delete relating to the Budget Act of 2015.end deletebegin insert to 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

SB 92, as amended, Committee on Budget and Fiscal Review. 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 Under existing law, the fee may not be assessed after July 31, 2015, and these provisions will be repealed on January 1, 2016.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 Under existing law, the rate methodology will become inoperative after July 31, 2015, and these provisions will be repealed on January 1, 2016.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

3

1324.23.  

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

5(b) The director may adopt regulations as are necessary to
6implement this article. These regulations may be adopted as
7emergency regulations in accordance with the rulemaking
P3    1provisions of the Administrative Procedure Act (Chapter 3.5
2(commencing with Section 11340) of Part 1 of Division 3 of Title
32 of the Government Code). For purposes of this article, the
4adoption of regulations shall be deemed an emergency and
5necessary for the immediate preservation of the public peace, health
6and safety, or general welfare. The regulations shall include, but
7need not be limited to, any regulations necessary for any of the
8following purposes:

9(1) The administration of this article, including the proper
10imposition and collection of the quality assurance fee not to exceed
11amounts reasonably necessary for purposes of this article.

12(2) The development of any forms necessary to obtain required
13information from facilities subject to the quality assurance fee.

14(3) To provide details, definitions, formulas, and other
15requirements.

16(c) As an alternative to subdivision (b), and notwithstanding
17the rulemaking provisions of Chapter 3.5 (commencing with
18Section 11340) of Part 1 of Division 3 of Title 2 of the Government
19Code, the director may implement this article, in whole or in part,
20by means of a provider bulletin or other similar instructions,
21without taking regulatory action, provided that no such bulletin or
22other similar instructions shall remain in effect after July 31,begin delete 2015.end delete
23begin insert 2020.end insert It is the intent of the Legislature that the regulations adopted
24pursuant to subdivision (b) shall be adopted on or before July 31,
25begin delete 2015.end deletebegin insert 2020.end insert

26begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 1324.29 of the end insertbegin insertHealth and Safety Codeend insertbegin insert is
27amended to read:end insert

28

1324.29.  

(a) The quality assurance fee shall cease to be
29assessed after July 31,begin delete 2015.end deletebegin insert 2020.end insert

30(b) Notwithstanding subdivision (a) and Section 1324.30, the
31department’s authority and obligation to collect all quality
32assurance fees and penalties, including interest, shall continue in
33effect and shall not cease until the date that all amounts are paid
34or recovered in full.

35(c) This section shall remain operative until the date that all fees
36and penalties, including interest, have been recovered pursuant to
37subdivision (b), and as of that date is repealed.

38begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 1324.30 of the end insertbegin insertHealth and Safety Codeend insertbegin insert is
39amended to read:end insert

P4    1

1324.30.  

This article shall become inoperative after July 31,
2begin 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
3a later enacted statute, that becomes operative on or before January
41,begin delete 2016,end deletebegin insert 2021,end insert deletes or extends the dates on which it becomes
5inoperative and is repealed.

6begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 14126.022 of the end insertbegin insertWelfare and Institutions Codeend insert
7begin insert is amended to read:end insert

8

14126.022.  

(a) (1) By August 1, 2011, the department shall
9develop the Skilled Nursing Facility Quality and Accountability
10Supplemental Payment System, subject to approval by the federal
11Centers for Medicare and Medicaid Services, and the availability
12of federal, state, or other funds.

13(2) (A) The system shall be utilized to provide supplemental
14payments to skilled nursing facilities that improve the quality and
15accountability of care rendered to residents in skilled nursing
16facilities, as defined in subdivision (c) of Section 1250 of the
17Health and Safety Code, and to penalize those facilities that do
18not meet measurable standards.

19(B) A freestanding pediatric subacute care facility, as defined
20in Section 51215.8 of Title 22 of the California Code of
21Regulations, shall be exempt from the Skilled Nursing Facility
22Quality and Accountability Supplemental Payment System.

23(3) The system shall be phased in, beginning with the 2010-11
24rate year.

25(4) The department may utilize the system to do all of the
26following:

27(A) Assess overall facility quality of care and quality of care
28improvement, and assign quality and accountability payments to
29skilled nursing facilities pursuant to performance measures
30described in subdivision (i).

31(B) Assign quality and accountability payments or penalties
32relating to quality of care, or direct care staffing levels, wages, and
33benefits, or both.

34(C) Limit the reimbursement of legal fees incurred by skilled
35nursing facilities engaged in the defense of governmental legal
36actions filed against the facilities.

37(D) Publish each facility’s quality assessment and quality and
38accountability payments in a manner and form determined by the
39director, or his or her designee.

P5    1(E) Beginning with the 2011-12 fiscal year, establish a base
2year to collect performance measures described in subdivision (i).

3(F) Beginning with the 2011-12 fiscal year, in coordination
4with the State Department of Public Health, publish the direct care
5staffing level data and the performance measures required pursuant
6to subdivision (i).

begin insert

7(5) The department, in coordination with the State Department
8of Public Health, shall report to the relevant Assembly and Senate
9budget subcommittees by May 1, 2016, information regarding the
10quality and accountability supplemental payments, including, but
11not limited to, its assessment of whether the payments are adequate
12to incentivize quality care and to sustain the program.

end insert

13(b) (1) There is hereby created in the State Treasury, the Skilled
14Nursing Facility Quality and Accountability Special Fund. The
15fund shall contain moneys deposited pursuant to subdivisions (g)
16and (j) tobegin delete (l),end deletebegin insert (m),end insert inclusive. Notwithstanding Section 16305.7 of
17the Government Code, the fund shall contain all interest and
18dividends earned on moneys in the fund.

19(2) Notwithstanding Section 13340 of the Government Code,
20the fund shall be continuously appropriated without regard to fiscal
21year to the department for making quality and accountability
22payments, in accordance with subdivisionbegin delete (m),end deletebegin insert (n),end insert to facilities
23that meet or exceed predefined measures as established by this
24section.

25(3) Upon appropriation by the Legislature, moneys in the fund
26may also be used for any of the following purposes:

27(A) To cover the administrative costs incurred by the State
28Department of Public Health for positions and contract funding
29required to implement this section.

30(B) To cover the administrative costs incurred by the State
31Department of Health Care Services for positions and contract
32funding required to implement this section.

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

36(c) No appropriation associated with this bill is intended to
37implement the provisions of Section 1276.65 of the Health and
38Safety Code.

39(d) (1) There is hereby appropriated for the 2010-11 fiscal year,
40one million nine hundred thousand dollars ($1,900,000) from the
P6    1Skilled Nursing Facility Quality and Accountability Special Fund
2to the California Department of Aging for the Long-Term Care
3Ombudsman Program activities pursuant to Chapter 11
4(commencing with Section 9700) of Division 8.5. It is the intent
5of the Legislature for the one million nine hundred thousand dollars
6($1,900,000) from the fund to be in addition to the four million
7one hundred sixty-eight thousand dollars ($4,168,000) proposed
8in the Governor’s May Revision for the 2010-11 Budget. It is
9 further the intent of the Legislature to increase this level of
10appropriation in subsequent years to provide support sufficient to
11carry out the mandates and activities pursuant to Chapter 11
12(commencing with Section 9700) of Division 8.5.

13(2) The department, in partnership with the California
14Department of Aging, shall seek approval from the federal Centers
15for Medicare and Medicaid Services to obtain federal Medicaid
16reimbursement for activities conducted by the Long-Term Care
17Ombudsman Program. The department shall report to the fiscal
18committees of the Legislature during budget hearings on progress
19being made and any unresolved issues during the 2011-12 budget
20deliberations.

21(e) There is hereby created in the Special Deposit Fund
22established pursuant to Section 16370 of the Government Code,
23the Skilled Nursing Facility Minimum Staffing Penalty Account.
24The account shall contain all moneys deposited pursuant to
25subdivision (f).

26(f) (1) Beginning with the 2010-11 fiscal year, the State
27Department of Public Health shall use the direct care staffing level
28data it collects to determine whether a skilled nursing facility has
29met the nursing hours per patient per day requirements pursuant
30to Section 1276.5 of the Health and Safety Code.

31(2) (A) Beginning with the 2010-11 fiscal year, the State
32Department of Public Health shall assess a skilled nursing facility,
33licensed pursuant to subdivision (c) of Section 1250 of the Health
34and Safety Code, an administrative penalty if the State Department
35of Public Health determines that the skilled nursing facility fails
36to meet the nursing hours per patient per day requirements pursuant
37to Section 1276.5 of the Health and Safety Code as follows:

38(i) Fifteen thousand dollars ($15,000) if the facility fails to meet
39the requirements for 5 percent or more of the audited days up to
4049 percent.

P7    1(ii) Thirty thousand dollars ($30,000) if the facility fails to meet
2the requirements for over 49 percent or more of the audited days.

3(B) (i) If the skilled nursing facility does not dispute the
4determination or assessment, the penalties shall be paid in full by
5the licensee to the State Department of Public Health within 30
6days of the facility’s receipt of the notice of penalty and deposited
7into the Skilled Nursing Facility Minimum Staffing Penalty
8Account.

9(ii) The State Department of Public Health may, upon written
10notification to the licensee, request that the department offset any
11 moneys owed to the licensee by the Medi-Cal program or any other
12payment program administered by the department to recoup the
13penalty provided for in this section.

14(C) (i) If a facility disputes the determination or assessment
15made pursuant to this paragraph, the facility shall, within 15 days
16of the facility’s receipt of the determination and assessment,
17simultaneously submit a request for appeal to both the department
18and the State Department of Public Health. The request shall
19include a detailed statement describing the reason for appeal and
20include all supporting documents the facility will present at the
21hearing.

22(ii) Within 10 days of the State Department of Public Health’s
23receipt of the facility’s request for appeal, the State Department
24of Public Health shall submit, to both the facility and the
25department, all supporting documents that will be presented at the
26hearing.

27(D) The department shall hear a timely appeal and issue a
28decision as follows:

29(i) The hearing shall commence within 60 days from the date
30of receipt by the department of the facility’s timely request for
31appeal.

32(ii) The department shall issue a decision within 120 days from
33the date of receipt by the department of the facility’s timely request
34for appeal.

35(iii) The decision of the department’s hearing officer, when
36issued, shall be the final decision of the State Department of Public
37Health.

38(E) The appeals process set forth in this paragraph shall be
39exempt from Chapter 4.5 (commencing with Section 11400) and
40Chapter 5 (commencing with Section 11500), of Part 1 of Division
P8    13 of Title 2 of the Government Code. The provisions of Section
2100171 and 131071 of the Health and Safety Code shall not apply
3to appeals under this paragraph.

4(F) If a hearing decision issued pursuant to subparagraph (D)
5is in favor of the State Department of Public Health, the skilled
6nursing facility shall pay the penalties to the State Department of
7Public Health within 30 days of the facility’s receipt of the
8decision. The penalties collected shall be deposited into the Skilled
9Nursing Facility Minimum Staffing Penalty Account.

10(G) The assessment of a penalty under this subdivision does not
11supplant the State Department of Public Health’s investigation
12process or issuance of deficiencies or citations under Chapter 2.4
13(commencing with Section 1417) of Division 2 of the Health and
14Safety Code.

15(g) The State Department of Public Health shall transfer, on a
16monthly basis, all penalty payments collected pursuant to
17subdivision (f) into the Skilled Nursing Facility Quality and
18Accountability Special Fund.

19(h) Nothing in this section shall impact the effectiveness or
20utilization of Section 1278.5 or 1432 of the Health and Safety Code
21relating to whistleblower protections, or Section 1420 of the Health
22and Safety Code relating to complaints.

23(i) (1) Beginning in the 2010-11 fiscal year, the department,
24in consultation with representatives from the long-term care
25industry, organized labor, and consumers, shall establish and
26publish quality and accountability measures, benchmarks, and data
27submission deadlines by November 30, 2010.

28(2) The methodology developed pursuant to this section shall
29include, but not be limited to, the following requirements and
30performance measures:

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

32(i) Immunization rates.

33(ii) Facility acquired pressure ulcer incidence.

34(iii) The use of physical restraints.

35(iv) Compliance with the nursing hours per patient per day
36requirements pursuant to Section 1276.5 of the Health and Safety
37Code.

38(v) Resident and family satisfaction.

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

P9    1(B) If this act is extended beyond the dates on which it becomes
2inoperative and is repealed, in accordance with Section 14126.033,
3the department, in consultation with representatives from the
4long-term care industry, organized labor, and consumers, beginning
5in the 2013-14 rate year, shall incorporate additional measures
6into the system, including, but not limited to, quality and
7accountability measures required by federal health care reform
8that are identified by the federal Centers for Medicare and Medicaid
9Services.

10(C) The department, in consultation with representatives from
11the long-term care industry, organized labor, and consumers, may
12incorporate additional performance measures, including, but not
13limited to, the following:

14(i) Compliance with state policy associated with the United
15States Supreme Court decision in Olmstead v. L.C. ex rel. Zimring
16(1999) 527 U.S. 581.

17(ii) Direct care staff retention, if not addressed in the 2012-13
18rate year.

19(iii) The use of chemical restraints.

begin insert

20(D) Beginning with the 2015-16 fiscal year, the department, in
21consultation with representatives from the long-term care industry,
22organized labor, and consumers, shall incorporate direct care
23staff retention as a performance measure in the methodology
24developed pursuant to this section.

end insert

25(j) (1) Beginning with the 2010-11 rate year, and pursuant to
26subparagraph (B) of paragraph (5) of subdivision (a) of Section
2714126.023, the department shall set aside savings achieved from
28setting the professional liability insurance cost category, including
29any insurance deductible costs paid by the facility, at the 75th
30percentile. From this amount, the department shall transfer the
31General Fund portion into the Skilled Nursing Facility Quality and
32Accountability Special Fund. A skilled nursing facility shall
33provide supplemental data on insurance deductible costs to
34facilitate this adjustment, in the format and by the deadlines
35determined by the department. If this data is not provided, a
36facility’s insurance deductible costs will remain in the
37administrative costs category.

38(2) Notwithstanding paragraph (1), for the 2012-13 rate year
39only, savings from capping the professional liability insurance cost
40category pursuant to paragraph (1) shall remain in the General
P10   1Fund and shall not be transferred to the Skilled Nursing Facility
2Quality and Accountability Special Fund.

3(k) begin deleteBeginning with end deletebegin insertFor end insertthe 2013-14 rate year, if there is a rate
4increase in the weighted average Medi-Cal reimbursement rate,
5the department shall set aside the first 1 percent of the weighted
6average Medi-Cal reimbursement rate increase for the Skilled
7Nursing Facility Quality and Accountability Special Fund.

8(l) If this act is extended beyond the dates on which it becomes
9inoperative and is repealed,begin delete in accordance with Section 14126.033,
10beginning withend delete
begin insert forend insert the 2014-15 rate year, in addition to the amount
11set aside pursuant to subdivision (k), if there is a rate increase in
12the weighted average Medi-Cal reimbursement rate, the department
13shall set aside at least one-third of the weighted average Medi-Cal
14reimbursement rate increase, up to a maximum of 1 percent, from
15which the department shall transfer the General Fund portion of
16this amount into the Skilled Nursing Facility Quality and
17Accountability Special Fund.

begin insert

18(m) Beginning with the 2015-16 rate year, and each subsequent
19rate year thereafter for which this article is operative, an amount
20equal to the amount deposited in the fund pursuant to subdivisions
21(k) and (l) for the 2014-15 rate year shall be deposited into the
22Skilled Nursing Facility Quality and Accountability Special Fund,
23for the purposes specified in this section.

end insert
begin delete

24(m)

end delete

25begin insert(n)end insert (1) (A) Beginning with the 2013-14 rate year, the
26department shall pay a supplemental payment, by April 30, 2014,
27to skilled nursing facilities based on all of the criteria in subdivision
28(i), as published by the department, and according to performance
29measure benchmarks determined by the department in consultation
30with stakeholders.

31(B) (i) The department may convene a diverse stakeholder
32group, including, but not limited to, representatives from consumer
33groups and organizations, labor, nursing home providers, advocacy
34organizations involved with the aging community, staff from the
35Legislature, and other interested parties, to discuss and analyze
36alternative mechanisms to implement the quality and accountability
37payments provided to nursing homes for reimbursement.

38(ii) The department shall articulate in a report to the fiscal and
39appropriate policy committees of the Legislature the
40implementation of an alternative mechanism as described in clause
P11   1(i) at least 90 days prior to any policy or budgetary changes, and
2seek subsequent legislation in order to enact the proposed changes.

3(2) Skilled nursing facilities that do not submit required
4performance data by the department’s specified data submission
5deadlines pursuant to subdivision (i) shall not be eligible to receive
6supplemental payments.

7(3) Notwithstanding paragraph (1), if a facility appeals the
8performance measure of compliance with the nursing hours per
9patient per day requirements, pursuant to Section 1276.5 of the
10Health and Safety Code, to the State Department of Public Health,
11and it is unresolved by the department’s published due date, the
12department shall not use that performance measure when
13determining the facility’s supplemental payment.

14(4) Notwithstanding paragraph (1), if the department is unable
15to pay the supplemental payments by April 30, 2014, then on May
161, 2014, the department shall use the funds available in the Skilled
17Nursing Facility Quality and Accountability Special Fund as a
18result of savings identified in subdivisions (k) and (l), less the
19administrative costs required to implement subparagraphs (A) and
20(B) of paragraph (3) of subdivision (b), in addition to any Medicaid
21funds that are available as of December 31, 2013, to increase
22provider rates retroactively to August 1, 2013.

begin delete

23(n)

end delete

24begin insert(o)end insert The department shall seek necessary approvals from the
25federal Centers for Medicare and Medicaid Services to implement
26this section. The department shall implement this section only in
27a manner that is consistent with federal Medicaid law and
28regulations, and only to the extent that approval is obtained from
29the federal Centers for Medicare and Medicaid Services and federal
30financial participation is available.

begin delete

31(o)

end delete

32begin insert(p)end insert In implementing this section, the department and the State
33Department of Public Health may contract as necessary, with
34California’s Medicare Quality Improvement Organization, or other
35entities deemed qualified by the department or the State
36Department of Public Health, not associated with a skilled nursing
37facility, to assist with development, collection, analysis, and
38reporting of the performance data pursuant to subdivision (i), and
39with demonstrated expertise in long-term care quality, data
40collection or analysis, and accountability performance measurement
P12   1models pursuant to subdivision (i). This subdivision establishes
2an accelerated process for issuing any contract pursuant to this
3section. Any contract entered into pursuant to this subdivision shall
4be exempt from the requirements of the Public Contract Code,
5through December 31,begin delete 2013.end deletebegin insert 2020.end insert

begin delete

6(p)

end delete

7begin insert(q)end insert Notwithstanding Chapter 3.5 (commencing with Section
811340) of Part 1 of Division 3 of Title 2 of the Government Code,
9the following shall apply:

10(1) The director shall implement this section, in whole or in
11part, by means of provider bulletins, or other similar instructions
12without taking regulatory action.

13(2) The State Public Health Officer may implement this section
14by means of all facility letters, or other similar instructions without
15taking regulatory action.

begin delete

16(q)

end delete

17begin insert(r)end insert Notwithstanding paragraph (1) of subdivisionbegin delete (m),end deletebegin insert (n),end insert if a
18final judicial determination is made by any state or federal court
19that is not appealed, in any action by any party, or a final
20determination is made by the administrator of the federal Centers
21for Medicare and Medicaid Services, that any payments pursuant
22to subdivisions (a) andbegin delete (m),end deletebegin insert (n),end insert are invalid, unlawful, or contrary
23to any provision of federal law or regulations, or of state law, these
24subdivisions shall become inoperative, and for the 2011-12 rate
25year, the rate increase provided under subparagraph (A) of
26paragraph (4) of subdivision (c) of Section 14126.033 shall be
27reduced by the amounts described in subdivision (j). For the
282013-14begin delete rate year,end delete andbegin delete for each subsequentend deletebegin insert 2014-15end insert ratebegin delete year,end delete
29begin insert years,end insert any rate increase shall be reduced by the amounts described
30in subdivisions (j) to (l), inclusive.

31begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 14126.027 of the end insertbegin insertWelfare and Institutions Codeend insert
32begin insert is amended to read:end insert

33

14126.027.  

(a) (1) The Director of Health Care Services, or
34his or her designee, shall administer this article.

35(2) The regulations and other similar instructions adopted
36pursuant to this article shall be developed in consultation with
37representatives of the long-term care industry, organized labor,
38seniors, and consumers.

39(b) (1) The director may adopt regulations as are necessary to
40implement this article. The adoption, amendment, repeal, or
P13   1readoption of a regulation authorized by this section is deemed to
2be necessary for the immediate preservation of the public peace,
3health and safety, or general welfare, for purposes of Sections
411346.1 and 11349.6 of the Government Code, and the department
5is hereby exempted from the requirement that it describe specific
6facts showing the need for immediate action.

7(2) The regulations adopted pursuant to this section may include,
8but need not be limited to, any regulations necessary for any of
9the following purposes:

10(A) The administration of this article, including the specific
11analytical process for the proper determination of long-term care
12rates.

13(B) The development of any forms necessary to obtain required
14cost data and other information from facilities subject to the
15ratesetting methodology.

16(C) To provide details, definitions, formulas, and other
17requirements.

18(c) As an alternative to the adoption of regulations pursuant to
19subdivision (b), and notwithstanding Chapter 3.5 (commencing
20with Section 11340) of Part 1 of Division 3 of Title 2 of the
21Government Code, the director may implement this article, in
22whole or in part, by means of a provider bulletin or other similar
23instructions, without taking regulatory action, provided that no
24such bulletin or other similar instructions shall remain in effect
25after July 31,begin delete 2015.end deletebegin insert 2020.end insert It is the intent of the Legislature that
26regulations adopted pursuant to subdivision (b) shall be in place
27on or before July 31,begin delete 2015.end deletebegin insert 2020.end insert

28begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 14126.033 of the end insertbegin insertWelfare and Institutions Codeend insert
29begin insert is amended to read:end insert

30

14126.033.  

(a) The Legislature finds and declares all of the
31following:

32(1) Costs within the Medi-Cal program continue to grow due
33to the rising cost of providing health care throughout the state and
34also due to increases in enrollment, which are more pronounced
35during difficult economic times.

36(2) In order to minimize the need for drastically cutting
37enrollment standards or benefits during times of economic crisis,
38it is crucial to find areas within the program where reimbursement
39levels are higher than required under the standard provided in
P14   1Section 1902(a)(30)(A) of the federal Social Security Act and can
2be reduced in accordance with federal law.

3(3) The Medi-Cal program delivers its services and benefits to
4Medi-Cal beneficiaries through a wide variety of health care
5providers, some of which deliver care via managed care or other
6contract models while others do so through fee-for-service
7arrangements.

8(4) The setting of rates within the Medi-Cal program is complex
9and is subject to close supervision by the United States Department
10of Health and Human Services.

11(5) As the single state agency for Medicaid in California, the
12State Department of Health Care Services has unique expertise
13that can inform decisions that set or adjust reimbursement
14methodologies and levels consistent with the requirements of
15federal law.

16(b) Therefore, it is the intent of the Legislature for the
17department to analyze and identify where reimbursement levels
18can be reduced consistent with the standard provided in Section
191902(a)(30)(A) of the federal Social Security Act and also
20consistent with federal and state law and policies, including any
21exemptions contained in the act that added this section, provided
22that the reductions in reimbursement shall not exceed 10 percent
23on an aggregate basis for all providers, services, and products.

24(c) This article, including Section 14126.031, shall be funded
25as follows:

26(1) General Fund moneys appropriated for purposes of this
27article pursuant to Section 6 of the act adding this section shall be
28used for increasing rates, except as provided in Section 14126.031,
29for freestanding skilled nursing facilities, and shall be consistent
30with the approved methodology required to be submitted to the
31federal Centers for Medicare and Medicaid Services pursuant to
32Article 7.6 (commencing with Section 1324.20) of Chapter 2 of
33Division 2 of the Health and Safety Code.

34(2) (A) Notwithstanding Section 14126.023, for the 2005-06
35rate year, the maximum annual increase in the weighted average
36Medi-Cal rate required for purposes of this article shall not exceed
378 percent of the weighted average Medi-Cal reimbursement rate
38for the 2004-05 rate year as adjusted for the change in the cost to
39the facility to comply with the nursing facility quality assurance
40fee for the 2005-06 rate year, as required under subdivision (b) of
P15   1Section 1324.21 of the Health and Safety Code, plus the total
2projected Medi-Cal cost to the facility of complying with new state
3or federal mandates.

4(B) Beginning with the 2006-07 rate year, the maximum annual
5increase in the weighted average Medi-Cal reimbursement rate
6required for purposes of this article shall not exceed 5 percent of
7the weighted average Medi-Cal reimbursement rate for the prior
8fiscal year, as adjusted for the projected cost of complying with
9new state or federal mandates.

10(C) Beginning with the 2007-08 rate year and continuing
11through the 2008-09 rate year, the maximum annual increase in
12the weighted average Medi-Cal reimbursement rate required for
13purposes of this article shall not exceed 5.5 percent of the weighted
14average Medi-Cal reimbursement rate for the prior fiscal year, as
15adjusted for the projected cost of complying with new state or
16federal mandates.

17(D) For the 2009-10 rate year, the weighted average Medi-Cal
18reimbursement rate required for purposes of this article shall not
19be increased with respect to the weighted average Medi-Cal
20reimbursement rate for the 2008-09 rate year, as adjusted for the
21projected cost of complying with new state or federal mandates.

22(3) (A) For the 2010-11 rate year, if the increase in the federal
23medical assistance percentage (FMAP) pursuant to the federal
24American Recovery and Reinvestment Act of 2009 (ARRA)
25(Public Law 111-5) is extended for the entire 2010-11 rate year,
26the maximum annual increase in the weighted average Medi-Cal
27reimbursement rate for the purposes of this article shall not exceed
283.93 percent, or 3.14 percent, if the increase in the FMAP pursuant
29to ARRA is not extended for that period of time, plus the projected
30cost of complying with new state or federal mandates. If the
31increase in the FMAP pursuant to ARRA is extended at a different
32rate, or for a different time period, the rate adjustment for facilities
33shall be adjusted accordingly.

34(B) The weighted average Medi-Cal reimbursement rate increase
35specified in subparagraph (A) shall be adjusted by the department
36for the following reasons:

37(i) If the federal Centers for Medicare and Medicaid Services
38does not approve exemption changes to the facilities subject to the
39quality assurance fee.

P16   1(ii) If the federal Centers for Medicare and Medicaid Services
2does not approve any proposed modification to the methodology
3for calculation of the quality assurance fee.

4(iii) To ensure that the state does not incur any additional
5General Fund expenses to pay for the 2010-11 weighted average
6Medi-Cal reimbursement rate increase.

7(C) If the maximum annual increase in the weighted average
8Medi-Cal rate is reduced pursuant to subparagraph (B), the
9department shall recalculate and publish the final maximum annual
10increase in the weighted average Medi-Cal reimbursement rate.

11(4) (A) Subject to the following provisions, for the 2011-12
12rate year, the increase in the Medi-Cal reimbursement rate for the
13purpose of this article, for each skilled nursing facility as defined
14in subdivision (c) of Section 1250 of the Health and Safety Code,
15shall not exceed 2.4 percent of the rate on file that was applicable
16on May 31, 2011, plus the projected cost of complying with new
17state or federal mandates. The percentage increase shall be applied
18equally to each rate on file as of May 31, 2011.

19(B) The weighted average Medi-Cal reimbursement rate increase
20specified in subparagraph (A) shall be adjusted by the department
21for the following reasons:

22(i) If the federal Centers for Medicare and Medicaid Services
23does not approve exemption changes to the facilities subject to the
24quality assurance fee.

25(ii) If the federal Centers for Medicare and Medicaid Services
26does not approve any proposed modification to the methodology
27for calculation of the quality assurance fee.

28(iii) To ensure that the state does not incur any additional
29General Fund expenses to pay for the 2011-12 weighted average
30Medi-Cal reimbursement rate increase.

31(C) The department may recalculate and publish the weighted
32average Medi-Cal reimbursement rate increase for the 2011-12
33rate year if the difference in the projected quality assurance fee
34collections from the 2011-12 rate year, compared to the projected
35quality assurance fee collections for the 2010-11 rate year, would
36result in any additional General Fund expense to pay for the
372011-12 rate year weighted average reimbursement rate increase.

38(5) To the extent that rates are projected to exceed the adjusted
39limits calculated pursuant to subparagraphs (A) to (D), inclusive,
40of paragraph (2) and, as applicable, paragraphs (3) and (4), the
P17   1department shall adjust each skilled nursing facility’s projected
2rate for the applicable rate year by an equal percentage.

3(6) (A) (i) Notwithstanding any other provision of law, and
4except as provided in subparagraph (B), payments resulting from
5the application of paragraphs (3) and (4), the provisions of
6paragraph (5), and all other applicable adjustments and limits as
7required by this section, shall be reduced by 10 percent for dates
8of service on and after June 1, 2011, through July 31, 2012. This
9is a one-time reduction evenly distributed across all facilities to
10ensure long-term stability of nursing homes serving the Medi-Cal
11 population.

12(ii) Notwithstanding any other provision of law, the director
13may adjust the percentage reductions specified in clause (i), as
14long as the resulting reductions, in the aggregate, total no more
15than 10 percent.

16(iii) The adjustments authorized under this subparagraph shall
17be implemented only if the director determines that the payments
18resulting from the adjustments comply with paragraph (7).

19(B) Payments to facilities owned or operated by the state shall
20be exempt from the payment reduction required by this paragraph.

21(7) (A) Notwithstanding any other provision of this section,
22the payment reductions and adjustments required by paragraph (6)
23shall be implemented only if the director determines that the
24payments that result from the application of paragraph (6) will
25comply with applicable federal Medicaid requirements and that
26federal financial participation will be available.

27(B) In determining whether federal financial participation is
28available, the director shall determine whether the payments
29comply with applicable federal Medicaid requirements, including
30those set forth in Section 1396a(a)(30)(A) of Title 42 of the United
31States Code.

32(C) To the extent that the director determines that the payments
33do not comply with applicable federal Medicaid requirements or
34that federal financial participation is not available with respect to
35any payment that is reduced pursuant to this section, the director
36retains the discretion to not implement the particular payment
37reduction or adjustment and may adjust the payment as necessary
38to comply with federal Medicaid requirements.

39(8) For managed care health plans that contract with the
40department pursuant to this chapter and Chapter 8 (commencing
P18   1with Section 14200), except for contracts with the Senior Care
2Action Network and AIDS Healthcare Foundation, and to the
3extent that these services are provided through any of those
4contracts, payments shall be reduced by the actuarial equivalent
5amount of the reduced provider reimbursements specified in
6paragraph (6) pursuant to contract amendments or change orders
7effective on July 1, 2011, or thereafter.

8(9) (A) For the 2012-13 rate year, all of the following shall
9apply:

10(i) The department shall determine the amounts of reduced
11payments for each skilled nursing facility, as defined in subdivision
12(c) of Section 1250 of the Health and Safety Code, resulting from
13the 10-percent reduction imposed pursuant to clause (i) of
14subparagraph (A) of paragraph (6) for the period beginning on
15June 1, 2011, through July 31, 2012.

16(ii) For claims adjudicated through October 1, 2012, each skilled
17nursing facility as defined in subdivision (c) of Section 1250 of
18the Health and Safety Code that is reimbursed under the Medi-Cal
19fee-for-service program, shall receive the total payments calculated
20by the department in clause (i), not later than December 31, 2012.

21(iii) For managed care plans that contract with the department
22pursuant to this chapter or Chapter 8 (commencing with Section
2314200), except contracts with Senior Care Action Network and
24AIDS Healthcare Foundation, and to the extent that skilled nursing
25services are provided through any of those contracts, payments
26shall be adjusted by the actuarial equivalent amount of the
27reimbursements calculated in clause (i) pursuant to contract
28amendments or change orders effective on July 1, 2012, or
29thereafter.

30(B) Notwithstanding subparagraph (A), beginning on August
311, 2012, through July 31, 2013, the department shall pay the facility
32specific Medi-Cal reimbursement rate that was on file and
33applicable to the specific skilled nursing facility on August 1, 2011,
34prior to and excluding any rate reduction implemented pursuant
35to clause (i) of subparagraph (A) of paragraph (6) for the period
36beginning on June 1, 2011, to July 31, 2012, inclusive, and adjusted
37for the projected costs of complying with new state or federal
38mandates. These rates are deemed to be sufficient to meet operating
39expenses.

P19   1(C) The weighted average Medi-Cal reimbursement rate increase
2specified in subparagraph (B) shall be adjusted by the department
3if the federal Centers for Medicare and Medicaid Services does
4not approve any proposed modification to the methodology for
5calculation of the skilled nursing quality assurance fee pursuant
6to Article 7.6 (commencing with Section 1324.20) of Chapter 2
7of Division 2 of the Health and Safety Code.

8(D) Notwithstanding any other provision of law, beginning on
9January 1, 2013, Article 7.6 (commencing with Section 1324.20)
10of Chapter 2 of Division 2 of the Health and Safety Code, which
11imposes a skilled nursing facility quality assurance fee, shall not
12be enforceable against any skilled nursing facility unless each
13skilled nursing facility is paid the rate provided for in
14subparagraphs (A) and (B). Any amount collected during the
152012-13 rate year by the department pursuant to Article 7.6
16(commencing with Section 1324.20) of Chapter 2 of Division 2
17of the Health and Safety Code shall be refunded to each facility
18not later than February 1, 2013.

19(E) The provisions of this paragraph shall also be included as
20part of a state plan amendment implementing the 2011-12 and
212012-13 Medi-Cal reimbursement rates authorized under this
22article.

23(10) (A) Subject to the following provisions, for the 2013-14
24and 2014-15 rate years, the annual increase in the weighted average
25Medi-Cal reimbursement rate for the purpose of this article, for
26each skilled nursing facility as defined in subdivision (c) of Section
271250 of the Health and Safety Code, shall be 3 percent for each
28rate year, respectively, plus the projected cost of complying with
29new state or federal mandates.

30(B) (i) For the 2013-14 rate year, if there is a rate increase in
31the weighted average Medi-Cal reimbursement rate, the department
32shall set aside 1 percent of the increase in the weighted average
33Medi-Cal reimbursement rate, from which the department shall
34transfer the nonfederal portion into the Skilled Nursing Facility
35Quality and Accountability Special Fund, to be used for the
36supplemental rate pool.

37(ii) For the 2014-15 rate year, if there is a rate increase in the
38weighted average Medi-Cal reimbursement rate, the department
39shall set aside at least one-third of the weighted average Medi-Cal
40reimbursement rate increase, up to a maximum of 1 percent, from
P20   1which the department shall transfer the nonfederal portion of this
2amount into the Skilled Nursing Facility Quality and Accountability
3Special Fund.

4(C) 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(11) The director shall seek any necessary federal approvals for
14the implementation of this section. This section shall not be
15implemented until federal approval is obtained. When federal
16approval is obtained, the payments resulting from the application
17of paragraph (6) shall be implemented retroactively to June 1,
182011, or on any other date or dates as may be applicable.

begin insert

19(12) (A) Beginning with the 2015-16 rate year, the annual
20increase in the weighted average Medi-Cal reimbursement rate,
21 required for the purposes of this article, shall be 3.62 percent, plus
22the projected cost of complying with new state or federal mandates.

end insert
begin insert

23(B) The weighted average Medi-Cal reimbursement rate
24increase specified in subparagraph (A) may be adjusted by the
25department as it deems necessary to obtain any applicable federal
26approval.

end insert

27(d) The rate methodology shall cease to be implemented after
28July 31,begin delete 2015.end deletebegin insert 2020.end insert

29(e) (1) It is the intent of the Legislature that the implementation
30of this article result in individual access to appropriate long-term
31care services, quality resident care, decent wages and benefits for
32nursing home workers, a stable workforce, provider compliance
33with all applicable state and federal requirements, and
34administrative efficiency.

35(2) Not later than December 1, 2006, the Bureau of State Audits
36shall conduct an accountability evaluation of the department’s
37progress toward implementing a facility-specific reimbursement
38system, including a review of data to ensure that the new system
39is appropriately reimbursing facilities within specified cost
P21   1categories and a review of the fiscal impact of the new system on
2the General Fund.

3(3) Not later than January 1, 2007, to the extent information is
4available for the three years immediately preceding the
5implementation of this article, the department shall provide baseline
6information in a report to the Legislature on all of the following:

7(A) The number and percent of freestanding skilled nursing
8facilities that complied with minimum staffing requirements.

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

10(C) The staffing retention rates prior to the implementation of
11this article.

12(D) The numbers and percentage of freestanding skilled nursing
13facilities with findings of immediate jeopardy, substandard quality
14of care, or actual harm, as determined by the certification survey
15of each freestanding skilled nursing facility conducted prior to the
16implementation of this article.

17(E) The number of freestanding skilled nursing facilities that
18received state citations and the number and class of citations issued
19during calendar year 2004.

20(F) The average wage and benefits for employees prior to the
21implementation of this article.

22(4) Not later than January 1, 2009, the department shall provide
23a report to the Legislature that does both of the following:

24(A) Compares the information required in paragraph (2) to that
25same information two years after the implementation of this article.

26(B) Reports on the extent to which residents who had expressed
27a preference to return to the community, as provided in Section
281418.81 of the Health and Safety Code, were able to return to the
29community.

30(5) The department may contract for the reports required under
31this subdivision.

32begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 14126.036 of the end insertbegin insertWelfare and Institutions Codeend insert
33begin insert is amended to read:end insert

34

14126.036.  

This article shall become inoperative on August 1,
35begin 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
36later enacted statute that is enacted before January 1,begin delete 2016,end deletebegin insert 2021,end insert
37 deletes or extends that date.

38begin insert

begin insertSEC. 8.end insert  

end insert
begin insert

This act is a bill providing for appropriations related
39to the Budget Bill within the meaning of subdivision (e) of Section
4012 of Article IV of the California Constitution, has been identified
P22   1as related to the budget in the Budget Bill, and shall take effect
2immediately.

end insert
begin delete
3

SECTION 1.  

It is the intent of the Legislature to enact statutory
4changes relating to the Budget Act of 2015.

end delete


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