BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 779 (Hall) - Skilled nursing facilities:  certified nurse  
          assistant staffing
          
           ----------------------------------------------------------------- 
          |                                                                 |
          |                                                                 |
          |                                                                 |
           ----------------------------------------------------------------- 
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Version: May 4, 2015            |Policy Vote: HEALTH 7 - 2       |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Urgency: No                     |Mandate: Yes                    |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Hearing Date: May 18, 2015      |Consultant: Brendan McCarthy    |
          |                                |                                |
           ----------------------------------------------------------------- 

          This bill meets the criteria for referral to the Suspense File.

          Bill  
          Summary:  SB 779 would increase the minimum number of required  
          direct care hours per patient in skilled nursing facilities from  
          3.2 hours to 4.1 hours. The bill would require the Department of  
          Public Health to develop staff to patient ratios that convert  
          the direct care hours requirement into staffing ratios.


          Fiscal  
          Impact:  
           Annual costs of $110 million per year to $250 million per year  
            for additional Medi-Cal payments to skilled nursing facilities  
            (General Fund and federal funds). Under current law, the  
            Department of Health Care Services pays skilled nursing  
            facilities  that care for Medi-Cal beneficiaries on a  
            cost-based system. Under current law, the Department is  
            required to increase reimbursement rates to skilled nursing  
            facilities to offset any additional costs mandated by the  
            state or federal government. Currently, the average nursing  
            hours is about 3.7 per patient day. It is not clear whether  
            current law will require the Department to offset the  







          SB 779 (Hall)                                          Page 1 of  
          ?
          
          
            increased cost to go from 3.7 to 4.1 hours, or whether the  
            Department will be required to pay for the costs to go from  
            the currently required 3.2 hours to 4.1 hours. The lower cost  
            estimate above assumes that the Department will increase  
            payments to a skilled nursing facility based on the cost to  
            increase staffing levels from current practice to the newly  
            mandated hours requirement. The higher cost estimate assumes  
            that the Department increases payments to facilities to pay  
            the full costs of increasing staffing levels from the  
            currently mandated level to the level mandated in this bill.

           Unknown costs to the Department of State Hospitals for  
            additional staff (General Fund). The Department of State  
            Hospitals operates three skilled nursing units as part of the  
            state hospital system. Because state hospitals are licensed as  
            psychiatric hospitals, the skilled nursing facilities operated  
            by the Department of State Hospitals are not eligible for the  
            exemption granted in the bill for skilled nursing facilities  
            that are a distinct part of a general acute care hospital. The  
            cost for the Department to comply with the mandated direct  
            care hours in the bill is unknown, in part because the nature  
            of the patient population in the state hospital system  
            generally requires more staffing than is typical in a normal  
            skilled nursing facility.

           One-time costs, less than $150,000 to adopt regulations and  
            modify internal tracking systems by the Department of Public  
            Health (Licensing and Certification Fund).

           Minor additional ongoing enforcement costs to the Department  
            of Public Health (Licensing and Certification Fund). Because  
            the Department already licenses skilled nursing facilities,  
            including compliance with existing nursing hours requirements,  
            there is no anticipated additional cost to enforce the  
            requirements of this bill as part of the ongoing licensing  
            program.


          Background:  Under current law, skilled nursing facilities are licensed and  
          regulated by the Department of Public Health. Current law and  
          regulation requires skilled nursing facilities to provide 3.2  
          hours of nursing care per patient per day. 
          Under current law, skilled nursing facilities that provide  
          services to Medi-Cal patients are paid on a cost-based system.  








          SB 779 (Hall)                                          Page 2 of  
          ?
          
          
          Under that system, a skilled nursing facility receives payments  
          are based on the facility's actual costs, with certain caps,  
          based on similar facilities. For example, a skilled nursing  
          facility's Medi-Cal payments reflect the actual labor costs of  
          the facility, capped at the 95th percentile of labor costs for  
          similar facilities. Under current law (set to sunset in July  
          2015), the Department of Health Care Services is required to pay  
          skilled nursing facilities for the projected cost to comply with  
          new state or federal mandates, on top of the calculated payment  
          rates. The cost based reimbursement system was adopted at the  
          same time the state imposed a quality assurance fee on skilled  
          nursing facilities, in order to use fee revenues to draw down  
          additional federal funding to pay for skilled nursing facility  
          services (and generate General Fund savings of about $500  
          million per year). (A similar system exists for private  
          hospitals.) In addition, current law authorizes a Quality and  
          Accountability Supplemental Payment System, which provides  
          additional payments to skilled nursing facilities based on  
          performance measures. Since the shift in payments to a  
          cost-based system and the creation of the incentive payment  
          system, average nursing hours have increased from the mandated  
          3.2 hours per patient to an estimated statewide average of about  
          3.7 hours per patient, in part because the current financing  
          system rewards skilled nursing facilities for investing in  
          additional staff to improve patient care.




          Proposed Law:  
            SB 779 would increase the minimum number of required direct  
          care hours per patient in skilled nursing facilities from 3.2  
          hours to 4.1 hours.
          Specific provisions of the bill would:
           Revise the term "nursing care" which can include care provided  
            by nurses or unlicensed staff to "direct care hours";
           Increase the minimum number of direct care hours in skilled  
            nursing facilities from 3.2 to 4.1 per patient per day;
           Exempt skilled nursing facilities that are a distinct part of  
            a general acute care hospital from the increased staffing  
            requirement;
           Require the Department of Public Health to develop staff to  
            patient ratios that convert the direct care hours requirement  
            into specified staffing ratios. (The specified staffing ratios  








          SB 779 (Hall)                                          Page 3 of  
          ?
          
          
            in the bill do not appear to increase the overall staffing  
            requirements for skilled nursing facilities, beyond what the  
            bill already requires to increase direct care hours.);
           Require skilled nursing facilities to post information about  
            direct care hours being provided by the facility;
           Require skilled nursing facilities to make information  
            available to the public, upon request, regarding staffing  
            levels;
           Specifically apply the new direct care hours requirement to  
            skilled nursing facilities providing service under the  
            Medi-Cal program;
           Add compliance with direct care service hours to the quality  
            performance measures used by the Department of Health Care  
            Services to determine additional payments.


          Staff  
          Comments:  Current law which governs the rate setting for  
          skilled nursing facilities and implements the skilled nursing  
          facility quality assurance fee sunsets on July 31, 2015. The  
          Governor's budget proposal includes trailer bill language to  
          extend the quality assurance fee and the rate setting  
          methodology until 2020. The proposed trailer bill language would  
          extend the current requirement to pay skilled nursing facilities  
          for the costs to comply with new state or federal mandates.
          The only costs that may be incurred by a local agency relate to  
          crimes and infractions. Under the California Constitution, such  
          costs are not reimbursable by the state.







                                      -- END --