BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        SB 815|
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                                UNFINISHED BUSINESS 


          Bill No:  SB 815
          Author:   Hernandez (D) and De León (D)
          Amended:  6/9/16  
          Vote:     27 - Urgency

           SENATE HEALTH COMMITTEE:  8-0, 4/27/16
           AYES:  Hernandez, Nguyen, Mitchell, Monning, Nielsen, Pan,  
            Roth, Wolk
           NO VOTE RECORDED:  Hall

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 5/27/16
           AYES:  Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

           SENATE FLOOR:  39-0, 5/31/16
           AYES:  Allen, Anderson, Bates, Beall, Berryhill, Block,  
            Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,  
            Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,  
            Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Stone,  
            Vidak, Wieckowski, Wolk
           NO VOTE RECORDED:  Runner

           ASSEMBLY FLOOR:  79-0, 6/23/16 (Consent) - See last page for  
            vote
           
           SUBJECT:   Medi-Cal:  demonstration project


          SOURCE:    Author


          DIGEST:  This bill enacts the statutory provisions of Medi-Cal  
          2020, the states recently approved five-year federal Section  
          1115 waiver, which runs through December 31, 2020. Implements  
          the Public Hospital Redesign and Incentive in Medi-Cal program,  








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          the Global Payment Program for county designated public  
          hospitals, and the access assessment required under the Special  
          Terms of Conditions of Medi-Cal 2020.


          Assembly Amendments delete provisions establishing the Whole  
          Person Care (WPC) and Dental Transformation Initiative (DTI),  
          which are contained in AB 1568 (Bonta and Atkins), which is a  
          companion bill to this measure, and make the measures contingent  
          upon each other. In addition, the Assembly amendments add a  
          requirement that designated public hospital systems (DPHs are  
          University of California and county hospitals) report a summary  
          of the contracting arrangement the DPHs has with Medi-Cal  
          managed care plans and the scope of services covered under the  
          contract, and add legislative intent language to encourage  
          contracting between the two parties.




          ANALYSIS   Existing law establishes a Medicaid Section 1115  
          demonstration project under the Medi-Cal program until October  
          31, 2015, known as California's Bridge to Reform, to implement  
          specified objectives. Provides for payments under the state's  
          Bridge to Reform waiver to DPHs, and for federal  
          disproportionate share (DSH), payments to private hospitals  
          (referred to as "DSH replacement payments") and non-designated  
          public hospitals (NDPHs are now referred to as  
          District/Municipal Public Hospitals or DMPH) through October 1,  
          2015.  


          This bill:

           1) Requires the Department of Health Care Services (DHCS) to  
             implement the Medi-Cal 2020 Demonstration Project, consistent  
             with federal law and the Special Terms and Conditions (STCs).  
             Requires the STCs to prevail in the event of a conflict  
             between this bill and the STCs.











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           2) Continues the current Medi-Cal fee-for-service (FFS) payment  
             methodologies for DPHs from the previous waiver, whereby DPHs  
             receive cost-based reimbursement with county certified public  
             expenditures used to draw down federal Medicaid matching  
             funds, and which require DPHs to receive supplemental  
             reimbursements for the costs incurred for physician and  
             non-physician services provided to Medi-Cal beneficiaries, to  
             the extent those services are not claimed as inpatient  
             hospital services by the hospital.





           3) Requires DSH payments to be paid only to UC DPHs and DMPHs,  
             and requires private DSH hospitals to receive "DSH  
             replacement payments" funded by General Fund (GF) and federal  
             Medicaid funds (instead of federal DSH funds) in the same  
             manner as under the previous waiver, with the federal DSH  
             amounts going to UC DPHs capped by fiscal year. Requires  
             federal DSH payments and federal funds under an uncompensated  
             care pool (referred to as the Safety Net Care Pool under the  
             previous waiver) to be used for a new Global Payment Program  
             (GPP).





           4) Requires DHCS to implement the new GPP to supporting  
             participating health care systems that provide health care  
             for the uninsured. Requires, under GPP, GPP systems to  
             receive global payments based on the health care they provide  
             to the uninsured, in lieu of traditional DSH payments and  
             payments from an uncompensated care pool. 













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           5) Requires DPH systems to receive GPP payments based on a  
             value-based point methodology that incorporates measures of  
             value for patients in conjunction with the recognition of  
             costs. Requires the points assigned to a particular service  
             or activity to be the same across all GPP systems.





           6) Requires the nonfederal share of payment under GPP to be  
             funded by intergovernmental transfers (IGTs).





           7) Requires DHCS to establish and operate the Public Hospital  
             Redesign and Incentives in Medi-Cal (PRIME) program, which is  
             intended to accelerate efforts by participating PRIME  
             entities to change care delivery to maximize health care  
             value and strengthen their ability to successfully perform  
             under risk-based alternative payment models. PRIME is the  
             successor to the Delivery System Reform Incentive Program  
             from the previous waiver.





           8) Makes participating PRIME entities eligible to earn  
             incentive payments by undertaking projects set forth in the  
             STCs for which there are required metrics.





           9) Designates DPHs and DMPHs as participating PRIME entities.  
             Subject to the STCs, authorizes up to $1.2 billion available  
             to DPHs and $200 million available to DMPHs. Requires the  
             nonfederal share of PRIME payments to consist of voluntary  








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             IGTs. 





           10)Requires PRIME entities to submit a five-year PRIME project  
             plan containing the specific elements of the STCs. Requires  
             DHCS to review all five-year PRIME project plans and take  
             action to approve or disapprove each plan.





           11)Permits DHCS to enter into exclusive or nonexclusive  
             contracts or amend existing contracts on a bid or negotiated  
             basis. Exempts these contracts from specified provisions of  
             the Public Contract Code and Department of General Services  
             review.





           12)Requires DHCS to seek any federal approval as necessary to  
             implement Medi-Cal 2020, this bill and any changes to the  
             STCs as deemed necessary. Implements this only to the extent  
             federal financial participation (FFP) is available and is not  
             otherwise jeopardized.





           13)Permits the DHCS director to modify any process or  
             methodology in this bill to the extent necessary to comply  
             with federal law or the STCs, but only if the modification is  
             consistent with the goals of this bill.











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           14)Requires the DHCS director to develop a methodology by which  
             payments under Medi-Cal 2020 are reduced if the amount of FFP  
             is reduced due to the application of penalties in the STC,  
             the enforcement of the budget neutrality limit or other  
             similar occurrence.





           15)Permits DHCS to claim FFP for expenditures associated with  
             designated state health programs (DSHP) identified in the  
             STCs.





           16)Continues the continuously appropriated Demonstration DSH  
             Fund and Public Hospital Investment, Improvement and  
             Incentive Fund, and establishes two new continuously  
             appropriated funds. 





           17)Requires DHCS to conduct or arrange to have conducted any  
             study, report, assessment, evaluation or other similar  
             demonstration project activity required under the STCs.  
             Requires DHCS to conduct or arrange to have conducted the  
             PRIME program evaluation, the DTI evaluation, the WPC pilot  
             program, and two evaluations of the GPP required by the STCs.


          Comments
          
          Author's statement. According to the author, this bill is needed  
          to provide the statutory framework for implementation of  
          "Medi-Cal 2020." While the STCs outline the programmatic and  








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          financing elements of Medi-Cal 2020, state law changes are  
          required, particularly related to hospital financing. This bill  
          is needed to continue existing Medi-Cal FFS payments to DPHs, to  
          change how federal DSH funds are provided to DPHs consistent  
          with the STCs under the GPP, to continue DSH payments to private  
          and DMPHs, to implement the expanded provisions of PRIME, to  
          appropriate funds for the waiver-related provisions, and to  
          codify the provisions of the STCs establishing the Medi-Cal  
          managed care access assessment. In addition, this bill grants  
          flexibility to DHCS to implement Medi-Cal 2020 without using the  
          regular contracting and regulatory processes due to waiver  
          timelines, and requires notification to the Legislature  
          regarding waiver-related


          FISCAL EFFECT:   Appropriation:    Yes         Fiscal  
          Com.:YesLocal:   No

          According to the Assembly Appropriations Committee:

          1)DHCS has requested administrative resources through an April  
            2016 Spring Finance Letter totaling $33.6 million for waiver  
            implementation over its five-year lifetime, $14 million of the  
            total is for contract costs, and $10.8 million of which is  
            requested for 2016-17.  Funding will pay for implementation,  
            monitoring, oversight, evaluation and assessment, technical  
            assistance, program development, and related activities  
            (GF/federal). 


            The funding request is the cost to implement the entire  
            waiver, but only certain elements of the waiver are included  
            in this bill.  Other provisions are implemented in AB 1568  
            (Bonta), a companion bill.  


          2)Federal matching funds available by waiver program component  
            are as follows:

                       PRIME                   $3.73 billion
                       GPP                     $236 million* 
                       DTI                     $375 million**








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                       DSHPs                   $375 million
                       WPC                     $1.5 billion** 
                       --------------------------------------
                       Total                   $6.2 billion

        *The $236 million for GPP only represents additional waiver  
          funding; it does not include the existing federal DSH component  
          of GPP funding. Federal DSH funding over the five-year life of  
          the waiver is projected to be about $5.8 billion.  In addition,  
          only the first year of federal funding for GPP is shown here.   
          Funding in subsequent years is based on a study of uncompensated  
          care.

        **DTI and WPC are implemented in AB 1568 (Bonta).


          SUPPORT:   (Verified6/23/16)


          Antelope Valley Hospital
          Association of California Healthcare Districts
          Bear Valley Community Healthcare District
          California Association of Public Hospitals and Health Systems
          California Hospital Association
          California Primary Care Association
          California State Association of Counties
          California State Council of the Service Employees International  
                    Union
          Coalinga Regional Medical Center
          County Health Executives Association of California
          County of San Bernardino 
          District Hospital Leadership Forum
          El Camino Hospital
          Health Access California
          Kern Valley Healthcare District
          Mammoth Hospital
          Marin General Hospital
          Mayers Memorial District Hospital
          Northern Inyo Hospital
          Oak Valley Hospital District 
          Palo Verde Hospital
          Palomar Health








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          Pioneers Memorial Healthcare District
          Plumas District Hospitals
          Salinas Valley Memorial Healthcare System
          San Bernardino Mountains Community Hospital District
          San Gorgonio Memorial Hospital
          Santa Clara County Board of Supervisors
          San Joaquin General Hospital
          Seneca Healthcare District
          Tahoe Forest Hospital District
          Tri-City Medical Center
          University of California
          Urban Counties of California
          Ventura County Board of Supervisors
          Washington Hospital Healthcare System
          Western Center on Law & Poverty


          OPPOSITION:   (Verified6/23/16)


          None received

          ARGUMENTS IN SUPPORT:  This bill is supported by hospitals and  
          consumer and labor groups, which write in support of the $6.2  
          billion in federal funds and the new waiver funding components,  
          including PRIME and GPP. Public and district hospitals write in  
          support of PRIME, arguing the incentive funding provided by  
          PRIME will provide opportunity for public hospitals to put into  
          place needed programs to allow California to continue its drive  
          toward quality, improved outcomes and accountability in safety  
          net systems. The California Association of Public Hospitals and  
          Health Systems (CAPH) writes in support that this bill will  
          leverage California's coverage expansion with significant  
          payment reforms and delivery system improvements for public  
          health care systems. 


           ASSEMBLY FLOOR:  79-0, 6/23/16
           AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,  
            Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,  
            Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth  








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            Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,  
            Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,  
            Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim,  
            Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis,  
            Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,  
            Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas,  
            Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,  
            Waldron, Weber, Wilk, Williams, Wood, Rendon
           NO VOTE RECORDED: O'Donnell



          Prepared by:Scott Bain / HEALTH / (916) 651-4111
          6/24/16 14:33:56


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