BILL ANALYSIS
AB 75
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Date of Hearing: March 24, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 75 (Huffman) - As Amended: March 11, 2009
SUBJECT : Medi-Cal.
SUMMARY : Revises for purposes of Medi-Cal hospital payments,
the methodology for determining which non-contract hospitals in
an open health facility planning area (HFPA) are subject to an
interim payment rate reduction and a cost settlement report
reduction. Specifically, this bill :
1)Excludes state-owned or state-operated hospitals from the
count used to determine whether an open HFPA has three or more
hospitals (if the open HFPA has three or more hospitals,
hospitals in that HFPA are subject to a Medi-Cal interim
payment rate reduction).
2)Excludes state-owned or state-operated hospitals from the
count used to determine whether an open HFPA has more than
three hospitals (if the open HFPA has more than three
hospitals, hospitals in that HFPA are subject to a hospital
cost report settlement Medi-Cal payment rate reduction).
3)Revises the cost report settlement criteria in #2 above by
requiring that a Medi-Cal hospital cost settlement report
reduction applies in an open HFPA with three or more
hospitals, instead of more than three hospitals.
4)Makes legislative findings and declarations that:
a) The Legislature intended that a state-owned or
state-operated hospital not be included in determining the
number of hospitals with licensed general acute care beds
in an open HFPA;
b) The Legislature intended that the exceptions for a
hospital in an open HFPA both (the exceptions in #1 and #2
above) be applicable if the open HFPA has three or more
hospitals with licensed general acute care beds; and,
c) The Legislature's intent in enacting this bill is to
construe and clarify the meaning and effect of existing
law.
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EXISTING LAW :
1)For services provided on and after July 1, 2008, reduces
Medi-Cal interim payments and cost report settlements by 10%
for amounts paid for inpatient hospital services provided by
hospitals that are not under contract with the state, for
services provided on and after July 1, 2008.
2)Effective October 1, 2008, reduces, in addition to the
reduction in #1 above, non-contract hospital Medi-Cal interim
payments and cost report settlements, with exceptions,
pursuant to a specified formula.
3)Exempts hospitals in an open HFPA from the interim payment
reduction under #2 above unless they are located in an open
HFPA with three or more hospitals.
4)Exempts hospitals in an open HFPA from the cost report
settlement reduction under #2 above unless they are located in
an open HFPA with more than three hospitals.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE . According to the author, this bill would clarify
provisions of the 2008-09 health budget trailer bill to
protect certain hospitals from a Medi-Cal budget reduction by
excluding state-run and state-operated hospitals from the
count used to determine whether hospitals in open HFPAs are
subject to a budget reduction.
2)BACKGROUND . The California Medical Assistance Commission
(CMAC) is the state agency established for negotiating
contracts with hospitals on behalf of the state for inpatient
services under the Medi-Cal program through what is known as
the Selective Provider Contracting Program (SPCP). Through
CMAC, the state selectively contracts on a competitive basis
with hospitals for inpatient services provided to Medi-Cal
beneficiaries in the fee-for-service Medi-Cal program. CMAC
contracts with slightly over 200 general acute care hospitals,
of which 197 hospitals are under contract in 62 "closed areas"
of the state. "Closed areas" are those HFPAs where SPCP
contracts have been signed. In closed areas, Medi-Cal
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beneficiaries must generally receive inpatient care at a
contract hospital. "Open areas" are those HFPAs where the
SPCP is generally not in effect and are primarily rural areas
with a limited number of hospitals where competitive
contracting is not feasible. Hospitals that do not contract
with the state in the fee-for-service Medi-Cal program are
known as non-contract hospitals.
When non-contract hospitals bill Medi-Cal for services, they are
initially paid an interim rate. Hospitals are then required
to submit a cost report within five months of the close of
their fiscal period, and the Department of Health Care
Services (DHCS) reviews each hospital's cost report and
prepares a tentative settlement, which is a determination of
the allowable reimbursable reported costs for a hospital's
fiscal period. DHCS compares what a hospital was paid in
interim payments for the hospital's fiscal period, to the
hospital's allowable reimbursable reported costs for that
fiscal period. The difference may result in either an
underpayment that is paid to the hospital or an overpayment
that is recouped from the hospital.
This bill contains three provisions dealing with inpatient
payment reductions to non-contract hospitals enacted in 2008
through the mid-year reduction bill enacted in February 2008
(AB 5 X3 (Committee on Budget) Chapter 3, Statutes of 2008)
and the health budget trailer bill of 2008 (AB 1183 (Committee
on Budget), Chapter 758, Statutes of 2008) enacted in
September 2008. This bill excludes state-owned and
state-operated general acute care hospitals from the
calculations to determine which hospitals will have an interim
payment reduction and a reduction at the point of the final
cost settlement report. These calculations depend on the
number of hospitals in a given geographic region, or open
HFPA. When state-owned and state-operated facilities are
included in the calculations, more hospitals end up with rate
reductions than was anticipated in the budget-related
legislation passed last year.
This bill specifically revises three different calculations that
are made as follows:
a) Medi-Cal interim payment rates : Existing law reduces
Medi-Cal interim payment rates for non-contract hospitals,
but exempts hospitals in an open HFPA, unless they are
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located in an open HFPA with three or more hospitals. This
bill excludes state-owned and state-operated hospitals from
the count as to whether an HFPA has three or more
hospitals. There are 10 state-owned or operated hospitals
with general acute care beds in the state operated by the
California Department of Developmental Services, California
Department of Corrections and Rehabilitation, and
California Department of Veterans Affairs. Including these
state hospitals in the three or more count makes more
hospitals subject to the required rate reduction. DHCS
indicates six hospitals have had an unintended rate
reduction from the inclusion of state-owned facilities in
this count. DHCS indicates it was the not the department's
intent to subject these hospitals to the rate reduction,
and DHCS did not assume savings from reducing the rates of
these six hospitals.
b) Medi-Cal cost settlement reports : Existing law reduces
Medi-Cal final cost settlement report payment rates for
non-contract hospitals, but exempts hospitals in an open
HFPA, unless they are located in open HFPA with more than
three hospitals. This bill excludes state-owned and
state-operated hospitals from the determination of whether
an open HFPA has more than three hospitals. In addition,
this provision would revise the cost report settlement
reduction by requiring a payment reduction if an open HFPA
has three or more hospitals, instead of more than three
hospitals. DHCS indicates the change from more than three
to three or more is to ensure consistency with the interim
payment rate reduction provisions, and to ensure that
appropriate interim payment rate reductions will not be
restored to non-contract hospitals when DHCS completes its
cost settlement.
c) Restoration of Medi-Cal inpatient payment rate cuts made
so far : The third provision of this bill makes legislative
findings and declarations that the Legislature intended
that a state-owned or state-operated hospital not be
included in determining the number of hospitals with
licensed general acute care beds in an open HFPA, and that
the Legislature intended that the exceptions for a hospital
in an open HFPA be applicable if the open HFPA has three or
more hospitals with licensed general acute care beds.
According to DHCS, this provision would enable DHCS to
restore the Medi-Cal payment reductions to the affected
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hospitals for services provided from October 1, 2008
through the enactment date of this bill.
3)SUPPORT . The California Hospital Association (CHA) writes in
support that this bill corrects an unintended consequence from
the 2008-09 budget regarding Medi-Cal cuts to hospitals. CHA
states that including state-owned or operated hospitals in the
calculation caused several community hospitals to be included
in the Medi-Cal payment cuts, and this bill corrects and
revises the formula. Queen of the Valley Medical Center
(QVHC) writes in support, as one of the hospitals subject to a
rate reduction, stating its HFPA contains a state veteran's
home, which resulted in the HFPA having three hospitals in its
HFPA and therefore made QVHC subject to the rate reduction.
Similarly, St. Helena Medical Center writes as an affected
hospital in support of this bill. St. Helena states it is
subject to the lower Medi-Cal reimbursement rate as a result
of last year's budget action, which it estimates will reduce
its payments by $2.85 million annually.
DHCS writes in support that this bill would clarify that
state-owned or operated hospitals are not to be counted when
considering whether open HFPAs have three or more hospitals
with general acute care beds for the purpose of determining
which hospitals are subject to the payment reduction for
non-contract hospitals. Additionally, DHCS writes that this
bill would enable DHCS to restore Medi-Cal payments for
inpatient hospital services provided from October 1, 2008
through the enactment of this bill to those non-contract
hospitals that were unintentionally impacted by the rate
reduction. Finally, DHSC states this bill corrects an
inconsistency in statute to ensure that hospitals which
received an intended interim rate reduction do not have funds
restored during the DHCS audit and cost settlement process.
4)URGENCY CLAUSE . The author has requested an urgency clause be
added to this bill so that the provisions of this bill can
take effect immediately upon enactment.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
California Hospital Association
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Department of Health Care Services
St. Helena Hospital
Queen of the Valley Medical Center
Opposition
None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097