BILL ANALYSIS
AB 75
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Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 75 (Huffman) - As Amended: March 26, 2009
Policy Committee: Health Vote:18-0
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill holds six hospitals (in Petaluma, Napa, and Newport
Beach) harmless with respect to inadvertent Medi-Cal
non-contracting hospital rate reductions enacted in AB 5 X3
(Committee on Budget), Chapter 3, Statutes of 2008 and AB 1183
(Committee on Budget), Chapter 758, Statutes of 2008.
Specifically, this bill:
1)Excludes state-owned and state-operated hospitals (including
Developmental Centers and Veterans Homes) from Health Facility
Planning Area (HFPA) calculations.
2)Provides clarification that the six hospitals are not subject
to the non-contracting rate reduction once state hospitals are
excluded from the HFPA calculation.
FISCAL EFFECT
1)Increased annual Medi-Cal inpatient hospital revenues in the
range of $10 million (50% GF) to return the six hospitals to
cost-based reimbursement rather than subjecting the hospitals
to the rate reductions.
For some non-contracting hospitals, the reductions enacted in
2008 means moving from a Medi-Cal inpatient, cost-based rate
of approximately $3,000 a day to a Medi-Cal inpatient rate of
about $1,100 a day. This estimate reflects published
hospital Medi-Cal reimbursements and material submitted by
hospitals and the author's office with respect to the AB 75
fiscal impacts. Below are the Medi-Cal non-contracted
hospitals and state hospitals addressed in this bill:
AB 75
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HFPA 403, Petaluma
Petaluma Valley
Sonoma Valley Hospital
Sonoma Developmental Center
HFPA 407, Napa
St. Helena
Queen of the Valley
Yountville Veterans Home
HFPA 1016, Newport Beach
Hoag Memorial
College Hospital
Fairview Developmental Center
2)Court Injunction Holds Hospitals Harmless . Following recently
enacted Medi-Cal budget reductions, several lawsuits by
providers and stakeholders have been filed. In early April
2009, the California Hospital Association's request to be
added to a current preliminary injunction was granted by the
Ninth Circuit Court of Appeals.
The injunction applies to four rate reductions: (a) inpatient
services for non-contract hospitals (addressed in AB 75), (b)
outpatient services, (c) distinct part nursing facilities, and
(d) subacute facilities. The injunction on rate issues to
which hospitals have now been added has been in place for
several months. The injunction is likely to remain in place
for several more months. Therefore, the clarification in this
bill is less urgent.
COMMENTS
1)Rationale . This bill clarifies Medi-Cal rate reduction
statutes to protect six hospitals from a Medi-Cal budget
reduction. Four of the hospitals are in or near the author's
district and two other hospitals are in southern California.
According to the sponsor, the Department of Health Care
Services (DHCS) and the author, these hospitals were not
supposed to be subject to a rate reduction, but because the
statutory change to back-out the state hospitals was not made,
DHCS has reduced the cost-based reimbursements to these
hospitals.
2)Contracting and Non-Contracting Hospitals . The California
AB 75
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Medical Assistance Commission (CMAC) negotiates contracts with
hospitals on behalf of DHCS for inpatient services under the
Medi-Cal program. The CMAC selectively contracts on a
competitive basis with hospitals for inpatient services
provided to beneficiaries in the fee-for-service Medi-Cal
program via the Selective Provider Contracting Program (SPCP).
CMAC contracts with about 200 general acute care hospitals.
Those hospitals that do not contract with CMAC, are
non-contract hospitals. Non-contracting hospitals subject to
recent rate reductions have been moved from a cost-based
reimbursement (reflecting documented costs of care) to either
a 10% reduction from the cost-basis or to the average CMAC
contracted rate reduced by 10%, whichever results in a lower
rate. This bill addresses six non-contracting hospitals and
what rate they should be paid.
3)Related Legislation . AB 728 (Neilson), in the current session,
addresses another set of hospitals, 26 in total, with regard
to reversing Medi-Cal rate reductions recently enacted. AB 728
is neither sponsored by nor supported by DHCS. AB 728 reveres
a significant portion of budget savings without the
clarification or technical fix found in AB 75.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081