BILL ANALYSIS
AB 75
Page 1
ASSEMBLY THIRD READING
AB 75 (Huffman)
As Amended March 26, 2009
2/3 vote. Urgency
HEALTH 18-0 APPROPRIATIONS 17-0
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|Ayes:|Jones, Adams, Ammiano, |Ayes:|De Leon, Nielsen, Ammiano, |
| |Block, Carter, Conway, De | | |
| |La Torre, | |Charles Calderon, Davis, |
| |De Leon, Emmerson, | |Duvall, Fuentes, Hall, |
| |Gaines, Hall, Hayashi, | |Harkey, Miller, |
| |Hernandez, | |John A. Perez, Price, |
| |Bonnie Lowenthal, Nava, | |Skinner, Solorio, Audra |
| |V. Manuel Perez, Salas, | |Strickland, Torlakson, |
| |Audra Strickland | |Krekorian |
|-----+--------------------------+-----+---------------------------|
| | | | |
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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.
Contains an urgency clause to ensure that the provisions of this
bill go into immediate effect upon enactment. 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
AB 75
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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.
FISCAL EFFECT : According to the Assembly Appropriations Committee:
1)Annual Medi-Cal inpatient hospital costs that has been accounted
for in the Budget Act in the range of $10 million (50% General
Fund) to return the six hospitals to cost-based reimbursement
rather than subjecting the hospitals to the rate reductions.
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.
COMMENTS : 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. This bill contains three provisions dealing with
inpatient payment reductions to non-contract hospitals enacted
through the health budget trailer bill of 2008 (AB 1183 (Committee
on Budget), Chapter 758, Statutes of 2008) that resulted in more
hospitals receiving a rate reduction than was anticipated.
Specifically, this bill revises three different calculations, as
follows:
1)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 located in an open HFPA
with three or more hospitals. This bill excludes state-owned and
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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. The Department of Health Care Services
(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 DHCS' intent to subject
these hospitals to the rate reduction, and DHCS did not assume
savings from reducing the rates of these six hospitals.
2)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 report.
3)Restoration of Medi-Cal inpatient payment rate cuts made so far:
The third provision of this bill makes legislative findings and
declarations to enable DHCS to restore the Medi-Cal payment
reductions to the affected hospitals for services provided from
October 1, 2008 through the enactment date of this bill.
This bill is supported by hospitals and DHCS to correct an
unintended consequence from the 2008-09 health budget trailer bill.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097FN:
0001167