BILL ANALYSIS
AB 303
Page 1
Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 303 (Beall) - As Amended: April 28, 2009
Policy Committee: Health Vote:18-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes specified hospitals to access supplemental
Medi-Cal reimbursement for debt service related to eligible
capital projects. Specifically, this bill authorizes
supplemental payments to hospitals that meet the following
eligibility:
1)Facilities that contract with the California Medical
Assistance Commission (CMAC) and are county hospitals, UC
medical centers, children's hospitals, or specified private
disproportionate share (DSH) (Private Essential Access
Community Hospitals-PEACH) hospitals.
2)Submission of specified planning documents to the California
Department of Health Care Services (DHCS) and the Office of
Statewide Health Planning and Development (OSHPD).
3)Availability of non-GF for the non-federal share of costs.
Non-GF may include local intergovernmental transfers (IGT) and
certified public expenditures (CPE).
FISCAL EFFECT
Annual costs in the range of $40 million to $60 million (50%
federal, 50% IGT or CPE) to provide supplemental reimbursement
on debt service to 15 hospitals. Actual costs depend on how many
hospitals pursue supplemental funding access established by this
bill.
There are approximately 70 county, UC, children's, and PEACH
hospitals statewide. Under current law, hospitals drawing on
similar supplemental reimbursements under the Construction and
AB 303
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Renovation Reimbursement Program (CRRP) receive annual
reimbursement of $95 million to $120 million. Debt service costs
typically run about $65,000 per $1 million of capital projects,
assuming an amortization over thirty years.
COMMENTS
1)Rationale . This bill is sponsored by the Santa Clara County
Board of Supervisors to allow the county's public hospital,
Santa Clara Valley Medical Center (SCVMC), to access
supplemental seismic safety reimbursement by matching local
funds with federal Medi-Cal funds. Costs of this bill would
depend on how many hospitals apply for reimbursement and how
many applications are deemed eligible. The SCVMC has
particularly high capital needs because of its geographic
location as well as major patient caseload growth. Since 2000,
the hospital has seen a 45% increase in the number of patients
seeking care. Current state law requires the hospital to
replace or retrofit more than half of its 524 licensed acute
care beds or reduce services accordingly. Cost of the seismic
safety effort is $1.4 billion and funding has been provided
for almost 70% of that cost. This bill helps Santa Clara
County bridge the seismic safety funding gap by leveraging
federal Medi-Cal supplemental funding.
2)The Construction and Renovation Reimbursement Program (CRRP)
was established by SB 1732 (Presley) Chapter 1635, Statutes of
1988. This program provides supplemental reimbursement for the
debt service incurred on revenue bonds for hospital
construction, renovation, or replacement of facilities or
fixed equipment. Hospitals throughout California are subject
to statutory seismic requirements and face billions of dollars
of unfunded construction needs. According to OSHPD, there is
$10 billion in hospital planning and construction currently
underway statewide. According to a 2007 study by RAND, total
construction costs for California may range from $45 billion
to $110 billion in 2006 dollars. The actual costs will depend
on project size and duration, future inflation, and
construction costs.
3)Hospital Earthquake Risk . Structural Performance Category-1
(SPC-1) hospital buildings pose a significant risk of collapse
and a danger to the public after a strong earthquake. Under
current law, SPC-1 buildings must have been retrofitted,
replaced, or removed from acute-care service by January 1,
AB 303
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2008, unless a hospital has been granted an extension to 2013.
According to estimates, about half of the 2,000 hospital
buildings statewide are classified in the SPC-1 category and
about half of SPC-1 buildings have not met or are unable meet
2008/2013 statutory deadlines due to financial constraints.
(HAZUS) is a standardized federal earthquake loss methodology
that relies on mathematical modeling along with information
about building stock, economic data, local geology and
location and size of potential earthquakes to estimate losses
due to seismic events. Significant conclusions about the
impact of HAZUS reclassification will be available during the
summer of 2009.
4)Concerns . Some concerns have been expressed with regard to
recent amendments adding PEACH hospitals to eligibility for
supplemental reimbursement in this bill. PEACH hospitals are
private hospitals, not county or UC hospitals. Concerns relate
to the use of local CPE and IGT on behalf of private entities.
5)Related Legislation AB 1149 (Beall), in 2007 authorized
hospitals with specified trauma services and located in
particular seismic risk areas to access similar supplemental
reimbursement as AB 303 establishes. AB 1149 was held on the
Suspense File of this committee.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081