BILL ANALYSIS
AB 728
Page 1
Date of Hearing: April 14, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 728 (Nielsen) - As Introduced: February 26, 2009
SUBJECT : Medi-Cal: hospitals: reimbursements.
SUMMARY : Exempts certain non-contract hospitals from a Medi-Cal
inpatient rate reduction by requiring a Medi-Cal inpatient rate
reduction to apply in open health facility planning areas
(HFPAs) with a minimum number of full-service hospitals with
licensed general acute care beds, instead of hospitals with
licensed general acute care beds under existing law. Contains
an urgency clause to ensure that the provisions of this bill go
into immediate effect upon enactment. Specifically, this bill :
1)Exempts non-contract hospitals in an open HFPA from the
Medi-Cal interim payment reduction unless they are located in
an open HFPA with three or more full service hospitals with
licensed general acute care beds, instead of three or more
hospitals with licensed general acute care beds under existing
law.
2)Exempts non-contract hospitals in an open HFPA from the
Medi-Cal cost report settlement reduction unless they are
located in an open HFPA with more than three full service
hospitals with licensed general acute care beds, instead of
more than three hospitals with licensed general acute care
beds under existing law.
3)Defines, for purposes of this bill, a "full service" hospital
as a general acute care hospital which, at a minimum, provides
all of the following:
a) Basic emergency medical services;
b) Medical or surgical services, or both;
c) Intensive care services; and,
d) Perinatal services.
EXISTING LAW :
1)Reduces, for services provided on and after July 1, 2008,
Medi-Cal interim payments and cost report settlements by 10%
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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)Reduces, effective October 1, 2008, non-contract hospital
Medi-Cal interim payments and cost report settlements to the
lesser of the 10% reduction in 1) above or the regional
average per diem hospital contract rate, reduced by 5% and
multiplied by the number of Medi-Cal covered inpatient days.
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 with licensed general acute
care beds.
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 with licensed
general acute care beds.
5)Sunsets the above provisions January 1, 2013.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE . The author argues this bill would exempt hospitals
from a Medi-Cal rate reduction so as to take into account
their unique fiscal circumstances as health providers to the
Medi-Cal population. Specifically, this bill requires a
payment reduction to apply only in open HFPA with a minimum
number of "full service" hospitals, thereby exempting certain
hospitals, most notably in the communities of Redding and
Bakersfield, from reductions in the level of inpatient
reimbursement they receive under the Medi-Cal program.
Because the affected hospitals serve a large Medi-Cal
population, the author argues this bill will help ease the
financial crisis that threatens to close key community
hospitals.
The author cites as an example of the payment reduction an open
HFAP in the Redding area where there are three main health
care facilities with general acute care beds: Mercy Medical
Center (256 beds), Shasta Regional Medical Center (246 beds),
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and Patients Hospital (10 beds). While the first two
constitute "full-service" hospitals, Patients Hospital, which
is a specialized facility, does not offer the necessary
services, as defined, to be considered a "full-service"
hospital. Nevertheless, Patients Hospital counts as the third
hospital making all three facilities eligible for the Medi-Cal
reduction, irrespective of the type of services provided. The
author argues this classification imposes a heavy financial
burden upon true "full-service" hospitals simply because of
their close proximity to a small specialized hospital that
does not serve a significant Medi-Cal population. The author
argues the Administration's blanket approach to achieve
Medi-Cal savings does not properly reflect the unique
circumstances of certain hospitals, such as those in Redding
and others in rural areas which serve a high number of
Medi-Cal patients and rely heavily upon state Medi-Cal
reimbursement. These hospitals are often the only provider of
vital services to their communities, so any cuts to the
reimbursement rates cause disproportionately greater financial
losses to these hospitals. The author states just last year,
Mercy Medical Center in Redding lost over $15 million due
largely to insufficient Medi-Cal reimbursements. Continued
losses like this threaten to close hospital doors, leaving
hundreds of thousands of Californians without a hospital
nearby.
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
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.
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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 exempts certain hospitals from the inpatient payment
reductions to non-contract hospitals enacted through the
health budget trailer bill last year. Last session, two
budget measures affected non-contract hospital reimbursement:
the mid-year reduction bill in February 2008 (AB 5 X3
(Committee on Budget) Chapter 3, Statutes of 2008 Third
Extraordinary Session) and the health budget trailer bill of
2008 (AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008) passed in September 2008. AB 5 X3 reduced, for services
provided on and after July 1, 2008, 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. AB 1183, effective October 1, 2008
reduced non-contract rates to the lesser of the 10% reduction
enacted by AB 5 X3 or the regional average CMAC per diem
contract rate, reduced by 5% and multiplied by the number of
Medi-Cal covered inpatient days.
This bill changes the calculation used to determine which
hospitals in an open HFPA are subject to a Medi-Cal interim
payment rate reduction and a Medi-Cal cost settlement report
reduction in AB 1183. 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 with general acute care
beds. This bill instead requires the HFPA to have three or
more full service hospitals with licensed general acute care
beds. Existing law reduces Medi-Cal final cost settlement
report payment rates for non-contract hospitals, but exempts
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hospitals in an open HFPA, unless they are located in open
HFPAs with more than three hospitals with licensed general
acute care beds. This bill would instead require the rate
reduction if the open HFPA has more than three full service
hospitals with licensed general acute care beds.
DHCS indicates there are nine open HFPAs with 29 hospitals that
are currently subject to the additional rate reduction. If
this bill were enacted, the number of HFPAs subject to the
payment reduction would be reduced to two HFPAs with 7
hospitals, thus reducing the General Fund savings achieved
through the budget act of last year. The table below shows
the list of open HFPA and hospitals that would no longer
receive the rate reduction from AB 1183:
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|HFPA |HFPA NAME | AREA | CMAC | Facility Name |
| | |STATUS | Region | |
|-----+----------+-------+-----------+---------------------------|
|1014 |Huntington|Open |Southern |Fountain Valley Regional |
| | Beach | |California |Hospital and Medical |
| | | | |Center - Euclid |
|-----+----------+-------+-----------+---------------------------|
|1014 |Huntington|Open |Southern |Huntington Beach Hospital |
| | Beach | |California | |
|-----+----------+-------+-----------+---------------------------|
|1014 |Huntington|Open |Southern |Kindred Hospital - |
| | Beach | |California |Westminster |
|-----+----------+-------+-----------+---------------------------|
|1014 |Huntington|Open |Southern |Orange Coast Memorial |
| | Beach | |California |Medical Center |
|-----+----------+-------+-----------+---------------------------|
|1016 |Newport |Open |Southern |Fairview Developmental |
| |Beach | |California |Center |
|-----+----------+-------+-----------+---------------------------|
|1016 |Newport |Open |Southern |Hoag Memorial Hospital |
| |Beach | |California |Presbyterian |
|-----+----------+-------+-----------+---------------------------|
|1016 |Newport |Open |Southern |Kaiser Foundation Hospital |
| |Beach | |California |- Irvine |
|-----+----------+-------+-----------+---------------------------|
|1016 |Newport |Open |Southern |College Hospital Costa |
| |Beach | |California |Mesa |
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|-----+----------+-------+-----------+---------------------------|
|1211 |Victor |Open |Southern |Desert Valley Hospital |
| |Valley | |California | |
|-----+----------+-------+-----------+---------------------------|
|1211 |Victor |Open |Southern |St. Mary Medical Center |
| |Valley | |California | |
|-----+----------+-------+-----------+---------------------------|
|1211 |Victor |Open |Southern |Victor Valley Community |
| |Valley | |California |Hospital |
|-----+----------+-------+-----------+---------------------------|
|209 |Redding |Open |Other |Patient's Hospital of |
| | | | |Redding |
|-----+----------+-------+-----------+---------------------------|
|209 |Redding |Open |Other |Shasta Regional Medical |
| | | | |Center |
|-----+----------+-------+-----------+---------------------------|
|209 |Redding |Open |Other |Mercy Medical Center - |
| | | | |Redding |
|-----+----------+-------+-----------+---------------------------|
|209 |Redding |Open |Other |Northern California |
| | | | |Rehabilitation Hospital |
|-----+----------+-------+-----------+---------------------------|
|403 |Petaluma |Open |San |Sonoma Developmental |
| | | |Francisco |Center |
| | | |Bay Area | |
|-----+----------+-------+-----------+---------------------------|
|403 |Petaluma |Open |San |Petaluma Valley Hospital |
| | | |Francisco | |
| | | |Bay Area | |
|-----+----------+-------+-----------+---------------------------|
|403 |Petaluma |Open |San |Sonoma Valley Hospital |
| | | |Francisco | |
| | | |Bay Area | |
|-----+----------+-------+-----------+---------------------------|
|407 |Napa |Open |San |St. Helena Hospital |
| | | |Francisco | |
| | | |Bay Area | |
|-----+----------+-------+-----------+---------------------------|
|407 |Napa |Open |San |Nelson M. Holderman |
| | | |Francisco |Memorial Hospital |
| | | |Bay Area | |
|-----+----------+-------+-----------+---------------------------|
|407 |Napa |Open |San |Queen of the Valley |
| | | |Francisco |Hospital |
| | | |Bay Area | |
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|-----+----------+-------+-----------+---------------------------|
|615 |Hanford |Open |Other |Central Valley General |
| | | | |Hospital |
|-----+----------+-------+-----------+---------------------------|
|615 |Hanford |Open |Other |Corcoran District Hospital |
|-----+----------+-------+-----------+---------------------------|
|615 |Hanford |Open |Other |Hanford Community Hospital |
----------------------------------------------------------------
3)RELATED LEGISLATION . AB 75 (Huffman) revises for purposes of
Medi-Cal hospital payments, the methodology for determining
which non-contract hospitals in an open HFPA are subject to an
interim payment rate reduction and a cost settlement report
reduction. That measure would restore Medi-Cal rates for six
hospitals that were not intended to have a rate reduction
through legislation enacted last year. AB 75 passed the
Assembly Health Committee on consent and is currently awaiting
hearing in the Assembly Appropriations Committee.
4)PREVIOUS LEGISLATION . This bill is similar to AB 2784 (La
Malfa) of last session, which was gutted and amended on
September 15th, and unanimously passed both houses of the
Legislature the following day. AB 2784 was vetoed by Governor
Schwarzenegger with the following veto message:
The 2008-09 budget contained provisions that will
protect the state's Selective Provider Contracting
Program by incentivizing hospitals to enter into
contracts for inpatient Medi-Cal services. Inpatient
hospital rates are the fastest growing cost in the
Medi-Cal program and the state must ensure it obtains
the best rates while also maintaining access to
critical services for beneficiaries.
This bill would diminish those contracting incentives
and increase costs to the state. I would suggest that
the Legislature work with the Department of Health
Care Services and the California Medical Assistance
Commission to craft more targeted language to address
the problem of hospital access in specific rural
areas.
5)POLICY QUESTION . This bill addresses an important issue in
that provider payment rates in public programs are a key
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factor in beneficiaries' ability to access program services.
However, given the state's current fiscal constraints and
potential cuts to existing health programs, should additional
hospitals be exempt from a recently enacted rate reduction?
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097