BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1383|
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THIRD READING
Bill No: AB 1383
Author: Jones (D), et al
Amended: 9/4/09 in Senate
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 9-1, 9/9/09
AYES: Alquist, Strickland, Cedillo, Cox, DeSaulnier, Leno,
Negrete McLeod, Pavley, Wolk
NOES: Aanestad
NO VOTE RECORDED: Maldonado
SENATE APPROPRIATIONS COMMITTEE : 9-2, 9/11/09
AYES: Kehoe, Cox, Corbett, Hancock, Leno, Oropeza, Price,
Wolk, Yee
NOES: Denham, Walters
NO VOTE RECORDED: Runner, Wyland
ASSEMBLY FLOOR : 71-3, 6/2/09 - See last page for vote
SUBJECT : Medi-Cal: hospital payments: quality
assurance fees
SOURCE : California Childrens Hospital Association
California Hospital Association
Daughters of Charity Health System
DIGEST : This bill, relating to Medi-Cal, provides the
method of raising money through a hospital provider fee and
states the specific method and formula for distribution of
the funds.
CONTINUED
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Senate Floor Amendments of 9/4/09 correct drafting errors
and clarify that matching federal funds should be
appropriated.
Senate Floor Amendments of 9/3/09 rewrote the bill's
provisions but the intent remains the same.
ANALYSIS : Existing federal law establishes Medicaid,
also known as Medi-Cal in California, which provides
comprehensive health benefits to eligible low-income
individuals including the aged, blind, disabled, pregnant
women, and children. The Department of Health Care
Services (DHCS) administers Medi-Cal. Existing federal law
requires that health-care related taxes levied by states
must conform to specified standards: (1) be broad-based,
(2) not exceed 25 percent of the state share of Medicaid
expenditures, and (3) payers of the tax cannot be
explicitly held harmless.
Many states, including California, utilize health-care
related taxes to fund a portion of the state share of
health care costs. These revenues are available to draw
down matching federal funds and enable states to increase
provider reimbursement rates. California currently imposes
three provider fees for Medi-Cal, specifically, a quality
improvement fee on Medi-Cal managed care plans, a quality
assurance fee on skilled nursing facilities, and a quality
assurance fee on intermediate care facilities for the
developmentally disabled. Existing federal law allows
states to request waivers of federal law under Section 1115
of the Social Security Act for research and demonstration
projects.
Existing state law, SB 1100 (Perata), Chapter 560, Statutes
of 2005, establishes the five-year Medi-Cal
Hospital/Uninsured Care Section 1115 Waiver Demonstration
(current 1115 waiver), which prescribes the reimbursement
method for public, private, and district hospitals that
provide services to Medi-Cal and uninsured patients.
Existing law names specific county and University of
California hospitals as designated public hospitals and
provides for reimbursement for services rendered to
Medi-Cal patients through a certified public expenditure
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(CPE) process. Existing state law establishes a selective
provider contract program (SPCP) for hospitals that provide
services to individuals in the Medi-Cal program. Under the
SPCP, the California Medical Assistance Commission (CMAC)
negotiates reimbursement rates with hospitals serving
Medi-Cal patients that are not one of the designated public
hospitals specifically defined in SB 1100. As of December
1, 2008, CMAC has negotiated rates with 179 hospitals. The
current 1115 waiver governs hospital funding through the
end of federal fiscal year 2010, or October 1, 2010. The
state will be negotiating a waiver to replace the current
1115 waiver in 2010.
This bill:
1. Requires hospitals to be paid a new supplemental payment
which, when combined with their other Medi-Cal payments,
equals the upper payment limit for hospital outpatient
and inpatient services, as specified. (The federal UPL
is a reasonable estimate of the amount that would be
paid for Medicaid services under Medicare payment
principles.) This payment would result in higher
Medi-Cal payments to hospitals.
2. Requires Medi-Cal managed care plans, including mental
health plans, to receive supplemental payments for the
provision of Medi-Cal hospital services to the extent
that there are funds generated by the coverage dividend
fee. Requires each Medi-Cal managed care plan to pay
all of the supplemental payments for hospital services.
3. States that the provisions of the bill related to
supplemental payments shall become inoperative if the
federal government denies approval or does not approve
the implementation of the applicable provisions of the
bill before January 1, 2012.
4. Imposes a provider fee on hospitals, except for the 20
county and University of California hospitals, which are
defined in law as designated public hospitals, and other
specified hospitals. Establishes a formula for
determining the provider fee and procedures for the
payment and collection of the provider fee.
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5. Requires DHCS to submit a Medicaid state plan amendment
to implement the supplemental payment program. Requires
DHCS to seek federal approval or waivers to obtain
federal financial participation (FFP) to the maximum
extent possible for payments made under this bill.
6. Limits use of the provider fee revenues to the purposes
of making increased payments to hospitals, paying
supplemental payments to managed care plans, paying for
health care coverage for children and paying the
administrative costs of DHCS. Provides that $80 million
will be available quarterly to provide for health care
coverage for children.
This bill requires the DHCS to provide the Joint
Legislative Budget Committee and the fiscal and appropriate
policy committee of the Legislature a status update of the
implementation of the bill's provisions, on January 1,
2010, and quarterly thereafter.
This bill provides that the provisions of the bill shall
not be implemented with respect to the 2009-10 and 2010-11
federal fiscal years until the earlier of April 30, 2010,
or the date the federal government approves a federal
waiver for a demonstration that will replace the Medi-Cal
Hospital/Uninsured Care Demonstration Project Act.
Background
Hospitals are reimbursed by Medi-Cal in a variety of ways,
depending upon whether they contract with the state through
CMAC, whether they qualify as a disproportionate share
hospital based on their patient census, and whether they
are a designated public hospital, a private hospital, or a
non-designated public hospital (district hospital).
Designated public hospitals certify their own expenditures,
which becomes the state match for drawing down federal
funds.
Another factor affecting reimbursement is whether the
Medi-Cal patient they are serving is covered through
managed care or fee-for-service Medi-Cal. Fee-for-service
Medi-Cal outpatient hospital rates are established by DHCS
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through a fee schedule.
For Medi-Cal inpatient services, CMAC negotiates contracts
with hospitals on behalf of the state under the Medi-Cal
program through the selective provider contract program.
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. According to CMAC, the competitive
contracting model has resulted in savings to the state
General Fund of over $600 million this fiscal year. CMAC
has negotiated a rate on behalf of the state with 179
hospitals as of December 1, 2008. 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 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.
Last session, two budget measures affected non-contract
hospital reimbursement: the mid-year reduction bill in
February 2008 [AB 5 (Assembly Budget Committee), Chapter 3,
Statutes of the 2008, Third Extraordinary Session] and the
health budget trailer bill of 2008 [AB 1183 (Assembly
Budget Committee), Chapter 758, Statutes of 2008] passed in
September 2008. AB 5XXX reduced, for services provided on
and after July 1, 2008, Medi-Cal interim payments and cost
report settlements by 10 percent 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 percent
reduction enacted by AB 5XXX or the regional average CMAC
per diem contract rate, reduced by five percent and
multiplied by the number of Medi-Cal covered inpatient
days.
On April 6, 2009, the United States Court of Appeals for
the Ninth Circuit granted a motion made by hospital
plaintiffs (which included the California Hospital
Association and some individual hospitals) and ordered a
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stay of the rate cuts enacted in AB 1183 with respect to
the specified hospital services, including inpatient
services for non-contract hospitals, pending their appeal
to the United States Court of Appeals for the Ninth Circuit
of the district court's order denying the motion for a
preliminary injunction.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
Appropriates $1,000,000 from the Private Hospital
Supplemental Fund to the department to pay DHCS's staffing
and administrative costs associated with the bill,
including for workload associated with seeking the
necessary federal approvals to implement the bill's
provisions and $13,500,000,000 from the Hospital Quality
Assurance Revenue Fund to the DHCS for the bill's purposes
to be available for expenditure until January 1, 2013. If
the DHCS obtains federal approval, the bill requires the
DHCS to use money in the Hospital Quality Assurance Revenue
Fund to reimburse $1,000,000 to the Private Hospital
Supplemental Fund. If the DHCS does not obtain federal
approval, the bill requires any unexpended moneys from the
$1,000,000 appropriated to the DHCS from the Private
Hospital Supplemental Fund pursuant to this bill to revert
to the Private Hospital Supplemental Fund.
SUPPORT : (Verified 9/8/09)
California Children's Hospital Association (co-source)
California Hospital Association (co-source)
Daughters of Charity Health System (co-source)
Adventist Health
American Federation of State, County and Municipal
Employees, AFL-CIO
California Association of Public Hospitals and Health
Systems
Citrus Valley Health Partners
Integrated Healthcare Holdings, Inc.
Loma Linda University Medical Center
Pacific Alliance Medical Center
PICO California/the 100% Campaign (Children's Defense Fund
California, Children NOW, the Children's Partnership)
Private Essential Access Community Hospitals
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Saint Joseph Health System
Santa Clara County Board of Supervisors
Service Employees International Union
Sutter Health
OPPOSITION : (Verified 9/4/09)
Anthem
California Chamber of Commerce (unless amended)
California Taxpayers' Association
Cedars-Sinai (unless amended)
Department of Health Care Services (unless amended)
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : The California Children's Hospital
Association (CCHA) writes this bill will result in
essential improvements in Medi-Cal reimbursement for all
hospitals and is critically important to the state's
children's hospitals, which treat a high volume of Medi-Cal
beneficiaries and provide resource-intensive services to
the state's sickest and most vulnerable patients. CCHA
states its eight private, not-for-profit, children's
hospitals lose more than $200 million each year providing
services to Medi-Cal beneficiaries. Despite the fact that
hospital costs are escalating and utilization in children's
hospitals is increasing, increases in Medi-Cal payments
have been minimal. Inadequate Medi-Cal reimbursement
affects all hospitals, but has a disproportionate impact on
children's hospitals. CCHA states, due to the volume of
Medi-Cal patients in children's hospitals, there is little
opportunity for cost shifting and children's hospitals are
falling further behind in reimbursement of costs. CCHA
states that inadequate Medi-Cal reimbursement currently is
compromising access to non-urgent care for Medi-Cal
beneficiaries.
ARGUMENTS IN OPPOSITION : The California Taxpayers'
Association is opposed to the bill "because it would be
premature for the Legislature to agree on a hospital 'fee'
without knowing the basic details of how the 'fee' would be
structured and its direct impacts on health coverage for
Californians." Furthermore, they "encourage additional
discussion between all involved parties to achieve
consensus before the Legislature enacts such a 'fee.'"
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ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Arambula, Beall, Tom Berryhill,
Blakeslee, Blumenfield, Brownley, Buchanan, Caballero,
Charles Calderon, Carter, Chesbro, Conway, Cook, Coto,
Davis, De La Torre, De Leon, DeVore, Duvall, Emmerson,
Eng, Evans, Feuer, Fong, Fuentes, Fuller, Furutani,
Gaines, Galgiani, Garrick, Gilmore, Hall, Hayashi,
Hernandez, Hill, Huber, Huffman, Jeffries, Jones,
Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza,
Miller, Monning, Nava, Nestande, Niello, John A. Perez,
V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico,
Villines, Yamada, Bass
NOES: Anderson, Knight, Nielsen
NO VOTE RECORDED: Bill Berryhill, Block, Fletcher, Hagman,
Harkey, Tran
CTW/DLW/JJA:mw 9/11/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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