BILL ANALYSIS
AB 1462
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Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
AB 1462 (Feuer) - As Amended: April 14, 2009
SUBJECT : Medi-Cal: inpatient hospital services contracts.
SUMMARY : Requires the California Medical Assistance Commission
(CMAC) to consider graduate medical education (GME) programs in
negotiating Medi-Cal inpatient contracts with hospitals or in
drawing specifications for competitive bidding.
EXISTING LAW :
1)Requires the governor to designate a person in his or her
office to act as a special negotiator (in practice, CMAC) to
negotiate rates, terms, and conditions for contracts with
hospitals for inpatient services to be rendered to Medi-Cal
Program beneficiaries.
2)Permits the special negotiator, if he or she deems it
expedient, to call for bids, in lieu of negotiations, and
requires the special negotiator to consider, when contracting,
the total funds appropriated for inpatient hospital services.
3)Requires the negotiator to take into account specified factors
in negotiating contracts or in drawing specifications for
competitive bidding.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . This bill is sponsored by Cedars-Sinai
Medical Center (CSMC) and requires CMAC to consider the costs
of GME when negotiating Medi-Cal hospital inpatient contracts.
CSMC states it is one of the country's leading medical
centers and provides an extensive program of GME where more
than 350 residents and fellows participate in more than 60 GME
programs. CSMC wants to be eligible for reimbursement from
CMAC for a portion of its GME expenses related to providing
Medi-Cal services. CSMC states CMAC has considered the
authority to pay for GME to be separate from their general
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negotiating authority, and that GME reimbursement is limited
to university teaching hospitals or major (non-university)
teaching hospitals that are also categorized as
disproportionate share (DSH) hospitals (CSMC is not a DSH
hospital).
The definitions for the phrases "university teaching hospital"
and "major (non-university) teaching hospital" are in a 1991
peer group study by the Department of Health Care Services
where hospitals are listed by name. CSMC states the
designations are based on numbers of beds and intern hours per
bed, and there is no procedure to move within the
designations, and whatever the designation was in 1991 remains
the designation today. CSMC states it was listed in the 1991
peer group study as a large teaching emphasis hospital
(hospitals with over 300 licensed beds and between 200 and 550
intern hours per bed). Major (non-university) teaching
hospital are defined as hospitals with over 500 intern hours
per bed that do not qualify as a university teaching hospital.
CSMC indicates it has over 900 licensed beds and provides 580
intern hours per bed, but because of the "lock in" effect of
the 1991 study, CSMC cannot move into the major
(non-university) teaching hospital category in order to be
eligible for payments from the CMAC-administered Private
Hospital Supplemental Payment Fund created by legislation
implementing the state's current hospital waiver.
Instead of allowing CSMC to access the Private Hospital
Supplemental Payment Fund, this bill would require GME to be
taken into consideration when hospitals negotiate with CMAC
over their contractual Medi-Cal per diem rate. CSMC indicates
it if receives funding for GME it can explore several
educational opportunities, including the development of a
primary care training track as part of the internal medicine
residency, and an expansion of the medical simulation program
where residents use simulators so they can practice their
skills before actually performing invasive procedures on
patients.
2)CMAC . Since 1983, CMAC has been the state agency responsible
for negotiating contracts with hospitals on behalf of the
state for inpatient services under the fee-for-service
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
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for fee-for-service inpatient services provided to Medi-Cal
beneficiaries. The CMAC competitive contracting model has
resulted in savings to the state General Fund. According to
its 2008 Annual Report, based on a fiscal year 2007-08 average
statewide Medi-Cal SPCP contract rate of $1,290 per day, the
average contract rate has increased 151.5%, or approximately
3.8% per year on a compounded basis, since the inception of
the SPCP program. For non-SPCP hospitals remaining under the
cost-based reimbursement system, the average Medi-Cal interim
payment rate was $2,195 per day, and the average cost-based
rate has increased 307%, or approximately 6.3% per year on a
compounded basis since the inception of SPCP. The average
SPCP contract rate is based on the negotiated rates of the 182
hospitals with which CMAC maintained rate contracts as of
December 1, 2007.
Existing law requires CMAC, in negotiating contracts or in
drawing specifications for competitive bidding, to take into
account an enumerated list of factors, that include but are
not limited to, beneficiary access, utilization controls, the
ability to render quality services efficiently and
economically, and the capacity to provide a given tertiary
service, such as specialized children's services, on a
regional basis. Additionally, CMAC is required to give
special consideration to the reimbursement issues faced by
hospitals caring for Medi-Cal beneficiaries who are receiving
treatment for acquired immunodeficiency syndrome (AIDS).
3)SUPPORT . The California Children's Hospital Association
(CCHA) writes in support that its eight non-profit regional
children's hospitals all have academic teaching programs in
place and children's hospitals train more than 530 future
pediatricians and pediatric sub-specialists each year. CCHA
states recognizing the critical workforce needs of many
pediatric medical subspecialties, pediatric surgical
specialties, and other pediatric specialty disciplines makes
these graduate medical education programs in children's
hospitals critical to the future health needs of all
California children. CCHA argues training physicians provides
both significant benefits to Medi-Cal beneficiaries and
increased costs, and the need for requiring CMAC to consider
GME is vital as teaching facilities incur costs beyond those
covered by patient revenues to support the broad teaching
mission, which includes conducting biomedical research,
training health professionals, and providing rare and highly
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specialized clinical services and innovative clinical care,
all services that benefit Medi-Cal beneficiaries.
4)RELATED LEGISLATION . AB 366 (Ruskin), which was heard by the
Assembly Health Committee on April 21, 2008, would require
CMAC, in negotiating contracts or in drawing specifications
for competitive bidding, to provide for separate reimbursement
for hospitals for the full cost of orthopedic implants for
bone cancers. AB 366 is currently awaiting hearing in the
Assembly Appropriations Committee.
5)PREVIOUS LEGISLATION . AB 249 (Papan) of 1999 would have would
have required CMAC to take into consideration medical
education programs for physicians, nurses, or allied health
professionals in negotiating Medi-Cal inpatient contracts with
hospitals or in drawing specifications for competitive
bidding. AB 249 was vetoed by Governor Davis. In this veto
message, Governor Davis stated:
This bill is not necessary as CMAC is already
required to consider medical education costs as they
contribute to county hospital and university medical
center costs for caring for medically indigent
patients, and is already permitted to consider other
factors, including medical education costs generally.
In addition, this bill is premature because the
related study by CMAC, the University of California,
and the Department of Health Services required by
Chapter 799, Statutes of 1997 on the future funding
of graduate medical education and other health
professions training programs is expected in November
1999.
REGISTERED SUPPORT / OPPOSITION :
Support
Cedars-Sinai Medical Center (sponsor)
American Federation of State, County and Municipal Employees,
AFL-CIO
California Children's Hospital Association
California Hospital Association
Private Essential Access Community Hospitals
Opposition
AB 1462
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None on file.
Analysis Prepared by : Scott Bain / HEALTH / (916) 319-2097