BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1462
A
AUTHOR: Feuer
B
AMENDED: April 14, 2009
HEARING DATE: June 25, 2009
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CONSULTANT:
4
Dunstan/
6
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SUBJECT
Medi-Cal: inpatient hospital services contracts
SUMMARY
This bill requires the California Medical Assistance
Commission (CMAC) to include reimbursement for the costs of
graduate medical education (GME), in addition to the
factors already required, when negotiating contracts for
inpatient care or developing specifications for competitive
bidding.
CHANGES TO EXISTING LAW
Existing law:
Establishes the Medi-Cal program, administered by the
Department of Health Care Services (DHCS), which provides
comprehensive health care coverage for low-income
individuals and their families; pregnant women; elderly,
blind, or disabled persons; nursing home residents; and
refugees who meet specified eligibility criteria.
Requires the governor to designate a person in his or her
office to act as a special negotiator to negotiate rates,
terms, and conditions for contracts with hospitals for
inpatient services to be rendered to Medi-Cal Program
Continued---
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beneficiaries.
Permits the special negotiator 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.
Requires the negotiator to take into account specified
factors in negotiating contracts or in drawing
specifications for competitive bidding.
Requires CMAC to assume the duties and powers of the
special negotiator.
Creates the Medi-Cal Medical Education Supplemental Payment
and the Large Teaching Emphasis Hospital and Children's
Hospital Medi-Cal Medical Education Supplemental Payment
administered by CMAC for eligible hospitals. Requires that
eligible hospitals must be in the selective provider
contract program and meet other specified criteria.
This bill:
Requires CMAC to include reimbursement for the costs of
graduate medical education (GME), along with a number of
existing factors, when negotiating contracts for inpatient
care or developing specifications for competitive bidding.
FISCAL IMPACT
According to the Assembly Appropriations Committee analysis
there is no direct fiscal impact to CMAC. Current law
authorizes the consideration of more than a dozen factors
for CMAC to consider during contracting and although GME is
not specifically mentioned, CMAC reports it takes GME costs
into consideration.
BACKGROUND AND DISCUSSION
The author states that this bill will allow CMAC to
consider the costs of GME when negotiating reimbursement
rates with hospitals. The author states that this bill is
needed because CMAC is not currently authorized to consider
the costs of GME when negotiating with teaching hospitals
that are not university hospitals or disproportionate-share
hospitals. The author notes that under current law, GME
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reimbursement is limited to Major University Teaching
Hospitals or Large Non-University Teaching Hospitals that
are also categorized as disproportioned share hospitals.
The author states that these designations are based on
numbers of beds and intern hours per bed from a 1991
report. The author argues this bill is necessary because
there is no administrative procedure available to move
within the designations. The authors points to the example
of the sponsor, Cedars-Sinai Medical Center, which meets
the definition of a major (non-university) teaching
hospital, but does not qualify under the law because it did
not meet the criteria in 1991. The author states that
including this factor for consideration by CMAC 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, providing rare and highly specialized
clinical services and innovative clinical care, all
services that benefit Medi-Cal recipients. The author
argues that making the GME payments to more hospitals is
important because it provides both significant benefits to
Medi-Cal beneficiaries and reimbursement to the hospitals
for the increased costs that they incur for GME.
Background
Since 1983, through what is known as the Selective Provider
Contracting Program (SPCP), 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 CMAC, the state
selectively contracts on a competitive basis with hospitals
for fee-for-service inpatient services provided to Medi-Cal
beneficiaries. 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.
Existing law requires CMAC, in negotiating contracts or in
drawing specifications for competitive bidding, to take
into account an enumerated list of factors. This list
includes 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
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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). Graduate medical education is not a specific
factor for consideration.
CMAC does administer two programs that provide supplemental
payment programs to hospitals to support graduate medical
education. The purpose of such programs is to recognize
medical education costs associated with health care
services rendered to Medi-Cal beneficiaries. To be
eligible for these programs, a hospital must:
be a contract hospital under the SPCP; and
be a university teaching hospital or major
(non-university) teaching hospital, or
be a large teaching-emphasis hospital, or children's
hospital and be eligible under the Disproportionate
Share Hospital program.
Related bills
AB 366 (Ruskin) requires the California Medical Assistance
Commission (CMAC), in negotiating Medi-Cal inpatient
contracts with hospitals under the selective provider
contracting program, or in drawing specifications for
competitive bidding, to consider as a factor specialization
in orthopedic implantation related to bone cancer. This
bill is in the Senate Rules committee.
Prior 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.
Arguments in support
Cedars-Sinai Medical Center, the bill's sponsor, states
that they are one of the leading medical centers and
provide an extensive program of GME. They note that they
contract with CMAC for payment of treatment for Medi-Cal
patients, but they want to be eligible for compensation
from CMAC for the portion of its graduate medical education
expenses related to providing Medi-Cal services.
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Cedars-Sinai argues that current law limits the ability of
CMAC to negotiate this amount with Cedars-Sinai. They also
point out that the programs for supplemental payments to
hospitals for GME are very restrictive and outdated since
they are based on definitions and determinations made in
1991.
Other supporters argue that many other hospitals operate
academic teaching programs that train future physicians and
other medical professionals each year. Supporters argue
that this effort is especially important in light of the
critical workforce shortage in the health care industry.
They argue that recognizing the important role that
graduate medical education programs play in the delivery of
care to the Medi-Cal population is an important issue for
CMAC to consider.
PRIOR ACTIONS
Assembly Floor: 77-0
Assembly Appropriations: 77-0
Assembly Health: 18-0
POSITIONS
Support: Cedars-Sinai Medical Center (Sponsor)
California Children's Hospital Association
California Hospital Association
Lucille Packard Children's Hospital, Stanford
University Medical Center
Oppose: None received
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