BILL NUMBER: AB 1472	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Torrico

                        FEBRUARY 27, 2009

   An act to amend Section 14126.023 of the Welfare and Institutions
Code, relating to Medi-Cal.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1472, as introduced, Torrico. Medi-Cal: long-term care
reimbursement: ratesetting methodology.
   Existing law provides for the Medi-Cal program, which is
administered by the State Department of Health Care Services, and
under which qualified low-income individuals receive health care
services. The Medi-Cal Long-Term Care Reimbursement Act requires the
department to implement a facility-specific ratesetting system, using
a cost-based reimbursement rate methodology, and to update these
rates annually. Under existing law, the methodology is required to
reflect the sum of the projected cost of specified cost categories
and passthrough costs, including a labor cost category.
   This bill would require labor costs to be determined by facility
payroll data, submitted electronically to the department on a
quarterly basis, as prescribed.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 14126.023 of the Welfare and Institutions Code
is amended to read:
   14126.023.  (a) The methodology developed pursuant to this article
shall be facility specific and reflect the sum of the projected cost
of each cost category and passthrough costs, as follows:
   (1) Labor costs limited as specified in subdivision (c).
   (2) Indirect care nonlabor costs limited to the 75th percentile.
   (3) Administrative costs limited to the 50th percentile.
   (4) Capital costs based on a fair rental value system (FRVS)
limited as specified in subdivision (d).
   (5) Direct passthrough of proportional Medi-Cal costs for property
taxes, facility license fees, new state and federal mandates,
caregiver training costs, and liability insurance projected on the
prior year's costs.
   (b) The percentiles in paragraphs (1) through (3) of subdivision
(a) shall be based on annualized costs divided by total resident days
and computed on a specific geographic peer group basis. Costs within
a specific cost category shall not be shifted to any other cost
category.
   (c) The labor costs category shall be comprised of a direct
resident care labor cost category, an indirect care labor cost
category, and a labor-driven operating allocation cost category, as
follows:
   (1) Direct resident care labor cost category which shall include
all labor costs related to routine nursing services including all
nursing, social services, activities, and other direct care
personnel. These costs shall be limited to the 90th percentile.
   (2) Indirect care labor cost category which shall include all
labor costs related to staff supporting the delivery of patient care
including, but not limited to, housekeeping, laundry and linen,
dietary, medical records, inservice education, and plant operations
and maintenance. These costs shall be limited to the 90th percentile.

   (3) Labor-driven operating allocation shall include an amount
equal to 8 percent of labor costs, minus expenditures for temporary
staffing, which may be used to cover allowable Medi-Cal expenditures.
In no instance shall the operating allocation exceed 5 percent of
the facility's total Medi-Cal reimbursement rate.
   (d) The capital cost category shall be based on a FRVS that
recognizes the value of the capital related assets necessary to care
for Medi-Cal residents. The capital cost category includes mortgage
principal and interest, leases, leasehold improvements, depreciation
of real property, equipment, and other capital related expenses. The
FRVS methodology shall be based on the formula developed by the
department that assesses facility value based on age and condition
and uses a recognized market interest factor. Capital investment and
improvement expenditures included in the FRVS formula shall be
documented in cost reports or supplemental reports required by the
department. The capital costs based on FRVS shall be limited as
follows:
   (1) For the 2005-06 rate year, the capital cost category for all
facilities in the aggregate shall not exceed the department's
estimated value for this cost category for the 2004-05 rate year.
   (2) For the 2006-07 rate year and subsequent rate years, the
maximum annual increase for the capital cost category for all
facilities in the aggregate shall not exceed 8 percent of the prior
rate year's FRVS cost component.
   (3) If the total capital costs for all facilities in the aggregate
for the 2005-06 rate year exceeds the value of the capital costs for
all facilities in the aggregate for the 2004-05 rate year, or if
that capital cost category for all facilities in the aggregate for
the 2006-07 rate year or any rate year thereafter exceeds 8 percent
of the prior rate year's value, the department shall reduce the
capital cost category for all facilities in equal proportion in order
to comply with paragraphs (1) and (2).
   (e) For the 2005-06 and 2006-07 rate years, the facility specific
Medi-Cal reimbursement rate calculated under this article shall not
be less than the Medi-Cal rate that the specific facility would have
received under the rate methodology in effect as of July 31, 2005,
plus Medi-Cal's projected proportional costs for new state or federal
mandates for rate years 2005-06 and 2006-07, respectively.
   (f) The department shall update each facility specific rate
calculated under this methodology annually. The update process shall
be prescribed in the Medicaid state plan, regulations, and the
provider bulletins or similar instructions described in Section
14126.027, and shall be adjusted in accordance with the results of
facility specific audit and review findings in accordance with
subdivisions (h) and (i).
   (g) The department shall establish rates pursuant to this article
on the basis of facility cost data reported in the integrated
long-term care disclosure and Medi-Cal cost report required by
Section 128730 of the Health and Safety Code for the most recent
reporting period available, and cost data reported in other facility
financial disclosure reports or supplemental information required by
the department in order to implement this article.  Labor costs
shall be determined by facility payroll data that facilities shall
submit electronically to the department on a quarterly basis, in a
uniform format established by the department. The facility reports
shall specify the category of work an employee performs, such as
whether the employee is a registered nurse, licensed vocational
nurse, or certified nurse assistant, and shall provide  
daily resident census data. 
   (h) The department shall conduct financial audits of facility and
home office cost data as follows:
   (1) The department shall audit facilities a minimum of once every
three years to ensure accuracy of reported costs.
   (2) It is the intent of the Legislature that the department
develop and implement limited scope audits of key cost centers or
categories to assure that the rate paid in the years between each
full scope audit required in paragraph (1) accurately reflects actual
costs.
   (3) For purposes of updating facility specific rates, the
department shall adjust or reclassify costs reported consistent with
applicable requirements of the Medicaid state plan as required by
Part 413 (commencing with Section 413.1) of Title 42 of the Code of
Federal Regulations.
   (4) Overpayments to any facility shall be recovered in a manner
consistent with applicable recovery procedures and requirements of
state and federal laws and regulations.
   (i) (1) On an annual basis, the department shall use the results
of audits performed pursuant to subdivision (h), the results of any
federal audits, and facility cost reports, including supplemental
reports of actual costs incurred in specific cost centers or
categories as required by the department, to determine any difference
between reported costs used to calculate a facility's rate and
audited facility expenditures in the rate year.
   (2) If the department determines that there is a difference
between reported costs and audited facility expenditures pursuant to
paragraph (1), the department shall adjust a facility's reimbursement
prospectively over the intervening years between audits by an amount
that reflects the difference, consistent with the methodology
specified in this article.
   (j) For nursing facilities that obtain an audit appeal decision
that results in revision of the facility's allowable costs, the
facility shall be entitled to seek a retroactive adjustment in its
facility specific reimbursement rate.
   (k) Compliance by each facility with state laws and regulations
regarding staffing levels shall be documented annually either through
facility cost reports, including supplemental reports, or through
the annual licensing inspection process specified in Section 1422 of
the Health and Safety Code.