BILL ANALYSIS
AB 1653
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1653 (Jones) - As Introduced: January 14, 2010
Policy Committee: Health Vote:16-1
Urgency: Yes State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill lays out a general framework to extend a hospital
quality assurance fee (QAF) established by AB 1383 (Jones),
Chapter 627, Statutes of 2009. The bill contains blanks for the
calculation of the fee charged to hospitals as well as the
distribution method of the continuous appropriation. This bill
extends the the QAF from January 1, 2011 through June 30, 2011
to match a pending extension of enhanced Federal Medical
Matching Percentage (FMAP) funding established by the American
Recovery and Reinvestment Act (ARRA) in 2009.
FISCAL EFFECT
1)A one-time increase of $1 billion in federal funding for the
six-month period, January 1, 2011 through June 30, 2011. This
estimate is based on AB 1383, which is expected to generate an
annual $2 billion in federal funding, if approved by the
federal Centers for Medicare and Medicaid (CMS).
2)Unknown costs in the range of $200,000 (50% GF) to the
California Department of Health Care Services (DHCS) to
administer the QAF until June 30, 2011.
3)Major GF pressure is created when the QAF expires. GF pressure
is created to continue increased Medi-Cal payments for
inpatient and outpatient rates paid to hospitals. The
increased rates under AB 1383 range from 50% to 100% of
baseline rates.
4)The bill contains blanks for calculation of the fee charged to
hospitals as well as the distribution method of the continuous
appropriation. The author and sponsor indicate the specificity
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of information is pending until additional direction from CMS
about AB 1383 is provided. For example, dates in AB 1383 may
need to be modified because of delays in implementation.
5)In late March of 2010 several hospitals in Arizona, Nevada,
and Oregon filed a lawsuit about AB 1383. The lawsuit
challenges the distribution of billions of dollars under AB
1383 to California hospitals without regard to these states on
California's borders that treat Medi-Cal patients. The case is
pending federal review. Regardless of the merits of the
plaintiff's suit, this legal action may delay and complicate
AB 1383 implementation.
COMMENTS
1)Rationale . This bill contains an urgency clause and is
co-sponsored by the California Hospital Association (CHA), the
California Children's Hospital Association (CCHA) and the
Daughters of Charity health system. This bill lays out a
general framework for extending AB 1383 to take advantage of
the enhanced FMAP that may become available.
The author and sposnors indicate this bill will support hospital
care with no state cost and without any cost to patients or
taxpayers. According to the author, this bill maximizes
funding opportunities generally available via federal Medicaid
QAF and while funding enhancement (61.59% federal) is
available under ARRA.
2)Quality Assurance Fees . Federal law authorizes states to fund
a portion of Medicaid through provider fees that meet federal
requirements. These fees are matched with federal funding to
pay providers without state funds. Dozens of states collect
provider fees to drawn down federal funding. For example, 33
states collect QAF on nursing homes, 21 states collect QAF
from hospitals, and 15 states collect QAF from managed care
organizations.
To be permissible under federal law, QAF must be broad-based,
uniform, and cannot hold a group of providers harmless with
respect to fees levied. California currently has several QAF
established via budget committee action and legislation. These
QAF generate revenues for Medi-Cal managed care plans ($252
million in 2008-09), nursing homes ($239 million in 2008-09),
and intermediate care facilities for the developmentally
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disabled ($19 million in 2008-09).
3)Hospital Finance Landscape . Medi-Cal payment to hospitals
depends on whether a hospital contracts with DHCS through the
California Medical Assistance Commission (CMAC), if they
qualify as a disproportionate share hospital, and whether they
are a designated public hospital, a private hospital, or a
district hospital. Fee-for-service Medi-Cal outpatient
hospital rates are established in a DHCS fee schedule. The
CMAC negotiates contracts with hospitals on behalf of DHCS for
in-patient services under the Medi-Cal program. The CMAC
selectively contracts on a competitive basis with hospitals
for inpatient services provided to beneficiaries in the
fee-for-service Medi-Cal program via the Selective Provider
Contracting Program (SPCP). CMAC contracts with about half of
California's 400 acute care hospitals.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081