BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1653|
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THIRD READING
Bill No: AB 1653
Author: Jones (D), et al
Amended: 8/20/10 in Senate
Vote: 27 - Urgency
SENATE HEALTH COMMITTEE : 6-2, 6/30/10
AYES: Alquist, Cedillo, Leno, Negrete McLeod, Pavley,
Romero
NOES: Strickland, Aanestad
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : 10-1, 8/12/10
AYES: Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno,
Price, Wolk, Wyland, Yee
NOES: Walters
ASSEMBLY FLOOR : 63-14, 6/1/10 - See last page for vote
SUBJECT : Medi-Cal: hospitals: managed health care
plans: mental
health plans
SOURCE : California Childrens Hospital Association
California Hospital Association
Daughters of Charity Health System
DIGEST : This bill amends the methodology for the
calculation, collection, and distribution of the existing
provider fee on general acute care hospitals for the 21
months spanning April 1, 2009, to December 31, 2010.
CONTINUED
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Senate Floor Amendments of 8/20/10 ensure that the quality
assurance fee enacted last year (AB 1383 (Jones), Chapter
627, Statutes of 2009), can be successfully implemented.
The amendments reflect the product of prolonged
negotiations between the state and the federal Centers for
Medicare and Medicaid Services (CMS), the agency that
approves the quality assurance fee. The amendments
establish timetables and procedures to adjust to the delay
in federal approval. In addition, the amendments allow the
state and county to swap funds, which will allow the state
a relatively simply means to draw down approximately $750
million in certain federal funds.
ANALYSIS : Existing law establishes the Medi-Cal program,
administered by the State Department of Health Care
Services, under which basic health care services are
provided to qualified low-income persons. The Medi-Cal
program is, in part, governed and funded by federal
Medicaid provisions.
Existing law, subject to federal approval, requires the
department to make supplemental payments for certain
services, as specified, to private hospitals, nondesignated
public hospitals, and designated public hospitals, as
defined, for subject federal fiscal years, as defined.
This bill makes various changes to the formulas used to
determine the amount of supplemental payments made to
private and designated public hospitals. This bill expands
the definition of a nondesignated public hospital.
Existing law proscribes certain deadlines by which the
above-described supplemental payments are required to be
made to hospitals depending upon the federal fiscal year
for which the payment is to be made.
This bill requires the department to make to hospitals the
supplemental payments for the 2008-09, 2009-10, and 2010-11
federal fiscal years in 7 payments, as specified.
Existing law requires the department to make enhanced
payments to managed health care plans, as defined, and
requires the state to make enhanced payments to mental
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health plans, as defined, for each subject federal fiscal
year, as specified. Existing law requires the managed
health care plans and mental health plans that received
enhanced payments to make supplemental payments to subject
hospitals, as defined, pursuant to specified formulas.
This bill, instead, refers to the payments made by the
department to the managed health care plans and mental
health plans as increased capitation payments. The bill
requires the department to determine the amount of
increased capitation payments for each Medi-Cal managed
care plan and to consider certain factors in making that
determination.
The bill prohibits the amount of increased capitation
payments to each Medi-Cal managed care health plan from
exceeding an amount that results in capitation payments
that are certified by the state's actuary as meeting
federal requirements. The bill would require each managed
health care plan to expend 100% of any increased capitation
payments it receives from the department on hospital
services.
This bill:
1. Allows implementation of the quality assurance fee upon
the Department of Health Care Services (DHCS) receiving
conditional federal approval. Establish requirements
for what will constitute conditional approval, including
receiving such approval in a written form from an
official of CMS or its parent agency, the Department of
Health and Human Services that the conditional federal
approval provide sufficient justification for
implementing the quality assurance fee. Requires DHCS
to consult with the hospital community.
2. Requires DHCS to seek approval from the federal
government to make payments to hospitals that meet the
definition of a converted hospital, meaning they have
undergone a change in ownership status during the period
that the quality assurance fee is in effect, and also
are a nondesignated public hospital. Require that DHCS
await federal approval for the overall implementation
before requesting a change for converted hospitals.
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3. Provides a timetable for DHCS to accumulate funds for
making lump sum increased payments to managed care
plans. Provide a timetable for accumulating funds for
payments to the state for children's health coverage and
for funds that are either used for grants to designated
public hospitals or retained by the state.
4. Grants DHCS authority to modify timelines if federal
approval or conditional federal approval is not obtained
by September 1, 2010 and such modification is necessary
to implement the program.
5. Provides that if conditional federal approval is not
obtained on or before December 1, 2010, then the
statutes creating the quality assurance fee are
inoperative.
6. Allows payments to hospitals and managed care plans to
be recouped by the state if the final approval is not
obtained from the federal government. Establishes that
fees paid by hospitals will be refunded if federal
approval is not obtained.
7. Clarifies the definition of a nondesignated public
hospital (district hospitals).
8. Clarifies the contractual obligation created by the
original legislation whereby the state agreed to use fee
proceeds only for the specific purposes stated in the
legislation, can be altered by subsequent amendments to
the original legislation.
9. Allows the state to retain $420 million from quality
assurance fee revenues that were originally to be
allocated for grants to designated public hospitals.
10.Provides an alternative mechanism for designated public
hospitals to claim an equal amount of federal funds from
the safety net care pool, in effect allowing a swap of
funds between the state and the designated public
hospitals. Provide protections to ensure that the swap
does not jeopardize funding for designated public
hospitals.
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The bill provides that the quality assurance fee shall not
be imposed on a converted hospital, as defined, for a
subject federal fiscal year in which the hospital becomes a
converted hospital or for subsequent federal fiscal years.
Prior to federal approval of implementation of the
above-described provisions, existing law requires each
general acute care hospital that is not an exempt facility
to certify to the best of its knowledge that the hospital
is prepared to pay the aggregate quality assurance fee, as
defined.
This bill deletes the above-described certification
requirement. The bill would require hospitals to pay the
quality assurance fee in 7 equal installments, as specified
and subject to federal approval of the above-described
provisions.
Existing law authorizes the department, as necessary to
receive federal approval for the implementation of the
above-described provisions, to increase or decrease certain
amounts used to calculate the quality assurance fee.
This bill deletes the above-described authorization.
Existing law, effective January 1, 2011, and subject to the
authority of a subsequent statute enacted to take effect on
or after January 1, 2011, that meets certain conditions,
imposes a quality assurance fee in a manner necessary to
obtain federal Medicaid matching funds that shall be due
and payable to the department by each general acute care
hospital at specified rates for the purpose of making
Medi-Cal payments to hospitals.
This bill, effective January 1, 2011, imposes on each
general acute care hospital that is not an exempt facility,
as defined, a quality assurance fee, as a condition of
participation in state-funded health insurance programs,
other than the Medi-Cal program. This bill would require
the quality assurance fee to be computed starting on the
effective date of the bill and continue through and
including December 31, 2010. The bill would require the
proceeds from the fee to be used for the same purposes as
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the above-described quality assurance fee that is imposed
on hospitals through and including December 31, 2010. The
bill would provide that the method of calculation and
collection of the quality assurance fee is to be determined
in an unspecified manner.
This bill requires the director to seek federal approvals
or waivers as may be necessary to implement the
above-described provisions and to obtain federal financial
participation to the maximum extent possible with the
proceeds from the quality assurance fee paid pursuant to
those provisions.
This bill requires the fee payments and any related federal
reimbursement under the above-described provisions that
become effective January 1, 2011, to be deposited in the
Hospital Quality Assurance Revenue Fund. The bill would
continuously appropriate these moneys in an unspecified
manner.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Fee revenue prior to ($3,081,000) $0
$0Special*
December 31, 2010
Supplemental payments $2,000,000 $0
$0Special/**
to hospitals prior to $3,215,000
$0$0Federal
December 31, 2010
Grant to DPHs prior $516,000 $0
$0Special*
to December 31, 2010
Children's coverage prior $560,000 $0
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$0Special***
to December 31, 2010 $560,000 - $1,040,000
$0$0Federal
QAF revenue January 1, (likely
$500 million - $1 billion)
Special*
2011, to June 30, 2011
Supplemental payments likely
$500 million - $1.5 billion
Special/**
to hospitals January 1, 2011, Federal
through June 30, 2011-includes
managed care, DPH payments,
children's coverage
DHCS QAF start-up and
likely hundreds of thousands of dollars
General/****
administration 1/1/11 tocommencing upon the passage of this
bill Federal
6/30/11
*Hospital Quality Assurance Revenue Fund (Hospital QA
Revenue Fund)
**Approximately 50 percent federal funds, 50 percent
Hospital QA Revenue Fund; significant General Fund cost
pressure upon the expiration of the QAF
***35-50 percent Hospital QA Revenue Fund, 50-65 percent
federal funds
****50 percent General Fund, 50 percent federal funds
SUPPORT : (Verified 8/23/10)
California Children's Hospital Association (co-source)
California Hospital Association (co-source)
Daughters of Charity Health System (co-source)
Adventist Health
Alliance of Catholic Health Care
American Federation of State, County and Municipal
Employees
County of Los Angeles Board of Supervisors
County of San Bernardino Board of Supervisors
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Health Access
Loma Linda University
Private Essential Access Community Hospitals, Inc. (PEACH)
Service Employees International Union
ARGUMENTS IN SUPPORT : According to the California
Hospital Association, California Children's Hospital
Association and Daughters of Charity, hospitals in
California are under serious financial pressures as a
result of the traditional low Medi-Cal reimbursement rate
in California, recent reductions, the increase in the
number of uninsured and the economic downturn. Supporters
state that this bill would extend the Medi-Cal hospital
provider fee to take maximum advantage of an extension for
the enhanced federal match for an additional six months, if
passed by Congress. The supporters note that this bill
could provide an additional $160 million to the state as
well.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Arambula, Bass, Beall, Bill
Berryhill, Block, Blumenfield, Bradford, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Galgiani, Gilmore, Hall, Hayashi,
Hernandez, Hill, Huber, Huffman, Jones, Lieu, Bonnie
Lowenthal, Ma, Mendoza, Monning, Nava, Nestande, Niello,
Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,
Saldana, Skinner, Smyth, Solorio, Swanson, Torlakson,
Torres, Torrico, Villines, Yamada, John A. Perez
NOES: Anderson, Blakeslee, DeVore, Gaines, Garrick, Hagman,
Harkey, Jeffries, Knight, Logue, Miller, Norby, Silva,
Tran
NO VOTE RECORDED: Tom Berryhill, Audra Strickland, Vacancy
CTW:RJG:nl 8/23/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
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