BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1872
A
AUTHOR: Galgiani
B
AMENDED: April 6, 2010
HEARING DATE: June 23, 2010
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CONSULTANT:
8
Dunstan/jl
7
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SUBJECT
Health care programs: provider reimbursement rates
SUMMARY
Extends the January 1, 2011 sunset on the requirement that
hospital inpatient payment rates for the California
Children's Services Program (CCS Program), the Genetically
Handicapped Persons Program (GHPP), and other specified
health care programs be 90 percent of the Medi-Cal hospital
interim rates of payment, as developed by the Department of
Health Care Services (DHCS). Repeals the requirement that,
effective January 1, 2011, the rates of payment for non
Medi-Cal patients be identical to payment rates for the
same service performed by the same provider type under the
Medi-Cal Program.
CHANGES TO EXISTING LAW
Existing law:
Requires provider payment rates for non-Medi-Cal services
rendered in the CCS Program, the GHPP, the Breast and
Cervical Cancer Early Detection Program (BCCEDP), the
State-Only Family Planning Program (State-Only FPP) and the
Continued---
STAFF ANALYSIS OF ASSEMBLY BILL 1872 (Galgiani) Page
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Family Planning, Access, Care, and Treatment (Family PACT)
waiver program to be identical to the rates of payment for
the same service performed by the same provider type in the
Medi-Cal Program. Establishes an exception for hospital
inpatient rates, which are required to be 90 percent of the
Medi-Cal hospital interim rates of payment, as developed by
DHCS and sunsets that exception on January 1, 2011.
This bill:
Extends the sunset date from January 1, 2011, until the
earlier of January 1, 2014, or until implementation of the
Medicaid expansion provisions of the federal Patient
Protection and Affordable Care Act (PPACA), (PL 111-148)
for the following requirements:
Provider rates for these health programs shall be
identical to the rates of payment for the same service
performed by the same provider type in the Medi-Cal
program.
Maintains the exception that hospital inpatient
payment rates be 90 percent of the Medi-Cal hospital
interim rates of payment, as developed by the
Department of Health Care Services (DHCS).
Repeals the existing requirement that, after the sunset,
effective January 1, 2011, the rates of payment, including
hospital inpatient rates, for non-Medi-Cal patients would
be identical to the payment rates for the same service
performed by the same provider type under the Medi-Cal
Program.
FISCAL IMPACT
According to the Assembly Appropriations Committee
analysis, there would be annual Medi-Cal costs in the range
of $15 million to $25 million (50 percent General Fund) to
hold children's hospitals addressed by this bill, harmless
by extending the AB 896 sunset by several years. These
costs are already accounted for in the Medi-Cal budget
because this bill codifies a longstanding DHCS
reimbursement policy that has been followed for nearly a
decade. Costs in 2011 and 2014 will be half the annual
costs because of the timing of the sunset.
The committee analysis notes that costs for the hospital
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funding addressed in this bill can be highly variable.
Actual annual costs may be less to the extent that certain
high cost patients do not have significant health needs in
a given year. The analysis also suggests that there could
be cost shifts from public programs to private insurance
for children with serious health conditions due to recent
changes in federal law. PPACA requires children be
eligible for health insurance by the end of 2010, without
regard to pre-existing medical conditions. This change,
paired with the elimination of annual and lifetime limits
on health insurance, may shift the cost for children with
serious health issues to private payers and away from
public programs.
BACKGROUND AND DISCUSSION
According to the author, children's hospitals provide vital
services to the most vulnerable Californians, whose needs
in a time of economic crisis will only increase. The
author argues that a cut in provider reimbursement directly
impacts access to care. According to the author, research
shows that delays in accessing care costs the health care
system more because the children are sicker and treatments
are more costly. The author states that AB 1872 extends
the sunset contained in earlier legislation indefinitely,
to ensure hospitals receive more adequate reimbursement for
providing high-cost services to seriously ill children
enrolled in CCS. The author argues that it was never the
intent of DHCS that these services be reimbursed at an
amount less than Medi-Cal allowable costs, and AB 1872
clarifies that intention.
Background
The CCS Program provides diagnostic and treatment services,
medical case management, and medical and occupational
therapy services to eligible children and young adults less
than 21 years of age. Eligibility includes diagnosis of
specified medical conditions such as cancer, congenital
heart disease, and sickle cell anemia. GHPP provides
medical care to individuals with genetically handicapping
conditions, including cystic fibrosis, hemophilia, sickle
cell disease, Huntington's disease, Friedreich's Ataxia,
STAFF ANALYSIS OF ASSEMBLY BILL 1872 (Galgiani) Page
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and certain hereditary metabolic disorders.
Hospitals such as Children's Hospitals treat a
disproportionate number of low-income patients, including
CCS patients. CCS patients include infants and children
with serious illnesses such as childhood cancer, cystic
fibrosis, sickle cell anemia and other chronic and severe
conditions. These patients have high acuity and they are
costly to treat.
In 2008, a legal review by DHCS brought into question the
methodology for reimbursing hospitals in these programs.
During budget discussions, the DHCS practice of reimbursing
hospitals at the interim rate for individuals in
non-Medi-Cal CCS and GHPP appeared to be at odds with what
was required under law, which requires that the payment
rate is to be the same as the provider's Medi-Cal rate.
Instead, hospitals providing services to children enrolled
in the CCS Program and GHPP, but who were not enrolled in
Medi-Cal, were being reimbursed at their interim Medi-Cal
rate, a higher rate.
Prior to AB 2474 becoming law in 2008, DHCS was planning to
reimburse hospitals for non-Medi-Cal CCS patients based on
their negotiated California Medical Assistance Commission
(CMAC) rate, and also was planning to recoup payments above
the hospital-specific CMAC rate for the prior four years
based on a legal review. Such a recoupment would have
totaled many tens of millions of dollars for the eight
regional children's hospitals alone and was never the
intention of either the Legislature or DHCS. The sunset
contained in 2009's AB 896 (which extended the original
sunset contained in 2008's AB 2474 by one year) would
require hospitals treating these ill and injured children
to receive their negotiated CMAC rate, beginning January 1,
2011.
CMAC is a state commission established to negotiate
Medi-Cal contracts with hospitals on behalf of the state.
Hospitals that treat Medi-Cal fee-for-service beneficiaries
receive reimbursement either by contracting with the state
through CMAC, or billing for services provided. CMAC rates
are confidential for four years. When hospitals do not
contract with CMAC (referred to as non-contract hospitals),
they are initially paid an interim rate. Hospitals are
STAFF ANALYSIS OF ASSEMBLY BILL 1872 (Galgiani) Page
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then required to submit a cost report within five months of
the close of their fiscal period, and DHCS reviews each
hospital's cost report and prepares a tentative settlement,
which is a determination of the allowable reimbursable
reported costs for a hospital's fiscal period. DHCS
compares what a hospital was paid in interim payments, to
the hospital's allowable reimbursable reported costs. The
difference may result in either an underpayment that is
paid to the hospital or an overpayment that is recouped
from the hospital.
This bill effectively only relates to inpatient
reimbursement for non-Medi-Cal individuals enrolled in the
CCS Program and GHPP. The other programs (BCCEDP,
State-Only FFP, and Family PACT) do not reimburse for
inpatient services.
Prior legislation
AB 896 (Galgiani), Chapter 260, Statutes of 2009, extended
the sunset date from January 1, 2010 to January 1, 2011 the
provisions that the hospital inpatient rate of payment is
90 percent of the Medi-Cal hospital interim rates of
payment.
AB 2474 (Galgiani), Chapter 496, Statutes of 2008, was
enacted as an urgency measure to clarify that the hospital
inpatient rate of payment is 90 percent of the Medi-Cal
hospital interim rates of payment and provided that its
provisions would sunset on January 1, 2010.
Arguments in support
The California Children's Hospital Association (CCHA), the
bill's sponsor, states that this bill clarifies the
legislative intent regarding hospital inpatient
reimbursement for non-Medi-Cal CCS patients. CCHA reports
that, currently, the children's hospitals are operating
with a -1.6 percent operating margin, and this will only
worsen with increased Medi-Cal enrollment and decreased
non-operating revenues due to the continued economic
downturn. CCHA goes on to argue that the impact of
reducing hospital reimbursement for non-Medi-Cal CCS
Program patients to the individual hospital CMAC rate would
be significant for California's children's hospitals and
the children that they serve. CCHA states that hospitals
such as children's hospitals that treat a disproportionate
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number of low-income patients cannot absorb any additional
reimbursement reductions without seriously compromising
patient access. The California Hospital Association argues
that this bill would ensure hospitals receive more adequate
reimbursement for providing high-cost services to seriously
ill children in CCS.
PRIOR ACTIONS
Assembly Health: 19-0
Assembly Appropriations: 17-0
Assembly Floor: 77-0
COMMENTS
1. Sunset provisions of bill could be triggered earlier
than 2014 by waiver proposal. The bill would sunset either
January 1, 2014 or when the state implements the Medicaid
expansions in PPACA. The administration has proposed to
begin an early implementation of the Medicaid coverage
expansion under PPACA. This proposal is part of the
proposal for a new Section 1115 waiver under federal law.
Although the timing is unclear at this point, the expansion
could begin well before January 1, 2014. A suggested
amendment would be to sunset the bill on January 1, 2014.
Proposed amendment
Page 3, beginning line 8
(d) This section shall remain in effect until the earlier
of January 1, 2014 , or on the date the state begins
implementing the provisions expanding Medi-Cal pursuant to
the federal Patient Protection and Affordable Care Act
(Public Law 111-148), whichever occurs first .
Page 4, beginning line 10
(d) This section shall remain in effect until the earlier
of January 1, 2014 , or on the date the state begins
implementing the provisions expanding Medi-Cal pursuant to
the federal Patient Protection and Affordable Care Act
(Public Law 111-148), whichever occurs first
POSITIONS
STAFF ANALYSIS OF ASSEMBLY BILL 1872 (Galgiani) Page
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Support: California Children's Hospital Association
(sponsor)
Adventist Health
California Hospital Association
Loma Linda University
Private Essential Access Community Hospitals, Inc.
(PEACH)
Oppose: None received
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