BILL ANALYSIS
AB 2599
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Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 2599 (Bass and Hall) - As Introduced: February 19, 2010
SUBJECT : Medi-Cal: South Los Angeles.
SUMMARY : Requires the Department of Health Care Services (DHCS)
and the California Medical Assistance Commission (CMAC) to
ensure Medi-Cal funding, as specified, for the new private
nonprofit hospital that will serve the population formerly
served by the Los Angeles County Martin Luther King, Jr.-Harbor
Hospital (MLK-Harbor). Specifically, this bill :
1)Requires the DHCS and CMAC to ensure that the successor
hospital to MLK-Harbor receives the following:
a) Payment for inpatient rates, negotiated by CMAC, at no
less than 60% of the hospital's costs;
b) Continued Medi-Cal supplemental payments for debt
service incurred by Los Angeles County for capital
projects;
c) Payment for outpatient services at the same Medi-Cal
cost-based reimbursement methodology of 100% of reasonable
and allowable costs that was provided to clinics and
hospital outpatient services at Los Angeles County
facilities under the original Los Angeles waiver and
continued under the Hospital/Uninsured Care waiver; and,
d) Funding from the South Los Angeles Medical Services
Preservation Fund.
2)Makes specified Legislative findings and declarations related
to a new hospital to be located in the seismically-compliant
patient tower on the campus of the former Los Angeles County
MLK-Harbor Hospital and states the Legislature's intent to
facilitate the success of the new hospital.
EXISTING LAW :
1)Establishes the Medi-Cal Program, administered by DHCS, which
provides comprehensive health benefits to low-income children,
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their parents or caretaker relatives, pregnant women, elderly,
blind or disabled persons, nursing home residents, and
refugees who meet specified eligibility criteria.
2)Establishes a schedule of benefits under the Medi-Cal Program,
which includes hospital inpatient and outpatient services,
subject to utilization controls.
3)Creates the Selective Provider Contracting Program (SPCP),
administered by CMAC, which is a competitive contracting
program that directs Medi-Cal patients not enrolled in managed
care plans to participating hospitals in exchange for
negotiated per diem hospital payments.
4)Establishes standards and supplemental payment programs for
hospitals that qualify as Disproportionate Share Providers
(DSH) of Medi-Cal and uninsured patients.
5)Establishes the Medi-Cal Hospital/ Uninsured Demonstration
Project Act, a five year waiver, expiring on August 31, 2010,
to provide funding for certain public, private, and district
hospitals for services provided to Medi-Cal and uninsured
patients including creation of the Safety Net Care Pool
(SNCP).
6)Provides for supplemental reimbursement through the
Construction Renovation Reimbursement Program (CRRP) to
qualifying DSH hospitals for certain debt service costs of
revenue bonds used for financing the construction, renovation
or replacement of hospital facilities, buildings and equipment
and
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . The former Los Angeles County
MLK-Harbor Hospital, located in the Willowbrook/Watts area,
closed in August 2007. According to Los Angeles County and
the University of California (UC), co-sponsors of this bill,
ever since the closure, the County has been committed to
re-establishing the hospital services at the MLK-Harbor site.
The author states that this bill codifies the agreement that
resulted from the negotiations between the parties and the
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State to reopen MLK-Harbor Hospital, which would serve as a
safety net provider in South Los Angeles and would treat a
high volume of Medi-Cal and uninsured patients. The new
MLK-Harbor Hospital will be a wholly independent, nonprofit
501(c) (3) entity which will hold the license. Neither County
nor UC would operate the new hospital, nor would the parties
be financially liable for the activities or debts. A new
governing entity will be established with appointments by UC
and the County. The new hospital will contract with UC for
the provision of physician services.
This bill is necessary, according to the author, to assure the
critical fiscal elements necessary for the ongoing financial
viability of the new hospital. The author asserts that
existing law, particularly with regard to eligibility for
state and federal funding, either relates to the former
hospital or does not exist. According to the author, funding
stability is accomplished by requiring that funding streams
previously available to the former MLK-Harbor Hospital would
become available to the newly opened hospital.
2)BACKGROUND . As a result of the Watts riots in 1965, Governor
Pat Brown convened a commission chaired by former CIA Director
John McCone to investigate the causes. The McCone Commission
concluded that African Americans in Los Angeles had been
denied a fair share of public services, particularly
healthcare. There was no accredited hospital in Watts or
surrounding communities and the nearest public hospital was
difficult to travel to by public transportation. In 1966, the
county began to plan a full service community and teaching
hospital operated by the county in conjunction with the Drew
Medical Society, University of Southern California (USC) and
University of California Los Angeles (UCLA). Charles R. Drew
University of Medicine and Science (King/Drew) opened in 1970
and the Martin Luther King, Jr General Hospital opened as a
full service medical center in March 1972. In 1981, the
hospital expanded by opening the Augustus F. Hawkins Mental
Health Center. The hospital expanded again in 1998, by
opening a state-of-the-art Trauma and Diagnostic Center to
treat patients who have sustained accidental and intentional
trauma injuries. At its peak, the hospital had a licensed bed
capacity of 537 beds, 461 for general acute care and 76 for
psychiatric care, and through its partnership with Drew
University had become the third teaching hospital in the
County of Los Angeles. In addition to the acute facilities,
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the 38.5 acre site included a dormitory for medical residents
who train in one of the 14 approved clinical residency
programs.
3)CLOSURE OF MLK-HARBOR . In 2004, the Los Angeles Times (Times)
ran a series on widespread neglect and mismanagement at MLK.
The Times extensively reported on medical errors, staff
problems, fiscal mismanagement and health and safety
violations going back almost to the beginning. Among its
findings:
a) King/Drew spent $492 more per patient daily than Olive
View-UCLA Medical Center, $685 more than County-USC, and
$815 more than Harbor-UCLA in 2003-03. Harbor-UCLA treated
61% more people in the emergency room and admitted 91% more
patients.
b) In the prior five years, King/Drew spent nearly $34
million on employees' injuries-53% more that Harbor-UCLA
and more than any of the UC Medical Centers.
c) In 2002 the Accreditation Council for Graduate Medical
Education had ordered the hospital to close three of 18
training programs due to lax oversight.
d) From 1999 to March 2004, the hospital was cited for
violating health and licensing regulations more often than
97% of hospitals statewide and had more violations than any
of the other county hospitals.
e) King/Drew spent $20.1 million on malpractice payouts
between 1999 and 2003, including for cases of unnecessary
death, medical neglect, and HIV-tainted blood infusions.
According to the Times, the County Board and the Department of
Health it oversees had received decades of warnings. Since
2000, there had been dozens of audits, scores of disciplinary
reports and hundreds of workers compensation claims. The
Times further stated that even as the county faced enormous
pressures over the years to trim its health budget, the board
has largely spared King/Drew. According to the series, the
slightest suspicion that a cut might be coming mobilized
activists who treasure the Black-run hospital. The Times also
stated that Latinos now constitute a majority of the residents
in the area surrounding King/Drew and a plurality of the
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hospital's patients.
In November 2004, the Board of Supervisors voted to close the
trauma unit to focus on fixing the other operations. After
the federal Centers for Medicare and Medicaid Services (CMS)
threatened decertification of the hospital to serve Medicare
and Medicaid patients, Los Angeles County terminated the
medical residency program, as part of a restructuring of the
hospital referred to as "Metro Care Plan." Under the Metro
Care Plan, the hospital's name was changed to MLK-Harbor
Hospital. The plan eliminated the Pediatric Intensive Care
Unit, Inpatient Pediatrics, Neonatal Intensive Care Units and
the general/medical surgical ward at MLK-Harbor.
Administrators from Harbor-UCLA were also asked to take over
management of the hospital.
In March 2007, an agreement was reached between CMS, the state
and the county to extend the Medicare contract for MLK-Harbor
until August 15, 2007. As part of the agreement, the county
agreed not to bill for non-emergency Medicare and Medi-Cal
services from May 1 through August 15. No further extensions
of the agreement were provided, and the hospital failed to
meet CMS standards prior to the August 15 expiration date and
was closed.
4)THE COMMUNITY . This committee conducted an informational
hearing called "Hospital Services and Emergency Care: An
Emerging Crisis" on May 18, 2007. According to the record
from that hearing, South Los Angeles had limited access to
health care services. The committee found that this area had
the largest need for additional beds and emergency department
treatment stations, the worst densities of available specialty
physicians, worst ratios of discharges to available beds, and
worst wait times for emergency room visits. The briefing
paper also states that South Los Angeles is confronted by the
most difficult realities, such as the highest rates of
uninsured children, teen births, obesity, high blood pressure,
and mortality from cancer, stroke, diabetes, and coronary
heart disease. In 2006, Memorial Hospital serviced 40,000
patients in its emergency room and MLK-Harbor serviced 60,000,
and now both are closed.
5)SELECTIVE PROVIDER CONTRACTING PROGRAM . The SPCP was
established by the Legislature in 1982 under a 1915(b) waiver
and allowed CMAC to selectively contract as long as there was
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adequate access to hospital beds to serve the Medi-Cal
population in a Health Facility Planning Area (HFPA). Except
for emergencies, most fee for service Medi-Cal beneficiaries
in a closed area were required to receive in-patient care at a
contract hospital. Selective contracting allowed CMAC to
negotiate a competitive rate in place of the traditional
"cost-based" reimbursement system used by most states.
According to CMAC's 2009 Annual Report to the Legislature,
this has saved the State a total of approximately $10.9
billion in State General Fund savings since 1983. Hospitals
in an open area continue to be reimbursed on a cost-based
system.
The SPCP program continues in a modified fashion under the 2005
Hospital/Uninsured Care Waiver. CMAC continued to maintain
contracts with 200 general acute care hospitals as of December
1, 2008, 179 of them for negotiated per diem rates. As
established in the waiver, 21 designated public hospitals
receive Medi-Cal payments based on certified public
expenditures rather than a negotiated CMAC rate. The average
per-day reimbursement received by the 179 general acute care
hospitals with Medi-Cal SPCP per diem contracts on December 1,
2008 was $1,369. In order to provide CMAC with negotiating
leverage, the rates paid to contracting hospitals are not
publicly available. Based on the CMAC estimate of savings,
the average ratio of reimbursement to cost is 65%.
6)SOUTH LOS ANGELES MEDICAL SERVICES PRESERVATION FUND . SB 474
(Kuehl), Chapter 518, Statutes of 2007, establishes the South
Los Angeles Medical Services Preservation Fund to which a
maximum amount of $100 million of SNCP funds was to be
deposited per year for the project years 2007-08, 2008-09, and
2009-10 for the purpose of funding health services for the
uninsured population of South Los Angeles. DHCS was directed
to allocate these funds for services provided by the County of
Los Angeles facilities still operating at the MLK-Harbor site,
by other designated public hospitals operated by Los Angeles
County and other providers who contract with Los Angeles
County. The County of Los Angeles was required to make
intergovernmental transfers to the state to provide the
nonfederal share of increased Medi-Cal payments to those
private hospitals that serve the population formerly served by
the MLK-Harbor.
7)ADDITIONAL FUNDING MECHANISMS . The CRRP was established by SB
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1732 (Presley), Chapter 1635, Statutes of 1988. The SB 1732
program provides supplemental reimbursement for debt service
costs on revenue bonds used for financing the construction,
renovation, or replacement of hospital facilities, buildings
and equipment. The program is administered by DHCS, but the
payment authority is incorporated into SPCP hospital
contracts. During fiscal year 2008-09, approximately $100
million in additional payments were made to hospitals. This
bill authorizes the new entity to be eligible to receive SB
1732 payments that MLK-Harbor would have received. It also
applies the methodology that currently applies to Los Angeles
County clinics and hospital outpatient departments of 100% of
cost-based reimbursement.
8)SUPPORT . The sponsors, UC and County of Los Angeles, write in
support that this bill requires that funding streams
previously available to the former MLK-Harbor become available
to the newly opened hospital. They also state in support that
the Legislature intend by these actions to provide adequate
and predictable funding to support the new hospital to ensure
that critical hospital services will be available to the
residents of South Los Angeles area. The Service Employees
International Union (SEIU) also states that it supports this
bill which would facilitate the reopening of King/Drew, a
vital hospital in South Los Angeles. According to SEIU, the
union represented the workers at King-Drew since it opened in
1968. SEIU states that the closure of the hospital was an
incalculable loss to the community, to the workers and members
who relied on it.
9)PRIOR AND RELATED LEGISLATION .
a) SB 1409 (Price) extends the period for which specified
sources of funding are available for paying health care
providers who provide services to the south Los Angeles
population formerly served by MLK-Harbor. SB 1409 is
pending in Senate Appropriations.
b) SB 209 (Steinberg) directs DHCS to develop a Medicaid
waiver for the state's Medi-Cal Program and submit the
waiver for federal approval by September 1, 2010. SB 209
is in the Assembly Health Committee.
c) AB 342 (Bass) is identical to SB 208 and is in the
Senate Health Committee.
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d) AB 2025 (De La Torre) requires, by September 1, 2010,
DHCS to submit proposed State Plan Amendments to CMS as
necessary to continue implementation of the Medi-Cal
Hospital/Uninsured Care Demonstration Project Act. AB 2025
is set for hearing in this committee on May 4, 2010.
e) SB 474 (Kuehl), Chapter 518, Statutes of 2007,
establishes the South Los Angeles Demonstration Project.
f) SB 1100 (Perata and Ducheny), Chapter 560, Statutes of
2005, provides the framework for implementing the 2005
federal hospital finance waiver, including establishing a
new mechanism for funding of safety-net hospitals.
10)POLICY QUESTIONS .
a) Governance . The Los Angeles County Board of Supervisors
delegates operation of the five public hospitals to the
Department of Health Services. Experts have proposed a
variety of changes to the governance. Some of the
suggestions have included: i) creating a health authority;
ii) appointing a separate board; iii) refocusing the
mission to focus on the medical conditions that affect the
community and not try to be a full-service teaching
hospital; and, iv) appoint a strong independent
administrator. How does the governance of the reopened
MLK-Harbor, as proposed in this bill, compare to these
recommendations?
b) Financing . The new entity created under this bill will
be a private non-profit. The author may wish to explain
why it should qualify for cost-based reimbursement for
outpatient services that is currently only available to
county-owned or operated outpatient facilities. This bill
also requires that CMAC guarantee a minimum of 60% of costs
for inpatient services. No other private hospital is
similarly situated and setting a statutory minimum
undermines the SPCP contracting program. Is this the
author's intent?
c) Waiver Interaction . The Hospital/Uninsured Care Waiver
fundamentally restructured hospital financing in the
Medi-Cal Program. The waiver expires on September 1, 2010.
One of the funding sources of this bill is the South Los
Angeles Medical Services Preservation Fund which in turn is
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funded from waiver funds. The author may wish to explain
how this will be possible, given that the waiver expires
prior to the planned reopening in 2012 or 2013.
REGISTERED SUPPORT / OPPOSITION :
Support
Los Angeles County (cosponsor)
University of California (cosponsor)
Service Employees International Union
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097