BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2599 (Bass)
Hearing Date: 8/12/2010 Amended: 6/1/2010 and as
proposed
Consultant: Katie Johnson Policy Vote: Health 5-1
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BILL SUMMARY: AB 2599, an urgency measure, would require the
Department of Health Care Services (DHCS) and the California
Medical Assistance commission (CMAC) to ensure Medi-Cal funding,
as specified, for a new, private, nonprofit hospital that would
serve the population formerly served by the Los Angeles County
Martin Luther King, Jr.-Harbor Hospital (MLK-Harbor). Proposed
author's amendments would specify that the new hospital that
would receive funds from this bill would be a hospital
established pursuant to an agreement between the County of Los
Angeles (LA County) and the University of California (UC).
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
CMAC SPCP contract/ at least in the tens of
millionsGeneral/*
SB 1732 capital debt payments/ of dollars commencing
likelyFederal
outpatient services late 2012 or early 2013
South LA Medical Services $50,000 - $75,000 $100,000
$100,000Federal**
Preservation Fund
*Costs shared 50 percent General Fund, 50 percent federal funds
**Federal funds matched by an equal amount of county funds
(CPEs)
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Pending author's amendments that were agreed to in the Senate
Health Committee and will be adopted in the Senate
Appropriations Committee would require that the new hospital
referred to in this bill would be required to be a private,
nonprofit hospital established pursuant to an agreement between
LA County and the UC, and would make specified technical
changes. This analysis includes the proposed amendments.
This bill would state that it is the Legislature's intent to
facilitate the success of the new hospital in providing critical
health care to the South Los Angeles population, which is
dependent upon adequate and predictable funding levels, and was
formerly served by MLK-Harbor.
MLK-Harbor, one of the state's 22 designated public hospitals
under the 1115 Medi-Cal Hospital Financing Waiver, closed in
August 2007. Existing law established the South Los Angeles
Medical Services Preservation Fund into which a maximum amount
of $100 million of Safety Net Care Pool funds, provided for by
the existing 1115 Waiver, could be deposited for the project
years 2007-2008, 2008-2009, and 2009-2010 to pay
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AB 2599 (Bass)
for services provided by LA County facilities continuing to
operate on the MLK-Harbor site, other LA County designated
public hospitals, and other providers that contract with LA
County. Existing law also requires LA County to make IGTs to
DHCS to provide the nonfederal share of increased Medi-Cal
payments to those private hospitals that serve the population
formerly served by MLK-Harbor.
This bill would require CMAC to take all necessary steps to
ensure the availability of Medi-Cal funding for the new
hospital, or to implement mechanisms to provide equivalent
funding under successor or modified Medi-Cal payment systems, as
follows:
1) Ensure that the rates for Medi-Cal inpatient hospital
services negotiated under the Selective Provider
Contracting Program (SPCP) would reimburse the new hospital
at at least 60 percent of cost; these payments would be
shared 50 percent General Fund and 50 percent federal
funds. To implement this provision, the new hospital would
need to choose to become a contracting hospital under the
SPCP. Currently, hospitals that contract with CMAC
negotiate their per diem inpatient reimbursement rates
based on the hospital's available services. Placing a
reimbursement rate requirement in statute would limit
CMAC's ability to negotiate with the hospital. It is
unclear if some of the Medi-Cal payments going to other Los
Angeles hospitals would transfer to this new hospital, thus
decreasing the overall net payments associated with opening
this new hospital.
2) Ensure that Medi-Cal debt service incurred by LA County,
and, if applicable, by the new hospital, with respect to
capital projects located at the site of the new hospital
that were previously determined eligible under the SB 1732
program, would be made to the new hospital. Costs would be
shared 50 percent General Fund and 50 percent federal
funds;
3) Ensure that Medi-Cal outpatient services, including
emergency room services, would be reimbursed at cost. These
services would be reimbursed 50 percent General Funds and
50 percent federal funds;
4) Ensure that the funding provided to LA County through
the South Los Angeles Medical Services Preservation
(SLAMSP) Fund would continue to be made available to the
county. Currently, LA County may access up to $100 million
in federal funds if it matches that amount with a similar
amount of county certified public expenditures (CPEs).
These funds are used to compensate LA hospitals that
currently serve the population formerly served by
MLK-Harbor hospital and was the approximate amount that
MLK-Harbor would have received under the 1115 Medi-Cal
Hospital Financing Waiver as a designated public hospital.
It is unclear to which hospitals these funds would be
distributed under the provisions of this bill. This new
hospital would not be a designated public hospital and
would receive Medi-Cal reimbursement either through a SPCP
contract or a cost-based interim rate if it were a
non-contracting hospital that would be 50 percent General
Fund and 50 percent federal funds.
On November 19, 2009, LA County and the University of California
(UC) announced that they would partner to reopen MLK-Harbor as a
nonprofit organization. The hospital would no longer be run by
the county, but it would contribute $50 million in start-up
funds, $353.8 million in capital project commitment, and $63
million annually in
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AB 2599 (Bass)
operating funds, including $13.3 million to support care for the
uninsured. The facility is scheduled to reopen as early as late
2012.
This bill would require that specified future funding be
guaranteed for this new hospital and for LA County. Since all of
these funding streams currently rely on federal matching funds,
staff recommends that the bill be amended to specify that it
would be contingent upon federal financial participation and to
require that DHCS apply for all necessary federal approvals, in
order to alleviate potential General Fund costs should federal
financial participation be unavailable.
This bill would modify the system of reimbursement to private
hospitals that serve this population under the current Section
1115 Medi-Cal Hospital Financing Waiver. The existing 1115
Waiver specifies the methodology by which the 22 designated
public hospitals, of which MLK-Harbor is one, access federal
funds for reimbursement for CPEs for treatment of Medi-Cal
beneficiaries and uninsured Californians. It expires August 31,
2010, and is currently being renegotiated by the Department of
Health Care Services (DHCS). The terms and conditions of the
renewed 1115 Waiver have not been finalized and it is unclear
whether or not the reimbursement methodology for public
hospitals would change. The new waiver could change the funding
source for the SLAMSP fund.
Medi-Cal fee-for-service CPEs are generally matched by federal
funds at 50 cents on the dollar. However, as a result of the
passage of the American Reinvestment and Recovery Act (ARRA) in
February of 2009, California's Federal Medical Assistance
Percentage (FMAP) increased from 50 percent to 61.59 percent.
Thus, retroactively from October 1, 2008, through December 31,
2010, the federal government would pay for approximately 62
cents for every CPE dollar spent. After December 31, 2010, the
FMAP reduces back to 50 cents on the dollar, unless Congress
approves and the President signs an extension. The Senate
recently approved a H.R. 1586, which would extend the FMAP
enhancement through June 30, 2011, but at a lower rate than
under ARRA.