BILL ANALYSIS
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THIRD READING
Bill No: AB 2599
Author: Bass (D), et al
Amended: 8/20/10 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 5-1, 8/4/10
AYES: Alquist, Cedillo, Leno, Negrete McLeod, Pavley
NOES: Aanestad
NO VOTE RECORDED: Strickland, Romero, Vacancy
SENATE APPROPRIATIONS COMMITTEE : 7-4, 8/12/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Ashburn, Emmerson, Walters, Wyland
ASSEMBLY FLOOR : 57-15, 6/3/10 - See last page for vote
SUBJECT : Medi-Cal: South Los Angeles
SOURCE : Los Angeles County Board of Supervisors
University of California
DIGEST : This bill enacts Medi-Cal funding provisions for
a new hospital, as defined, that would be a private
nonprofit entity that would serve the population of South
Los Angeles formerly served by the Los Angeles Martin
Luther King Jr.-Harbor Hospital.
ANALYSIS : Existing law:
1.Provides for the Medi-Cal program, which is administered
CONTINUED
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by the State Department of Health Care Services and under
which qualified low-income persons receive health care
benefits. The Medi-Cal program is, in part, governed and
funded by federal Medicaid provisions.
2.Authorizes the California Medical Assistance Commission
to negotiate selective provider contracts with eligible
hospitals to provide inpatient hospital services to
Medi-Cal beneficiaries.
3.Provides for the provision of inpatient and outpatient
hospital services under the Medi-Cal program on a
fee-for-service basis.
4.Provides for supplemental payments to hospitals providing
Medi-Cal services in accordance with prescribed
provisions of law.
5.Requires the County of Los Angeles, for the 2007-08,
2008-09, and 2009-10 state fiscal years, to make
intergovernmental transfers to fund the nonfederal share
of increased Medi-Cal payments to those private hospitals
that serve the South Los Angeles population formerly
served by Los Angeles County Martin Luther King,
Jr.-Harbor Hospital.
This bill:
1.Enacts Medi-Cal funding provisions for a new hospital, as
defined, that would be a private nonprofit entity that
would serve the population of South Los Angeles formerly
served by the Los Angeles Martin Luther King Jr.-Harbor
Hospital.
2.Authorizes the hospital to negotiate an inpatient
hospital services contract with the commission, as
provided for under existing law, and would contain
provisions relating to inpatient hospital services
reimbursement if a contract is not negotiated under these
provisions.
3.Contains provisions relating to reimbursement for
outpatient hospital services provided by the new hospital
and to the making of supplemental payments to the new
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hospital.
4.Establishes various conditions for its implementation,
including the receipt of all necessary federal approvals
and the receipt of federal financial participation.
Background
MLK Harbor Hospital
MLK Harbor is located on South Wilmington Avenue in Los
Angeles in an area known as Willowbrook. The hospital and
the Charles R. Drew University of Medicine and Science
(Drew University) were created in the aftermath of the 1965
Watts riots. In December 1965, the McCone Commission,
established in the wake of the riots, issued a report
citing the lack of adequate health care facilities as a
contributing factor to the civil unrest. This prompted
city and state officials to put in motion plans to build a
medical school and teaching hospital in the Watts
community. On
March 27, 1972, the hospital opened its doors to the
community as a full-service medical center. The hospital
expanded in 1998, by opening a state-of-the-art trauma and
diagnostic center that was dedicated to treating patients
who have sustained accidental and intentional trauma
injuries. At its peak, the hospital had a licensed bed
capacity of 537 beds, and through its partnership with Drew
University, had become a teaching hospital.
The hospital encountered a series of problems that
eventually led to the 2007 vote by the Los Angeles County
Board of Supervisors to close MLK-Harbor because various
challenges were threatening the hospital's ability to
continue operating, including the loss of Medicaid and
Medicare funds and the possible loss of its license over
allegations of substandard care. Since the closure of
MLK-Harbor in August 2007, the county has been developing
options to provide hospital services at that site. In the
spring of 2008, at the direction of the Board of
Supervisors, the county approached the UC to assist in this
effort. Representatives from the UC, Los Angeles County
and the Schwarzenegger Administration have been discussing
an arrangement that would allow MLK-Harbor to re-open as a
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viable health care facility.
The county has established a partnership with the
University of California system to re-open the hospital.
The hospital would be a private nonprofit entity, governed
by a seven-member board of directors; the hospital would no
longer be run by the county. The board of directors would
consist of two appointees made by the UC, two made by
county officials and three appointments that would be
jointly made by the UC and the county. The county will
contribute $50 million annually to cover expenses and
operating costs and $13.3 million toward the care of
uninsured patients. The county will continue to staff and
operate the hospital's outpatient services center, which
has remained open after the hospital closed. The facility
is scheduled to re-open as early as 2013. The new
nonprofit entity would handle all management and
administration, including hiring, for the hospital.
Current Medi-Cal Hospital Waiver
SB 1100 (Ducheny and Perata), Chapter 560, Statutes of
2005, provides the statutory framework for implementing the
current Medi-Cal hospital waiver. The bill also
established a new mechanism for funding all safety-net
hospitals. Under the waiver, federal funds match
"certified public expenditures" (CPEs) for health care
services provided in public hospitals and county clinics.
CPEs are expenditures for providing health care to Medi-Cal
recipients and the uninsured. Twenty-two selected public
hospitals, including the five UC hospitals, use CPEs to
claim federal funds under Medi-Cal, including DSH funds and
money from the safety net care pool. Public entities are
also allowed to use intergovernmental transfers, a
mechanism which counties transfer funds to the state and
the state uses these funds as the nonfederal share to match
federal Medicaid funds.
Under the current waiver, for uncompensated care provided
to Medi-Cal and uninsured patients, public hospitals have
access to over $1 billion in federal DSH funds. DSH
funding is a capped allocation of federal funds and is
accessible to public hospitals as a reimbursement of CPEs
and intergovernmental transfers. Public hospitals are also
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able to access Safety Net Care Pool funding established by
the waiver, which is a federal allotment of over $700
million.
DHCS is currently involved in a process to negotiate a new
waiver which is expected to be much broader in scope, but
will still address elements of hospital funding. The
current waiver expires August 31, 2010.
Selective Provider Contracting Program
Since 1982, California has had a federal waiver to
establish a selective provider contracting program (SPCP).
Under this program, CMAC negotiates daily rates for general
acute care hospital inpatient services on behalf of
Medi-Cal. By choosing hospitals that serve large numbers
of Medi-Cal patients, and bargaining with them for the best
rates, the state has been generally able to negotiate lower
rates for hospital services than if it simply allowed all
hospitals to serve Medi-Cal patients and bill the state for
services. Prior to the inception of the program,
California hospitals served the Medi-Cal population under a
cost-based reimbursement system.
SPCP continues in a modified fashion under the 2005
hospital demonstration project waiver. CMAC continues to
maintain contracts with a number of general acute care
hospitals. The biggest change to SPCP under the current
waiver is that designated public hospitals receive Medi-Cal
payments based on their costs that can be certified as
public expenditures rather than receiving a negotiated CMAC
rate. 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 percent.
South Los Angeles Demonstration Project
This demonstration project was created in the wake of the
2007 closure of MLK Harbor to assure that the community of
south Los Angeles continued to have access to needed
medical care. Under the project, the County of Los Angeles
is required to make intergovernmental transfers, in the
amount of $5 million per fiscal year, to the state. The
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state, in turn, uses the funds for the nonfederal share of
increased Medi-Cal payments to those private and public
hospitals that serve the south Los Angeles population
formerly served by MLK-Harbor Hospital. The demonstration
project was established for the 2007-08, 2008-09, and
2009-10 project years and is likely to be extended through
the 2010-11 budget. The demonstration project was
established because of the express intent of Los Angeles
County to restore hospital services on the MLK-Harbor
Hospital campus to be operated by either a private or
public entity.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
CMAC SPCP contract/ at least
in the tens of millions
General/
*SB 1732 capital debt payments/ of
dollars commencing likely
Federal
outpatient serviceslate 2012 or early 2013
South LA Medical Services $50,000 -
$75,000$100,000$100,000 Federal**
Preservation Fund
*Costs shared 50 percent General Fund, 50 percent federal
funds
**Federal funds matched by an equal amount of county funds
(CPEs)
SUPPORT : (Verified 8/25/10)
Los Angeles County Board of Supervisors (co-source)
University of California (co-source)
California Medical Association
Community Clinic Association of LA County
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Planned Parenthood Advocacy Project Los Angeles County
Saban Free Clinic
Service Employees International Union
T.H.E. Clinic, Inc.
ARGUMENTS IN SUPPORT : The bill's sponsors, UC and the
County of Los Angeles, argue that this bill will provide
adequate and predictable Medi-Cal funding to ensure the new
hospital's viability while providing services to a high
volume of uninsured and Medi-Cal patients. The sponsors
also state that they are sponsoring this bill because it is
compatible with their mission to provide quality health
care services to the patients they serve. The Service
Employees International Union (SEIU) also states that it
supports this bill which would facilitate the re-opening of
a vital hospital in South Los Angeles. SEIU states that
the closure of MLK-Harbor was an incalculable loss to the
community, to the workers who were employed there and the
members who relied on it. They also note that with the
enactment of federal health reform, the planned re-opening
of the hospitals is even more essential as hundreds of
thousands of county residents gain health care coverage.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Arambula, Bass, Beall, Block,
Blumenfield, Bradford, Brownley, Buchanan, Charles
Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De
La Torre, De Leon, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Furutani, Galgiani, Gilmore, Hall,
Hayashi, Hernandez, Hill, Huber, Huffman, Jones, Lieu,
Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, V. Manuel
Perez, Portantino, Ruskin, Salas, Saldana, Skinner,
Smyth, Solorio, Swanson, Torlakson, Torres, Torrico,
Tran, Yamada, John A. Perez
NOES: Anderson, Blakeslee, DeVore, Fuller, Gaines,
Garrick, Harkey, Logue, Miller, Nestande, Niello,
Nielsen, Norby, Silva, Villines
NO VOTE RECORDED: Bill Berryhill, Tom Berryhill,
Caballero, Hagman, Jeffries, Knight, Audra Strickland,
Vacancy
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CTW:mw:nl 8/25/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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