BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 732
S
AUTHOR: Alquist
B
AMENDED: March 31, 2009
HEARING DATE: April 22, 2009
7
CONSULTANT:
3
Green/
2
SUBJECT
Medi-Cal: long term care reimbursement: cost reporting
SUMMARY
Requires the Department of Health Care Services (DHCS) to
establish a skilled nursing facility (SNF) cost reporting
methodology that allows the department to adjust Medi-Cal
reimbursement rates in an expedient manner.
CHANGES TO EXISTING LAW
Existing law:
Under existing law, long-term health care facilities
include SNFs, intermediate care facilities, congregate
living facilities, nursing facilities, and pediatric day
health and respite facilities. Existing law defines a SNF
as a health facility that provides skilled nursing care and
supportive care to patients whose primary need is for the
availability of skilled nursing care on an extended basis.
Existing law requires SNFs to be licensed and certified by
the Department of Public Health (DPH).
Existing state law establishes the Medi-Cal program,
administered by the Department of Health Care Services
(DHCS), which provides comprehensive health care coverage
to certain categories of low-income eligible individuals
and families, including children, the aged, the blind, the
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STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 2
disabled, nursing home residents, refugees, and pregnant
women. Under existing law, Medi-Cal provides payments for
long-term care services for eligible beneficiaries,
including for services provided at SNFs.
Existing law requires DHCS to develop and implement a SNF
Medi-Cal reimbursement rate setting methodology that is
facility specific, and that is based on costs. Existing
law establishes specified cost categories, on which the
reimbursement rates is based, including direct and indirect
labor costs, administrative costs, capital costs, and
direct passthrough costs, such as property taxes, licensing
fees, and liability insurance. Existing law also requires
SNFs to pay a quality assurance fee.
Existing law requires SNFs to report costs for the most
recent reporting period available, to DHCS using a form
called the Integrated Long-Term Care Disclosure and
Medi-Cal cost report as well as through other financial
disclosure reports or supplemental forms as required by the
department.
Under existing law, the SNF Medi-Cal reimbursement rate
setting methodology sunsets on July 1, 2011.
This bill:
This bill would require DHCS, by July 1, 2010, to establish
a cost reporting methodology that allows the department to
adjust SNF rates in an expedient manner. The bill would
require the cost reporting methodology to itemize costs
within each cost category, and would require DHCS to
consult with SNF, labor, and consumer representatives when
determining what costs to itemize.
The bill would authorize DHCS to update and modify existing
cost reporting mechanisms when establishing the new cost
reporting methodology, and would require DHCS to continue
to collect cost data that was reported by SNFs prior to the
establishment of the new cost reporting methodology.
FISCAL IMPACT
Unknown.
BACKGROUND AND DISCUSSION
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 3
According to the author, AB 1629 (Frommer, Chapter 875,
Statutes of 2004) changed the Medi-Cal reimbursement system
for SNFs from a flat-rate reimbursement system to a system
with facility-specific rates based on the actual cost of
care, with the intent of providing SNFs with reimbursement
levels adequate enough to allow for investments in quality
improvement. The author states that, although AB 1629
established a new cost-based ratesetting system, the system
by which SNFs report costs to the state has not been
updated since the bill's enactment, resulting in long
delays, sometimes up to two years, between the time SNFs
report costs to the state, and the time their rates are
adjusted based on those costs. The author states that
these delays undermine quality improvement efforts by SNFs,
as some SNFs may be reluctant to make investments in
quality improvement knowing that they may not be reimbursed
for those investments for up to two years.
The author states that budget trailer bill language from
2008 created a stakeholder workgroup, comprised of
facility, labor, and consumer representatives, to make
recommendations on ways to improve the AB 1629 rate
reimbursement system, and that improving and updating cost
reporting mechanisms was an area that was unanimously
supported by all stakeholder groups. The author states
that SB 732 will establish a cost reporting methodology
that allows SNF rate adjustment to occur more expeditiously
in order to meet the original intent of AB 1629.
AB 1629
Prior to the implementation of AB 1629, SNFs received a
flat rate reimbursement which in many cases reimbursed SNFs
for less than it cost to provide resident care, and
provided no financial incentives for SNFs to enhance the
quality of care for residents.
AB 1629 was enacted into law in 2004 to reform the flat
rate system and establish a new reimbursement system that
would increase access to appropriate long-term care
services, promote quality care in SNFs, advance wages and
benefits for SNF staff, and achieve greater administrative
efficiency. AB 1629 established a new, facility-specific,
cost-based reimbursement system, and imposed a quality
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 4
assurance fee (QAF), paid by SNFs, that is used to draw
down additional federal funding to provide additional
reimbursement to SNFs that make quality improvement
efforts. AB 1629 also required SNFs to take part in
meeting the goals of the Olmstead Act by requiring them to
evaluate residents' capability to return to the community,
and assist them in doing so.
SNF reporting
Each year, SNFs are required to report specified financial
and cost information to the state via the Long-Term Care
Facility Integrated Disclosure and Medi-Cal Cost Report.
SNFs submit this report to the Office of Statewide Health
Planning and Development (OSHPD), which forwards a copy to
DHCS for the purposes of Medi-Cal rate adjustment.
The Long-Term Care Facility Integrated Disclosure and
Medi-Cal Cost Report is comprised of numerous schedules
through which facilities report a variety of financial and
cost data, including the inventory of services provided;
owner compensation and home office costs; facility revenues
and expenses generated by routine and ancillary services;
assets, liabilities, and equity; cash flow from operating
and nonoperating revenues, investments, and other financing
activities; and, facility staff salaries, wages, and
benefits.
Once the report is received, DHCS staff audits the report.
Costs are generally reported on an aggregate basis, and
costs that will be used for rate setting purposes are
identified and segregated by cost category during the audit
process. The audit process may take weeks or months,
depending on the information provided on the report.
Additionally, SNFs may be required to provide supplemental
cost reports to the department, which allow SNFs to provide
more detailed and specific cost information.
In March 2009, DHCS issued a provider bulletin announcing
that beginning in 2009, the SNF cost report would
incorporate specified supplemental schedules, allowing SNFs
to submit both the cost report and certain supplemental
reports simultaneously.
SNF Quality Workgroup
AB 1183 (Committee on Budget, Chapter 758, Statutes of
2008) established a SNF quality stakeholder workgroup
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 5
comprised of 18 members representing consumers, labor, and
SNFs. In February 2009, these stakeholders developed and
voted on over 50 recommendations on ways to improve the AB
1629 reimbursement system. The recommendations were given
to the Department of Health Care Services in February 2009.
DHCS is tasked with reviewing the recommendations, and
submitting a report to the Legislature, by March 1, 2009,
that presents all of the recommendations along with the
department's analysis of the feasibility of implementing
the proposed recommendations.
Improving SNF cost reporting mechanisms and methodology was
an area supported by the workgroup as a whole. However, a
consensus on the exact approach and design of a new cost
reporting system was not reached. Despite the variance
among workgroup members on how to specifically modify the
cost reporting methodology, the concept of updating
existing cost reports to synchronize with the current rate
setting methodology was unanimously accepted.
As of the time of the writing of this analysis, DHCS has
not completed its analysis of the feasibility of workgroup
recommendations.
Related legislation
AB 1472 (Torrico) this bill would require SNF labor costs
to be determined by facility payroll data, and reported
electronically to the department on a quarterly basis, as
specified. This bill is currently in the Assembly Health
Committee.
AB 1038 (Furutani) would increase the minimum number of
nursing hours per patient in a SNF from 3.2 hours to 3.5
hours. This bill is currently in the Assembly Health
Committee.
AB 773 (Liu) would increase fines for specified citations
issued against SNFs. This bill is currently in the
Assembly Health Committee.
Prior legislation
AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008, the 2008-2009 health budget trailer bill, established
a SNF quality stakeholder workgroup comprised of 18 members
representing SNFs, labor, and consumer advocates, and
required the workgroup to devise recommendations, and
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 6
extended the sunset on the facility-specific rate setting
system to July 1, 2011.
AB 203 (Committee on Budget), Chapter 188, Statutes of
2007, was the 2007-2008 health budget trailer bill. Among
its provisions, the extended the QAF and QAF-related
statutory provisions to July 31, 2009.
AB 360 (Frommer), Chapter 508, Statutes of 2005, among
other provisions, exempts a unit of a SNF that provides
pediatric subacute services and SNFs designated as an
institution for mental disease from the facility-specific
rate setting system and QAFs.
AB 1629 (Frommer), Chapter 875, Statutes of 2004,
establishes a new facility-specific, cost-based SNF
reimbursement system, imposes a QAF, paid by SNFs, that is
used to draw down additional federal funding to provide
additional reimbursement to SNFs that make quality
improvement efforts, and requires SNFs to take part in
meeting the goals of the Olmstead Act by requiring them to
evaluate residents' capability to return to the community,
and assist them in doing so.
Arguments in support
The California Association of Health Facilities (CAHF)
states that the current Medi-Cal cost report pre-dates the
new reimbursement system established by AB 1629, and does
not allow for proper segregation of costs in order to be
efficiently used to adjust reimbursement rates. For
example, CAHF states that costs for liability insurance,
workers' compensation, and health insurance are not
identified separately in the current cost report, but are
instead aggregated within other broad cost categories such
as administration or employee benefits. CAHF states that
in absence of a cost reporting system that itemizes these
costs, DHCS audit staff are required to identify and
reclassify these types of costs during the audit process,
and SNFs are required to submit supplemental cost reports,
in order to ensure that the SNF rates are properly
adjusted. CAHF states that this bill would help eliminate
these added steps, and allow for increased efficiency
during the audit and rate setting process.
COMMENTS
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 7
1. SNF rate setting system to sunset in 2011. This bill
would require DHCS to establish a new cost report
methodology by July 1, 2010. However, the cost-based rate
setting system is set to sunset on July 1, 2011, leaving
only one year for the new cost report methodology to be
implemented. Previous sunset dates for the cost-based rate
setting system have been extended through budget trailer
legislation.
POSITIONS
Support: California Association of Health Facilities
Crestwood Behavioral Health, Inc.
Pathways Home Health and Hospice
Oppose: None received
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