BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 732
S
AUTHOR: Alquist
B
AMENDED: January 5, 2009
HEARING DATE: January 13, 2010
7
CONSULTANT:
3
Bain/cjt
2
SUBJECT
Medi-Cal: skilled nursing facilities: continued use of
provider bulletins
SUMMARY
This bill allows the Department of Health Care Services
(DHCS) to continue use of provider bulletins or other
similar instructions, without taking regulatory action, for
one additional year in implementing Medi-Cal reimbursement
for specified freestanding skilled nursing facilities
(SNFs), and provisions imposing a quality assurance fee
(QAF) in nursing facilities.
CHANGES TO EXISTING LAW
Existing law:
Existing law, the Medi-Cal Long-Term Care Reimbursement Act
(the Act), requires DHCS to implement a facility-specific
reimbursement ratesetting system for certain freestanding
SNFs. Reimbursement rates for SNFs are funded by a
combination of federal funds, General Fund, and moneys
collected through a quality assurance fee (QAF) imposed on
SNFs. Existing law sunsets the QAF and rate methodology on
July 31, 2011. These provisions were initially established
by AB 1629 (Frommer), Chapter 875, Statutes of 2004.
Existing law authorizes the director of DHCS to adopt
regulations as are necessary to implement the
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STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 2
above-described provisions. These regulations can be
adopted as emergency regulations. Existing law states
legislative intent that regulations be adopted on or before
July 31, 2010.
Existing law authorizes the director of DHCS, as an
alternative to adopting regulations, to implement the Act
and the QAF-related provisions by means of a provider
bulletin, or other similar instructions. DHCS can use
provider bulletins or other similar instructions without
taking regulatory action, provided that the bulletins or
the other similar instructions do not remain in effect
after July 31, 2010.
Existing law, through the state Administrative Procedure
Act, prohibits any state agency from issuing, utilizing,
enforcing or attempting to enforce any guideline,
criterion, bulletin, manual, instruction, order, standard
of general application, or other rule, which is a
regulation unless it has been adopted as a regulation and
filed with the Secretary of State.
This bill:
This bill would allow DHCS to continue the use of provider
bulletins or other similar instructions, without taking
regulatory action, for one additional year in implementing
Medi-Cal reimbursement for specified freestanding SNFs, and
provisions imposing a QAF in nursing facilities. This bill
does this by delaying by one year the date by which
regulations must be adopted, from July 31, 2010 to July 31,
2011 . This would allow current provider bulletins to
remain in effect until July 31, 2011. This bill would take
effect immediately upon enactment as an urgency statute.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, this bill would provide DHCS with
an additional year to use provider bulletins to implement
and administer the provisions of AB 1629, before
regulations would have to be adopted. The author states
this urgency measure is necessary because the current
authority to use provider bulletins ends mid-year (July 31,
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 3
2010), the regulation adoption process can be lengthy, and
DHCS has not filed emergency regulations to implement the
provisions of AB 1629.
In the absence of regulations or legislation extending the
authority to continue to use provider bulletins, existing
provider bulletins would no longer remain in effect. DHCS
uses provider bulletins to establish the facility specific
rates, to establish the amount of the fee (the QAF)
facilities pay, and to limit exemptions from the QAF by
establishing criteria for SNFs that are part of a
continuing care retirement community (CCRC) must meet in
order to qualify for such an exemption. Without the
ability to continue to use provider bulletins to establish
policy for CCRC exemptions, the revenue generated from the
QAF that is used to fund SNF Medi-Cal reimbursement rates
could be adversely affected because additional facilities
could seek an exemption from paying the QAF. The author
concludes that this bill does not change the rate freeze
enacted as part of last year's budget agreement, but
instead provides a temporary one-year extension of the
provider bulletin authority until regulations can be
adopted.
Background
AB 1629 (Frommer), Chapter 875, Statutes of 2004
established the QAF and the Act. The revenue generated
from the QAF (which is estimated to raise $333 million on
an accrual basis in 2010-11) is made available to draw down
a federal match in the Medi-Cal program and is used to
provide additional reimbursement to, and support, SNF
quality improvement efforts. SNFs that are defined in
existing law as an "exempt facility" do not pay the QAF.
An "exempt facility" includes a SNF that is part of a CCRC
that provides independent living services, assisted living
services, and skilled nursing services on a single campus.
AB 1629 also changed the Medi-Cal reimbursement rates for
SNFs from a flat rate amount to a cost-based
facility-specific rate. Prior to the enactment of AB 1629,
SNF rates were based on the location (one of three regions
in the state) and size of the facility (whether the
facility had 60 or more beds). AB 1629 requires DHCS to
develop a facility-specific rate methodology that reflects
the sum of its projected cost in five cost categories and
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 4
as well as several pass-through costs, and is subject to a
maximum annual cap.
The goal of the Act, as contained in legislative intent
language in AB 1629, is to devise a Medi-Cal long-term care
reimbursement methodology that more effectively:
a)Ensures individual access to appropriate long-term care
services;
b)Promotes quality resident care;
c)Advances decent wages and benefits for nursing home
workers;
d)Supports provider compliance with all applicable state
and federal requirements; and,
e)Encourages administrative efficiency.
As part of last year's budget, the health budget trailer
bill (ABX4 5 (Evans), Chapter 5, Statutes of 2009)
increased the amount of revenue subject to the QAF, for the
2009-10 and 2010-11 rate years, to include Medicare revenue
for routine and ancillary services and Medicare revenue for
services provided to residents covered under a Medicare
managed care plan. In addition, ABX4 5 repealed the
provision that provided a maximum annual increase in the
weighted average Medi-Cal reimbursement rate of not more
than 5 percent of the weighted average Medi-Cal
reimbursement rate for the prior fiscal year for 2009-10
and 2010-11. Under current law (as changed by ABX4 5), the
weighted average Medi-Cal reimbursement rates for 2009-10
and 2010-11 rate years will instead not be increased over
the weighted average Medi-Cal reimbursement rate in effect
for the 2008-09 rate year.
Provider bulletins
State law prohibits state departments from issuing,
utilizing, or enforcing any bulletin or other rule which is
a regulation, unless it has been adopted as a regulation
and filed with the Secretary of State. The APA establishes
rulemaking procedures and standards for state agencies in
California which are designed to provide the public with a
meaningful opportunity to participate in the adoption of
state regulations, and to ensure that regulations are
clear, necessary and legally valid.
An exception to the requirement that DHCS adopt regulations
is the statutorily authorized use of provider bulletins.
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 5
Provider bulletins are authorized for use by the
Legislature to allow DHCS to provide for more rapid
implementation and easier administration of policy changes
and budget actions.
As an alternative to adopting regulations, existing law
authorizes DHCS to implement the Act and the QAF-related
provisions by means of a provider bulletin, or other
similar instructions. This authority was included in AB
1629 and has been extended twice through budget trailer
bills. DHCS can use provider bulletins or other similar
instructions without taking regulatory action only if the
provider bulletin or the other similar instructions do not
remain in effect after July 31, 2010.
DHCS has issued approximately 30 provider bulletins related
to AB 1629 since its enactment in 2004. DHCS indicates it
uses provider bulletins to establish facility specific
rates, explain the rate-setting methodology, adopt
reasonable SNF administrator compensation tables, establish
the amount of the QAF each facility pays, announce new
rates, and direct interested parties to DHCS' web page
where individual facility rates are posted.
The use of provider bulletins to establish criteria for
SNFs seeking an exemption from the QAF is significant
because AB 1629 exempts from the QAF those SNFs that are
part of a CCRC that provides independent living services,
assisted living services and skilled nursing care. Through
provider bulletins, DHCS has established minimum
requirements for SNF units and independent living and
assisted living units in order for facilities to quality
for the QAF exemption. These criteria close a potential
loophole by preventing facilities from adding a minimal
number of independent living and assisted living beds in
order to claim an exemption from paying the QAF.
DHCS also indicates that prior to AB 1629, it promulgated
regulations to detail the rate-setting methodology and
provide updates to the rates. DHCS indicates if the
authority for provider bulletins is not continued, it will
have to promulgate regulations for its rates and QAF
methodologies, as well as any updates.
Arguments in Opposition
The California Association of Health Facilities (CAHF)
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 6
writes in opposition that this bill would enable Medi-Cal
to use provider bulletins to maintain the status quo on SNF
reimbursement. CAHF argues this essentially supports a
policy that "freezes" facility rates, while continuing to
charge facilities a higher QAF that provides no added value
for SNFs paying the fee. CAHF states this bill allows DHCS
to delay the release of new rates for half of the year, and
by not notifying individual providers of their new reduced
rates until half way through the year, it allows DHCS to
deny facilities the opportunity the take steps to cope with
the cut for six months. CAHF states that by allowing
Medi-Cal to continue calculating rates in the current
manner, this bill penalizes facilities that played by the
rules and invested in patient care. Finally, CAHF
concludes that this bill would facilitate another round of
inadequate Medi-Cal provider rates and divert additional
QAF revenue from its intended purpose, which effectively
undermines the mutually beneficial state and provider
partnership crafted in AB 1629.
Prior legislation
a)AB 203 (Committee on Budget), Chapter 188, Statutes of
2007, the 2007-08 health budget trailer bill, among other
provisions, extended the QAF and QAF-related statutory
provisions to July 31, 2009. AB 203 also allowed DHCS to
continue use of provider bulletins without taking
regulatory action by changing the date by which
regulations must be adopted from July 31, 2007 to July
31, 2008.
b)AB 1183 (Committee on Budget), Chapter 758, Statutes of
2008, extended the QAF and QAF-related statutory
provisions to July 31, 2011, established a 5 percent
overall rate cap for the 2009-10 and 2010-11 rate years,
and established a stakeholder workgroup. AB 1183 also
allowed DHCS to continue use of provider bulletins
without taking regulatory action by changing the date by
which regulations must be adopted from July 31, 2008 to
July 31, 2010.
c)ABX4 5 (Evans), Chapter 5, Statutes of 2009, increased
the amount of revenue subject to the QAF, for the 2009-10
and 2010-11 rate years, to include Medicare revenue, and
repealed the provision that provided a maximum annual
increase in the weighted average Medi-Cal reimbursement
rate of not more than 5 percent of the weighted average
Medi-Cal reimbursement rate for the prior fiscal year for
2009-10 and 2010-11. Under ABX4 5, the weighted average
STAFF ANALYSIS OF SENATE BILL SB 732 (Alquist)Page 7
Medi-Cal reimbursement rates for 2009-10 and 2010-11 rate
years will instead not be increased over the weighted
average Medi-Cal reimbursement rate in effect for the
2008-09 rate year.
POSITIONS
Support: None received
Oppose: California Association of Health Facilities
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