BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 1083
S
AUTHOR: Correa
B
AMENDED: As Introduced
HEARING DATE: April 21, 2010
1
CONSULTANT:
0
Tadeo/
8 3
SUBJECT
Health facilities: licensure
SUMMARY
Eliminates existing provisions applicable to single
consolidated licenses for children's hospitals, and would
permit the Department of Public Health to issue a single
consolidated license for a children's hospital that has
facilities located not more than 35 miles apart.
CHANGES TO EXISTING LAW
Existing federal law:
Establishes the federal Medicaid Disproportionate Share
Hospital Program to provide financial assistance to both
public and private hospitals that serve large numbers of
Medicaid and uninsured patients.
Existing law:
Authorizes the Department of Public Health (DPH) to issue a
single consolidated license to a general acute care
hospital, which includes more than one facility maintained
and operated on separate premises, or has multiple licenses
for a single health facility on the same premises if there
is a single governing body, a single administration, and a
single medical staff for all of the facilities maintained
and operated by the licensee. The facilities cannot be
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STAFF ANALYSIS OF SENATE BILL 1083 (Correa) Page 2
located more than 15 miles apart.
Authorizes, if the physical facilities are located more
than 15 miles apart, a single consolidated license to be
issued if the applicant proves that it can comply with the
requirements of licensure and provide quality care and
adequate administrative and professional supervision, and
has one or more of the facilities located in a rural area,
or one or more of the facilities provides only outpatient
services, as defined by DPH.
Requires that if specified disproportionate share
eligibility for children's hospitals with consolidated
licensure is implemented, the applicant must be a non
profit corporation; a children's hospital; affiliated with
a major university; and operate a tertiary care facility.
One of the facilities must be located in a county with a
population between one and two million people; and be
located in a city with a population between 50,000 and
100,000 people.
This bill:
Eliminates existing provisions applicable to single
consolidated licenses for children's hospitals, and would
permit the department to issue a single consolidated
license for a children's hospital that has facilities
located not more than 35 miles apart.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
According to the author, SB 1083 would expand access to
necessary, life-saving, pediatric-specific hospital
services for California's most seriously ill and injured
children; allowing children to receive high quality
hospital care closer to their home, easing the burden of
travel on their families while ensuring the child has the
continuity of their own community, including less school
time missed. The author and sponsor state that SB 1083 is
needed due to the diminishing number of pediatric beds in
community hospitals and the increasing high occupancy rates
STAFF ANALYSIS OF SENATE BILL 1083 (Correa) Page 3
resulting from increased demand for children's hospitals
beds.
Disproportionate Share Hospital Program
The federal Medicaid Disproportionate Share Hospital (DSH)
program provides financial help to hospitals that serve
large numbers of Medicaid and uninsured patients, thereby
offsetting a portion of a hospital's uncompensated care
costs. The cost of providing uncompensated care is
incurred when a patient is unable to fully or partially pay
for their care. Uncompensated care costs are a major
factor creating financial pressure for many hospitals,
especially for public hospitals that serve large numbers of
low-income patients, either Medi-Cal recipients or the
uninsured. Even though the state pays hospitals for
treating Medi-Cal patients, the negotiated hospital rate
for Medi-Cal is so low that hospitals incur substantial
uncompensated care costs.
Congress has allocated about $1 billion annually in DSH
funds for California. Both public and private hospitals
are eligible to receive DSH funds. However, the current
Medicaid hospital waiver directs DSH funding to public
hospitals, while providing other state and federal funds to
private hospitals who would otherwise qualify for DSH
funds. These payments to private hospitals are commonly
referred to as DSH replacement payments.
Prior legislation
SB 559, (Torlakson), Chapter 394, Statutes of 2006,
authorizes DHS to issue a single consolidated license for a
general acute care hospital to Children's Hospital and
Research Center Oakland and the John Muir Medical Center,
Concord campus.
SB 1475 (Perata) 2002 would have granted DHS authorization
to issue a single consolidated license for Children's
Hospital Oakland and St. Rose Hospital in Hayward. Would
have exempted beds from those considered for participation
in the DSH Program and for allocation of DSH funds. This
bill failed passage in the Assembly Health Committee.
AB 2338 (Rainey), Chapter 1141, Statutes of 1996,
authorizes DHS to issue a single consolidated license to
Children's Hospital Oakland and the San Ramon Regional
Medical Center.
STAFF ANALYSIS OF SENATE BILL 1083 (Correa) Page 4
AB 1942 (Papan), Chapter 942, Statutes of 1998, authorizes
Lucille Packard Children's Hospital and the University of
California, San Francisco Medical Center to obtain a single
consolidated license.
Arguments in support
Children's Hospital Orange County (CHOC Children's) reports
that the CHOC Children's Hospital in Orange and CHOC
Children's at Mission Hospital are twenty-one miles apart
- six miles beyond the current limitation for joint
licensure. CHOC Children's contends that SB 1083 would
allow it to bring these two sister hospitals under a single
consolidated license, which would eliminate a number of
duplicative administrative functions and systems and lead
to greater efficiency and economies of scale for both
hospitals.
Lucille Packard Children's Hospital states that expanding
the hospital license requirement for children's hospitals
will support the regionalization of pediatric services that
is recognized as the most high-quality and cost-effective
system for children which also educates future
pediatricians and conducts world-class pediatric research.
Children's Hospital & Research Center Oakland (CHO) states
that expanding the hospital license requirement for
children's hospitals continues the regionalization of
pediatric services which is good for patients and their
families. CHO adds that, in this time of extreme shortages
of pediatric subspecialists, it is not possible for
community hospitals to provide the same services that
children's hospitals provide.
Support as proposed to be amended
Private Essential Access Community Hospitals (PEACH) states
that proposed amendments to SB 1083 adequately address
concerns that consolidating licenses, as outlined in this
bill could lead to instability and lack of predictability
in DSH funding for private community hospitals if
significant private DSH replacement funds were redirected
to children's hospitals.
Arguments in opposition
The Service Employees International Union (SEIU),
California State Council and the California Nurses
Association state that a hospital needs to operate as a
STAFF ANALYSIS OF SENATE BILL 1083 (Correa) Page 5
unit; nursing medical and other staff need to work together
as a team and that accomplishing this teamwork is
difficult, if not impossible if hospitals are more than
fifteen miles apart. The opponents argue that a nursing
director and medical director need to be able to literally
walk the floors of a hospital and see what is going on and
that when two parts of a hospital are separated by thirty
miles, such oversight is not possible on a routine basis.
The opponents note that hospital mergers have failed
because of physical distance, citing the attempt at a
merger by Stanford and University of California, San
Francisco. The opponents contend that there are numerous
barriers to merging hospitals, including different
missions, corporate cultures and communities served, and
that physical distance makes overcoming these barriers even
more challenging.
COMMENTS
1. This bill could negatively impact DSH funding. The
purpose of the following suggested amendments is to
minimize the impact of SB 1083 on non-children's private
DSH eligible hospitals' DSH funding. These amendments
limit the impact of the bill on DSH funding distributions.
Following is a summary of the proposed amendments:
If the satellite hospital is DSH eligible and the
children's hospital is DSH eligible, the DSH replacement
payment would be transferred from the satellite hospital
to the children's hospital.
If the satellite hospital is not DSH eligible, the
children's hospital would not receive any additional DSH
replacement payments despite the increase in Medi-Cal
days due to the remote unit at the satellite hospital.
The DSH provisions in the bill would sunset in five
years, or at the conclusion of a hospital financing
waiver, whichever is first.
The total shift of DSH funds from satellite hospital(s)
to children's hospital(s) is limited to $5 million per
year
Suggested amendments:
Page 7, below line 18 insert:
STAFF ANALYSIS OF SENATE BILL 1083 (Correa) Page 6
(m) To the extent permitted by federal law,
payments made to children's hospitals described in Section
10727 of the Welfare and Institutions Code pursuant to
Section 14166.11 of the Welfare and Institutions Code shall
be adjusted as follows:
(1) The number of Medi-Cal payment days and net
revenues calculated for satellite units of a children's
hospital described in Section 10727 of the Welfare and
Institutions Code that are between 15 and 35, inclusive,
miles from the children's hospital's main campus shall not
be considered for purposes of calculating eligibility for
the private hospital disproportionate share hospital
replacement funds for the children's hospital.
(2) The number of Medi-Cal payment days
calculated for hospital beds located in hospitals that
house satellite units of a children's hospital that are
located between 15 and 35, inclusive, miles from the
children's hospitals' main campus that are included in the
children's hospitals' consolidated license shall only be
used for purposes of calculating disproportionate share
hospital payments authorized pursuant to Section 14166.11
of the Welfare and Institutions Code to the extent that the
hospital that houses the satellite unit that is located
between 15 and 35, inclusive, miles from the children's
hospital's main campus is eligible for private hospital
disproportionate share hospital replacement funds.
(3) The total additional disproportionate share
hospital replacement payments calculated under paragraph
(B) made to children's hospitals shall not exceed $5
million per disproportionate share hospital replacement
year. If the adjusted payment calculation exceeds $5
million for a payment year, the payment distribution under
subdivision (m) to children's hospitals shall be determined
on a pro-rata basis based on Medi-Cal payment days
calculated for hospital beds located in hospitals that
house satellite units that are located between 15 and 35,
inclusive, miles from the main hospital campus that are
included in the children's hospitals' consolidated
licenses.
(4) The provisions of subdivision (m) shall
sunset the earlier of December 31, 2015 or upon the
expiration of a Section 1115 waiver that is approved after
June 30, 2010 and has substantive provisions relating to
hospital financing and thereafter, Medi-Cal payment days
and net revenues for hospital beds located in hospitals
that house satellite units that are located between 15 and
STAFF ANALYSIS OF SENATE BILL 1083 (Correa) Page 7
35, inclusive, miles from the main hospital campus that are
included in the children's hospitals' consolidated license
shall not be included in the calculation of
disproportionate share replacement payment program for
eligibility and payment purposes.
2. Quality of care and services coordination. SB 1083
builds on existing law that allows for a single
consolidated license for general acute care hospitals.
Quality of care issues could potentially arise if nursing
or medical services are not coordinated.
3. Technical amendments.
Suggested amendments:
Page 6, line 39; page 7, lines 5,12 and 14:
Children's Hospital Medical Center of Northern California,
Oakland
.
POSITIONS
Support: California Children's Hospital Association
(sponsor)
Children's Hospice and Palliative Care
Coalition
Children's Hospital Central California
Childrens Hospital Los Angeles
Children's Hospital & Research Center
Oakland
CHOC Children's Hospital
Family Voices of California
Lucile Packard Children's Hospital
Private Essential Access Community Hospitals (as
proposed to be amended)
Rady Childrens Hospital San Diego
Oppose: California Nurses Association
Service Employees International Union,
California State Council
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