BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1083 (Correa)
Hearing Date: 5/17/2010 Amended: 4/28/2010
Consultant: Katie Johnson Policy Vote: Health 5-0
_________________________________________________________________
____
BILL SUMMARY: SB 1083 would permit children's hospitals to
maintain and operate physical plants under a single,
consolidated license that are not more than 35 miles apart if
the children's hospital provides evidence that it can comply
with all requirements of licensure and provide quality care and
adequate administrative and professional supervision.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Potential increased Medi-Cal unknown, potentially millions*
General/**
reimbursement rates of dollars annually Federal
Transfer of DSH unknown, under $5 million
General/**
supplemental funds per year, if permittedFederal
*See staff comments
**38 percent General Fund, 62 percent federal fund until
December 31, 2010; 50 percent General Fund, 50 percent federal
funds ongoing
_________________________________________________________________
___
STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
There are 56 single, consolidated hospital licenses in
California for facilities that are located no more than 15 miles
away from each other, except that this number includes one
single consolidated license for a children's hospital and its
satellite facility, authorized by statute, that is beyond 15
miles away. This bill would permit children's hospitals to form
single, consolidated licenses with facilities up to 35 miles
away. There are 8 children's hospitals and they are the sponsors
of this bill. It is likely that several hospitals would explore
the use of a single, consolidated license.
Any costs to the California Department of Public Health (CDPH),
the entity that licenses hospitals, would be minor and
absorbable and covered by per bed licensing fees.
Potential Change in CMAC Medi-Cal Hospital Per Diem Rates
The California Medical Assistance Commission (CMAC), through the
Selective Provider Contracting Program (SPCP), negotiates
competitive per diem rates for Medi-Cal days with 200 of the
state's hospitals on behalf of the Department of Health Care
Services (DHCS). In the case of a single, consolidated license,
CMAC may negotiate one or two contracts that would include a
blended rate or two separate payment rates. Some hospitals
choose not to contract with CMAC and are paid an interim,
cost-based rate
Page 2
SB 1083 (Correa)
and are reimbursed for fewer days than the contract hospitals.
The average CMAC per diem is $1,369 according to its 2009 Annual
Report. The average children's hospital per diem rate is
approximately $2,000. The cost-based, interim rate paid to
non-contracting hospitals is generally higher than both CMAC
rates. These reimbursements would consist of 38 percent General
Fund and 62 percent federal funds until December 31, 2010, and
would be shared 50 percent General Fund and 50 percent federal
funds thereafter.
CMAC-negotiated rates could change as a result of this bill and
the impact on state reimbursements would depend on the current
CMAC hospital rates, the level of acuity, and the CMAC
contracting status of the new beds that the children's hospital
would put under its single-consolidated license.
While it is unknown whether the average per diem rates would
increase or decrease, this bill could increase the availability
of specialized pediatric services. Thus, the potential for
increased utilization of these services, and thereby the
potential for increased costs to Medi-Cal, exists as a result of
this bill.
For example, in a scenario that would illustrate the potential
cost exposure to the state, if one were to assume that the rate
of reimbursement were to increase $631 per day (the difference
between the average contracting day and the estimated children's
hospital rate) for 10 to 20 beds at one facility, and those beds
were occupied 50 to 75 percent of the year by Medi-Cal enrollees
reimbursed at the CMAC rate, the annual reimbursement could
increase by $1.2 million - $3.5 million. This estimate assumes
that the cost and quality of care increased to the level of that
delivered at the children's hospital and that the host hospital
was a CMAC contracting hospital.
On the other hand, if a children's hospital were to bring beds
that had been reimbursed at the interim rate under a single,
consolidated license, and the beds were then reimbursed at a
lower rate for the same number of days and services, there could
potentially be less of a cost impact. This would be difficult to
estimate since the contracted children's hospital and the
non-contracting host hospital would have been reimbursed at
different rates and for different days.
Transfer of DSH Replacement Payments
The second fiscal aspect of this bill relates to the
Disproportionate Share Hospital (DSH) fund replacement payments
that DHCS remits to private DSH hospitals based on a specified
formula in statute and the annual federal DSH allotment for
designated public hospitals. The DSH replacement payments are
made up of General Fund and matching federal funds, which are
also shared 38 percent General Fund and 62 percent federal funds
until December 31, 2010, and would be shared 50 percent General
Fund and 50 percent federal funds thereafter. DSH hospitals
provide services to a disproportionately high number of
low-income and uninsured individuals.
These provisions of this bill would not constitute an increase
in DSH payments; instead, they would redistribute the funds as
follows.
Page 3
SB 1083 (Correa)
In the event that a children's hospital adds beds to its single,
consolidated license that are located at a DSH hospital pursuant
to this bill, DSH replacement payments would transfer from the
host hospital to the children's hospital. This bill would limit
that amount to a total of $5 million annually. If payments due
were to exceed $5 million in a given year, the children's
hospitals that would be receiving increased DSH funds would be
paid a fraction of the $5 million that would be proportionate to
their share. If a host hospital does not receive DSH replacement
funds, then the children's hospital would not receive increased
DSH funding.
These provisions would become inoperative on January 1, 2016, or
upon the expiration of the next 1115 Hospital Financing Waiver
enacted after June 30, 2010. After these provisions become
inoperative, Medi-Cal payment days and net revenues for hospital
beds located in hospitals that house satellite units that are
located between 15 and 35 miles from the main hospital campus
that are included in the children's hospital consolidated
license shall not be included in the calculation of DSH
replacement payment program for eligibility and payment
purposes.