BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 1409
S
AUTHOR: Price
B
AMENDED: April 13, 2010
HEARING DATE: April 21, 2010
1
CONSULTANT:
4
Dunstan/cjt
0 9
SUBJECT
Medi-Cal: hospital demonstration project funding: County of
Los Angeles
SUMMARY
Extends the period for which specified sources of funding
are available for paying health care providers who provide
services to the south Los Angeles population formerly
served by Los Angeles County Martin Luther King, Jr. -
Harbor Hospital (MLK Harbor).
CHANGES TO EXISTING LAW
Existing federal law:
Existing federal law establishes the Medicaid program to
provide comprehensive health benefits to specified groups
of low-income persons. Existing law also provides that
states may be granted waivers of federal law to implement
their Medicaid programs.
Existing state law:
Establishes the Medi-Cal program, the state's Medicaid
program, administered by Department of Health Care Services
(DHCS), which provides comprehensive health benefits to
low-income children; their parents or caretaker relatives;
pregnant women; elderly, blind or disabled persons; nursing
home residents and refugees. Creates a hospital
demonstration project to implement a five-year federal
Continued---
STAFF ANALYSIS OF SENATE BILL 1409 (Price) Page 2
Medicaid waiver for support of public hospitals that serve
uninsured patients and patients whose health care services
are covered by Medi-Cal. Creates the Safety Net Care Pool
for the federal funds available under the demonstration
project to ensure continued government support for the
provision of health care services to uninsured populations.
Defines a designated public hospital to be one of 22
hospitals designated in the federal waiver.
Establishes the South Los Angeles Medical Services
Preservation Fund to which a maximum amount of $100 million
of safety net care pool funds will be deposited per year
for the project years 2007-08, 2008-09, and 2009-10 for the
purpose of funding health services for the uninsured
population of South Los Angeles. Directs DHCS to allocate
these funds for services provided by the County of Los
Angeles facilities still operating at the MLK Harbor site,
by other designated public hospitals operated by Los
Angeles County and other providers who contract with Los
Angeles County. Requires the County of Los Angeles to make
intergovernmental transfers to the state to provide the
nonfederal share of increased Medi-Cal payments to those
private hospitals that serve the population formerly served
by the MLK Harbor.
Existing law requires counties to provide medical services
for the medically indigent.
This bill:
Adds three additional years to the period in which the
County of Los Angeles shall make intergovernmental
transfers to the state to provide the nonfederal share of
increased Medi-Cal payments to those private hospitals that
serve the population formerly served by the MLK Harbor
Hospital.
Adds three additional years to the period in which the
safety net care pool may provide funding for health
services in south Los Angeles.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
STAFF ANALYSIS OF SENATE BILL 1409 (Price) Page 3
BACKGROUND AND DISCUSSION
The author argues that the closure of MLK Harbor in 2007
left a void in health care services in south Los Angeles,
one of the most medically underserved communities in the
United States. The author states that in order to meet the
health care needs of South Los Angeles, the federal and
local funding that previously supported MLK Harbor was
redistributed in accordance with state law by the County of
Los Angeles to community clinics and private hospitals
serving the community as well as the clinic which the
County of Los Angeles continues to operate on the site of
the MLK Harbor. He notes that other county clinics and
hospitals also took some of the patient load. The author
argues that this legislation is needed this year to extend
the sunset, and without such an extension, the funding will
be distributed elsewhere in California or reverted to the
federal government. The author argues that failure to act
now would mean taking away funding from community clinics,
private hospitals and county health system services that
have filled the gap left by the closure of MLK Harbor
hospital.
Background
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 which 32 people died and 1,000 people were
injured. 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 is
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 it's partnership with Drew University, had become a
teaching hospital.
The hospital began to face significant difficulties,
STAFF ANALYSIS OF SENATE BILL 1409 (Price) Page 4
culminating in the 2007 vote by the Los Angeles County
Board of Supervisors to close MLK-Harbor because of the
challenges threatening the continuing operation of the
hospital, including losing its funding or the possibility
of losing its license over allegations of substandard care.
Since the closure of MLK-Harbor in August 2007, the county
has been working on 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 University of California to assist in this
effort. Representatives from the University, Los Angeles
County and the Schwarzenegger administration have been
discussing an arrangement that would allow MLK-Harbor to
reopen as a viable health care facility.
The county established a partnership with the University of
California system to reopen the hospital as a nonprofit
organization 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 by the
university system, two by county officials, and three
jointly. The county will contribute $50 million annually to
cover expenses and operating costs and $13.3 million a year
toward the care of uninsured patients. The county would
continue to staff and operate the hospital's outpatient
services center, which has remained open after the hospital
closed. The facility is scheduled to reopen as early as
2013. The new nonprofit entity would handle all hiring for
the hospital.
SB 1100 of 2005
SB 1100 authored by Senators Ducheny and Perata, (Chapter
560, Statutes of 2005), provides the statutory framework
for implementing the current hospital waiver. SB 1100 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, disproportionate share
hospital. Public entities are also allowed to use
intergovernmental transfers where funds are transferred to
the state and the state subsequently uses the funds as the
nonfederal share to match federal Medicaid funds.
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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
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. There is a
distinct possibility that the existing waiver will be
extended to allow additional time for the development and
approval of a new waiver.
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
state, in turn, used the funds for the nonfederal share of
increased Medi-Cal payments to those private 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. The demonstration project was created in the wake
of express intent on the part of the County of Los Angeles
to restore hospital services on the MLK Harbor Hospital
campus to be operated by either a private or public entity.
Related bills
SB 209 (Steinberg) directs the Department of Health Care
Services (DHCS) to develop a Medicaid waiver for the
state's Medi-Cal program and submit the waiver for federal
approval by September 1, 2010. This bill is in the
Assembly Health Committee
AB 342 (Bass) is identical to SB 208. This bill is in the
Senate Health Committee.
STAFF ANALYSIS OF SENATE BILL 1409 (Price) Page 6
Prior legislation
SB 474 (Kuehl), Chapter 518, Statutes of 2007, established
the South Los Angeles Demonstration Project.
SB 1100 (Perata and Ducheny), Chapter 560, Statutes of
2005, provides the framework for implementing the new
federal hospital finance waiver, including establishing a
new mechanism for funding of safety-net hospitals.
Arguments in support
The Service Employees International Union, the bill's
sponsor, argues that this bill is necessary to continue
providing the funding to help community clinics and private
hospitals so that the closing of MLK Harbor did not mean a
loss of health care capacity. They also note that there
has been considerable progress made in reopening MLK Harbor
and that its planned reopening coincides with the
implementation of health care reform, which should
dramatically decrease the number of uninsured in south
central Los Angeles. Clinics that receive funding under
this program write in support of the bill and note that
they have become increasingly concerned about their ability
to continue to provide health care services to their most
vulnerable community members while maintaining the existing
capacity that they now have. They report that their
patient base has grown 52 percent since the closing of the
MLK Harbor.
COMMENTS
This bill makes sense in the context of the current
Medi-Cal hospital waiver. As mentioned, DHCS is in the
process of developing a new waiver that will address, among
other issues, hospital funding, including the safety net
care pool. When the new waiver is negotiated, the
provisions of this bill may need to be revisited to ensure
they are consistent with the new waiver.
POSITIONS
Support: Service Employees International Union (sponsor)
California Medical Association
St. John's Well Child & Family Center
Southside Coalition of Community Health Centers
STAFF ANALYSIS OF SENATE BILL 1409 (Price) Page 7
To Help Everyone Clinic, Inc.
University Muslim Medical Association Community
Clinic (UMMA)
Oppose: None received
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