BILL ANALYSIS �
AB 113
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( Without Reference to File )
CONCURRENCE IN SENATE AMENDMENTS
AB 113 (Monning)
As Amended March 31, 2011
2/3 vote. Urgency
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|ASSEMBLY: | |(February 22, |SENATE: |37-0 |(April 7, |
| | |2011) | | |2011) |
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(vote not relevant)
Original Committee Reference: Not applicable
SUMMARY : Establishes the Non-Designated Public Hospital (NDPH)
Inter-governmental Transfer (IGT) Program, administered by the
Department of Health Care Services (DHCS), under which public
entities would voluntarily transfer funds to the state for the
purpose of drawing down federal funds to make supplemental
Medi-Cal payments to these NDPHs.
The Senate amendments delete the Assembly-approved version of this
bill, and instead:
1)Establish an NDPH Medi-Cal Rate Stabilization Program to allow
NDPHs (District Hospitals) to use local public funds as IGTs
that can be matched with federal funds in the Medi-Cal program
and paid as supplemental payments for inpatient Medi-Cal
fee-for-service (FFS) days in a NDPH.
2)Make participation in the IGT program voluntary for public
entities and authorizes the state to retain 9% of each IGT
amount to reimburse DHCS for its administrative costs, and for
the benefit of Medi-Cal children's health care programs.
3)Require full implementation beginning with the 2010-11 fiscal
year, subject to federal approval.
4)Establish a process for determining the federal Upper Payment
Limit (UPL) and the shortfall in UPL as a mechanism to determine
the maximum amount allowable for an IGT pool.
5)Require the available funds to be allocated from each pool
according to a point system formula based on the amount of
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charity care, bad debt, percentage of Medi-Cal charges, and
whether the hospital meets specified conditions relating to
medically underserved, health professional shortage or critical
access criteria.
6)Categorize hospitals based on the point system and provide for
specific allocations within each category based on the actual
number of acute care beds.
7)Establish a process and timelines for determining the
participation, transfer of funds and IGT allocation from each
NDPH.
8)Establish a mechanism for transfer of funds to the state for
deposit in the existing Medi-Cal Inpatient Payment Adjustment
Fund, which is continuously appropriated.
9) Require DHCS must make supplemental payments to NDPHs by March
31st of each fiscal year.
10)Require DHCS to report annually for four years to the
Legislature on the NDPH IGT Program.
11)Authorize DHCS to implement this bill by means of policy
letters or similar instruction without further regulatory
action.
12)Appropriate $1.5 billion from the Hospital Quality Assurance
Revenue Fund and $1.5 billion from the Federal Trust Fund to
DHCS to make supplemental payments to private hospitals under SB
90 (Steinberg).
13)Make this bill operative only if SB 90 (Steinberg) is enacted
and becomes operative.
14)Add an urgency clause.
EXISTING LAW :
1)Establishes the Medi-Cal Program, administered by DHCS, to
provide comprehensive health care services and long-term care to
pregnant women, children, and people who are aged, blind, and
disabled.
2)Provides for the payment of hospital services including FFS
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negotiated, by contract with the California Medical Assistance
Commission (CMAC) or by with a Medi-Cal managed care (MCMC)
health plans.
AS PASSED BY THE ASSEMBLY , this bill contained content language
related to the Budget Act of 2011.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS : This bill would provide a source for supplemental
payments in the Medi-Cal Program for NDPHs, hospitals owned by
hospital districts. Hospitals in the Medi-Cal Program are
reimbursed in a variety of ways. Federal law generally requires
Medi-Cal providers to be paid for reasonable costs up to the
amount Medicare pays for a similar service. Hospitals under this
rule are paid costs on a FFS service basis. However California
utilizes a variety of creative payment systems, cost-cutting
programs, and rate reductions enacted through the budgets that
have resulted in an actual rate in California that is closer to
50% of Medicare. For instance, in certain areas hospitals must
contract with CMAC and may also contract with a MCMC plan. This
contracting allowed CMAC to negotiate a competitive rate in place
of the traditional "cost-based" reimbursement system used by most
states. According to CMAC's Annual Report to the Legislature,
2009, this has saved the state a total of approximately $10.9
billion in State General Fund (GF) savings since 1983.
PUBLIC HOSPITAL REIMBURSEMENT. Reimbursement for 21 University of
California and county designated public hospitals is based on
certified public expenditures (CPEs) up to the Medicare limit and
the CPEs provide the match for federal funds, rather than GF.
NDPHs are reimbursed differently. NDPHs are paid by Medi-Cal with
federal funds and state GF, and the amounts vary by hospital.
NDPHs choosing to contract with the state through CMAC are paid by
Medi-Cal a per diem rate (a daily rate) for each day a Medi-Cal
beneficiary is in the hospital that is negotiated between CMAC and
the hospital. Under the state's Medicaid 1115 waiver (called
"California Bridge to Reform Implementation"), CMAC payments can
include supplemental payments using GF and federal funds, provided
these payments do not exceed the federal UPL under federal
regulations.
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NDPHs that do not contract with the state in the FFS Medi-Cal
program are known as non-contract hospitals, and they are
initially paid an interim rate. Noncontract hospitals are then
required to submit a cost report before the close of their fiscal
period. Based on each hospital's cost report Medi-Cal will pay up
to the allowable reimbursable reported costs for the noncontract
hospital's fiscal period.
In addition, NDPHs are eligible for Medicaid disproportionate
share (DSH) payments if they meet the criteria to be a DSH
hospital. Under the state's Medicaid 1115 waiver, the nonfederal
share of DSH payments to NDPHs is the state GF.
UPL LIMIT. There are 48 NDPHs in California. Federal law
establishes a maximum payment that categories of hospitals can
receive under Medicaid, known as the UPL. NDPHs are estimated to
have "room" under their UPL under Medicaid law that will allow
them to receive $64 million in supplemental Medi-Cal payments in
2010-11. Under this bill, public entities would transfer (through
an IGT) $30.7 million to the state, which would then be matched by
$33.2 million in federal funds. The resulting $64 million in
total revenue would be returned to these facilities under the
allocation formula contained in this measure. The IGT program
established under this bill would be an on-going program.
HOSPITAL PROVIDER FEE. Under the Medi-Cal hospital fee enacted by
legislation last session, NDPHs were exempt from paying the
Medi-Cal hospital provider fee but received supplemental payments
resulting from revenue. Under the six-month extension of the
hospital fee contained in SB 90 (Steinberg), NDPHs will not
receive supplemental payments. Instead, this bill establishes an
IGT program for these NDPHs whereby public entities would transfer
funds to the state, and these funds would be matched by federal
funds to provide additional funds up to the federal UPL. The
advantage of an IGT program is that, unlike the fee program, all
transferring hospitals benefit from additional federal funds above
amounts they contribute, up the amount of the contributions from
governmental entities.
CONTINGENT ENACTMENT. Enactment of this bill is contingent on
enactment of SB 90 (Steinberg), which would make inoperative
specified Medi-Cal hospital rate freezes and rate reductions
enacted in the budgets of 2008-09, 2009-2010, and 2010-2011. SB
90 would also impose a new hospital provider fee on specified
private hospitals for six months (January 1, 2011 until June 30,
2011), and use the resulting revenue to do several things: to
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draw down federal funds to provide supplemental payments to
private hospitals in FFS Medi-Cal, MCMC, and for acute psychiatric
days; to provide $210 million in funding for children's health
coverage in the current year. SB 90 also reduces DSH-type
payments to private hospitals by $30 million in the current year
and $75 million in the 2011-12 budget year.
SB 90 also requires DHCS to design and implement an IGT program
for MCMC services provided by designated and non-designated public
hospitals in order to increase capitation payments for the purpose
of increasing reimbursement to these hospitals.
In addition, SB 90 would also allow hospitals that have received
extensions to 2013 of the seismic deadlines for their SPC-1
(structural performance category) buildings to request an
additional extension of up to seven years, and would allow the
Office of Statewide Health Planning and Development (OSHPD) to
grant the extension if the hospital meets several interim
deadlines. In deciding whether to grant the extension, as well as
the length of the extension, OSHPD would be required to consider
several criteria, including the structural integrity of the
building(s), community access to the hospital services, and the
hospital owner's financial capacity. The length of any extension
could not exceed the amount of time that the owner reasonably
needs to complete construction; however, a hospital would be able
to adjust the length of the extension by up to six months under
certain circumstances. OSHPD would be authorized to revoke an
extension if a hospital falsifies information, fails to meet any
interim deadlines, or if construction is abandoned or suspended,
as specified. Hospital owners who apply for extensions under
this bill would be required to pay additional fees to cover
OSHPD's costs of reviewing the requests for extensions. OSHPD
would be allowed to use emergency regulations to implement the
bill's seismic extension provisions. The bill provides that the
seismic extension provisions would become operative on the date
that DHCS receives federal approvals for a 2011-12 hospital
quality assurance fee program that includes $320 million in fee
revenue to pay for health coverage for children, as specified.
The GF savings from all of the provisions of SB 90 are estimated
to be $50 million in the current year and $305 million in the
budget year. If the state is assumed to continue to be unable to
fully implement a Medi-Cal rate freeze due to a court injunction,
the savings resulting from this bill are estimated to be greater,
resulting in a net gain to the state of $88 million in the current
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year and $412 million in the budget year, for a total of $500
million.
This bill has been substantially amended in the Senate, the
subject matter in this bill has not been heard in an Assembly
policy committee.
Analysis Prepared by : Marjorie Swartz and Tanya Taylor-Robinson
/ HEALTH / (916) 319-2097
FN: 0000199