BILL ANALYSIS �
AB 1728
Page 1
Date of Hearing: April 10, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 1728 (Galgiani) - As Amended: March 27, 2012
SUBJECT : Health care programs: provider reimbursement rates.
SUMMARY : Requires, for services provided between January 1, 2011
and December 31, 2016, hospital inpatient payment rates for the
Healthy Families Program (HFP), non-Medi-Cal California
Children's Services Program (CCS Program), and the Genetically
Handicapped Persons Program (GHPP) be 90% of the Medi-Cal
hospital interim rate of payment developed by the Department of
Health Care Services (DHCS).
EXISTING LAW :
1)Requires provider payment rates for services rendered in the
CCS Program, GHPP, the Breast and Cervical Cancer Early
Detection Program (BCCEDP), the State-Only Family Planning
Program (State-Only FFP), and the Family Planning, Access,
Care, and Treatment (Family PACT) Waiver Program, to be
identical to the rates of payment for the same service
performed by the same provider type under the Medi-Cal
program.
2)Authorizes services provided under the programs in 1) above to
be reimbursed at rates greater than the Medi-Cal rate that
would otherwise be applicable if those rates are increased by
the DHCS Director in regulations.
3)Requires DHCS to develop and implement a new inpatient
hospital payment system based on diagnosis-related groups
(DRG) by July 1, 2012, or the date upon which the DHCS
director executes a declaration certifying that all necessary
federal approvals have been obtained and the methodology is
sufficient for formal implementation, whichever is later.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
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necessary to prevent a decrease in the inpatient hospital
reimbursement rate for services provided to non-Medi-Cal CCS
and GHPP patients. The author points out that without this
legislation, the inpatient reimbursement rate is set to change
from cost-based (the hospital interim rate) to the lower
Medi-Cal rate negotiated through the California Medical
Assistance Commission (CMAC). The author argues that this
bill maintains current reimbursement for the medically fragile
CCS population until full implementation of the new DRG
payment system. According to the author, hospitals such as
children's hospitals, which treat a disproportionate number of
low-income patients, cannot absorb any additional
reimbursement reductions without seriously compromising
patient access. The author points out that the effect of
reducing hospital reimbursement for non-Medi-Cal CCS patients
to the individual hospital CMAC rate would be significant for
California's children's hospitals -an approximately $1
million to more than $3 million reduction per facility
annually. According to the author, the time frame proposed by
this bill is to prevent recoupment for the period between the
expiration of the prior reduction delay and the present and to
delay any future reduction until the full implementation of
the new DRG reimbursement structure.
2)BACKGROUND . This bill effectively only relates to inpatient
reimbursement in the CCS Program and GHPP for non-Medi-Cal
individuals enrolled in those programs because the other
programs (BCCEDP, State-Only FFP, and Family PACT) do not
reimburse for inpatient services.
The CCS Program provides diagnostic and treatment services,
medical case management, and medical and occupational therapy
services to eligible children and young adults less than 21
years of age. Eligibility includes diagnosis of specified
medical conditions such as cancer, congenital heart disease,
and sickle cell anemia. Children receive services in one of
three enrollment pathways: a) CCS-Medi-Cal, in which 141,094
children are estimated to be enrolled in 2011-12; b) CCS-HFP,
in which 24,929 children are estimated to be enrolled in
2011-12; and, c) CCS-only, in which 21,284 children are
estimated to be enrolled in 2011-12. This bill affects
inpatient reimbursement rates for CCS-HFP and CCS-only
children.
GHPP provides medical care to individuals with genetically
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handicapping conditions, including cystic fibrosis,
hemophilia, sickle cell disease, Huntington's disease,
Friedreich's Ataxia, and certain hereditary metabolic
disorders. Individuals receive services in one of two
enrollment pathways: a) GHPP-Medi-Cal, in which 785
individuals are estimated to be enrolled in 2011-12; and, b)
GHPP-only, in which 838 individuals were estimated to be
enrolled in 2011-12. This bill affects inpatient
reimbursement rates for GHPP-only individuals.
3)MEDI-CAL HOSPITAL REIMBURSEMENT . CMAC is a state commission
established to negotiate Medi-Cal contracts with hospitals on
behalf of the state. Hospitals that treat Medi-Cal
fee-for-service (FFS) beneficiaries receive reimbursement
either by contracting with the state through CMAC, or billing
for services provided. CMAC rates are confidential for four
years. When hospitals do not contract with CMAC (referred to
as non-contract hospitals), they are initially paid an interim
rate. Hospitals are then required to submit a cost report
within five months of the close of their fiscal period, and
DHCS reviews each hospital's cost report and prepares a
tentative settlement, which is a determination of the
allowable reimbursable reported costs for a hospital's fiscal
period. DHCS compares what a hospital was paid in interim
payments, to the hospital's allowable reimbursable reported
costs. The difference may result in either an underpayment
that is paid to the hospital or an overpayment that is
recouped from the hospital.
The health budget trailer bill of 2010, SB 853 (Committee on
Budget and Fiscal Review), Chapter 717, Statutes of 2010,
requires DHCS to implement a Medi-Cal methodology based on
DRGs to reimburse hospitals for inpatient care. Medicare has
reimbursed most hospitals since the early 1980s on the basis
of DRGs. Under DRGs, every inpatient hospital stay is
assigned to a single DRG using a computerized algorithm that
takes into account the patient's diagnoses, age, major
procedures performed, and discharge status. Each DRG has a
relative weight that reflects the typical hospital resources
needed to care for a patient in that DRG relative to the
hospital resources needed to take care of the average patient.
Last year's health budget trailer bill, AB 102 (Committee on
Budget), Chapter 29, Statutes of 2011, requires the
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implementation date of the DRG reimbursement methodology to be
July 1, 2012, or the date upon which the DHCS Director
executes a declaration certifying that all necessary federal
approvals have been obtained and the methodology is sufficient
for formal implementation, whichever is later. This date has
now been pushed back to January 1, 2013 to allow hospitals
more time to prepare for full implementation set for 2014. As
the basis for the new DRGs is Medicare, it must be tailored to
the Medi-Cal population, particularly with regard to
children's hospitals. The Medicare population doesn't include
many children and there are no equivalent DRGs for many of the
pediatric-specific services such as neonatal. DHCS is
planning to transition hospitals over a four-year period to
minimize the impact on individual hospitals, especially
hospitals that serve children and rural areas. This bill
proposes to sunset in 2017 to reflect the four year phase in
rather than the 2014 implementation date.
4)CCS AND GHPP HOSPITAL REIMBURSEMENT RATES . AB 2474
(Galgiani), Chapter 496, Statutes of 2008, was enacted as an
urgency measure to clarify that the hospital inpatient rate of
payment is 90% of the Medi-Cal hospital interim rates of
payment. AB 2474 also delayed until January 1, 2010 the
requirement that rates in the CCS Program and GHPP inpatient
hospital rates be reimbursed at their lower Medi-Cal CMAC
rate. In addition, AB 2474 made legislative findings to
prevent a recoupment of previous year hospital inpatient
overpayments in the CCS Program and GHPP by stating that it
was never the Legislature's intent in enacting the 2002 health
budget trailer bill that services to non-Medi-Cal children
enrolled in the CCS Program and GHPP be reimbursed at an
amount less than the Medi-Cal interim rate. The intent
language in AB 2474 was to protect hospitals that provide care
in the CCS Program and GHPP from being subject to recoupment
for overpayments, and to protect the state from being
obligated to reimburse the federal government for overpayments
in the HFP, which is generally funded 65% by federal funds.
AB 896 (Galgiani), Chapter 260, Statutes of 2009, extended the
reimbursement rate until January 1, 2011. AB 1872 (Galgiani)
of 2010 would have extended the sunset to January 1, 2014.
However it died on suspense in Senate Appropriations and
therefore the law reverted to the pre-AB 2474 version. AB 715
(Galgiani) of 2011 would enact a new permanent exception but
it died on suspense in the Assembly Appropriations Committee.
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5)SUPPORT . According to the sponsor, California Children's
Hospital Association (CCHA), hospitals have historically
received their Medi-Cal cost-based rate (interim rate) for
treating non-Medi-Cal CCS patients. The sponsor writes in
support, that the costs associated with treating these
seriously ill children can be significant due to the acuity of
the patients and the intensity of resources required for their
care. CCHA further explains that AB 2474 and AB 896 were in
response to a 2008 legal review by DHCS which brought into
question the methodology for reimbursing hospitals. According
to CCHA, both AB 2474 and AB 896 clarified DHCS and
legislative intent that hospitals should receive 90% of their
cost-based rate until January 1, 2011. CCHA further argues
that despite the expiration of the prior legislation,
hospitals have continued to receive the 90% rate.
The sponsor argues that without this bill, hospitals will
begin to be reimbursed at a lower rate for their high-cost,
medically fragile CCS patients starting April 23, 2012.
According to CCHA, this is when DHCS has said it plans to
switch over to the reimbursement system that pays hospitals
the lower CMAC-negotiated rate for services for the
non-Medi-Cal population. CCHA also reports that DHCS is
planning to begin to recoup the difference in reimbursement
retroactively to January 1, 2011 when the last delay
sunsetted. CCHA argues in support that the loss to the
children's hospitals is significant as the recoupment cost for
the past 15 months is approximately $800,000-$4.5 million per
facility. According to CCHA, hospitals, such as children's
hospitals, that treat a disproportionate number of low-income
patients cannot absorb any additional reimbursement reductions
without seriously compromising patient access.
6)PREVIOUS LEGISLATION .
a) AB 715 of 2011, would have enacted a permanent exception
to the requirement that hospital inpatient rates for the
non-Medi-Cal CCS Program and the GHPP be identical to
payment rates for the same service performed by the same
provider type under the Medi-Cal Program, and instead would
have required that hospital inpatient rates be 90% of the
Medi-Cal hospital interim rates of payment. AB 715 died on
suspense in the Assembly Appropriations Committee.
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b) AB 1872 would have delayed, until January 1, 2014, the
requirement that non-Medi-Cal hospital inpatient rates in
the CCS Program, GHPP, BCCEDP, and Family PACT Waiver
Program be identical to payment rates for the same service
performed by the same provider type under the Medi-Cal
Program and clarifies that the rate be 90% of the Medi-Cal
hospital interim rate. AB 1872 died on suspense in the
Senate Appropriations Committee.
c) AB 896 extended the reimbursement rate exemption until
January 1, 2011.
d) AB 2474 delayed, to January 1, 2010, the requirement
that non-Medi-Cal hospital inpatient rates in the CCS
Program, GHPP, BCCEDP, and Family PACT Waiver Program be
identical to payment rates for the same service performed
by the same provider type under the Medi-Cal Program and
clarifies that the rate be 90% of the Medi-Cal hospital
interim rate.
e) AB 434 (Committee on Budget), Chapter 1161, Statutes of
2002, required that provider rates of payment for services
rendered in the CCS Program, GHPP, BCCEDP, State-Only FPP,
and Family PACT be identical to the rates of payment for
the same service performed by the same provider type in the
Medi-Cal Program Legislature
7)POLICY QUESTION.
a) Need for this bill. AB 1872 of 2010 would have delayed
implementation of the inpatient rate reduction until 2014,
but it died on suspense in the Senate Appropriations
Committee. AB 715 of 2011 would have permanently delayed
implementation, but it died on suspense in the Assembly
Appropriations Committee even though the estimated $15
million to $25 million cost was included in the DHCS
2011-12 budget as reflecting a longstanding DHCS
reimbursement policy.
However, the legislature has for the last two years declined
to extend the exemption and DHCS has now made the systems
changes to implement the law. Given the current fiscal
constraints and potential cuts to existing health programs,
is there sufficient justification to require DHCS to
reverse course? Should inpatient reimbursement be
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different depending upon whether the CCS Program or
GHPP-eligible individual is enrolled in Medi-Cal versus
GHPP-only, CCS-only or CCS-HFP?
8)AMENDMENTS . Proposed amendments to be adopted by the committee
add an urgency clause in order for the bill to become
effective immediately and prevent retroactive recoupment.
REGISTERED SUPPORT / OPPOSITION :
Support
California Children's Hospital Association, sponsor
California Hospital Association
Children's Hospital Central California
Children's Hospital Los Angeles
Children's Specialty Care Coalition
CHOC Children's Hospital Orange County
Lucile Packard Children's Hospital
Miller Children's Hospital Long Beach
Opposition
None on file.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097