BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 90|
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UNFINISHED BUSINESS
Bill No: SB 90
Author: Steinberg (D), et al.
Amended: 4/6/11
Vote: 27 - Urgency
PRIOR SENATE VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available at time of writing
SUBJECT : Health: hospitals: Medi-Cal
SOURCE : California Hospital Association
DIGEST : This bill enacts standards for an extension of
hospital seismic safety requirements, enacts a Medi-Cal
six-month hospital provider fee, an intergovernmental
transfer (IGT) program for public hospitals related to
Medi-Cal managed care (MCMC), and makes other changes
necessary to implement savings related to the 2010-11
Budget and the 2011-12 Budget Act.
Assembly Amendments delete the prior version of the bill, a
Budget trailer bill, and implement the current language
regarding Medi-Cal.
NOTE: On April 6, 2011, this bill passed the Assembly
Health Committee (14-1), as well as the Assembly
Appropriations Committee (16-0), where an urgency
clause was added.
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ANALYSIS : This bill and the companion bill, AB 113
(Monning), represent a negotiated agreement between the
Governor and the California Hospital Association (CHA) as
part of the 2010-12 Budget. The package will result in a
net increase General Fund savings to the State of
approximately $50 million for the current year and
potentially up to $355 million in budget year 2011-12.
This bill includes an enactment of a new six-month hospital
provider fee and supplemental payments of up to
approximately $2 billon to private hospitals that serve
Medi-Cal patients. A portion of the new funds will be used
for children's health coverage.
Existing law:
1. Establishes and grants the Office of Statewide Health
Planning and Development (OSHPD) authority and
responsibility for reviewing and approving all plans
relating to construction, additions to, reconstruction,
or alteration of, "health care facilities," as defined.
Before adopting any such plans, requires hospitals to
submit the plans to OSHPD for approval and to pay an
application filing fee, as determined by OSHPD, based on
the project's estimated construction cost.
2. Establishes the Alfred E. Alquist Hospital Facilities
Seismic Safety Act of 1983 (Alquist Act), and its
amendments, with the following deadlines for seismic
safety compliance:
A. After January 1, 2008, requires any hospital
building that is determined to be a potential risk
for collapse or significant loss of life in a major
earthquake (i.e., designated as structural
performance category-1 �SPC-1]) to be used only for
non-acute care purposes;
B. Authorizes OSHPD to extend the 2008 deadline by
five years, to January 1, 2013, if:
The hospital demonstrates that compliance
with the 2008 deadline will result in a loss of
health care capacity that may not be provided by
other hospitals within a reasonable proximity, and
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other conditions are met;
The hospital agrees that by January 1, 2013,
designated services will be provided by moving into
an existing conforming building, relocating to a
newly-built building, or continuing in the
retrofitted building, as specified; or,
The building is either retrofitted to SPC-2
and non-structural performance category-3
standards, or not used for inpatient services, by
January 1, 2013.
C. Authorizes OSHPD to extend the 2013 deadline by up
to two additional years, up to January 1, 2015, if
the hospital meets specified interim deadlines and is
making reasonable progress toward meeting its
timeline to retrofit or replace an SPC-1 building but
is delayed due to factors beyond its control;
D. Permits a hospital owner, in lieu of retrofitting
or rebuilding SPC-1 buildings by 2013, to instead
replace them by January 1, 2020, if:
The hospital meets specified conditions,
including serving Medi-Cal or indigent patients and
underserved areas, and OSHPD certifies that the
hospital owner lacks the financial capacity to meet
seismic standards, as defined; or,
The nonconforming building is owned or
operated by a county, city, or county and city that
lacks the ability to meet the 2013 deadline but
commits to replace the buildings by January 1,
2020.
E. Authorizes OSHPD to extend the 2013 deadline by
two-years for a hospital building owned by a health
care district, but operated by a third party under a
lease that extends at least through December 31,
2009, based on a declaration that the health care
district has lacked, and continued to lack,
unrestricted access to the hospital building for
seismic planning purposes during the time of the
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lease;
F. Authorizes OSHPD to extend the 2013 deadline by up
to three years for hospitals that document a local
planning delay. Authorizes OSHPD to grant an
additional extension of up to two years, beyond the
three years, for projects that do not provide acute
care services and meet other criteria regarding life
support systems and structural risk, as specified;
and,
G. Requires, by January 1, 2030, all hospital
buildings to be capable of remaining intact after an
earthquake, and capable of continued operation and
provision of acute care medical services (designated
as SPC-5), and requires owners of all acute care
inpatient hospitals to demolish, replace, or change
to non-acute care all hospital buildings not in
substantial compliance.
3. Requires an owner of a hospital building classified as
SPC-1, who has not requested an extension of the 2008
deadline, to submit a report to OSHPD no later than
April 15, 2007, describing the status of each building
in complying with the deadline, and to identify the
following:
A. Each building that is subject to the deadline;
B. The project number or numbers for retrofit or
replacement of each building;
C. The projected construction start date or dates and
projected construction completion date or dates; and,
D. The building or buildings to be removed from acute
care service and the projected date or dates of this
action.
4. Requires owners of SPC-1 hospital buildings who have
requested an extension of the 2008 deadline to submit
similar reports by June 30, 2009, and November 1, 2010.
5. Requires OSHPD to make the information reported pursuant
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to #3 and #4 above available on its Web site within 90
days of receipt.
6. Establishes the Medi-Cal Program, administered by the
Department of Health Care Services (DHCS), to provide
comprehensive health care services and long-term care to
pregnant women, children, and people who are aged,
blind, and disabled.
7. Provides for the payment of hospital services, including
fee for service (FFS), negotiated by contract with the
California Medical Assistance Commission (CMAC) or by
MCMC health plans.
Specifics of this bill
Seismic Safety Standards :
1. Permits all hospitals that have received an extension of
the hospital seismic safety standards requirement to
2013, to also request an additional extension of up to
seven years, for a hospital building that it owns or
operates.
2. Permits the OSHPD to grant the extension subject to the
hospital meeting the following milestones, unless the
hospital building is reclassified to a SPC-2 or higher
as a result of its Hazard Loss Estimation Methodology,
Earthquake Module score (known as Hazards US, or HAZUS)
if:
A. The hospital owner submits to OSHPD, no later than
March 31, 2012, a letter of intent stating whether it
intends to rebuild, replace, or retrofit the
building, or remove all general acute care beds and
services from the building, and the amount of time
necessary to complete the construction;
B. The hospital owner submits to OSHPD, no later than
March 31, 2012, a schedule detailing why the
requested extension is necessary, and specifically
how the hospital intends to meet the requested
deadline;
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C. The hospital owner submits an application ready
for review to OSHPD seeking structural reassessment
of each of its SPC-1 buildings using current computer
modeling based upon software developed by Federal
Emergency Management Agency (FEMA), referred to as
Hazards US, no later than January 1, 2013;
D. The hospital owner submits to OSHPD plans ready
for review consistent with the letter of intent
submitted in accordance with #2-A above and the
schedule submitted in accordance with #2-B above, no
later than January 1, 2015;
E. The hospital owner submits a financial report to
OSHPD at the time the plans referenced in #2-D above
are submitted. Requires the financial report to
demonstrate the hospital owner's financial capacity
to implement the construction plans; and,
F. The hospital owner receives a building permit
consistent with the letter of intent referenced in
#2-A above and the schedule referenced in #2-B above
no later than July 1, 2018.
3. Requires OSHPD, when evaluating public safety and
determining whether to grant an extension of the
deadline or the length of that extension, to consider
the following criteria:
A. The structural integrity of the hospital's SPC-1
buildings based on its HAZUS scores;
B. Community access to essential hospital services;
and,
C. The hospital owner's financial capacity to meet
the deadline as determined by either a bond rating of
BBB, or below, or the financial report on the
hospital owner's financial capacity submitted in
accordance with #2-E above.
4. Prohibits the extension granted by OSHPD from exceeding
the amount of time that is reasonably necessary to
complete the construction.
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5. Requires a hospital owner to notify OSHPD, as soon as
practicable, if the circumstances underlying the request
for extension change, but no later than six months after
the hospital owner discovers the change of
circumstances. Permits OSHPD to adjust the length of
the extension granted as necessary, but no longer than
up to 2020.
6. Permits a hospital denied an extension to appeal the
denial to the Hospital Building Safety Board.
7. Permits OSHPD to revoke an extension granted for any
hospital building where it is determined any information
submitted was falsified, or if the hospital failed to
meet a milestone set forth in #2 inclusive above, or
where the work of construction is abandoned or suspended
for a period of at least six months, unless the hospital
demonstrates in a publicly available document that the
abandonment or suspension was caused by factors beyond
its control.
8. Requires regulatory submissions made by OSHPD to the
California Building Standards Commission to implement
this seismic extension to be deemed emergency
regulations and be adopted as such.
9. Requires a hospital owner that applies for this
extension to pay to OSHPD an additional fee, to be
determined by OSHPD, sufficient to cover the additional
cost incurred by OSHPD for maintaining the additional
reporting requirements as a result of this extension,
including but not limited to, the costs of reviewing and
verifying the extension documentation. Prohibits the
additional fee from including any cost for review of the
plans or other duties related to receiving a building or
occupancy permit.
10.Requires this seismic extension to become operative on
the date that the DHCS receives all necessary federal
approvals for a 2011-12 fiscal year hospital quality
assurance fee program that includes $320 million in fee
revenue to pay for health care coverage for children,
which is made available as a result of the legislative
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enactment of a 2011-12 fiscal year hospital quality
assurance fee program.
Hospital Financing Provisions:
11.Reduces, disproportionate share hospital (DSH)
replacement payments to private hospitals by $30 million
General Fund, and matching Federal Financial
Participation (FFP) for the current budget year and by
$75 million General Fund for 2011-12.
12.Makes inoperative various rate reductions and rate
freezes as follows:
A. Makes inoperative the freeze, enacted by SB 853
(Senate Budget and Fiscal Review Committee), Chapter
717, Statutes of 2010 (Health Budget Trailer Bill) on
any inpatient rate increases negotiated by private
hospitals by the CMAC, restores the rate
retroactively and adds a requirement that DHCS
explore other avenues for achieving rate stability
needed for transition to a Diagnosis-Related Groups
methodology;
B. Makes inoperative, from the effective date of this
bill, the 10 percent reduction in Medi-Cal FFS
interim payments for inpatient services that was
effective as of July 1, 2008 and the reduction based
on the average CMAC rate minus 5 percent that was
effective on October 1, 2008; and,
C. Exempts hospital in-patient reimbursement rates
from the 10 percent provider reimbursement rate
reduction enacted in AB 97 (Assembly Budget
Committee), Chapter 3, Statutes of 2011, the health
budget trailer bill that enacted the statutory
changes necessary for the Budget Act of 2011-12.
13. AB 1383 (Jones), Chapter 627, Statutes of 2009 relating
to the Medi-Cal Hospital Provider Fee . Specifically, it
clarifies that the Medi-Cal hospital provider fee
enacted by AB 1383 was not intended to create a private
right of action by a hospital against a managed care
plan, provided the managed care plan expends all
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increased capitation payments for hospital services.
14. Provides for a Six-Month Extension of Medi-Cal Hospital
Provider Fee . Specifically, the bill enacts a hospital
provider fee and Medi-Cal supplemental payment program
for the period from January 1, 2011 through June 30,
2011 as follows:
A. Establishes a per diem fee rate to be paid by
hospitals at a rate of $27.25 per non-MCMC day, $275
per Medi-Cal inpatient day, $15.26 per prepaid health
plan hospital managed care day, $154 per prepaid
health plan hospital MCMC day, and up to $253.59 for
FFS;
B. Imposes the requirement to pay the fee on all
general acute care hospitals, on a six month basis
from January 1, 2011 to July 1, 2011; and exempts
public hospitals, district hospitals, and small and
rural hospitals;
C. Specifies timelines for DHCS to calculate the fee
for each hospital, notify the hospitals, and for each
hospital to pay the designated amount and definitions
necessary for implementation, dependent on federal
approval;
D. Provides that the fee shall not exceed the maximum
aggregate net patient revenue percentage that is
allowed under federal law as necessary to preclude a
finding of an indirect guarantee;
E. Authorizes DHCS to deduct amounts owed from other
payments to the hospital, to assess interest and
authorizes the penalties to be waived;
F. Requires private hospitals to be paid a
supplemental payment for Medi-Cal outpatient services
based on the hospital's percentage of all Medi-Cal
FFS outpatient services;
G. Requires supplemental payments to private
hospitals for inpatient services and sub-acute
hospital services to be 50 percent of the following:
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$911.48 for each general acute day;
$485 for each acute psychiatric day
directly reimbursed by DHCS;
An additional $1,350 for high acuity days,
as defined, for hospitals that qualify as moderate
DSH;
An additional $1,350 for high acuity days
to hospitals with certain trauma centers, as
specified; and,
20 percent of the amount of Medi-Cal
sub-acute payments to hospitals that qualify as
moderate DSH for sub-acute services;
H. Requires DHCS to increase monthly capitation
payments to Medi-Cal health managed care plans in the
total amount of $323 million and requires DHCS to
determine the amount of increased capitation for each
plan considering the composition of Medi-Cal
enrollees in each plan and based on federal actuary
requirements;
I. Requires that payments otherwise made to managed
care plans shall not be reduced as a consequence of
these supplemental payments, establishes timelines
and a process to make payments to managed care plans
and requires that 100 percent be expended on hospital
services;
J. Requires managed care plans to expend the
capitation rate increases consistent with actuarial
certification, enrollment, and utilization of
hospital services and within specified timelines;
K. Establishes alternative payment and fee collection
procedures in the event of a new hospital, hospital
closures or conversions, a reduction in FFP or fees
that are paid after specified dates;
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L. Requires disbursements from the Hospital Quality
Assurance Revenue Fund for deposit of the fee, plus
Federal Medical Assistance Percentage (FMAP) funds,
to be used exclusively as appropriated by the
Legislature, in this bill in the following priority:
Administrative costs incurred by DHCS for
implementation of this bill up to $500,000;
Health coverage for children up to $105
million per quarter;
Increased capitation payments to MCMC
plans;
Reimburse the General Fund for increase in
costs due to a hospital no longer contracting with
CMAC;
Increased payments to private hospitals;
Increased payments to Medi-Cal mental
health plans.
M. Creates a contractually enforceable promise on
behalf of the state to use the proceeds only for the
specified purposes and to comply with all obligations
imposed pursuant to this bill;
N. Authorizes DHCS to make modifications specified,
if necessary to obtain federal approval and requires
consultation with the hospital community;
O. Authorizes DHCS to modify timelines as necessary,
requires notice to the Legislature and consultation
with the hospital community and establishes
contingencies for collection and payments that may be
made after the FMAP increase has expired;
P. Ensures that payments made to hospitals or
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reimbursement rates set pursuant to other provisions
of existing law are not affected or reduced as a
result of the supplemental payments established by
this bill and that upon termination, the rates to
hospitals and managed care plans shall revert to the
rates prior to the implementation;
Q. As of the effective date of this bill, prohibits
any reduction in the Medi-Cal rate paid to hospitals
for outpatient, inpatient, or sub-acute hospital
services until July 1, 2011;
R. Requires DHCS to seek approval from the Centers
for Medicare and Medicaid Services, as specified and
authorizes implementation upon receipt of conditional
approval, including interim payments and provides for
recoupment if federal approval is denied;
S. Makes the fee and supplemental payment provisions
inoperative if federal approval is not received by
June 1, 2011 or if a judicial determination results
in specified impact to the General Fund;
T. Authorizes DHCS to implement this program by means
of policy letters or similar instruction;
U. Restricts payment to a hospital that sues on the
grounds that the program is unlawful;
V. Limits the source of payments to the fees and FFP;
and,
W. Prohibits payment until federal approval has been
obtained and fees have been collected.
15.Requires DHCS to design and implement an IGT program,
relating to MCMC services provided by designated and
nondesignated public hospitals (DPH and NDPH) in order
to increase capitation payments, as follows:
A. Implementation is to begin on or after June 30,
2011;
B. Participation is voluntary;
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C. With regard to NDPH, requires DHCS to follow the
requirements of the IGT program proposed to be
established for NDPH in AB 113 (Monning), the
companion bill to this bill and requires the payments
to be in proportion to the transfer amounts under
that program; and,
D. Requires payments to be actuarially sound.
16.Makes enactment contingent on enactment of AB 113
(Monning), a companion bill that enacts a FFS IGT
program for NDPH.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/7/11)
California Hospital Association (source)
Adventist Health
Children's Hospital Association
Citrus Valley Health Partners
City of Hope
College Health Enterprises
College Hospital Costa Mesa
Community Hospital of San Bernardino
District Hospital Leadership Forum
Garden Grove Hospital and Medical Center
Henry Mayo Newhall Memorial Hospital
Hi-Desert Medical Center
Kaweah Delta Health Care District
Loma Linda University
Private Essential Access Community Hospitals
SEIU California
OPPOSITION : (Verified 4/7/11)
California Nurses Association
ARGUMENTS IN SUPPORT : The bill's sponsor, CHA, writes in
support that this comprehensive solution was agreed to in
light of the ongoing state budget crisis. CHA argues that
the hospital fee program is crucial to the preservation of
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California's entire safety net and that even before the
economic down turn, California's Medi-Cal program
under-funded hospital providers. According to CHA, part of
what made the 2009-10 fee program successful was the
enhanced FMAP of 62 percent. Developing a hospital fee
program that could be successful for the six-month period
covered by this bill was more difficult due to the decrease
of 5.3 percent FMAP. Given this change in the major
program element, the sponsors explain that it was decided
to make modifications to the fee. Specifically, the NDPH
and DPHs would use an IGT to fund increased Medi-Cal
managed care payments and the provisions of AB 113
(Monning), a companion bill, allow NDPHs to access
available increased payments for hospital services that are
paid for on a fee for service basis or by contract with
CMAC.
ARGUMENTS IN OPPOSITION : The California Nurses
Association opposes the bill and states:
"�T]he bill would essentially grant up to a seven-year
extension to hospitals to comply with California's 1973
seismic safety law.
"Most disturbing, SB 90 would grant a seven-year extension
to 2022 for any hospital with a building at risk of
collapsing in an earthquake, even those that were
previously on track to comply with the law if the hospital
complies with the following loose criteria:
Files a letter of intent by March, 2012 that could
consist of a one-sentence statement by the hospital.
Submits a schedule and a statement of how the
hospital intends to meet the deadline by March, 2012,
a statement that is not subject to review or rejection
by OSHPD and that is not required to meet any
statutory standard.
Applies by September 30, 2012 for review under
HAZUS.
Submits a financial report that is not subject to
any statutory standard and could be as little as a
one-sentence assertion by the hospital about its
financial capacity.
Receives a building permit by July, 2018, FIVE
years after the current 2013 deadline."
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CTW:kc 4/7/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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