BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 920
AUTHOR: Hernandez
AMENDED: January 4, 2012
HEARING DATE: January 11, 2012
CONSULTANT: Bain
SUBJECT : Medi-Cal: hospitals.
SUMMARY : Extends the sunset date and inoperative date of
the Medi-Cal Hospital Provider Rate Improvement Act of 2011
(Rate Act) so that it is the same the same sunset and
inoperative dates as the Private Hospital Quality Assurance
Fee Act of 2011 (Fee Act); requires the Director of
Department of Health Care Services (DHCS) to state the
basis for a determination that the Rate Act or the Fee Act
is made inoperative; and makes clarifying and technical
drafting corrections to the Rate Act and the Fee Act.
Existing law:
1.Establishes the Medi-Cal program, administered by DHCS,
under which health care services are provided to
qualified low-income persons. Inpatient and outpatient
hospital services are a covered benefit under the
Medi-Cal program, subject to utilization controls.
2.Enacts the Rate Act to provide supplemental payments from
July 1, 2011, to December 31, 2013 to private hospitals
for inpatient and outpatient services in Medi-Cal
fee-for-service, managed care and acute psychiatric days,
and to make direct grants to designated public hospitals
in support of health care expenditures.
3.Establishes the Fee Act, which levies a hospital quality
assurance fee (QAF), from July 1, 2011 to January 1,
2014, on each hospital that is not an exempt hospital,
with varying fee amounts by payor source and type of
payment.
4.Requires all funds from the QAF to be used exclusively to
enhance federal financial participation (FFP) for
hospital services under Medi-Cal, to provide additional
reimbursement to hospitals, to pay DHCS staffing and
administrative costs, to make increased payments to
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managed care health plans and mental health plans, and to
fund children's health coverage, in a specified order of
priority.
5.Requires, under the Rate Act, if federal approval or a
letter indicating likely federal approval has not been
received by September 1, 2013, then the body of law
establishing the Rate Act becomes inoperative and is
repealed. Requires, under the Fee Act, if federal
approval or a letter indicating likely federal approval
has not been received by December 1, 2013, then the body
of law establishing the Fee Act becomes inoperative and
is repealed.
6.Sunsets the Rate Act on July 1, 2014, the date the last
payment of QAF, or the date of the last payment from
DHCS, whichever is latest. Sunsets the Fee Act on
January 1, 2015, the date of the last payment of QAF
payments, or the date of the last payment from DHCS,
whichever is latest.
This bill:
1.Extends the sunset date of the Rate Act to the later of
January 1, 2015 (instead of July 1, 2014), the date of
the last payment of the QAF, or the date of the last
payment from DHCS, whichever is latest.
2.Extends the inoperative date of the Rate Act from
September 1, 2013, to December 1, 2013.
3.Requires the DHCS Director, if he or she determines the
Rate Act or the Fee Act to be inoperative, to execute a
declaration stating that this determination has been
made, and would include as a reason for each Act becoming
inoperative, either Act sunsetting.
4.Makes other technical and clarifying changes including
correcting a drafting error in the Private Hospital
Supplemental Fund statute.
FISCAL IMPACT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. According to the author, this bill
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makes a number of noncontroversial, technical or clean-up
changes to the Medi-Cal Hospital Provider Rate
Improvement Act of 2011 and the Private Hospital Quality
Assurance Fee Act of 2011 enacted by SB 335 (Hernandez),
Chapter 286, Statutes of 2011. These changes would align
the sunset and inoperative dates in the two Acts, would
require the DHCS Director to state the basis when a
declaration that either Act is made inoperative, would
clarify drafting related to the inoperative and sunset
dates, would correct a drafting error, and would
eliminate redundant statutory references.
2.Background. Federal Medicaid law authorizes states to
levy fees on health care providers if the fees meet
federal requirements. Many states (including California)
fund a portion of their share of Medicaid program costs
through a fee on health care providers. Under these
funding methods, states collect funds (through fees,
taxes, or other means) from providers, which are then
matched to allow increased Medicaid reimbursement to
providers. The Legislature enacted a series of bills
establishing a time-limited hospital QAF in 2009, and an
additional six-month QAF for the first six months of
2011. In addition to the hospital QAF, California
currently has a QAF for intermediate care facilities for
the developmentally disabled, and a separate QAF for
skilled nursing facilities.
Last year, SB 335 (Hernandez) imposed a QAF on hospitals
for 30 months (from June 30, 2011, until December 31,
2013). SB 335 uses the resulting revenue to draw down
federal funds to provide supplemental payments to private
hospitals in fee-for-service Medi-Cal, Medi-Cal managed
care, and for acute psychiatric days, and to provide
specified funding amounts from the QAF per quarter for
children's health coverage until December 31, 2013. In
addition, SB 335 requires county and University of
California hospitals to be paid direct grants (not
Medi-Cal payments), funded from the QAF. SB 335 also
reduced disproportionate share hospital replacement
payments and supplemental payments from the Private
Hospital Supplemental Fund to hospitals by specified
amounts in 2012-13 and 2013-14. Finally, SB 335
appropriates $13.6 billion to DHCS for purposes of that
measure. SB 335 took effect as an urgency statute upon
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signature by the Governor in September 2011.
The California Hospital Association (CHA) estimates that
over the 30-month period, the QAF will raise
approximately $7 billion and will be matched with
approximately $6.1 billion in federal funds with a net
benefit to the hospital industry of $5.2 billion.
According to CHA, private hospitals could receive up to
approximately $6 billion in supplemental payments for
inpatient services, $1.8 billion for outpatient services,
and $475 million for out-of-network emergency medical
services to Low Income Health
Program enrollees. All hospitals will be eligible for up
to $3.9 billion in payments from Medi-Cal managed care
plans. Public hospitals and district hospitals will be
eligible for up to $139 million in grants. In addition,
over $900 million will be available for children's health
care coverage and the administrative costs of DHCS.
3.Prior legislation. AB 1383 (Jones), Chapter 627,
Statutes of 2009 and AB 188 (Jones), Chapter 645,
Statutes of 2009, enacted a Medi-Cal hospital provider
fee and a methodology for making supplemental payments to
hospitals, and provided funds for children's health care
coverage and grants to public hospitals. In response to
the state's request for federal approval, the Centers for
Medicare and Medicaid Services (CMS) in June of 2010 sent
a letter raising objections and concerns to the
methodology which concluded that the fee enacted by AB
1383 did not meet federal standards. CMS also suggested
modifications, which were made by AB 1653 (Jones),
Chapter 218, Statutes of 2010. AB 1653 also established
an alternative mechanism for funding supplemental grants
to public hospitals and allowed the state to retain the
funds that were previously allocated to these hospitals.
SB 90 (Steinberg), Chapter 19, Statutes of 2010, repeals
specified Medi-Cal hospital rate freezes and rate
reductions enacted in health budget trailer bills in
2008, 2010 and 2011. SB 90 also imposed a QAF on
specified hospitals for six months (January 1, 2011,
until June 30, 2011), and used the resulting revenue to
draw down federal funds to provide supplemental payments
to private hospitals in fee-for-service Medi-Cal,
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Medi-Cal managed care, and for acute psychiatric days, to
provide $210 million for children's health coverage, and
to pay for DHCS administrative costs in administering the
hospital fee and supplemental payment provisions of this
bill. SB 90 also reduced disproportionate share General
Fund (GF) payments to private hospitals by $30 million GF
in the previous fiscal year and $75 million GF in the
budget year. SB 90 also requires DHCS to design and
implement an inter-governmental transfer program for
Medi-Cal managed care services provided by designated
public hospitals (DPH) and non-designated public
hospitals (NDPH) for the purpose of increasing
reimbursement to NDPHs and DPHs.
In addition, SB 90 allows hospitals that have received
extensions to January 1, 2013, of the January 1, 2008,
seismic deadline, for their SPC-1 buildings, to request
an additional extension of up to seven years.
DHCS indicates it has been working with CMS over the past
several months, and CMS is reviewing the fee model in
order to approve the fee waiver. DHCS is also working on
submitting responses to CMS, and has informed CMS that it
would like approval of the by end of February or early
March 2012.
4.Support. CHA writes in support of this bill, arguing
this bill makes a number of technical corrections and
improvements to the hospital fee program necessary for
implementation of the program.
SUPPORT AND OPPOSITION :
Support: California Hospital Association
California Childrens Hospital Association
Private Essential Access Community Hospitals
Oppose: None received.
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