BILL ANALYSIS �
SB 920
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 920 (Hernandez) - As Amended: August 6, 2012
Policy Committee: HealthVote:16-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill modifies provisions related to the Medi-Cal hospital
fee program enacted by SB 335 (Hernandez), Chapter 286, Statues
of 2011. Specifically, this bill:
1)Increases direct grants to non-designated public hospitals
(NPDHs) from the funds generated by the fee. Provides that
NDPHs are no longer eligible for payments from a fund designed
to supplement out-of-network emergency payments for Low Income
Health Program (LIHP) enrollees, thereby limiting LIHP
supplemental payments solely to private hospitals.
2)Extends the sunset date and inoperative date of two code
sections that govern the overall implementation of the fee
programs.
3)Requires the Director of the Department of Health Care
Services (DHCS) to state the basis for a determination that
would make the fee programs inoperative.
4)Adjusts the supplemental payment amounts to hospitals to
comply with recently revised federal guidance.
5)Requires the first fiscal year (FY) Diagnosis Related Group
(DRG) methodology is implemented, the Director of DHCS to
allocate the Private Hospital Supplemental Fund among eligible
private entities pursuant to a methodology developed in
consultation with specified hospital entities.
6)Requires the methodology in (5), to the extent possible and
for FY 2013-14 only, to ensure that hospitals are allocated
funding proportionate to the level of payment received for
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the FY 2011-12, taking into consideration applicable
eligibility criteria and available funding.
7)Makes other clarifying and technical drafting corrections to
provisions governing the hospital fee program.
FISCAL EFFECT
1)Minor, absorbable administrative costs to DHCS. Costs related
to administration of the hospital fee program are funded
through the program.
2)The current fee program projects payments of over $13 billion
to hospitals over its 30-month life. The bill will not result
in net costs to the state, but it does make significant
adjustments to various funding streams. This bill makes the
following changes:
a) Increases direct grants to NDPHs by $8.6 million
annually ($21.5 million total), and reduces fees raised for
the LIHP program by the same amount.
b) Reduces LIHP supplement out-of-network emergency
payments by $17.2 million annually ($43 million total).
COMMENTS
1)Rationale . According to the author, this bill is necessary to
address a concern regarding the potential unequal distribution
of payments through the LIHP out-of network supplemental
payments established by SB 335 (Ed Hernandez), Chapter 286,
Statues of 2011. The author states that not all of the NDPHs
are in areas where LIHP supplemental payments could be
accessed, and that this may result in an unequal distribution
of those funds. Instead, this bill proposes that NDPHs be
provided an increase in direct grants as a more equitable way
to provide increased funding for them from the provisions of
SB 335. This bill would use a portion of the hospital fees
that would have been used for LIHP supplemental payments to
fund increased direct grants to NDPHs. In return, the NDPHs
would no longer be eligible for payments from the LIHP
out-of-network supplemental fund. Under this bill, LIHP
supplemental payments would be available solely for private
hospitals.
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According to the author, this bill is also needed to make a
number of noncontroversial, technical, or clean-up changes to
the fee program enacted by SB 335. In addition, this bill
adjusts the payment amounts to hospitals to address the
recently revised federal guidance. Lastly, this bill requires
the Director of DHCS to allocate the Private Hospital
Supplemental Fund among eligible private entities pursuant to
a methodology developed in consultation with specified
hospital entities.
2)Background . Federal law authorizes states to fund a portion of
Medicaid through provider fees that meet federal requirements
and are matched with federal dollars to increase payments to
providers without state funds. State Quality Assurance Fees
(QAF) must be broad-based, uniform, and cannot hold a group of
providers harmless with respect to fees paid and payments
received.
In California, three hospital QAF programs have been enacted.
AB 1383 (Jones), Chapter 627, Statutes of 2009 established the
first QAF, followed by SB 90 (Steinberg), Chapter 19, Statutes
of 2011, which ended June 30, 2011. This bill modifies the
QAF established by SB 335, which ends on December 31, 2013.
QAF have also been used to generate revenues for Medi-Cal
managed care plans, skilled nursing facilities (SNF, nursing
homes), and intermediate care facilities for the
developmentally disabled (ICF-DD).
3)Hospital QAF Program . The program is designed to make
supplemental inpatient and outpatient Medi-Cal payments to
private hospitals, including additional payments for certain
facilities that provide high-acuity care and trauma services
to the Medi-Cal population. This hospital QAF program provides
a mechanism for increasing payments to hospitals that serve
Medi-Cal patients, with no impact on the state's General Fund.
Some of these payments will be made directly by the state,
while others will be made by Medi-Cal managed care plans that
will receive increased capitation rates from the state in
amounts equal to the supplemental payments. Federal approval
was recently granted for the fee-for-service component of the
fee program, while the state is working with the federal
government to receive approval for the managed care component.
4)Low-Income Health Program (LIHP) Component . In 2010, DHCS
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received CMS approval for a new Medi-Cal demonstration waiver
that expanded on current county-based coverage initiatives by
creating the LIHP. Through the LIHP, the population from
0-133% of the federal poverty level (FPL), who under federal
law will receive coverage under Medi-Cal in 2014, will be
provided a core set of services, including inpatient and
outpatient services, prescription drugs, mental health, and
other medically necessary services. The LIHP is funded
through local funds and federal matching funds.
Because of the reliance on public hospitals as contracted
providers to the LIHP population, there was concern about the
potential for non-contracted hospitals to receive very low
rates for the provision of emergency services to this
population. Directing some of the QAF revenue to the LIHP
Managed Care Expansion (MCE) Out-of Network Emergency Care
Services Fund, and using this fund to pay supplemental
payments to non-contract hospitals proportional to their
provision of emergency services to LIHP enrollees, is intended
to mitigate these low rates. This bill provides that LIHP
supplemental payments are available only to private hospitals,
and allows NDPHs, who previously were authorized to access
LIHP supplemental payments, to instead access increased direct
grant funds.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081