BILL ANALYSIS �
SB 920
Page 1
SENATE THIRD READING
SB 920 (Ed Hernandez)
As Amended August 20, 2012
2/3 vote. Urgency
SENATE VOTE :34-0
HEALTH 16-0 APPROPRIATIONS 17-0
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|Ayes:|Monning, Atkins, Eng, |Ayes:|Gatto, Harkey, |
| |Garrick, Gordon, Hayashi, | |Blumenfield, Bradford, |
| |Roger Hern�ndez, Bonnie | |Charles Calderon, Campos, |
| |Lowenthal, Mansoor, | |Davis, Donnelly, Fuentes, |
| |Mitchell, Nestande, Pan, | |Hall, Hill, Cedillo, |
| |V. Manuel P�rez, Silva, | |Mitchell, Nielsen, Norby, |
| |Smyth, Williams | |Solorio, Wagner |
| | | | |
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SUMMARY : Revises provisions of the Medi-Cal Hospital Provider
Rate Payment Act (Rate Act) of 2011 and the Private Hospital
Quality Assurance Fee (QAF) Act (Fee Act) of 2011.
Specifically, this bill :
1)Increases direct grants to district owned or operated
hospitals known as nondesignated public hospitals (NDPHs) from
the funds generated by the fee and provides that NDPHs would
no longer be eligible for payments from the Low Income Health
Plan (LIHP) out-of-network supplemental fund.
2)Limits LIHP supplemental payments solely to private hospitals
and authorizes Department of Health Care Services (DHCS) to
make the payments directly to the hospital instead of to the
LIHP.
3)Extends the sunset date and inoperative date of the Rate Act
of 2011 to align it with the sunset and inoperative dates of
the Fee Act of 2011.
4)Requires the Director of DHCS to state the basis for a
determination that the Rate Act or the Fee Act is made
inoperative.
5)Adjusts the payment amounts to hospitals to address the
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recently revised federal upper payment limit (UPL).
6)Revises the methodology used to determine the percentage of
the total fee each hospital must pay.
7)Requires the Director of DHCS, effective the first year that
diagnosis-related group methodology reimbursement to private
hospitals is implemented, to allocate the Private Hospital
Supplemental Fund among eligible private hospitals pursuant to
a methodology developed in consultation with the statewide
associations representing children's hospitals and private
Disproportionate Share Hospitals. In addition, for the
2013-14 fiscal year as a transition, the methodology shall, to
the extent possible, ensure that each eligible hospital is
allocated funding at a proportionate level of payment it
received for the 2011-12 fiscal year (FY) taking into
considering specified factors.
8)Makes clarifying and technical drafting corrections to the
Rate Act and the Fee Act.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Minor, absorbable administrative costs to DHCS related to the
change. 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 : According to the author, this bill is also needed to
make a number of noncontroversial, technical, or clean-up
changes to the Rate Act of 2011 and the Fee Act of 2011 enacted
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by SB 335 (Ed Hernandez), Chapter 286, Statues of 2011. In
addition, this bill adjusts the payment amounts to hospitals to
address the recently revised UPL. 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, and requires the methodology, to the extent possible,
to ensure that the hospitals are allocated funding at the level
of payment received for FY 2011-12, taking into consideration
applicable eligibility criteria.
SB 90 (Steinberg), Chapter 19, Statutes of 2011, established a
new QAF and hospital supplemental payment program for the period
between January 1, 2011, and June 30, 2011, that was similar to
the previous fee and supplemental payment program. SB 335
enacted a 30-month extension of the Medi-Cal hospital provider
fee or QAF and allowed for a continuation of the ability to draw
down federal funds to match fee revenue and provide increased
payments to private hospitals in the Medi-Cal Program, provided
$930 million to pay for children's health care coverage,
provided grants to designated public hospitals (DPHs) and NDPHs,
increased payments to Medi-Cal Managed Care (MCMC) plans for
hospital services and limited rate reductions for hospitals that
participate in the Medi-Cal Program. SB 335 also included a new
element that allowed the use of the hospital QAF funds to
provide $75 million a year for the non-federal share of
supplemental payments to hospitals that provide out-of-network
emergency services to enrollees in LIHPs.
On June 22, 2012, DHCS received federal approval of the SB 335
hospital fee and the associated inpatient and outpatient
Medi-Cal fee-for-service (FFS) supplemental payments effective
retroactively to July 1, 2011, and to continue through December
31, 2013. According to DHCS, the approval of the fee and the
supplemental FFS payments allows DHCS to begin assessing the fee
and paying the supplemental FFS payments. DHCS is continuing to
work with the Centers for Medicaid and Medicare Services (CMS)
to receive the federal approval of the increased Medi-Cal
managed care capitation rates.
In November 2010, California received federal approval for a new
five year Section 1115(a) Medi-Cal Demonstration/Pilot Project
Waiver, entitled "A Bridge to Reform." Section 1115(a) of the
Social Security Act authorizes the federal Secretary of Health
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and Human Services to allow states to receive federal Medicaid
matching funds without complying with all of the federal
Medicaid rules. This 2010 Replacement Waiver is intended as a
bridge to implementation of the Patient Protection and
Affordable Care Act which requires states to include childless
adults, under age 65, who are not otherwise eligible for
Medi-Cal or Medicare with incomes up to 133% of the federal
poverty level in its Medicaid program. Building on the Health
Care Coverage Initiative model from the 2005 waiver, the 2010
waiver establishes the LIHP for this population and expands it
statewide at the option of a county option or other local
entity. A local entity that chooses to participate will use
certified public expenditures (CPEs) as the matching funds. The
Special Terms and Conditions (STCs) that accompanied the waiver
approval provided that this locally-based coverage is a bridge
to the more significant coverage that is effective in 2014 and
CMS considers this transition a Medicaid expansion. As such,
CMS imposed a number of Medicaid requirements in the STCs but
allowed for flexibility within the parameters of a Medicaid
demonstration project.
The STCs treat the LIHP as a managed care organization and
therefore allow a closed network of providers. Because the
source of the nonfederal matching funds is CPEs, most of the
network providers are expected to be DPHs. However, the STCs
also require the LIHP to reimburse a hospital that is not in the
network for emergency care or approved post-stabilization
services provided to a LIHP enrollee. The reimbursement rate
however is limited to 30% of the rate that a MCMC plan would
ordinarily be required to pay for similar out-of-network
services (so-called "Rogers Amendment Rate"). SB 335
established a fund to supplement these payments. The total over
the duration of the bill is $475 million. The first $20 million
is composed of an Intergovernmental Transfer provided by DPHs
plus $20 million in federal matching funds. Private hospitals
will contribute $75 million in fee revenue which will also be
matched by an equal amount of federal funds. Over the 30 month
period, the pool will total $475 million. SB 335 provided that
NDPHs would also be eligible to receive supplemental payments.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
319-2097
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FN: 0005053