August 2012 Recap of DHLF Activities

Following is a summary of the issues the DHLF has been focusing on since our last recap in early August.  As outlined below, most activities have been (and will continue to be) focused on the state budget which changed Medi-Cal inpatient fee-for-service reimbursement for District and Municipal hospitals, effective July 1, 2012.

Activities Related to District Hospitals’ Transition to CPEs/Obtaining New Federal Waiver Funding

Current and Ongoing Activities

The Department of Health Care Services still is awaiting approval (from the Centers for Medicare and Medicaid Services – CMS) of all components of the 2012-13 state budget proposal to transition non-designated public hospitals (NDPHs) to using certified public expenditures (CPE) for Medi-Cal fee-for-service inpatient services coupled with receiving waiver funding (for uncompensated care costs and delivery system improvements.

Uncompensated Care

As previously noted, in year 1, $45 million in federal funds is available to District/Municipal hospitals in recognition of the care provided to the uninsured ($50 million will be available in year 2 and $55 million in year 3).  These funds will be accessed utilizing hospital certified public expenditures and the actual process/timing is a topic of ongoing discussion with DHCS based on receipt of CMS approval.

Accessing federal funding for providing care to the uninsured makes it even more important that all costs associated with care to these patients is correctly captured and reported by all District/Municipal hospitals.

Delivery System Reform Incentive Payments (DSRIP)

In year 1, $40 million is available to District/Municipal hospitals as incentive payments ($62.5 million/year will be available in years 2 and 3) for making delivery system improvements.  DHLF staff and hospital representatives are meeting weekly with DHCS to finalize the DSRIP plan to be submitted to CMS this week.

All hospitals will be required to submit a 3-year plan and incentive payments will be made based on meeting the milestones identified by each hospitals (with approval by DHCS and CMS).  The non-federal share for DSRIP payments will be intergovernmental transfers provided by public District/Municipal hospitals.  Detailed information on DSRIP requirements has been provided to all NDPHs previously through ongoing emails, conference calls and these monthly updates.

If you or staff within your hospital are interested in participating in the DHLF DSRIP workgroup, please respond to this email expressing your interest.  Please look for a DSRIP update in your email shortly.

Hospital-Specific Funding

The distribution of the new federal waiver funding was considered in a DHLF Board meeting held August 28.  The Board voted on a distribution as outlined below:

  • Year 1 (2012-2013) – the new waiver funds will be distributed to all District/Municipal hospitals on a pro-rata basis determined by the loss incurred in Medi-Cal reimbursement.  This is based upon data reported to the state through the 2010-11cost report process.
  • Year 2 (2013-2014) – is considered a transition year with small and rural and CMAC-contracting NDPHs receiving an adjustment over and above the amount provided for in year 1.
  • Year 3 (2014-2015) – all NDPHs will receive approximately 98.8 percent of Medi-Cal allowable costs for these services.

The DHLF Executive Committee considered many options and the Board decision was unanimous.  Members spoke in favor of transitioning to year 3 as described above based on the principle of cost being the most fair and equitable measure of reimbursement.

There are a few caveats, however.  The above principles are based on current estimates which will continue to be refined.  Years 2 and 3 will need to factor in changes in volume and cost (for all hospitals).  The actual distribution may change somewhat from the above due to the need to “back into” a formula.  Approval will be necessary from DHCS and possibly CMS.  In addition, any hospital that does not meet hospital-specific milestones related to the DSRIP will see funding reduced on a hospital-specific basis.  Finally, future funding is always subject to further action taken by the Administration/Legislature.

Hospital Provider Fee

The first installment of direct grants to all NDPHs contained in the 30-month hospital provider fee (the term of the fee is July 1, 2011 through December 31, 2013) should be distributed to hospitals within two to three weeks.  Subsequent installments will then be made periodically (approximately 10 installments) over the term of the fee.

State Legislative Update

The 2011-2012 Legislative Session came to a close in the early morning hours of September 1.

Low-Income Health Program (LIHP) –SB 1081 (Fuller, R-Bakersfield), the DHLF-sponsored bill will modify the waiver terms/conditions to allow a public District hospital to become an MCE-LIHP contractor in counties that are both without a county hospital or are not interested in becoming a LIHP contractor is on the Governor’s desk awaiting his signature.  The bill will become effective upon his signature (based on the urgency clause in the bill).

DHLF Board Meeting

The next DHLF Board meeting will be held in Sacramento on October 17.  Much of this meeting will be devoted to recapping 2012 activities and planning for 2013.  Due to a number of factors (notably the 2012 state election and its potential impact on the state budget), 2013 already is shaping up to be a challenging year.