July & Early 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 July.  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.

Changes to District/Municipal Hospital Medi-Cal Reimbursement

As previously reported, the 2012-13 state budget changes Medi-Cal reimbursement for fee-for-service inpatient from the previous system (per diem or cost-based) to certified public expenditures for non-designated public hospitals (NDPHs).  This will result in District/Municipal hospitals providing the 50 percent non-federal share, matched with federal funds up to cost for these services.  To minimize the impact on District hospitals, the Department of Health Care Services (DHCS) is seeking increased federal funding (funding for uncompensated care and delivery system improvements) to minimize the financial impact of this change on District hospitals.

In the current fiscal year (2012-13), NDPHs will experience a reduction in reimbursement of $14 million in aggregate, but in the two subsequent fiscal years (2013-14 and 2014-15), there should be a small increase in reimbursement based on current estimates.

Please note that the AB 113 intergovernmental transfer program for District/Municipal hospitals, was eliminated in the budget action effective July 1.  Similarly, the Non-Designated Public Hospital Supplemental Fund (previously known as SB 1255 funds) is also eliminated.

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

Current and Ongoing Activities

Once federal approvals are obtained for all components of this budget proposal, information will be provided outlining requirements for each hospital’s completion and submission of a “Paragraph 14” report.  This is information that will be obtained primarily from Medi-Cal cost reports and hospital accounting records and will be the basis of the CPEs for both Medi-Cal and uncompensated care.  Once the form is revised (along with the instructions), the DHLF will work with DHCS to schedule webinars to allow NDPH staff to better understand the requirements.

Uncompensated Care

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.  Both the Forum and DHCS recognize the significant impact to a hospital’s cash flow due to the change to CPEs and all stakeholders are committed to mitigating the impact using all available options.

As noted above, information used for claiming funds for care to the uninsured will be taken from hospitals’ “Paragraph 14” reports.  Therefore, it will become even more important that all costs associated with care to these patients is correctly captured and reported by all District/Municipal hospitals so all federal funds can be claimed. 

Delivery System Reform Incentive Payments (DSRIP)

In year 1, $40 million is available to District/Municipal hospitals as incentive payments ($62.5 million 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.  All hospitals will be required to submit a 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.  Funding to individual hospitals will be reduced if milestones are not met, which will exacerbate the reductions to NDPHs as a result of the budget action.

There are 4 areas for which federal funding is available under the DSRIP to improve population health and clinical quality, including the patient care experience.  The categories are included below, but it must be noted that the state recognizes the differences among District hospitals, so a plan for a Critical Access Hospital will be very different from a plan for a large tertiary District hospital.

Infrastructure Development – Investments in technology, tools and human resources that will strengthen the organization’s ability to serve its population and continuously improve its services.

Innovation and Redesign – Investments in innovative models of care delivery (e.g., Medical Homes) that have the potential to make significant improvements in health, clinical outcomes, and patient experience.

Population-focused Improvements – Investments in enhancing care delivery for high-burden (mortality, morbidity, cost, prevalence, etc.) conditions in non-designated public hospital systems.

Patient Safety – Implementation of evidence-based intervention to improve patient safety (e.g., Institute for Healthcare Improvement bundles).  Interventions will be selected from a list and will address the specific needs of the hospital and the population it serves.

Currently, NDPHs are providing DHLF staff with a draft of their desired body of work for the program, listing their top 2-3 projects of interest in each category.  Important things to consider when selecting projects:

  • Will the projects selected be able to be executed in 2- 2.5 demonstration years?
  • Do the projects selected address population health?
  • Do the projects selected give opportunity for quality improvement?
  • Can baseline data be collected?
  • Can follow-up data be collected?
  • Can the project tell a narrative for future hospitals?

Draft projects will be submitted to DHLF staff by August 14.

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

Hospital-Specific Funding

The distribution of the new federal funding is an issue currently being considered by the DHLF Executive Committee and Board.  The hospitals will have some flexibility with distribution of the funds related to uncompensated care, while the DSRIP distribution will need to be based on a formula (although flexibility in determining the formula will be considered).  In addition to the Executive Committee and Board, a workgroup also is working with staff on this issue.

As with the DSRIP workgroup, please respond to this email if you or your staff are interested in participating in this federal funds distribution workgroup.

Hospital Provider Fee 

One funding source available to offset the reductions of the budget action described above is the 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).  The current direct grants are $10 million annually and a subsequent NDPH direct grant (currently in the Legislature) is $8.6 million annually for a total of $18.6 million/annually until December 31, 2013.

Private hospitals have recently paid the first installment of the fee, therefore, payments under the first direct grant should be distributed by early Fall of this year.

State Legislative Update

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.  The bill successfully passed the Assembly Health Committee and is awaiting hearing in Assembly Appropriations.  We hope to have it on the governor’s desk very soon as  it will become effective upon his signature (based on the urgency clause in the bill).

Other Bills SB 920 (Hernandez) contains clean-up legislation for the hospital provider fee, including the second round of direct grants for District hospitals.  This bill next will be heard August 16 in the Assembly Appropriations Committee.

The 2012 Legislature adjourns August 31 when the focus will shift to the November election.  We can expect several new members of both the Assembly and Senate in 2013.

DHLF Board Meeting 

The DHLF Board met Sacramento on August 7. The Board/members heard presentations/discussions by DHCS staff on the DSRIP, transition to CPEs for Medi-Cal and uncompensated care funding.  In addition, the DHLF was pleased to welcome C. Duane Dauner, president, California Hospital Association (CHA) who outlined a number of federal and state challenges facing hospitals and the association’s current efforts in response to the challenges.

Finally, the Forum was privileged to host California Health and Human Services Secretary, Diana Dooley, during the meeting.  In addition to a presentation outlining the governor’s vision/strategy relative to health care, Secretary Dooley also took the opportunity to hear from members about a number of issues and challenges facing them in their local communities.

The next DHLF Board meeting is October 17, 2012.