July Recap of DHLF Activities

Following is a summary of the issues the DHLF has been focusing on since our last monthly recap.  Most of the activities during July were related to discussions during the DHLF Board meeting and working with the industry on the 2014-15 hospital provider fee.  This newsletter, as well as additional information and resources related to Forum activities, is available on our website – www. cadhlf.org. 
July Board Meeting 
The DHLF Board met July 11 in Carlsbad.  Prior to the meeting, members were able to tour two member hospitals – Palomar in Escondido and Tri-City in Oceanside.  Both facilities were quite impressive and the tours illustrated to Forum members the hospital-specific programs and innovations in place at both hospitals to best serve the patients in each community. 
The evening before the Board meeting, Larry Anderson of Tri-City hosted a dinner at the hotel. The Forum is very appreciative to Larry as this provided the opportunity for networking among Forum colleagues while enjoying the sunset over the ocean. 
Complete minutes of the meeting will be provided, but the key issues of discussion and some next steps are outlined below. 
Medi-Cal 1115 Waiver
Much of the meeting was devoted to discussing strategies for district/municipal hospital participation in both the current and upcoming 1115 waiver.  Participation in the current waiver is linked to AB 498 (discussion below).  Regarding the subsequent waiver, the current waiver is scheduled to expire in 2015, however DHCS, CHA and others have noted the Administration’s plans to begin work on the subsequent waiver later this year or early 2014.  The Forum has begun efforts to ensure, unlike the prior two waivers, district hospitals are included both financially and programmatically in the upcoming waiver.  During the Board meeting, it was determined that a multi-prong approach will be needed: advocacy at both the state and federal levels and with both the Legislature and Administrative branches.  Additionally, other potential partnerships/relationships were identified as ones that also could play a role. 
As a follow-up to the waiver discussion, a letter was sent to Toby Douglas, Director of DHCS (attached) making a formal request for district/municipal participation.  Copies of the letter were provided to Congressional, Senate and Assembly representatives of district/municipal hospitals and, on a state level, DHLF legislative advocates are contacting each of the Senate/Assembly representatives for further discussion.  Follow-up with the California Congressional delegation will occur soon. 
Larry Anderson invited a representative, Lenna Wright, from Rep. Issa’s office to attend the meeting.  Ms. Wright had reviewed the DHLF materials and came prepared both with questions and advice. Most importantly she emphasized that Rep. Issa is committed to working with the Forum as his office did in 2012 to convene meetings with the Centers for Medicare and Medicaid Services (CMS) and otherwise provide direction.  
Subsequent to this meeting, the Forum Executive Committee and Board voted to approve a federal advocacy proposal which will be led by Charity Bracy.  Next steps include working with members to identify those Congressional representatives that can best assist the Forum, either due to position in leadership or on committees.  An advocacy trip to Washington, D.C. will be planned for Forum members later this Fall, possibly in conjunction with an upcoming CHA/AHA advocacy days event.  The D.C. meetings will include Congressional, U.S. Senate and CMS representatives.  The plan as outlined is robust and includes advocacy on all levels at the state and federal levels. 
Identifying Innovative District Hospital Programs
Bill Abalona, an attorney with Foley Lardner, attended the DHLF Board meeting to expand upon some issues he raised at a meeting late last year.  A Georgia case where state law allows “health authorities” to be formed and operate hospitals in a manner similar to California’s district hospital law was heard by the Supreme Court.  The principal issue was whether the “state action doctrine” allows public entities which operate hospitals to be exempt from federal antitrust laws where it can be demonstrated that the activity in which they engage was “reasonably contemplated” by the enabling legislation.   
Mr. Abalona discussed this case and then expanded upon potential programmatic issues that the DHLF could further investigate for potential inclusion in the next 1115 waiver. This would be the mechanism to use to allow states and providers innovative approaches to delivering health care.  There was interest in further investigation to be done regarding a district hospital “health system” and the formation of a foundation/clinic to best obtain physician services by district hospitals.  More information on these issues will be provided as additional research is completed. 
Medi-Cal APR DRGs
The DHLF Board requested the Forum work with DHCS to obtain a six-month delay in the implementation of APR-DRGs for Medi-Cal.  Reasons cited included training for staff and physicians on documentation, IT and care coordination system changes required, purchase of the 3M grouper.  DHCS appears to have flexibility in this area, so Forum staff has begun advocacy to delay the implementation until July 1, 2014. 
APR-DRG rate notifications for year 1 (January – June 2014) were mailed to district/municipal hospitals in late June with rate notifications for years 2 and 3 sent in July.  DHCS indicates the best place to direct questions is drg@dhcs.ca.gov.                                                     
If you could provide a copy of the rate notification that you received to Forum staff via email or fax, it will be used to build a district/municipal hospital database which we can then use as part of our advocacy efforts. 
CPE/Waiver Proposal/AB 498 (Chavez) 
As previously reported, the DHLF-sponsored, AB 498 (Chavez), was amended to direct the Administration to access waiver funding for district/municipal hospitals.  We are pleased to report, the bill passed the Senate Health Committee unanimously on July 3.  This is due in large part to the significant grassroots efforts on behalf of district and municipal hospitals.  The bill next will be heard in the Senate Appropriations Committee and advocacy efforts are underway with DHCS, committee staff and the Department of Finance. 
As noted above regarding DHLF federal advocacy, this bill will be one component of that strategy.  The short-term campaign with the Centers for Medicare and Medicaid Services (CMS) for them to apply pressure to the state Administration to accomplish waiver funding for district/municipal hospitals will initially be done with a focus on this legislation for 2013-14 and 2014-15.  The longer-term strategy focuses on the subsequent waiver. 
Hospital Provider Fee
The CHA Board of Directors has approved the next 2-year hospital provider fee (calendar years 2014-15) and the DHLF staff has been participating with CHA and other hospital constituency groups to determine the most appropriate level of participation by district/municipal hospitals.  As reported on the DHLF Board conference call last week, the current proposal for district hospitals is outlined below:

District Hospital Leadership Forum Proposal      
2015-15 Hospital Provider Fee – annual amounts in millions    
  District/Muni Hospital Benefit   Cost to Private Hospitals
Direct Grants




Fund rate range for private hospitals




Subtotal (used for smallest districts without ability to use IGTs for other funds)



Increase districts’ managed care payments (actuarially determined based on AB 113); accessed via IGTs




Net provider fee managed care increased payments (dist/muni may provide IGT or these may be direct grant-like)




Net Annual Benefit




Current 30-month fee – annual benefit



Unfortunately, the proposal is rather convoluted so that we can minimize the impact on the private hospitals while improving funding to district/municipal hospitals. 
In addition to what’s outlined above, below are a few comments: 
The $15 million in improved managed care rates for districts (based on an actuarial equivalent of AB 113) is being included in the provider fee package to ensure it doesn’t “accidentally” fall to the bottom of DHCS’ priorities.  Ideally, we’d like to see the amount districts can generate included in the total managed care amount (the $15 million improvement and the $35 million managed care piece from the provider fee), with the districts then IGTing $50 million including both components.  Also, including it in the provider fee will hopefully save admin fees, which is beneficial ultimately for everyone (except DHCS).  Depending on administrative issues, it is possible the $35 million of provider fee managed care rates MAY be done via direct  grant rather than IGT, but that is still to be determined. 
Regarding the amount of direct grants, the proposal is for $20 million to be diverted to the rate range to benefit private hospitals to allow for enhanced flexibility.  More research is being done on this issue but the back-up plan is for an IGT.  
Finally, absolutely key is the need for protections related to the rate range IGT.  This could take the form of an MOE (maintenance of effort) for the hospitals currently receiving rate range funds and those districts that should be participating at a particular level and/or could be structured so districts are prioritized first (or first in coordination with county/UC hospitals).  This is a piece of a larger proposal including funding from county/UC hospitals and benefitting private hospitals so there is still much work to be done on this particular component. 
The entire provider fee proposal (for all hospitals) will be amended into SB 239 (Hernandez) and the bill is scheduled to be heard in the Assembly Health Committee next week.  We will keep you apprised of any need for grassroots advocacy as well as the results of the hearing and any changes to the overall concepts. 
Medi-Cal Distinct-Part Nursing Facility Reduction 
AB 900 (Alejo) remains viable in the Legislature and members’ grassroots advocacy on this bill will continue to be as important as it has been to date.  Affected hospitals should have received information regarding preparation for the potential state lawsuit on the same matter.  Preparing for the state litigation currently is underway.  The DHLF and CHA are in the process of determining potential plaintiffs with an initial focus on larger facilities most impacted (both district and non-district hospitals).  However, all affected hospitals, regardless of size, should participate if they determine the need to do so. 
CHA continues their advocacy efforts with the Administration in conjunction with AB 900, but concerns exist about the retroactive component not being included as a solution.  Additional information will be provided on both the state litigation and efforts in the Legislature on this important issue. 
DP/NF Supplemental Program for Public Hospitals 
There is a supplemental program that allows public DP/NFs to claim any unreimbursed costs through a CPE federal match program.  The effect of the supplemental is to cut the reductions – both retroactive and prospective — in half for all public hospitals through the receipt of federal funds.  Forum staff has been working with DHCS to ensure hospitals have the necessary tools to take advantage of this program when/if the reductions occur.  The program may only be accessed when the actual reductions occur (when costs are not obtained).  DHCS has submitted a draft claim for all public DP/NFs which will be amended if/when the reductions are implemented. 
District Municipal Hospital Supplemental Funds – AB 113 and Non-Designated Public Hospital Supplemental Fund 
Forum staff has been meeting with DHCS regarding the distribution of funds for 2012-13 under the AB 113 program (Medi-Cal intergovernmental transfer – IGT – program for fee-for-service).  As you recall, this program is being re-implemented due to the 2012-13 budget item to not move forward with certified public expenditures for Medi-Cal inpatient fee-for-service for district/municipal hospitals. 
DHCS had committed to providing hospitals with 2012-13 funding amounts under the AB 113 program by the end of July but that date has slipped to mid-August.  Further, they have committed to a distribution of funds in the first quarter 2013-14.  A schedule of when the IGTs are due and the other administrative mechanics will be provided to all of you when the funding amounts are determined. 
Once DHCS has distributed the funding for 2012-13, their attention will turn to the process for the 2013-14 funds. 
A similar process is underway for those eligible district hospitals participating in the non-designated public hospital supplemental program (formerly SB 1255) regarding the distribution of those funds for 2012-13, including the requirement that hospitals submit a proposal for the funds (similar to the proposals submitted previously to the California Medical Assistance Commission). 
DHLF Calendar
Upcoming DHLF Board Events:

  • TBD, Fall 2013 – DHLF Washington D.C. Advocacy Meetings
  • November 13 – DHLF Board Meeting, Sacramento