2014-16 Hospital Quality Assurance Fee/Estimated Funding for District/Muni Hospitals

This is an update on the 2014-16 hospital quality assurance fee (HQAF).  This fee went into effect January 1, 2014 and runs through December 2016.  Specific to district/municipal hospitals:

Funding via the HQAF for district/municipal hospitals is estimated at $27.5 million annually net.  This will be accessed via intergovernmental transfers (IGTs) and the funding primarily will be via the Medi-Cal managed care plans.  There is $5 million annually in direct grants that the DHLF Board determined to be distributed to rural district hospitals and distributed on a pro-rata basis based on average Medi-Cal revenues.  (These distributions are approved and several payments have been made to eligible hospitals.)

The DHLF has been working with DHCS, CHA and other hospital constituency groups on the various components.  The first approval of managed care rates, will include $17.5 million (net of the IGTs) for district/municipal hospitals and covers the  period January 1, 2014 through June 30, 2014.  There will be a subsequent amount of funding for this period for district/municipal hospitals (approximately $7 million) but that second component is likely related to the expansion population  and, therefore, will not occur until likely next year (although it remains retroactive to January 1, 2014).  We will notify you once DHCS obtains the approval (hopefully via email later today) for the $17.5 million.

Regarding distribution of the $17.5 million, a workgroup made up of DHLF members has been discussing options which was recently approved by the DHLF Executive Committee.  Key components of the distribution:

  • The data source is the same as the one used by the private hospitals in the 14-16 HQAF model, the Medicaid Utilization Data.
  • The prior HQAF distribution was based on Medi-Cal managed care days.  Since the implementation of managed care in the rural areas of California (in November 2013), the workgroup recognized the need to include the rurals in the distribution but 1) lacking a data source and 2) with more of a transition to managed care in all areas, recommended the use of all Medi-Cal days to determine the distribution.
  • A continued recognition of the challenges facing rural districts was considered so a floor was included for these hospitals, including the rural direct grant.
  • More information will be provided on IGT agreements, etc. to operationalize this process.

Finally, a note of appreciation from both DHLF staff and the DHLF Executive Committee to the workgroup who gave of their time and expertise to work through the many issues related to this distribution.  The Executive Committee carefully considered all comments and input before making the above recommendation.