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AB-2426 Martin Luther King, Jr. Community Hospital.(2021-2022)

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Date Published: 08/27/2022 04:00 AM
AB2426:v95#DOCUMENT

Enrolled  August 26, 2022
Passed  IN  Senate  August 23, 2022
Passed  IN  Assembly  August 24, 2022
Amended  IN  Senate  August 11, 2022
Amended  IN  Assembly  March 31, 2022
Amended  IN  Assembly  March 21, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 2426

Introduced by Assembly Member Gipson
(Coauthor: Senator Bradford)

February 17, 2022

An act to add Section 14165.51 to the Welfare and Institutions Code, relating to Medi-Cal.


LEGISLATIVE COUNSEL'S DIGEST


AB 2426, Gipson. Martin Luther King, Jr. Community Hospital.
Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Existing law provides that Medi-Cal funding be made available to a new hospital, now known as the Martin Luther King, Jr. Community Hospital, to serve the population of South Los Angeles.
This bill would require the department, in consultation with the hospital, to create a directed payment program in Medi-Cal managed care for outpatient hospital services to provide that total Medi-Cal managed care reimbursement received for services is approximately equal to the hospital’s costs for those services, as specified. The bill would establish funding provisions if those minimum reimbursements required under the program would result in payments above the level of compensation the hospital would have otherwise received, and if a nonfederal share is necessary with respect to the additional compensation. The bill would require that the hospital’s projected costs be based on specified principles. The bill would also require the department, in consultation with the hospital, to develop an alternative mechanism for ensuring inpatient services payment levels from Medi-Cal managed care plans, as specified. The bill would authorize the department to develop value-based quality directed payment, for use in payments to the hospital. The bill would authorize the department to implement those provisions by means of, among other things, all-facility letters. The bill would require the department to obtain federal approvals or waivers as necessary to implement those provisions, to obtain federal matching funds to the maximum extent permitted by federal law, and would condition the implementation of those provisions on obtaining federal approval.
This bill would make related findings and declarations. The bill would also make the implementation of its provisions contingent upon appropriation by the Legislature.
This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Los Angeles.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) Martin Luther King, Jr. Community Hospital is a critical safety net provider of maternity, critical and inpatient care, and primary and specialty outpatient services in South Los Angeles and serves some of the most vulnerable populations.
(b) During the 2009–10 Regular Session, the Legislature enacted Assembly Bill 2599, which, in recognition of the unique role of the hospital and the significant need in the South Los Angeles community, established a supplemental payment program specific to the hospital for inpatient Medi-Cal reimbursement in both the fee-for-service and managed care systems. Assembly Bill 2599’s goal and intent was to provide adequate and predictable funding to support Martin Luther King, Jr. Community Hospital and to facilitate the success of the hospital in providing critical health care to the South Los Angeles population.
(c) While the program authorized under Assembly Bill 2599 of the 2009–10 Regular Session has provided critical funding for inpatient services at the hospital, the hospital is facing substantial challenges to its ongoing fiscal stability due to multiple factors. Most notable of those factors, the hospital has a significantly larger number of emergency room visits than originally projected. In 2019 the hospital provided nearly 96,000 emergency room visits. Compared to the costs of these visits, the hospital’s reimbursement is insufficient.
(d) A key reason that the hospital is seeing both significant emergency room visits as well as inpatient services is that the hospital is operating in an area that does not have sufficient delivery of other health care service infrastructure that can serve this community. South Los Angeles is one of the most medically underserved areas, not just in California, but in the nation. The development of the hospital after the closure of the former county hospital was critically important to both local and state leaders given the high health care needs and lack of systems that were able to serve this South Los Angeles community.
(e) Eighty-seven percent of emergency room visits are Medi-Cal or uninsured. It is clear that the hospital is a central part of the safety net in South Los Angeles and demonstrates why reimbursements from other payors cannot offset the losses experienced in Medi-Cal. The hospital’s Medi-Cal and uninsured payor mix is the worst of any free-standing independent hospital in the entire State of California.
(f) The average Medi-Cal managed care payment received for emergency room services is less than 10 percent of the average commercial payment and less than 30 percent of the average Medicare payment.
(g) The high health care needs and lack of health equity in this community was highlighted and exacerbated by the COVID-19 pandemic. The hospital was at the center of the COVID surge with more patients proportionate to bed size, and in many cases, more patients by sheer numbers, than any other hospital in southern California.
(h) In order to ensure the future of Martin Luther King, Jr. Community Hospital and the services it provides to the South Los Angeles community, additional funding for outpatient services is necessary. With additional funding to stabilize the hospital, the hospital will be better positioned to develop additional outpatient services, reducing emergency room visits by delivering preventive care to the community.
(i) Additionally, the program created by Assembly Bill 2599 of the 2009–10 Regular Session needs to be modified due to requirements contained in the federal Medicaid Managed Care regulations finalized in 2016 to ensure that the funding for inpatient services continues to be paid to the hospital.

SEC. 2.

 Section 14165.51 is added to the Welfare and Institutions Code, to read:

14165.51.
 (a) To facilitate the financial viability of the Martin Luther King, Jr. Community Hospital, a private nonprofit hospital that serves the population of South Los Angeles that was formerly served by the Los Angeles County Martin Luther King, Jr.-Harbor Hospital, Medi-Cal funding shall, at a minimum, be made available, as specified in this section, or pursuant to mechanisms that provide equivalent funding under successor or modified Medi-Cal payment systems.
(b) (1) The department, in consultation with the hospital, shall create a directed payment program in Medi-Cal managed care for outpatient hospital services to provide that total Medi-Cal managed care reimbursement received by the hospital for those services is approximately equal to the hospital’s costs for those services.
(2) Consistent with federal law, the capitation rates paid to Medi-Cal managed care plans shall be determined to reflect the obligations described in paragraph (1).
(3) A Medi-Cal managed care plan receiving the increased payments described in paragraph (2) shall not impose a fee or retention amount, or reduce other payments to the hospital that would result in a direct or indirect reduction to the amounts required to be paid pursuant to paragraph (1).
(c) For purposes of this section, the hospital’s projected Medi-Cal costs shall be based on the Medi-Cal cost finding principles from the hospital’s Medi-Cal cost report. The projected Medi-Cal costs shall be determined prior to the start of each fiscal year in consultation with the hospital, using the best available and reasonable current estimates or projections made with respect to the hospital for an annual period, and shall be considered final as of the start of the fiscal year for purposes of the minimum payment levels described in subdivision (b).
(d) This section shall not be construed to preclude the hospital from receiving any other payment for which it is eligible in addition to the payments provided for by this section.
(e) If the applicable minimum reimbursement levels required in subdivision (b) result in payments to the hospital that are above the levels of compensation that would have been payable absent that requirement, and to the extent a nonfederal share is necessary with respect to the additional compensation, the following provisions shall apply:
(1) For each fiscal year, General Fund amounts appropriated in the annual Budget Act for the Medi-Cal program shall fund the nonfederal share of the additional payments to the extent that the rates of compensation for Medi-Cal managed care outpatient hospital services provided by the hospital that would have been payable in the absence of the requirements of subdivision (b) are less than 72 percent of the hospital’s projected Medi-Cal costs.
(2) (A) The remaining necessary nonfederal share of the additional payments, after taking into account the General Fund amounts described in paragraph (1), may be funded with public funds that are transferred to the state from the County of Los Angeles, at the county’s election, pursuant to Section 14164. To the extent the county elects not to fund any portion of the remaining necessary nonfederal share, the applicable minimum reimbursement levels required in subdivision (b) shall be reduced accordingly.
(B) Public funds transferred to the state for payments to the hospital, as described in this paragraph with respect to a fiscal period, shall be expended solely for the nonfederal share of the payments. Notwithstanding any other law, the department shall not impose any fee or assessment in connection with the transferred funds or the payments provided for under this section, including, but not limited to, reimbursement for state staffing or administrative costs.
(C) If any portion of the funds transferred pursuant to this paragraph is not expended, or is not expected to be expended, for the specified rate amounts required in subdivision (b), the unexpended funds shall be returned promptly to the transferring county.
(f) The department shall, in consultation with the hospital, develop an alternative mechanism for ensuring inpatient services payment levels to the hospital from Medi-Cal managed care plans, consistent with Section 14165.50 that comply with the federal Medicaid managed care regulations on directed payments.
(g) The department may, in consultation with the hospital, develop value-based quality directed payment, for use in payments to the hospital.
(h) Notwithstanding the rulemaking provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this section by means of all-facility letters, all-county letters, or similar instructions, without taking further regulatory action. This section shall not be construed to preclude the department from adopting regulations.
(i) (1) The department shall obtain federal approvals or waivers as necessary to implement this section and to obtain federal matching funds to the maximum extent permitted by federal law. This section shall be implemented only if, and to the extent that, federal financial participation is available and this section does not jeopardize the federal financial participation available for any other state program.
(2) This section shall be implemented only if, and to the extent that, any necessary federal approvals are obtained.
(j) Implementation of this section is contingent upon an appropriation by the Legislature in the annual Budget Act or another statute for the express purpose of this section.

SEC. 3.

 The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the fact that the Martin Luther King, Jr. Community Hospital is a critical safety net hospital with a need for more secure funding.