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AB-3712 Medi-Cal: Rural hospitals.(1991-1992)

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AB3712:v92#DOCUMENT

Assembly Bill No. 3712
CHAPTER 1150

An act to add Section 14132.77 to the Welfare and Institutions Code, relating to public social services.

[ Filed with Secretary of State  September 30, 1992. Approved by Governor  September 29, 1992. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 3712, Kelley. Medi-Cal: Rural hospitals.
The Medi-Cal program is funded by federal and state funds, and administered by the State Department of Health Services. Federal financial participation, through the federal medicaid program, is contingent upon state conformity to federal requirements.
Existing law authorizes the State Department of Health Services to implement cost control procedures in the administration of the Medi-Cal program, including the use of prior authorization requirements for the provision of health care benefits subject to utilization controls. The prior authorization process includes the use of treatment authorization requests, through which a Medi-Cal provider may request authority to provide those health care benefits through the Medi-Cal program.
This bill would authorize rural hospitals, as defined, to request to participate in a 2-year pilot project to perform delegated acute inpatient treatment authorization review. The bill would require a hospital to pay to the state an amount equal to any amount the hospital is reimbursed for services for which approval is denied. The bill would require the State Department of Health Services to review, on a random basis, a selected number of cases from those hospitals exempt from that process. The bill would provide for an immediate disallowance which would require offsets against pending Medi-Cal payments and either the revocation of participation, increased reviews, or mandatory educational programs if the department determines that a hospital has provided benefits that the department cannot approve to 3% or more of the Medi-Cal beneficiaries treated, and would provide for the reinstatement of participation if the hospital’s treatment authorization requests are not denied in 3% or more of the Medi-Cal days after a period of 3 months.
The bill would require the State Department of Health Services to submit a report containing the department’s evaluations of the pilot project to the appropriate committees of the Legislature.
The bill would provide that the pilot project shall be implemented only if appropriate federal waivers are received.

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


SECTION 1.

 The Legislature finds and declares all of the following:
(a)  Rural hospitals serve as the hub of health care, and through that role attract and retain in their communities physicians, nurses, and other primary care providers.
(b)  Because of the unavailability of economies of scale, compounded by reimbursement reforms, many rural hospitals may close before the end of this decade. This would result in the departure of primary care providers and the loss of emergency medical services both to residents and persons traveling in the area. The smallest and most remote facilities are at highest risk.
(c)  The rural hospital is often one of the largest employers in the community. The closure of such a hospital means the loss of an employer and negative economic impact beyond the health sector. Further, economic development of a rural area is, in part, tied to the existence of a hospital. For example, people tend to retire to areas where there is reasonable access to physician and hospital-based services.
(d)  While only a very small percentage of the Medi-Cal budget for inpatient and outpatient services is spent for services rendered by rural hospitals, their participation is essential to preserve the integrity of the entire Medi-Cal program.
(e)  Rural hospitals are suffering severe cash-flow problems. They are subject to variabilities in Medi-Cal payments and uncertainties in levels of reimbursement, yet these hospitals still have expenses they must meet on a regular basis.
(f)  Four Medi-Cal field offices, in Redding, Modesto, Santa Barbara, and Santa Rosa, have recently closed due to reductions in staff as a result of the state budget deficit. The closing of those offices has resulted in the loss of onsite visits for purposes of treatment authorization request approvals at all of the hospitals that generate less than 20 completed treatment authorization requests per week. The loss of onsite review nurses has caused further strain on the financial and human resources of California’s small and rural hospitals.
(g)  An exemption for rural hospitals from the treatment authorization request (TAR) requirement, whereby hospitals would make self-determinations regarding the necessity of care, would save both hospitals and the state’s financial and human resources.
(h)  A Medi-Cal reimbursement system based on regularly scheduled intervals would assist hospitals in meeting expenses and remaining viable.

SEC. 2.

 Section 14132.77 is added to the Welfare and Institutions Code, to read:

14132.77.
 (a)  (1)  Any rural hospital may request to participate in a two-year pilot project to perform delegated acute inpatient hospital treatment authorization review under the Medi-Cal program.
(2)  Any hospital that elects to participate in the pilot project under this section shall enter into an agreement with the department to ensure the appropriateness of the treatments and services that it provides to a Medi-Cal beneficiary.
(3)  Any rural hospital that elects to participate in a pilot project pursuant to this section shall remain in the project for not less than one year, unless it is removed by the department pursuant to subdivision (c).
(b)  The department shall review, on a random basis, every six months, up to 25 percent of the Medi-Cal beneficiaries treated by each participating hospital. As long as a hospital participates in a pilot project authorized by this section, reviews required by this section shall not interfere with, or delay, the processing of the hospital’s claims for payment. Consistent with subdivision (c), if the department finds that a hospital participating in a pilot project under this section is accumulating a significant overpayment, the department shall notify the provider.
(c)  (1)  (A)  If the department determines, as a result of a review required by subdivision (b), that the hospital has provided treatment that cannot be approved by the department, the department shall take an immediate disallowance that shall require offsets against pending Medi-Cal payments and any direct payment that may be required by the department. The disallowance shall be based on full extrapolation of the sample to the universe of Medi-Cal days covered by the sample period.
(B)  In addition to the requirements of subparagraph (A), if the department determines that the hospital has provided treatment that cannot be approved by the department for 3 percent or more of the Medi-Cal beneficiary days, the department shall take corrective action relative to the hospital’s participation in the pilot project. The corrective action shall include at least one of the following actions:
(i)  The revocation of the hospital’s participation pursuant to subdivision (a).
(ii)  An increased random review process.
(iii)  Mandatory educational programs.
(2)  After the random review required by subdivision (b), the hospital shall, through the reduction of the regularly scheduled periodic interim payment over a one-year period, pay the state an amount equal to the reimbursement received by the hospital for services for which approval has been denied and extrapolated pursuant to paragraph (1). This paragraph does not preclude any hospital from appealing a determination of the department under Article 5.3 (commencing with Section 14170). However, any issue under appeal shall not delay any disallowance or corrective action taken by the department under paragraph (1) until the appeal is resolved.
(d)  The department may reinstate any hospital’s participation revoked pursuant to subdivision (c) if, after a period of three months, the hospital’s requests for a treatment authorization are not denied in 3 percent or more of the Medi-Cal days.
(e)  Six months after the conclusion of the first year of the pilot project, the department shall prepare a report with an evaluation of the project and shall submit it to the appropriate committees of the Legislature. The department shall include its determination as to whether the project should be extended, modified, or terminated in the report and the basis for any determinations made by the department.
(f)  (1)  As part of the pilot project implemented under this section, the department may, subject to federal approval, authorize the reimbursement of a participating rural hospital at a predetermined amount every two weeks or on some other basis determined to be appropriate by the department. Following every six-month period, the department shall immediately begin adjustment of any overpayment or underpayment, based on the amount paid to the provider as compared to the actual amount of claims approved by the department. Any hospital that is selected to participate in the pilot project under this section that elects to be paid for acute inpatient services under this subdivision shall be subject to the payment provisions of this section for the duration of the hospital’s participation in the pilot project.
(2)  The amount of reimbursement under paragraph (1) shall be based on the actual claims payment experience for each hospital for the immediately preceding period of six months and rate adjustments made in accordance with existing Medi-Cal reimbursement requirements.
(g)  For purposes of this section, “rural hospital” means a small and rural hospital as defined in Section 1188.855 of the Health and Safety Code.
(h)  The scope of the pilot project shall be subject to federal approval and the necessary resources made available from sources other than the General Fund or savings from program efficiencies that may be identified for this purpose.
(i)  The department shall implement this section only upon receipt of all appropriate federal waivers.