Breakthrough Deal for Nursing Facilities

by David Gorn

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State officials yesterday agreed to a deal that will reverse the 10% Medi-Cal provider reimbursement cut for hospital-based, distinct-part skilled nursing facilities.

The reversal was tucked into the language of SB 239 by Sen. Ed Hernandez (D-West Covina), the bill to extend the hospital quality assurance fee.

That bill yesterday cleared the Assembly Committee on Health with a unanimous vote, and is headed to the Legislature floor for votes over the next two days.

Another bill, AB 900 by Assembly member Luis Alejo (D-Watsonville), dealt specifically with reversing the cut to hospital-based SNF units, but it was stuck in the appropriations committee.

"AB 900 would have technically had a cost to the state," said Jan Emerson-Shea, vice president of communications for the California Hospital Association. "As part of the [SB 239] fee bill, we're bringing in billions of dollars to the state."

SB 239 was recently amended to extend the hospital quality assurance fee for an extra year -- from a two-year extension to a three-year extension -- to the end of 2016.

Over those three years, the fee is expected to bring $2.4 billion to the state's general fund, in addition to another $10 billion in Medi-Cal dollars.

"We are very pleased," Emerson-Shea said. "The agreement was 'Let's take care of this problem with this bill.' By doing this, you're not going to make those cuts, you're going to lift the rate freeze."

Many urban hospitals' SNF units were in danger of closing if the rate cut hadn't been reversed, Emerson-Shea said.

"We've solved a problem. That was a big problem," she said.

The state recently exempted rural distinct-part SNF units from the cuts, but urban ones were facing similar problems, Emerson-Shea said. Two San Francisco units, at Laguna Honda Hospital and Jewish Home of San Francisco, were facing partial closure and that would've been a big problem for state health officials, she said.

"Those patients were going to have to be paid for by the state, anyway, if those facilities shut down beds," Emerson-Shea said. "It doesn't relieve obligation to the state. We always said it was penny-wise and pound-foolish because the state would be on the hook for more expensive care."

Under the hospital quality assurance fee structure, hospitals agree to be taxed and the state uses that money to secure matching federal funds and to issue grants to public hospitals. Private hospitals end up making back their money and more, while the state ends up with more money in the general fund.

"It's a win-win-win," Emerson-Shea said. "Hospitals are winning, the state is winning and we're taking care of this Medi-Cal rate cut issue."

The difference between current rates and lower rates since the cuts were approved two years ago -- known as "clawback" money -- is not part of the deal and nursing facilities may be expected to reimburse the state. The cuts approved by the Legislature two years ago were not implemented while the cuts were challenged in court.

Other Medi-Cal providers still face a 10% cut and must decide in two weeks whether to appeal those cuts to the U.S. Supreme Court. That decision is still being made, Emerson-Shea said. 

"We are part of a broader coalition and we still support other provider groups having those cuts restored," she said. "We're not going to stop working on that just because we got our piece of it fixed."


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