Assembly Bill (AB) 85

Redirection of 1991 Realignment Los Angeles County

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Background

California elected to implement a state-run Medicaid Expansion for Health Care Reform. Therefore, beginning in 2014, it assumed that county’s costs associated with the indigent population will decrease and the state’s costs will increase. Assembly Bill (AB) 85 lays out a process by which a portion of the 1991 Health Realignment Funds will be redirected to support Social Services programs.

Los Angeles County

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BackgroundLA County formula, should they not choose to redirect 60% of health realignment, is addressed in Section 17612.5

Redirection to begin effective January 2014

Los Angeles County

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OverviewLA County has 2 options

for determining the redirected amount. LA County must inform

DHCS of tentative decision by 11/1/13

May adopt a resolution by 1/22/14

60% of 1991 Health Realignment Funds

+60% of Maintenance

of EffortMOE is capped at 25.9% of the total value of LA County’s 2010-11 health realignment allocation

County Savings Determination

Process (Formula)Lesser of:

Revenues – Costs x.80 (.70 in 13/14)

OrCounty Indigent

Care Realignment (Health realignment

amount x health realignment indigent

care percentage)

If LA County does not adopt a resolution or fails to inform DHCS of their chosen option, then the calculation is 62.5% of County Realignment funds and 62.5% of the MOE.

Counties that select the 60%/40% option may later petition the Health Care Funding Resolution Committee to elect the formula option.

Los Angeles County

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County Savings Determination Process

The purpose of the formula is to calculate the health care savings the county is experiencing as a result of health care reform. This is achieved by determining if the overall available revenues exceed the costs the county is incurring (subject to a cost containment limit).

Revenues1. Total Revenues 2. Imputed county low-income health amount (county subsidy)

Costs3. Total Costs

County Indigent Care Health Realignment Amount Health Realignment Amount X Health Realignment Indigent Care Percentage

= MIN((SUM(1+2)-3)*.80 [or] County Indigent Care Health Realignment Amount)

*In 2013/14, the savings percentage will be .70 Los Angeles County

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Revenues

Los Angeles County

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Definitions – Total RevenueSum of revenue paid to LA County

Department of Health Services (DHS) Special Local Health Funds

• Assessments and fees for health services• 91% of Tobacco Settlements (Less bond

payments and cost of securitization)Determined based on its central accounting

system known as eCAPs as of November 30 of the following fiscal year

Type A and Type B payer revenues

Los Angeles County

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Type A Payers

MedicareCommercial health insuranceIn-home support services providers

Los Angeles County

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Historical Base Type A Revenues

Calculate actual revenue received for each historical year (FY 08/09-11/12)

Average the historical year amounts

Los Angeles County

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Type A Payer Revenues The greater of:

1. The amount of actual revenue received from Type A payers for services rendered during the fiscal year

2. Historical base Type A revenues as adjusted by Type A adjustments (these account for decreases in volume and costs)

Los Angeles County

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Baseline Type A Payer CostsAverage of the costs of services provided to

Type A payer patients rendered in each historical year (FY08/09-11/12)

1. Find the actual costs for each historical fiscal year

2. Take the average in 1.

Los Angeles County

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Type A AdjustmentType A Revenues are adjusted if:Step 1: Type A payer revenue for the fiscal year is less than the historical baseStep 2: If Step 1 is met, to adjust, all of the following must be met for at least one of the specified Type A payers:

Type A payer revenue for FY < historical base Type A payer costs for the FY < historical

base trended using the blended CPI Type A payer volume for the FY < historical

baseLos Angeles County

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Type A Adjustment - CalculationIf Step 2 is met, adjust according to Step 3Step 3:

1. Calculate the percentage decrease in cost from baseline Type A payer cost as trended by the blended CPI, applied from FY 2010/11 to the subject FY.

2. Calculate the percentage decrease in volume base on adjusted patient days from baseline Type payer volume

3. Average 1 and 2 above and apply this percentage to the historical base Type A payer revenue

(calculated and applied separately for each Type A payer)

Los Angeles County

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Type B Payers

Patient care revenuesState payments for patient financial services workers

Other federal payers (excluding federal grants, Medicare and Medicaid)

Los Angeles County

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Historical Base Type B RevenuesCalculate actual revenue received for each

historical yearAverage the historical year amounts

Los Angeles County

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Type B Payer RevenueType B payer revenues included in total

revenues in redirection formula is the greater of:

1. Actual revenues received from Type B payers in the fiscal year

2. Historical base Type B revenues

Los Angeles County

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Definition – Adjusted Patient dayLA county DHS’ total number of patient days

X(Total gross revenue for all services to all patients / Sum of LA county DPHs gross

inpatient revenue)

Excludes contract or out-of-network clinics or hospitals

Los Angeles County

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Definitions – Imputed County Low-Income Health Amount

SUM of:$323,000,000 trended by 1% annually from the

2012/13 fiscal yearCounty indigent care health realignment

amount (Health Realignment Amount X Health Realignment Indigent Care Percentage)

Los Angeles County

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Costs

Los Angeles County

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Definitions – Total CostActual net expenditures for all operating

budget units of the LA County DHS4 Hospital Enterprise FundsLA County DHS’s budget units from the within

the county general fundExcludes:

EncumbrancesIntrafund transfersExpenditure distributionsAll other billable services

Determined based on eCAPsLos Angeles County

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Cost Containment Limit (Formula)

Base Year Total CostsX

Blended CPI

*base year = fiscal year ending 3 years prior to the subject fiscal year

Los Angeles County

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Cost Containment LimitIF – the subject years actual indigent

program costs exceed the calculated cost containment limit for the year THEN the cost containment limit is used for the calculation OR adjustments to the cost containment limit can be sought

If the cost containment limit is applied, a reduction the revenues in the formula is also applied. The reduction to revenues is calculated as 50% of the amount that actual costs exceed the cost containment limit.

Los Angeles County

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Adjustments to the Cost Containment LimitIf adjusted patient days of service in subject FY

is in excess of 10% of those in the base year, the excess days will be multiplied by the cost per adjusted patient day for the base year and added to the trended base year amount.

Electronic health records and related implementation and infrastructure

Costs related to state or federally mandated activities, requirements, or benefit changes

Costs resulting from a court order settlement

Los Angeles County

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Adjustments to the Cost Containment Limit (Continued)Costs incurred in response to seismic

concerns, including costs to meet facility standards

Costs incurred as a result of a natural disaster or acts of terrorism

Total amount of any IGT for the nonfederal share of Medi-Cal payments to the “new” hospital facility in 14165.50(f)

Other costs as approved by DHCS

Los Angeles County

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Definitions – County Indigent Care Health Realignment Amount

= Health Realignment amount for that fiscal year

XHistorical health realignment

indigent care percentage (83%)

Los Angeles County

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Blended Consumer Price Index (CPI)Bureau of Labor Statistics dataNon-seasonally adjusted CPI for All Urban

Consumers – US city average Hospital and Related Services – weighted at

90%Medical Care Services – Weighted at 10%

Los Angeles County

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TimelineFY 2013/14

10/31/13 – The county provides data needed for formula to the State for: 1) Imputed Other Entity Intergovernmental Transfer

o 12/15/13 – State notifies Los Angeles county if we disagree with data submitted

o 1/13/14 – If no agreement has been reached regarding data, DHCS shall use the county’s data until a decision is made.

o The County Health Care Funding Resolution Committee shall decide whether the data is accurate/sufficient within 45 days.

By 6/30/15 –The county submits final data to stateBy 12/31/15 – State provides final FY 2013/14 calculations

to the county

Los Angeles County

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Timeline ContinuedFY 2014/15 and future yearsNovember – if using the formula, 5 months after the end of each

fiscal year the county submits reports on all revenue and cost data to DHCS.

January - DHCS completes the interim calculation the January prior to the starting fiscal year, using the most current/accurate data available.

May – DHCS updates the interim calculation in May before the start of the fiscal year.

June - 12 months/by June 30th of the year after subject fiscal year, county submits final data to DHCS.

July - December – DHCS completes the final calculation and submits to the county by December 31st of the fiscal year following the receipt of the final data – one and a half years after the subject fiscal year.

Los Angeles