California Assembly Bill AB498 Amended / Bill

 BILL NUMBER: AB 498AMENDED BILL TEXT AMENDED IN SENATE AUGUST 20, 2013 AMENDED IN SENATE JUNE 20, 2013 AMENDED IN ASSEMBLY MAY 7, 2013 AMENDED IN ASSEMBLY APRIL 23, 2013 AMENDED IN ASSEMBLY MARCH 19, 2013 INTRODUCED BY Assembly Member Chvez FEBRUARY 20, 2013 An act to amend Section 14166.151 of  , and to repeal Sections 14166.152, 14166.153, 14166.154, and 14166.155 of,  the Welfare and Institutions Code, relating to Medi-Cal. LEGISLATIVE COUNSEL'S DIGEST AB 498, as amended, Chvez. Medi-Cal.  Existing   (1)     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, subject to federal approval, modifies the inpatient fee-for-service reimbursement methodology for nondesignated public hospitals, as defined, under a specified demonstration project for services on or after July 1, 2012. Existing law provides that beginning with the 2012-13 fiscal year, and if specified conditions are met, nondesignated public hospitals, or governmental entities with which the hospitals are affiliated, shall be eligible to receive safety net care pool payments for uncompensated care from the Health Care Support Fund. Existing law provides that these provisions shall become operative on the date that all necessary federal approvals have been obtained to implement these and other related provisions.  Existing law requires designated public hospitals to report and certify specified   information for each successor demonstration year beginning with the 2012-13 fiscal year.   This bill would revise and recast those provisions.  This bill would instead authorize the department to seek necessary federal approvals or waivers to separately implement the safety net care pool payments for uncompensated care provisions for the 2013-14 and 2014-15 fiscal years. The bill would require the state, if the state receives federal safety net care pool funds for uncompensated care under these  provision   provisions  , to retain1/2 of the funds for Medi-Cal related expenditures.  (2) Under existing law, nondesignated public hospitals may receive fee-for-service payments for inpatient services, as specified. Under existing law, beginning with the 2012-13 fiscal year, subject to federal approval and if specified conditions are met, nondesignated public hospitals may receive delivery system reform incentive pool funding, as specified.   This bill would eliminate those provisions.  Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 14166.151 of the Welfare and Institutions Code is amended to read: 14166.151. (a) It is the intent of the Legislature to  reform the inpatient fee-for-service reimbursement methodology for   allow for a voluntary process for  nondesignated public hospitals  to claim reimbursement from the safety net care pool in the successor demonstration project  based on their public structure  in order to provide new opportunities for nondesignated public hospitals to receive reimbursement under the successor demonstration project for care provided to the uninsured and to receive new incentive payments for achievement related to delivery system reform.   ,   to the extent that there is funding available for nondesignated pu   blic hospitals in that pool, as allowed by the federal government, which shall be allocated equally between the state and the nondesignated public hospital, so that for every dollar of certified public expenditure used by the nondesignated public hospital, the nondesignated public hospital shall voluntarily allow the state to use a corresponding certified public expenditure amount for claiming purposes.  (b)  Subject to subdivision (c), beginning   (1)     Beginning  with services provided on or after July 1,  2012, fee-for-service payments to nondesignated public hospitals for inpatient services shall be governed by this subdivision. Each nondesignated public hospital shall receive as payment for inpatient hospital services provided to Medi-Cal beneficiaries during any successor demonstration year, the federal financial participation claimed by the department based on the hospital's allowable costs incurred in providing those services, subject to all of the following:   (1) Nondesignated public hospitals shall comply with the requirements of Section 14166.152. The payments authorized in this section shall be subject to audit and a final reconciliation where an overpayment to the nondesignated public hospital shall result in a collection of the overpayment and an underpayment to the nondesignated public hospital shall result in a corrective payment.   (2)    (A)     Nondesignated   2013, nondesignated  public hospitals shall be eligible to receive safety net care pool payments for uncompensated care costs to the extent that additional federal funding is made available pursuant to the Special Terms and Conditions for the safety net care pool uncompensated care limit of the successor demonstration project and if they comply with the requirements set forth in  Section 14166.154.   this section.   (B)   (2)  The amount of funds that may be claimed pursuant to  subparagraph (A)   paragraph (1)  shall not exceed the additional federal funding made available under the safety net care pool for nondesignated public hospital uncompensated care costs, and shall not reduce the amounts of federal funding for safety net care pool uncompensated care costs that would otherwise be made available to designated public hospitals in the absence of this paragraph, including the amounts available under the Special Terms and Conditions in effect as of April 1,  2012   2013  , and amounts available pursuant to Section 15916.  (C) (i)   (3)     (A)   Notwithstanding  subparagraph (B)   paragraph (2)  , if the designated public hospitals do not have sufficient certified public expenditures to claim the full amount of federal funding made available to the designated public hospitals as referenced in  subparagraph (B)   paragraph (2)  , including consideration of the potential for the designated public hospitals to have sufficient certified public expenditures in a subsequent year, the department may authorize the funding to be claimed by the nondesignated public hospitals.  (ii)  (B)  The department may determine whether designated public hospitals do not have sufficient certified public expenditures to claim the full amount of federal funding pursuant to  clause (i)   subparagraph (B)  no sooner than after the submission of the cost reporting information required pursuant to Section 14166.8 for the applicable successor demonstration year.  (iii)   (C)  If the department makes the determination identified in  clause (ii)   subparagraph (B)  based on as-filed cost reporting information submitted prior to a final audit, the department shall make the determination in consultation with the designated public hospitals and shall apply an audit cushion of at least 5 percent to the as-filed cost information. If the department makes the determination identified in  clause (ii)   subparagraph (B)  based on audited cost reporting information, no audit cushion shall be applied.  (3) (A) Nondesignated public hospitals shall be eligible to receive delivery system reform incentive pool payments to the extent additional federal funding is made available for this purpose under the delivery system reform incentive pool in the successor demonstration project and if the nondesignated public hospitals comply with the delivery system reform incentive pool funding requirements set forth in Section 14166.155.   (B) The amount of funds that may be received shall not exceed the additional federal funding made available for delivery system reform incentive pool payments to nondesignated public hospitals, and shall not reduce the amounts that would otherwise be made available to designated public hospitals in the absence of this paragraph, including the amounts that designated public hospitals would be eligible to receive under their delivery system reform incentive pool plans approved as of January 1, 2012.   (C) Notwithstanding subparagraph (B), if the designated public hospitals are unable to claim the full amount of federal funding made available to the designated public hospitals pursuant to Section 14166.77 and the Special Terms and Conditions, including through reallocations made pursuant to paragraph (3) of subdivision (a) of Section 14166.77 as authorized by the Special Terms and Conditions, and the unused amount of federal funding made available to the designated public hospitals cannot be used in a later demonstration year, the department may authorize such unused funding to be made available to the nondesignated public hospitals.   (c) (1) (A) The reimbursement methodology developed pursuant to subdivision (b) shall be effective beginning July 1, 2012. If all necessary federal approvals have not been received by July 1, 2012, then the effective date shall be retroactive to July 1, 2012. Between July 1, 2012, and when all necessary federal approvals have been received, any payments made pursuant to any methodology replaced by subdivision (b) shall be deemed as interim payments subject to offsetting and recoupment against payments made under subdivision (b) pursuant to Section 51047 of Title 22 of the California Code of Regulations.   (B) Subject to paragraph (2), beginning January 1, 2014, the reimbursement methodology developed pursuant to subdivision (b), which shall be in effect July 1, 2012, through and including December 31, 2013, shall continue for those nondesignated public hospitals that certify voluntary participation as described in clause (i), if the director executes a declaration on or before December 31, 2013, certifying all of the following:   (i) The governmental entities that own or operate a nondesignated public hospital, or hospitals, have provided certifications of voluntary participation in the reimbursement methodology pursuant to subdivision (b).   (ii) Any necessary federal approvals have been obtained.   (iii) Continuation of the reimbursement methodology for those nondesignated public hospitals certifying voluntary participation would be cost beneficial to the state.  (2) On December 31, 2013, if one or more of the nondesignated public hospitals subject to the reimbursement methodology described in subdivision (b) have not provided written certification of voluntariness described in clause (i) of subparagraph (B) of paragraph (1), or if the director determines, for any reason, that the reimbursement methodology described in subdivision (b) cannot be implemented on or after January 1, 2014, then the director shall execute a declaration certifying that the reimbursement methodology described in subdivision (b) cannot continue to be implemented for all or one or more of the nondesignated public hospitals, in which case subdivision (e) shall be implemented on January 1, 2014.   (d) Upon implementation of subparagraph (A) of paragraph (1) of subdivision (c), implementation of the laws and regulations listed in paragraphs (1) to (4), inclusive, shall be suspended with respect to fee-for-service payments to all nondesignated public hospitals for inpatient services through and including December 31, 2013. Implementation of the laws and regulations listed in paragraphs (1) to (4), inclusive, shall also be suspended with respect to fee-for-service payments to nondesignated public hospitals that certify voluntary participation if a declaration is executed pursuant to subparagraph (B) of paragraph (1) of subdivision (c), beginning on January 1, 2014, and until the expiration of the successor demonstration project.   (1) The Nondesignated Public Hospital Medi-Cal Rate Stabilization Act in Article 5.17 (commencing with Section 14165.55).   (2) The inpatient fee-for-service per diem rate authorized in Article 2.6 (commencing with Section 14081).   (3) The reimbursement methodology for fee-for-service inpatient services in Sections 14105 and 14105.15, and Article 7.5 (commencing with Section 51536) of Title 22 of the California Code of Regulations.   (4) Section 14166.17.   (e) Subject to the conditions in paragraph (2) of subdivision (c), on January 1, 2014, the percentage of each intergovernmental transfer amount retained pursuant to subdivision (j) of Section 14165.57 shall be increased to 20 percent to reimburse the department, or transferred to the General Fund, for the administrative costs of operating the Nondesignated Public Hospital Intergovernmental Transfer Program and for the benefit of the Medi-Cal program.   (f) (1) This section and Sections 14166.152, 14166.153, 14166.154, and 14166.155 shall become operative on the date all necessary federal approvals have been obtained to implement all of these sections.   (2) Notwithstanding paragraph (1) of this subdivision and Section 14166.154, if the necessary federal approvals are not obtained to implement all of the sections set forth in paragraph (1), the department may seek any necessary federal approvals or waivers to separately implement the safety net care pool payments for uncompensated care, as described in paragraph (2) of subdivision (b) of this section and Section 14166.154, for the 2013-14 and 2014-15 fiscal years. If federal safety net care pool funds for uncompensated care are received by the state for this purpose, the state shall retain one-half of the funds for Medi-Cal related expenditures.   (c) Beginning in the 2013-14 fiscal year, within five months after the end of a successor demonstration year, nondesignated public hospitals shall submit to the department all of the following reports:   (1) The hospital's Medicare or Medicaid cost report for the successor demonstration year.   (2) Other cost reporting and statistical data necessary for the determination of amounts due to the hospital under the successor demonstration project, as requested by the department.   (d) For each successor demonstration year, the reports shall identify all of the costs incurred in providing hospital services to uninsured individuals.   (e) A nondesignated public hospital, or the governmental entity with which it is affiliated, that operates nonhospital clinics or provides physician, nonphysician practitioner, or other health care services that are not identified as hospital services under the Special Terms and Conditions for the successor demonstration project, shall report and certify all of the uncompensated uninsured costs of the services furnished.   (f) Reports submitted under this section shall include all allowable costs.   (g) The appropriate public official shall certify to all of the following:   (1) The accuracy of the reports required under this section.   (2) That the expenditures to meet the reported costs comply with Section 433.51 of Title 42 of the Code of Federal Regulations.   (3) That the sources of funds used to make the expenditures certified under this section do not include impermissible provider taxes or donations, as defined under Section 1396b(w) of Title 42 of the United States Code, or other federal funds. For this purpose, federal funds do not include delivery system reform incentive pool payments or patient care revenue received as payment for services rendered under programs such as nondesignated state health programs, the Low Income Health Program, Medicare, or Medicaid.   (h) The certification of public expenditures made pursuant to this section shall be based on a schedule established by the department in accordance with federal requirements.   (1) The director may require nondesignated public hospitals to submit quarterly estimates of anticipated expenditures, if these estimates are necessary to obtain interim payments of federal Medicaid funds.   (2) All reported expenditures shall be subject to reconciliation to allowable costs, as determined in accordance with applicable implementing documents for the successor demonstration project.   (i) The timeframes for data submission and reporting periods may be adjusted as necessary in accordance with federal requirements.   (j) (1) Beginning in the 2013-14 fiscal year, safety net care pool payments for uncompensated care shall be allocated to nondesignated public hospitals as follows:   (A) The department shall determine the maximum amount of safety net care pool payments for uncompensated care that is available to nondesignated public hospitals for the successor demonstration year pursuant to this section. This determination shall be made solely with respect to allowable uncompensated care costs incurred by nondesignated public hospitals and reported pursuant to subdivisions (c) to (i), inclusive.   (B) The department shall establish, in consultation with the nondesignated public hospitals, an allocation methodology to determine the amount of safety net care pool payments to be made to the nondesignated public hospitals. The allocation methodology shall be implemented when the director issues a declaration stating that the methodology complies with all applicable federal requirements for federal financial participation.   (2) A safety net care pool payment amount may be paid to a nondesignated public hospital, or governmental entity with which it is affiliated, pursuant to this section independent of the amount of uncompensated uninsured costs that is certified as public expenditures pursuant to subdivisions (c) to (i), inclusive, provided that, in accordance with the Special Terms and Conditions for the successor demonstration project, the recipient hospital shall not return any portion of the funds received to any unit of government, excluding amounts recovered by the state or federal government.   (3) Nondesignated public hospitals, or governmental entities with which they are affiliated, shall receive the amount established pursuant to this subdivision, less the 50 percent retained by the state pursuant to subdivision (l), in quarterly interim payments during the successor demonstration year. The determination of the interim payments shall be made on an interim basis prior to the start of each successor demonstration year. The department shall use the cost and statistical data that is in subdivisions (c) to (i), inclusive.   (k) (1) No later than April 1 following the end of the relevant reporting period for the successor demonstration year, the department shall undertake an interim reconciliation of the payment amount established pursuant to subdivision (j) for nondesignated public hospitals using Medicare and other cost, payment, and statistical data submitted by the hospitals for the successor demonstration year, and shall adjust payments to the hospitals accordingly.   (2) All payments to nondesignated public hospitals are subject to a final reconciliation that is subject to final audits of all applicable Medicare and other cost, payment, discharge, and statistical data for the successor demonstration year.   (l) The process for supplemental payments made in subdivisions (j) and (k) is a voluntary process the implementation of which is limited by this subdivision. The department may submit for federal approval a proposed amendment to the successor demonstration project to implement this section.   (1) If a nondesignated public hospital voluntarily agrees to participate in a process that, up to the amount of safety net care pool funds available, allows the certified public expenditures for uncompensated care under this section to be allocated equally between the state and the nondesignated public hospital, so that for every dollar of certified public expenditure used by the nondesignated public hospital, the nondesignated public hospital shall voluntarily allow the state to use a corresponding certified public expenditure amount for claiming purposes. Participation in the safety net care pool under this section is voluntary on the part of the nondesignated public hospital for the purposes of all applicable federal laws. If a nondesignated public hospital does not voluntarily agree to participate in this process, it shall not be eligible to receive safety net care pool funds.   (2) If the budget neutrality requirements established under Section XI of the Special Terms and Conditions of the successor demonstration project are exceeded, payments made under this section shall be reduced to achieve budget neutrality. The state's share of the federal financial participation shall be reduced after the provider's share has been exhausted.   (3) Notwithstanding any other provision of law, upon the receipt of a notice of disallowance or deferral from the federal government related to any certified public expenditures for uncompensated care incurred by the nondesignated public hospital that are used for federal claiming under the safety net care pool pursuant to the successor demonstration project after this section is implemented, and subject to the processes set forth in this section, the department and the nondesignated public hospitals shall each be responsible for one-half of the repayment of the federal portion of any federal disallowance or deferral for the applicable successor demonstration year, up to the amount claimed and allocated pursuant to this section for that particular year beginning with the 2013-14 fiscal year.   (4) This section shall be implemented only to the extent other federal financial participation is not jeopardized.   (m) Eligible providers, as a condition of receiving supplemental reimbursement pursuant to this section, shall enter into, and maintain, an agreement with the department for the purposes of implementing this section and reimbursing the department for the costs of administering this section, including, but not limited to, the state personnel costs. No General Fund moneys shall be expended for the implementation and administration of this section.   SEC. 2.   Section 14166.152 of the   Welfare and Institutions Code   is repealed.   14166.152. (a) Pursuant to subdivision (b) of Section 14166.151, and notwithstanding any other law, fee-for-service payments to nondesignated public hospitals for inpatient services to Medi-Cal beneficiaries shall be governed by this section. The hospitals' allowable costs shall be determined, certified, and claimed in accordance with Section 14166.153. The Medicaid federal financial participation received by the state for the certified public expenditures of the hospital, or the governmental entity with which the hospital is affiliated, for inpatient hospital services rendered to Medi-Cal beneficiaries shall be paid to the hospital. (b) With respect to each successor demonstration year, each of the nondesignated public hospitals shall receive an interim payment for each day of inpatient hospital services rendered to Medi-Cal beneficiaries based upon claims filed by the hospital in accordance with the claiming process set forth in Division 3 (commencing with Section 50000) of Title 22 of the California Code of Regulations. The interim per diem payment amount shall be based on estimated costs, which shall be derived from statistical data from the following sources and which shall be multiplied by the federal medical assistance percentage: (1) For allowable costs reflected in the Medicare cost report, the cost report most recently audited by the hospital's Medicare fiscal intermediary adjusted by a trend factor to reflect increased costs, as approved by the federal Centers for Medicare and Medicaid Services for the successor demonstration project. (2) For allowable costs not reflected in the Medicare cost report, each hospital shall provide hospital-specific cost data requested by the department. The department shall adjust the data by a trend factor as necessary to reflect project year allowable costs. (c) Until the department commences making payments pursuant to subdivision (b), the department may continue to make fee-for-service per diem payments to the nondesignated public hospitals pursuant to the selective provider contracting program in accordance with Article 2.6 (commencing with Section 14081), for services rendered on and after July 1, 2012. Per diem payments shall be adjusted retroactively to the amounts determined under the payment methodology prescribed in this section. (d) No later than April 1 following the end of the relevant reporting period for the successor demonstration year, the department shall undertake an interim reconciliation of payments made pursuant to subdivisions (a) to (c), inclusive, based on Medicare and other cost and statistical data submitted by the hospital for the year and shall adjust payments to the hospital accordingly. (e) (1) The nondesignated public hospitals shall receive supplemental reimbursement for the costs incurred for physician and nonphysician practitioner services provided to Medi-Cal beneficiaries who are patients of the hospital, to the extent that those services are not claimed as inpatient hospital services by the hospital and the costs of those services are not otherwise recognized under subdivision (a). (2) Expenditures made by the nondesignated public hospital, or a governmental entity with which it is affiliated, for the services identified in paragraph (1) shall be reduced by any payments received pursuant to Article 7 (commencing with Section 51501) of Title 22 of the California Code of Regulations. The remainder shall be certified by the appropriate public official and claimed by the department in accordance with Section 14166.153. These expenditures may include any of the following: (A) Compensation to physicians or nonphysician practitioners pursuant to contracts with the nondesignated public hospital. (B) Salaries and related costs for employed physicians and nonphysician practitioners. (C) The costs of interns, residents, and related teaching physician and supervision costs. (D) Administrative costs associated with the services described in subparagraphs (A) to (C), inclusive, including billing costs. (3) Nondesignated public hospitals shall receive federal financial participation based on the expenditures identified and certified in paragraph (2). (4) The federal financial participation received by the department for the certified public expenditures identified in paragraph (2) shall be paid to the nondesignated public hospital, or a governmental entity with which it is affiliated. (5) Supplemental reimbursement under this subdivision may be distributed as part of the interim payments under subdivision (b), on a per-visit basis, on a per-procedure basis, or on any other federally permissible basis. (6) The department shall submit for federal approval, by September 30, 2012, a proposed amendment to the Medi-Cal state plan to implement this subdivision, retroactive to July 1, 2012, to the extent permitted by the federal Centers for Medicare and Medicaid Services. If necessary to obtain federal approval, the department may limit the application of this subdivision to costs determined allowable by the federal Centers for Medicare and Medicaid Services. If federal approval is not obtained, this subdivision shall not be implemented. (f) This section shall become operative as provided in subdivision (f) of Section 14166.151.   SEC. 3.   Section 14166.153 of the   Welfare and Institutions Code   is repealed.   14166.153. (a) Beginning in the 2012-13 fiscal year, within five months after the end of a successor demonstration year, each of the nondesignated public hospitals shall submit to the department all of the following reports: (1) The hospital's Medicare cost report for the project year or successor demonstration year. (2) Other cost reporting and statistical data necessary for the determination of amounts due the hospital under the demonstration project or successor demonstration project, as requested by the department. (b) For each project year or successor demonstration year, the reports shall identify all of the following: (1) To the extent applicable, the costs incurred in providing inpatient hospital services to Medi-Cal beneficiaries on a fee-for-service basis and physician and nonphysician practitioner services costs, as identified in subdivision (e) of Section 14166.152. (2) The costs incurred in providing hospital services to uninsured individuals. (c) Each nondesignated public hospital, or governmental entity with which it is affiliated, that operates nonhospital clinics or provides physician, nonphysician practitioner, or other health care services that are not identified as hospital services under the Special Terms and Conditions for the demonstration project and successor demonstration project, shall report and certify all of the uncompensated Medi-Cal and uninsured costs of the services furnished. The amount of these uncompensated costs to be claimed by the department shall be determined by the department in consultation with the governmental entity so as to optimize the level of claimable federal Medicaid reimbursement. (d) Reports submitted under this section shall include all allowable costs. (e) The appropriate public official shall certify to all of the following: (1) The accuracy of the reports required under this section. (2) That the expenditures to meet the reported costs comply with Section 433.51 of Title 42 of the Code of Federal Regulations. (3) That the sources of funds used to make the expenditures certified under this section do not include impermissible provider taxes or donations as defined under Section 1396b(w) of Title 42 of the United States Code or other federal funds. For this purpose, federal funds do not include delivery system reform incentive pool payments or patient care revenue received as payment for services rendered under programs such as nondesignated state health programs, the Low Income Health Program, Medicare, or Medicaid. (f) The certification of public expenditures made pursuant to this section shall be based on a schedule established by the department in accordance with federal requirements. (1) The director may require the nondesignated public hospitals to submit quarterly estimates of anticipated expenditures, if these estimates are necessary to obtain interim payments of federal Medicaid funds. (2) All reported expenditures shall be subject to reconciliation to allowable costs, as determined in accordance with applicable implementing documents for the demonstration project and successor demonstration project. (g) The director shall seek Medicaid federal financial participation for all certified public expenditures reported by the nondesignated public hospitals and recognized under the successor demonstration project. (h) The timeframes for data submission and reporting periods may be adjusted as necessary in accordance with federal requirements. (i) This section shall become operative as provided in subdivision (f) of Section 14166.151.   SEC. 4.   Section 14166.154 of the   Welfare and Institutions Code   is repealed.   14166.154. (a) (1) Beginning in the 2012-13 fiscal year, if the reimbursement methodology in subdivision (b) of Section 14166.151 is in effect and federal approval is obtained for an amendment to the successor demonstration project that was submitted pursuant to subdivision (d), then, with respect to each successor demonstration year, nondesignated public hospitals, or governmental entities with which they are affiliated, shall be eligible to receive safety net care pool payments for uncompensated care from the Health Care Support Fund established pursuant to Section 14166.21. Safety net care pool payments for uncompensated care shall be allocated to nondesignated public hospitals as follows: (A) The department shall determine the maximum amount of safety net care pool payments for uncompensated care that is available to nondesignated public hospitals for the successor demonstration year pursuant to paragraph (2) of subdivision (b) of Section 14166.151. This determination shall be made solely with respect to allowable uncompensated care costs incurred by nondesignated public hospitals and reported pursuant to Section 14166.153. (B) The department shall establish, in consultation with the nondesignated public hospitals, an allocation methodology to determine the amount of safety net care pool payments to be made to each hospital. The allocation methodology shall be implemented when the director issues a declaration stating that the methodology complies with all applicable federal requirements for federal financial participation. (2) A safety net care pool payment amount may be paid to a nondesignated public hospital, or governmental entity with which it is affiliated, pursuant to this section independent of the amount of uncompensated Medi-Cal and uninsured costs that is certified as public expenditures pursuant to Section 14166.153, provided that, in accordance with the Special Terms and Conditions for the successor demonstration project, the recipient hospital does not return any portion of the funds received to any unit of government, excluding amounts recovered by the state or federal government. (3) In establishing the amount to be paid to each nondesignated public hospital under this subdivision, the department shall minimize to the extent possible the redistribution of federal funds that are based on certified public expenditures as described in paragraph (2). (b) Each nondesignated public hospital, or governmental entity with which it is affiliated, shall receive the amount established pursuant to subdivision (a) in quarterly interim payments during the successor demonstration year. The determination of the interim payments shall be made on an interim basis prior to the start of each successor demonstration year. The department shall use the same cost and statistical data that is used in determining the interim payments for Medi-Cal inpatient hospital services under Section 14166.152. (c) (1) No later than April 1 following the end of the relevant reporting period for the successor demonstration year, the department shall undertake an interim reconciliation of the payment amount established pursuant to subdivision (a) for each nondesignated public hospital using Medicare and other cost, payment, and statistical data submitted by the hospital for the successor demonstration year, and shall adjust payments to the hospital accordingly. (2) The final payment to a nondesignated public hospital, for purposes of subdivision (b) and paragraph (1) of this subdivision, shall be subject to final audits of all applicable Medicare and other cost, payment, discharge, and statistical data for the successor demonstration year. (d) The department shall submit for federal approval a proposed amendment to the successor demonstration project to implement this section. (e) This section shall become operative as provided in subdivision (f) of Section 14166.151.   SEC. 5.   Section 14166.155 of the   Welfare and Institutions Code   is repealed.   14166.155. (a) (1) Beginning in the 2012-13 fiscal year, if the reimbursement methodology in subdivision (b) of Section 14166.151 is in effect and federal approval is obtained for an amendment to the successor demonstration project that was submitted pursuant to subdivision (c), then nondesignated public hospitals may receive payments pursuant to this section. The amount of delivery system reform incentive pool funding, consisting of both the federal and nonfederal share of payments, that is made available to each nondesignated public hospital system in the aggregate for the term of the successor demonstration project shall be based initially on the delivery system reform proposals that are submitted by the nondesignated public hospitals to the department for review and submission to the federal Centers for Medicare and Medicaid Services for final approval. The initial percentages of delivery system reform incentive pool funding among the nondesignated public hospitals for each successor demonstration year shall be determined based on the annual components as contained in the approved proposals. (2) The actual receipt of funds shall be conditioned on the nondesignated public hospital's progress toward, and achievement of, the specified milestones and other metrics established in its approved delivery system reform incentive pool proposal. A nondesignated public hospital may carry forward available incentive pool funding associated with milestones and metrics from one year to a subsequent period as authorized by the Special Terms and Conditions and the final delivery system reform incentive pool protocol. (3) The department may reallocate the incentive pool funding available under this section pursuant to conditions specified, and as authorized by, the Special Terms and Conditions and the final delivery system reform incentive pool protocol. (b) Each nondesignated public hospital shall be individually responsible for progress toward, and achievement of, milestones and other metrics in its proposal, as well as other applicable requirements specified in the Special Terms and Conditions and the final delivery system reform incentive pool protocol, in order to receive its specified allocation of incentive pool funding under this section. (1) The nondesignated public hospital shall submit semiannual reports and requests for payment to the department by March 31 and the September 30 following the end of the second and fourth quarters of the successor demonstration year, or comply with any other process as approved by the federal Centers for Medicare and Medicaid Services. (2) Within 14 days after the semiannual report due date, the nondesignated public hospital system or its affiliated governmental entity shall make an intergovernmental transfer of funds equal to the nonfederal share that is necessary to claim the federal funding for the pool payment related to the achievement or progress metric that is certified. The intergovernmental transfers shall be deposited into the Public Hospital Investment, Improvement, and Incentive Fund, established pursuant to Section 14182.4. (3) The department shall claim the federal funding and pay both the nonfederal and federal shares of the incentive payment to the nondesignated public hospital system or other affiliated governmental provider, as applicable. If the intergovernmental transfer is made within the appropriate 14-day timeframe, the incentive payment shall be disbursed within seven days with the expedited payment process as approved by the federal Centers for Medicare and Medicaid Services, otherwise the payment shall be disbursed within 20 days of when the transfer is made. (4) The nondesignated public hospital system or other affiliated governmental provider is responsible for any fee or cost required to implement the expedited payment process in accordance with Section 8422.1 of the State Administrative Manual. (c) The department shall submit for federal approval an amendment to the successor demonstration project to implement this section. (d) In the event of a conflict between any provision of this section and the Special Terms and Conditions for the successor demonstration project and the final delivery system reform incentive pool protocol, the Special Terms and Conditions and the final delivery system reform incentive pool protocol shall control. (e) This section shall become operative as provided in subdivision (f) of Section 14166.151.