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CHA Releases Final Draft Model of 2019-21 Hospital Fee Program

Yesterday, the Department of Health Care Services (DHCS) submitted a final draft of the Hospital Fee Program (VI) fee and payment model to the Centers for Medicaid & Medicare Services (CMS). Over the past six months, CHA has worked closely with DHCS in finalizing the next hospital fee program. The model should be considered a final draft until the state receives official CMS approval, though CHA and DHCS do not expect significant changes during the CMS review and approval process.

Hospital leaders should be aware that: 

  • As proposed in the final draft to CMS, in aggregate the 2019-21 Hospital Fee Program includes more than $21.6 billion in Medi-Cal supplemental payments, requiring more than $11.4 billion in fees to be raised by California hospitals. 
  • Of the proposed $21.6 billion in Medi-Cal supplemental payments to hospitals, roughly 40% ($8.3 billion) is estimated to be managed care directed payments. CMS requires managed care directed payments to be made only for actual utilization of contracted hospital inpatient and outpatient services to network providers. As shared previously, this is a significant change from the prior program where only 22% ($4.5 billion) in supplemental payments were subject to these new federal requirements. 
  • Given that 40% are estimated to be part of the managed care directed payment program, the estimated Medi-Cal supplemental payments — and, therefore, the estimated net impact for hospitals in the 2019-21 Hospital Fee Program (VI) model — will be less reliable than prior hospital fee models. Additionally, unlike in prior programs, a hospital’s ability to execute network provider agreements and reconcile Medi-Cal encounter data submitted to the state for use in directed payment calculations will have a greater impact on its ability to receive supplemental payments in the next program.

CMS will closely review the final draft of the 2019-21 Hospital Fee Program (VI) model to ensure the California provider tax waiver passes federally required statistical tests and will review two proposed State Plan Amendments, 19-0018 and 19-0019 (public notice). 

More information about the managed care directed payment network provider requirements is available in CHA’s Hospital Fee Program webinar, and questions can be directed to Ryan Witz at [email protected].