On Dec. 31, the Department of Health Care Services (DHCS) submitted a final draft of the Hospital Fee Program (VII) fee and payment model to the Centers for Medicare & Medicaid Services (CMS). Over the past three months, CHA has worked closely with DHCS in finalizing the next Hospital Fee Program.
Due to an accelerated timeline for the state to submit the fee and payment model to CMS, there are various placeholders included, which are expected to be finalized during the CMS review and approval process. Therefore, the model should be considered a draft until the state receives official CMS approval, which is expected to take four to five months. CHA will release a final model following CMS approval.
Hospital leaders should be aware that:
- As proposed in the draft to CMS, in aggregate the 2022 Hospital Fee Program (Jan. 1-Dec. 31, 2022) includes more than $8.5 billion in Medi-Cal supplemental payments, requiring more than $4.2 billion in fees to be raised by California hospitals.
- Of the proposed $8.5 billion in Medi-Cal supplemental payments to hospitals, roughly 40% ($3.7 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.
- 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 2022 Hospital Fee Program (VII) model — will be less reliable than prior Hospital Fee models.
CMS will closely review the final draft of the 2022 Hospital Fee Program (VII) model to ensure the California provider tax waiver passes federally required statistical tests and will review two proposed State Plan Amendments, 21-0036 and 21-0037 (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].