On March 23, the Department of Health Care Services (DHCS) submitted a draft of the Hospital Fee Program (VIII) fee and payment model to the Centers for Medicare & Medicaid Services (CMS). Over the past several months, CHA has worked closely with DHCS in finalizing the next Hospital Fee Program.
It is important to note that this model is subject to change 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 five to six 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 2023-24 Hospital Fee Program (Jan. 1, 2023-Dec. 31, 2024) includes more than $21 billion in Medi-Cal supplemental payments, requiring more than $10.8 billion in fees to be raised by California hospitals.
- Of the proposed $21 billion in Medi-Cal supplemental payments to hospitals, roughly 60% ($12.6 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 60% of total payments are estimated to be part of the managed care directed payment program, the estimated net impact by a hospital in the 2023-24 Hospital Fee Program (VIII) model will be less reliable than prior Hospital Fee models. This is due to directed payments being based on actual contracted utilization for the time period as opposed to payments being based on a prior period data source as is the case with fee-for-service and passthrough payments.
CMS will closely review the final draft of the 2023-24 Hospital Fee Program (VIII) model to ensure the California provider tax waiver passes federally required statistical tests and will review two proposed State Plan Amendments, 23-0007 and 23-0008 (public notice).
Questions can be directed to Robert Ducay at email@example.com.