Existing law provides for the licensure and regulation by the State Department of Public Health of health facilities, including, congregate living health facilities. Existing law defines congregate living health facility as a residential home with a capacity of 18 beds that provides inpatient and skilled nursing care, as specified. Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. The Medi-Cal Long-Term Care Reimbursement Act requires the department to implement a facility-specific ratesetting system using a cost-based reimbursement rate methodology and to update these rates annually.

This bill would require, beginning January 10, 2026, and every 3 years thereafter, the State Department of Health Care Services to prepare and submit a cost study to the appropriate fiscal and policy committees of the Legislature. The bill would require the cost study to evaluate all financial and operational costs associated with licensed congregate living health facilities, as specified. The bill would require the department to consult with congregate living health facility providers, patients or families, caregivers, and other relevant parties in preparing the study. The bill would require the department to increase rates for licensed congregate living facilities if a cost study shows an increase above the Consumer Price index for the years between the submitted studies. The bill would authorize the department to adjust rates to maintain patient access if licensed congregate living health facilities can demonstrate that costs have increased in a single year. The bill would require the department to adjust rates in a manner consistent with the study. The bill would require, after January 10, 2026, and each year thereafter, rate changes to be included in the Medi-Cal estimate, consistent with the annual Budget Act released on or before January 10 of each year, and are to be indexed to the previous fiscal year.

Existing law provides for the licensure and regulation by the State Department of Public Health of health facilities, as defined. Existing law prescribes the method for determining licensing and certification fees for health facilities, and requires the department to post on its internet website a list of the estimated fees, related prepared reports, and a list of the final fees.

This bill would make technical, nonsubstantive changes to that provision.

Date of Hearing: June 25, 2024

ASSEMBLY COMMITTEE ON HEALTH

Mia Bonta, Chair

SBPCA Bill Id:SB 1033

Author:(Menjivar) – As Amended Ver:May 16, 2024

SENATE VOTE: 38-0

SUBJECT: Medi-Cal cost reporting: private duty nursing and congregate living health facilities.

SUMMARY: Requires the Department of Health Care Services (DHCS) to develop and submit to the Legislature, by January 10, 2026, a study of the costs of operating a congregate living health facility (CLHF), and an estimate of the cost of increasing Medi-Cal rates of private duty nursing (PDN) services to pediatric patients to 87% and 100%, of the corresponding Medicare rate.

EXISTING LAW:

1. Licenses and regulates CLHFs by the California Department of Public Health (DPH), which are defined as residential homes with a capacity of no more than 18 beds (with specified exceptions for larger facilities) that provide inpatient care that is generally less intense than that provided in a general acute care hospital (GACH), but more intense than that provided in a skilled nursing facility, and that includes medical supervision, 24-hour skilled nursing care, pharmacy, dietary, social, recreational, and at least one of the following types of services:
   1. Services for persons who are mentally alert, persons with physical disabilities, who may be ventilator dependent;
   2. Services for persons who have a diagnosis of terminal illness, a diagnosis of a life-threatening illness, or both. Defines terminal illness as a life expectancy of six months or less; or,
   3. Services for persons who are catastrophically and severely disabled, which is defined as a person whose origin of disability was acquired through trauma or nondegenerative neurologic illness, for whom it has been determined that active rehabilitation would be beneficial and to whom services such as speech, physical, and occupational therapy are being provided. [Health and Safety Code (HSC) §1250(i)]
      
2. Requires a CLHF to have a noninstitutional, homelike environment. [HSC §1250(i)(5)]
   
3. Establishes the Medi-Cal program, administered by DHCS, under which low-income individuals are eligible for medical coverage. [Welfare and Institutions Code (WIC) §14000 et seq.]
   
4. Establishes a schedule of benefits under the Medi-Cal program, which includes home health care services as well as all medically necessary services covered under the federal early and periodic screening, diagnosis, and treatment (EPSDT) for individuals under 21 years of age. [WIC §14132, §14059.5]

FISCAL EFFECT: According to the Senate Appropriations Committee, unknown costs to DHCS for state administration (General Fund and federal funds).

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, both CHLFs and PDN services play a vital role in providing care for individuals with highly complex medical conditions. While CLHFs provide a residential setting for meeting the acute medical care needs of patients with catastrophic and sports-related accidents, amyotrophic lateral sclerosis (ALS), muscular dystrophy, stroke, and work-related injuries, PDN in Medi-Cal is specialized, continuous skilled nursing care in the home for children with complex medical illnesses. The author indicates CLHFs have not received a rate increase since they were created as a pilot program in 1983, while increases in the cost of nursing services have made current PDN payment rates uncompetitive. The author concludes that estimates of the cost of providing CLHF services and the costs of increasing PDN rates to a more competitive level will inform potential rate adjustments to allow CLHFs to remain open and sustain their services, and allow children with significant medical needs to access the PDN care they are authorized and entitled to receive.
2. BACKGROUND. CLHFs and PDN are both home and community-based alternatives to hospitalization, providing a high level of care to individuals with significant medical needs and/or severe disabilities.
   1. CLHFs. A licensed CLHF is a residential medical option for individuals requiring more intensive medical care than a skilled nursing facility, but less than that provided in an acute care hospital. The level of care that CLHFs provide is considered “subacute,” however, in contrast to subacute care facilities, CLHFs are six to18 bed residential homes that provide care in a homelike setting. CLHFs provide the following basic services: medical supervision, 24-hour skilled nursing and supportive care, pharmacy, dietary, social, and recreational. In addition, a CLHF must provide at least one type of the following services: services for persons who may be ventilator-dependent; services for persons who have a diagnosis of terminal illness, a diagnosis of a life-threatening illness, or both; or, services for persons who are catastrophically and severely disabled. The CLHF Association states, with the exception of individual contracts with managed care plans to care for a patients being discharged from an acute care hospital, CLHFs are only reimbursed through the Home and Community-Based Alternatives (HCBA) Medi-Cal Waiver.
      
      The HCBA waiver is a program implemented under a federally approved waiver of Medicaid program rules, which allows states to develop creative home- and community-based alternatives for individuals who would otherwise require care in a nursing facility or hospital. To receive care in a CLHF, patients are most often discharged from a GACH and must meet Medi-Cal and HCBA eligibility requirements and be approved by a HCBA Waiver Agency.
      
      The daily rate that Medi-Cal pays for care to residents in a CLHF under the HCBA Waiver is $490 per day. According to the CLHF Association, this rate is the same that was originally set for CLHFs when they were established in the 1980s and has never been adjusted. A provision in a prior version of this bill, which was removed, would have raised Medi-Cal commensurate with the cost study for CLHFs.
      

According to the CLHF Association, only 229 Medi-Cal patients are currently receiving CLHF care under the HCBA waiver. Although DHCS has received federal approval to grant additional waiver slots, enrollment is limited by the total number of slots available and eligible individuals are placed on a waiting list until slots are available. Individuals under 21 years of age, individuals transitioning from similar waiver programs, or individuals who have been residing in a health care facility for at least 60 days are prioritized for enrollment into the HCBA waiver.

• 1. Private Duty Nursing. According to federal Medicaid regulations, PDN is provided at a Medi-Cal recipient’s home, under the direction of their doctor, to an individual who requires more individual and continuous care than is available from a visiting nurse. Under federal and state law, Medi-Cal eligible children under age 21 are entitled to all of the services they need through the requirement of EPSDT, including PDN. Under the PDN benefit, a child under age 21 is authorized for a specific number of nursing hours based on medical need, usually from four to 24 hour per day. However, anecdotally, many families experience profound difficulty securing the authorized number of PDN hours that are medically necessary for their children.
     
     In 2018, a class-action lawsuit was filed against DHCS for failure to ensure that children receive the PDN hours they are authorized to receive. In 2019, the parties settled with DHCS, agreeing, among other things, to designate Medi-Cal managed care plans and other entities as case management service providers for affected class members to ensure that they receive in-home nursing care.
     
     While not part of the settlement agreement, a rate increase also went into effect in 2019. However, cosponsor California Association for Health Services at Home (CAHSAH), which represents licensed home health agencies that provide PDN services, states the value of these static Medi-Cal reimbursement rates have eroded over time given recent significant wage growth, and consequently there are not enough in-home nurses to care for the medically fragile children who are able to leave the hospital. PDN positions tend to be filled largely by licensed vocational nurses (LVNs). According to a 2023 study commissioned by CAHSAH, “Estimating the Cost of Caring for Children with Complex Medical Conditions During a Nursing Shortage,” the LVN wage supported by the current Medi-Cal rate had significantly eroded by 2022, such it was below the 25^th percentile LVN wage in the state.
     
  2. Medi-Cal Rates. According to DHCS, historically, Medi-Cal rates for most outpatient provider types are not updated annually and are only periodically adjusted through the state budget process. According to a handout produced by the Legislative Analyst’s Office (LAO) for a May 6, 2024, joint hearing of the Assembly Budget Subcommittee #1 on Health and Assembly Health Committee, the state has not had a formal, consistent process for adjusting rates once initially set. The LAO notes, in the absence of such a policy, the budget condition has been a driving factor of rate adjustments. AB 119 (Committee on Budget), Chapter 13, Statutes of 2023, reauthorized a tax on managed care organizations (MCOs) licensed by the Department of Managed Health Care or contracted with the Medi-Cal program to generate funds for the Medi-Cal program, including to increase provider rates. The tax rate was increased through early budget action to generate additional funding via SB 136 (Committee on Budget and Fiscal Review), Chapter 6, Statutes of 2024. MCO tax revenues have supported increased provider rates for primary care, maternal care, and mental health care, effective January 1, 2024. Additional rate increases were planned as part of the MCO tax expenditure plan proposed by DHCS in January 2024, however, these additional rate increase proposals were withdrawn in the May Revision to the Governor’s Budget to help address a projected budget deficit. The outcome of these additional proposed rate increases are unknown pending final budget decisions. Notably, the January 2024 expenditure plan addressed several provider types, pursuant to the authorizing statute, but did not propose rate increases for CLHFs or PDN services.
     
     For new benefits and services added by Medi-Cal, DHCS generally sets the fee-for-service Medi-Cal rate at 80% of the equivalent Medicare rate. Medicare rates are a common benchmark to which Medicaid payment levels are compared, both in California and across Medicaid programs nationwide. If there is no Medicare equivalent rate, DHCS commonly considers a variety of other factors when setting rates, such as available cost information, wage information, and payment rates of other payers.
     
  3. Cost Considerations for CLHF and PDN Rates. One unique aspect of CLHF and PDN services is that both provider types are generally less-costly alternatives to hospital care. If CLHF and PDN services are inaccessible, the intense clinical needs of Medi-Cal enrollees do not go away; on the contrary, individuals may be cared for in a more costly setting such as a GACH. It is unlikely that each individual who lacks access to a CLHF or to PDN services would be admitted to a hospital to receive care, but the 2023 study commissioned by the CAHSAH, referenced in b) above, modeled outcomes overall with respect to PDN provided to eligible children. According to the study, lack of in-home nursing drives up costs through delayed hospital discharges, increased length of stay waiting for adequate home nursing coverage, increased likelihood of readmission within 90 days, and overall increased likelihood of hospital admissions for children who are being cared for at home but receiving an inadequate number of hours. The study estimated net cost savings of $175 million annually if Medi-Cal rates for PDN were increased by 40% and the higher rates led to more children being served by PDN as an alternative to costly hospital care.

1. SUPPORT. This bill is cosponsored by the CLHF Association, which states that CLHFs have never received a rate adjustment in the 40 years these facilities have existed. While the maximum daily rate for a CLHF has been $490 for more than 40 years, the costs of skilled labor, medical equipment, food, and license fees have long surpassed the daily rate. The CLHF Association notes that licensing fees alone have increased by more than 700% in that time. A number of individual CLHF providers make similar arguments in support.

Cosponsor CAHSAH writes that because of stagnant Medi-Cal reimbursement rates for PDN services, home health agencies have been unable to compete with hospitals and other facilities that are paying large sign-on bonuses to nurses. PDN wages have frozen, compelling many private duty nurses to seek employment elsewhere and crippling the ability of home health agencies to recruit and retain an adequate supply of professionals to meet the demand.

Supporters Disability Rights California (DRC), who served as counsel in the 2018 class action lawsuit, writes that despite federal and state law requirements to cover PDN services, children are tragically prevented from returning home from the hospital, or forced to go without needed care, due to wholly inadequate reimbursement rates. They state it is particularly difficult in urban areas like the Bay Area where they have clients who cannot find a nurse for even a portion of the hours needed. DRC argues leaving such children without any nursing services is a clear violation of federal and state law. They also state that beyond the legal requirement and moral imperative of providing these services to children, increasing rates would save money.

1. RELATED LEGISLATION.
   1. SB 1492 (Menjivar) would have included PDN as an expenditure category under the MCO tax revenue expenditure plan. SB 1492 was held on the suspense file of the Senate Appropriations Committee. Simultaneously, provisions requiring an estimate of the cost of increasing PDN rates were included in SB 1033.
   2. SB 1423 (Dahle) requires DHCS to develop a rate methodology for critical access hospitals to ensure participating hospitals are reimbursed at a minimum of 100% of the projected and reasonable costs for Medi-Cal covered inpatient, outpatient, and emergency department services. SB 1423 is pending in the Assembly Health Committee.
   3. AB 2303 (Carrillo) requires DHCS to develop a minimum wage add-on as an alternative payment methodology to increase rates for federally qualified health center and rural health center services covered under the Medi-Cal program to account for the increase in minimum wage, subject to an appropriation. AB 2303 is pending in the Assembly Health Committee.
   4. AB 2342 (Lowenthal) requires DHCS to provide an annual supplemental payment to each critical access hospital that operates on an island at least ten miles offshore that is still within the jurisdiction of the state (i.e., Catalina Island Health). AB 2342 is pending in the Assembly Health Committee.
2. PREVIOUS LEGISLATION. AB 1211 (Maienschein), Chapter 483, Statutes of 2015, increased the maximum capacity of CLHFs, except those that are specifically permitted to have larger capacities due to meeting specified exemptions, from 12 to 18 beds.
3. AMENDMENTS. The author and sponsor have noted the lack of a Medicare equivalent rate for PDN services, and have agreed to add the following language to the bill to ensure a cost estimate can be made using an alternative benchmark rate. The language includes factors DHCS commonly considers in rate-setting when there is no equivalent Medicare rate for a particular service.

(c) If there is no available rate for corresponding services under the federal Medicare Program, the cost estimate described in subdivision (a) shall be calculated as follows:

(1) The department shall calculate an alternative benchmark rate, utilizing appropriate methodologies used for other Medi-Cal services with no Medicare equivalent, including, but not limited to, consideration of all of the following: 

(A) Analysis of current rates and reimbursement methodology.

(B) A rate scan of current rates in appropriate comparison states.

(C) Stakeholder engagement.

(D) A review of industry standards.

(E) Provider cost information.

(F) Publicly available data from the United States Bureau of Labor Statistics occupation wage studies and other similar sources of wage data.

(2) The cost estimate described in subdivision (a) shall estimate the cost of raising the Medi-Cal rates of private duty nursing services provided to pediatric patients to 87 percent of, and to 100 percent of the alternative benchmark rate developed pursuant to paragraph (1).

REGISTERED SUPPORT / OPPOSITION:

Support

Agape Congregate Living

Allwell Residential Care

Archwood House CLHF, Inc.

Aveanna Healthcare

Avenida Living Home INC

California Association for Health Services At Home

Care Home by RNs Congregate Living Health Facility

Caresource Congregate Living

Children's Specialty Care Coalition

Community Care Solutions, INC

Congregate Living Health Facility Association

Connected Living INC

Covina CLHF Corporation

Elderly Care Everywhere

Home of Compassion, Inc.

Los Angeles Congregate Living

Majesticare Health and Rehab Center of Moorpark

Maxim Healthcare Services

Optimum Care

Prime Home Health

Senior Congregate Living INC

Sunflower CLHF

Sunshine 1 Congregate Home, Inc.

Sunshine Lovely, INC

Team Select Home Care

The Community Home, INC.

The Eden CLHF

White Oak Congregate Facility, LLC

Opposition

None on file.

Analysis Prepared by: Lisa Murawski / HEALTH / (916) 319-2097

 THIRD READING  

Bill No: SB 1033

Author: Menjivar (D)

Amended: 5/16/24

Vote: 21

SENATE HEALTH COMMITTEE: 11-0, 4/24/24

AYES: Roth, Nguyen, Glazer, Gonzalez, Grove, Hurtado, Limón, Menjivar, Rubio, Smallwood-Cuevas, Wiener

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/16/24

AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab

SUBJECT: Medi-Cal cost reporting: private duty nursing and congregate living health facilities

SOURCE: Congregate Living Health Facility Association

DIGEST:

This bill requires the Department of Health Care Services to do a study of the costs of operating a congregate living health facility, and to do an estimate of the cost of increasing Medi-Cal rates of private duty nursing services to pediatric patients to 87%, and 100%, of the corresponding Medicare rate.

ANALYSIS:

Existing law:

1. Licenses and regulates congregate living health facilities (CLHFs) by the California Department of Public Health (CDPH), which are defined as residential homes with a capacity of no more than 18 beds (with specified exceptions for larger facilities) that provides inpatient care that is generally less intense than that provided in a general acute care hospital, but more intense than that provided in a skilled nursing facility, and that includes medical supervision, 24-hour skilled nursing care, pharmacy, dietary, social, recreational, and at least one of the following types of services:
   1. Services for persons who are mentally alert, persons with physical disabilities, who may be ventilator dependent;
   2. Services for persons who have a diagnosis of terminal illness, a diagnosis of a life-threatening illness, or both. Defines terminal illness as a life expectancy of six months or less; or,
   3. Services for persons who are catastrophically and severely disabled, which is defined as a person whose origin of disability was acquired through trauma or nondegenerative neurologic illness, for whom it has been determined that active rehabilitation would be beneficial and to whom services such as speech, physical, and occupational therapy are being provided. [HSC §1250(i)]
2. Prohibits anyone from being admitted to, or discharged from, a CLHF except upon the order of a physician, and requires all persons admitted to a CLHF to remain under the care of a physician who is required to see the resident at least every 30-calendar days or more frequently if required by the resident’s medical condition. [HSC §1267.12]
3. Establishes the Medi-Cal program, administered by the Department of Health Care Services (DHCS), under which low-income individuals are eligible for medical coverage. [WIC §14000 et seq.]
4. Establishes a schedule of benefits under the Medi-Cal program, which includes benefits required under federal law and benefits provided at the state’s option, both of which are funded with federal and state dollars. The schedule of benefits include home health care services as well as all medically necessary services covered under the federal early and periodic screening, diagnosis, and treatment (EPSDT) for individuals under 21 years of age. [WIC §14132, §14059.5]

This bill:

1. Requires DHCS to develop and submit a cost estimate, on private duty nursing services provided to pediatric patients, to the appropriate fiscal and policy committees of the Legislature.
2. Requires the cost estimate in 1) above to estimate the cost of raising the Medi-Cal rates of private duty nursing services provided to pediatric patients to 87% of, and to 100% of, rates for corresponding services under the Medicare program.
3. Requires DHCS, by January 10, 2026, to develop and submit a cost study on CLHFs to the appropriate fiscal and policy committees of the Legislature.
4. Requires the cost study in 3) above to evaluate all financial and operational costs associated with CLHFs in California. Requires DHCS to consult with CLHF providers, patients or families, caregivers, and other relevant parties in developing the cost study.
5. Requires the cost study in 3) above to include, but not be limited to, an assessment of the operational costs of direct and indirect labor, licensing fees, medical equipment, food, utilities, liability insurance, property tax, and staff training.

Comments

1. Author’s statement. According to the author, CLHFs play a vital role in providing inpatient care for individuals with highly complex medical conditions. These residential medical facilities are a lifeline for patients with catastrophic and sports-related accidents, ALS, muscular dystrophy, stroke, and work-related injuries. Many, if not most, CLHF patients are quadriplegic and ventilator-dependent. CLHFs provide a level of care that is less than that of a subacute care facility, but more than that of a Skilled Nursing Facility. This level of acute medical care in a home setting is an alternative to high-cost hospital settings that are often inappropriate for lifelong care for younger adult residents and are unable to provide the continued specialized care that is uniquely tailored to the individual's needs. Despite the vital services that these facilities provide, they have not received any rate adjustments since their inception in 1983. This fiscal inequity puts CLHFs at risk of either closing down or adds patients to waitlists while they unnecessarily live in hospitals or nursing homes. SB 1033 aims to ensure that the actual cost of providing care in these licensed facilities is quantified by the state.
   
   Regarding the cost study for private duty nursing, the author states that private duty nursing is specialized, continuous skilled-care nursing care in the home for medically complex and vulnerable children under Medi-Cal. Many of these patients require assistive technology such as ventilators and tracheostomies to sustain life. Because California is experiencing a profound nursing shortage, many families are struggling to get nursing care for these children. Increases in the cost of nursing services have made current private duty nursing payment rates uncompetitive. This means that families are unable to bring their medically fragile children home from the hospital, forcing some children to spend their first, second, and third birthdays in the hospital.
2. Background on CLHFs. CLHFs were established as an option for persons who require more medical care than a skilled nursing facility, but don’t need to be in an acute care hospital, or wish to be in a less institutional setting compared to something like a long-term acute care hospital. CLHFs serve persons who can be terminally ill, or catastrophically or severely disabled. Most CLHFs are licensed for six beds and from the outside look like a normal residential home, though CLHFs can be as large as 18 beds (with very narrow exceptions for larger facilities). According to the CLHF Association, with the rare exception of individual contracts with managed care plans in an emergency placement situation, CLHFs are only reimbursed through the Home and Community-Based Alternatives (HCBA) Waiver authorized under federal law. To receive care in a CLHF, patients, most often discharged from a general acute care hospital, must meet Medi-Cal and HCBA eligibility requirements and be approved by a HCBA Waiver Agency. While DHCS lists 180 CLHFs as licensed and approved to treat patients under the HCBA Waiver, according to the CLHF Association, there are currently only 229 waiver residents residing in CLHFs statewide.

The daily rate that Medi-Cal pays for care to residents in a CLHF under the HCBA Waiver is $490 per day. This rate is the same that was originally set for CLHFs when they were established in the 1980s and has never been adjusted.

1. HCBA Waiver. The HCBA Waiver is a Medicaid Home and Community-Based Services Waiver program authorized by federal law to provide services to Medi-Cal beneficiaries who are at risk of nursing home or institutional placement if not for the nursing and support services they receive in the community setting of their choice. Waiver recipients can receive services in their home, in a CLHF, or in an Intermediate Care Facility for Individuals with Developmental Disabilities-Continuous Nursing Care. Waivers are approved by the federal Centers for Medicare and Medicaid Services in five-year increments, and was most recently approved on February 2, 2023 for the 2023-2027 period. There is an enrollment cap, and the program reached maximum capacity and a waiting list was implemented on July 12, 2023. New applicants can apply and secure a placement on a waiting list with the assigned Waiver Agency in their area of residents. When slots are available, applicants will be prioritized based on Reserve Capacity criteria that includes applicants transitioning from similar Home and Community Based Services Waivers because their needs can no longer be met, applicants under 21, or applicants who have been residing in a health care facility (such as a nursing home) for at least 60 days. According to the CLHF Association, based on the current criteria for accepting waiver applicants from waiting lists, it is unlikely that this number will increase, as slots will be awarded to applicants who will receive care at home or other non-CLHF settings.
2. Private duty nursing shortages in Medi-Cal. According to federal Medicaid regulations, private duty nursing is nursing services provided at a Medi-Cal recipient’s home, under the direction of their doctor, to an individual who requires more individual and continuous care than is available from a visiting nurse. Under federal and state law, Medi-Cal eligible children under age 21 are entitled to all of the services they need through the requirement of EPSDT, including private duty nursing. In 2018, a class-action lawsuit was filed against DHCS for failure to ensure that children received this in-home nursing care, despite authorizing the services as medically necessary care. In 2019, the parties settled with DHCS agreeing, among other things, to designate Medi-Cal managed care plans, California Children’s Services, and Home and Community Based Waiver Agencies to serve as case management service providers for affected class members to ensure that they receive in-home nursing care. While not part of the settlement agreement, a rate increase also went into effect.

According to a 2023 analysis by California Health Policy Strategies commissioned by the sponsors, due to lagging Medi-Cal reimbursement rates, there currently are not enough in-home nurses to care for the medically fragile children who are able to leave the hospital. Private duty nursing positions tend to be filled largely by licensed vocational nurses who are paid a much lower rate than registered nurses are. The analysis cites the current nursing shortage and the failure of the Medi-Cal reimbursement rate to keep pace with the labor market, which has otherwise increased wages for nurses as causes of the private duty nursing shortage. Lack of in-home nursing drives up costs through: (a) hospital discharge delays; (b) increased length of stay waiting for adequate home nursing coverage; (c) increased likelihood of readmission within 90 days; and, (d) overall increased likelihood of hospital admissions for children who are being cared for at home, but not receiving enough treatment due to lack of adequate nursing coverage. The study concludes that current inadequate spending levels for private duty nursing care resulted in a 300% increase in delayed hospital discharges and hospital readmissions. If Medi-Cal reimbursement rates were increased by 40%, so that the Medi-Cal home nursing reimbursements were as competitive as they were in 2020, the increased private duty nursing cost would be $314 million, but would save $490 million in unnecessary hospital costs. A February 2022 story by the Los Angeles Times highlighted families that have been unable to find home health nurses even after Medi-Cal raised the rate it pays agencies for some categories of in-home nurses as there are jobs for these nurses with higher wages and better working conditions elsewhere.

1. Related budget request. The CLHF Association has submitted a budget request to both the Senate and Assembly Budget Committees to utilize $7.7 from the Medi-Cal Provider Payment Reserve Fund (funded by the Managed Care Organization provider tax [MCO tax]), along with $7.7 million in federal matching funds, to increase the daily rate for CLHFs from $490 to $675. The combined $15.4 million is sufficient to cover this daily rate increase for the 229 HCBA Waiver residents currently residing at CLHFs.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, unknown costs for the DHCS for state administration (General Fund and federal funds).

SUPPORT: (Verified 5/1/24)

Congregate Living Health Facility Association (source)

Agape Congregate Living

Avenida Living Home, Inc.

Bel Air Congregate Living

Care Home by RNs

Community Care Solutions/Sunnyview Home CLHF

Connected Living

Family Care CLHF

Global Care Solutions

Home of Compassion

Los Angeles Congregate Living

Majesticare Health and Rehab Center of Moorpark

Mountain View Congregate

Optimum Care

Senior Congregate Living, Inc.

Sunflower CLHF

Sunrise Congregate Corp

The Community Home, Inc.

White Oak Congregate Living

Five individuals

OPPOSITION: (Verified 5/1/24)

None received

ARGUMENTS IN SUPPORT: This bill is sponsored by the Congregate Living Health Facility Association, which states that CLHFs have never received a rate adjustment in the forty years of the model’s existing. CLHFs have not received a single dollar for a cost of living adjustment, supplemental payment, Provider Relief Funds during the pandemic, etc. While the maximum daily rate for a CLHF has been $490 for more than forty years, the costs of skilled labor, medical equipment, food, and license fees have long surpassed the daily rate. The CLHF Association notes that licensing fees alone have increased by more than 700% in that time. A number of individual CLHF providers make similar arguments in support.

Prepared by: Vincent D. Marchand / HEALTH / (916) 651-4111

5/20/24 18:52:22

**** END ****

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

SB 1033 (Menjivar) - Health facilities: congregate living health facilities

Bill Summary:

SB 1033 would require the Department of Health Care Services (DHCS) to submit a cost study related to congregate living health facilities and to adjust rates, as specified.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 16, 2024

Fiscal Impact:

Unknown costs for the DHCS for state administration (General Fund and federal funds).

Committee Amendments:

Delete the rate adjustments for congregate living health facilities, and require DHCS to develop a cost estimate on private duty nursing services, as specified.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

SB 1033 (Menjivar) - Health facilities: congregate living health facilities

Bill Summary:

SB 1033 would require the Department of Health Care Services (DHCS) to submit a cost study related to congregate living health facilities and to adjust rates, as specified.

Fiscal Impact:

• Unknown, potentially significant ongoing costs (General Fund and federal funds) to provide increased reimbursement rates to facilities.
• Unknown, ongoing General Fund costs, likely hundreds of thousands, for the DHCS for state administration.

Background:

The California Department of Public Health licenses and regulates congregate living health facilities (CLHFs). Current law defines CLHFs as residential homes with a capacity of no more than 18 beds (with specified exceptions for larger facilities) that provide inpatient care that is generally less intense than that provided in a general acute care hospital, but more intense than that provided in a skilled nursing facility, and that includes medical supervision, 24-hour skilled nursing care, pharmacy, dietary, social, recreational, and at least one of the following types of services:

• Services for persons who are mentally alert, persons with physical disabilities, who may be ventilator dependent.
• Services for persons who have a diagnosis of terminal illness, a diagnosis of a life-threatening illness, or both.
• Services for persons who are catastrophically and severely disabled, as defined.

CLHFs are currently reimbursed through the Home and Community-Based Alternatives (HCBA) Waiver authorized under federal Medicaid law. The HCBA Waiver provides funding for services to Medi-Cal beneficiaries who are at risk of nursing home or institutional placement if not for the nursing and support services they receive in the community setting of their choice.

Proposed Law:

Specific provisions of the bill would:

• Require, on or before January 10, 2026, and every three years thereafter, the DHCS to submit a cost study to the appropriate fiscal and policy committees of the Legislature; and require the cost study to evaluate all financial and operational costs associated with licensed congregate living health facilities in California.
• Require DHCS to adjust rates in a manner consistent with the triennial rate study described above; require rate changes to be included in the Medi-Cal estimate, consistent with the annual Budget Act released on or before January 10 of each year; and require the rate changes to be indexed to the previous fiscal year.

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SENATE COMMITTEE ON HEALTH

Senator Richard Roth, Chair

BILL NO: SB 1033

SUBJECT: Health facilities: congregate living health facilities

SUMMARY:

Requires the Department of Health Care Services to do a study of the costs of operating a congregate living health facility, by January 10, 2026, and every three years thereafter, and to adjust Medi-Cal rates for these facilities in accordance with the cost studies.

Existing law:

1. Licenses and regulates congregate living health facilities (CLHFs) by the California Department of Public Health (CDPH), which are defined as residential homes with a capacity of no more than 18 beds (with specified exceptions for larger facilities) that provide inpatient care that is generally less intense than that provided in a general acute care hospital, but more intense than that provided in a skilled nursing facility, and that includes medical supervision, 24-hour skilled nursing care, pharmacy, dietary, social, recreational, and at least one of the following types of services:
   1. Services for persons who are mentally alert, persons with physical disabilities, who may be ventilator dependent;
   2. Services for persons who have a diagnosis of terminal illness, a diagnosis of a life-threatening illness, or both. Defines terminal illness as a life expectancy of six months or less; or,
   3. Services for persons who are catastrophically and severely disabled, which is defined as a person whose origin of disability was acquired through trauma or nondegenerative neurologic illness, for whom it has been determined that active rehabilitation would be beneficial and to whom services such as speech, physical, and occupational therapy are being provided. [HSC §1250(i)]
2. Requires a CLHF to have a noninstitutional, homelike environment. [HSC §1250(i)(5)]
3. Requires a CLHF serving six or fewer persons to be considered a residential use of property for purposes of any zoning ordinance. [HSC §1267.8]
4. Prohibits anyone from being admitted to, or discharged from, a CLHF except upon the order of a physician, and requires all persons admitted to a CLHF to remain under the care of a physician who is required to see the resident at least every 30-calendar days or more frequently if required by the resident’s medical condition. [HSC §1267.12]
5. Establishes the Medi-Cal program, administered by the Department of Health Care Services (DHCS), under which low-income individuals are eligible for medical coverage. [WIC §14000 et seq.]
6. Requires DHCS to submit a plan, as part of the 2024-25 Governor’s Budget, to the Legislature for targeted increases to Medi-Cal provider payments in the following domains:
7. Primary care services, including those provided by physicians and nonphysician health professionals, obstetric care and doula services, and outpatient mental health services that are not the responsibility of county mental health plans;
8. Specialty services;
9. Community or hospital outpatient services;
10. Family planning services;
11. Hospital-based emergency and emergency physician services;
12. Ground emergency transport services;
13. Designated public hospitals;
14. Behavioral health care in hospital and institutional long-term care settings; and,
15. Investments to maintain and grow the workforce. [WIC §14105.202]

This bill:

1. Requires DHCS, on or before January 10, 2026 and every three years thereafter, to submit a cost study to the appropriate fiscal and policy committees of the Legislature. Requires the cost study to evaluate all financial and operational costs associated with CLHFs in California. Requires DHCS to consult with CLHF providers, patients or families, caregivers, and other relevant parties in developing the cost study.
2. Requires the cost study to include, but not be limited to, an assessment of the operational costs of direct and indirect labor, licensing fees, medical equipment, food, utilities, liability insurance, property tax, and staff training.
3. Requires DHCS, notwithstanding any other law, to adjust rates in a manner consistent with the triennial rate study required by this bill.
4. Requires, after January 10, 2026 and each year thereafter, rate changes to be included in the Medi-Cal estimate, consistent with the annual Budget Act released on or before January 10 of each year, and to be indexed to the previous fiscal year.

FISCAL EFFECT:

This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. Author’s statement. According to the author, CLHFs play a vital role in providing inpatient care for individuals with highly complex medical conditions. These residential medical facilities are a lifeline for patients with catastrophic and sports-related accidents, ALS, muscular dystrophy, stroke, and work-related injuries. Many, if not most, CLHF patients are quadriplegic and ventilator-dependent. CLHFs provide a level of care that is less than that of a subacute care facility, but more than that of a Skilled Nursing Facility. This level of acute medical care in a home setting is an alternative to high-cost hospital settings that are often inappropriate for lifelong care for younger adult residents and are unable to provide the continued specialized care that is uniquely tailored to the individual's needs. Despite the vital services that these facilities provide, they have not received any rate adjustments since their inception in 1983. This fiscal inequity puts CLHFs at risk of either closing down or adds patients to waitlists while they unnecessarily live in hospitals or nursing homes. SB 1033 aims to ensure that the actual cost of providing care in these licensed facilities is quantified by the state and that reimbursements are adjusted accordingly for the first time in 40 years. This cost study and rate correction will allow CLHFs to continue to serve residents who require intense medical attention and cannot care for themselves.
2. Background on CLHFs. CLHFs were established as an option for persons who require more medical care than a skilled nursing facility, but don’t need to be in an acute care hospital, or wish to be in a less institutional setting compared to something like a long-term acute care hospital. CLHFs serve persons who can be terminally ill, or catastrophically or severely disabled. Most CLHFs are licensed for six beds and from the outside look like a normal residential home, though CLHFs can be as large as 18 beds (with very narrow exceptions for larger facilities). According to the CLHF Association, with the rare exception of individual contracts with managed care plans in an emergency placement situation, CLHFs are only reimbursed through the Home and Community-Based Alternatives (HCBA) Waiver authorized under federal law. To receive care in a CLHF, patients, most often discharged from a general acute care hospital, must meet Medi-Cal and HCBA eligibility requirements and be approved by a HCBA Waiver Agency. While DHCS lists 180 CLHFs as licensed and approved to treat patients under the HCBA Waiver, according to the CLHF Association, there are currently only 229 waiver residents residing in CLHFs statewide.
   
   The daily rate that Medi-Cal pays for care to residents in a CLHF under the HCBA Waiver is $490 per day. This rate is the same that was originally set for CLHFs when they were established in the 1980s and has never been adjusted.
3. HCBA Waiver. The HCBA Waiver is a Medicaid Home and Community-Based Services Waiver program authorized by federal law to provide services to Medi-Cal beneficiaries who are at risk of nursing home or institutional placement if not for the nursing and support services they receive in the community setting of their choice. Waiver recipients can receive services in their home, in a CLHF, or in an Intermediate Care Facility for Individuals with Developmental Disabilities-Continuous Nursing Care. Waivers are approved by the federal Centers for Medicare and Medicaid Services in five-year increments, and was most recently approved on February 2, 2023 for the 2023-2027 period. There is an enrollment cap, and the program reached maximum capacity and a waiting list was implemented on July 12, 2023. New applicants can apply and secure a placement on a waiting list with the assigned Waiver Agency in their area of residents. When slots are available, applicants will be prioritized based on Reserve Capacity criteria that includes applicants transitioning from similar Home and Community Based Services Waivers because their needs can no longer be met, applicants under 21, or applicants who have been residing in a health care facility (such as a nursing home) for at least 60 days. According to the CLHF Association, based on the current criteria for accepting waiver applicants from waiting lists, it is unlikely that this number will increase, as slots will be awarded to applicants who will receive care at home or other non-CLHF settings.
4. Related budget request. The CLHF Association has submitted a budget request to both the Senate and Assembly Budget Committees to utilize $7.7 from the Medi-Cal Provider Payment Reserve Fund (funded by the Managed Care Organization provider tax [MCO tax]), along with $7.7 million in federal matching funds, to increase the daily rate for CLHFs from $490 to $675. The combined $15.4 million is sufficient to cover this daily rate increase for the 229 HCBA Waiver residents currently residing at CLHFs.
5. Related legislation. SB 1423 (Dahle) requires DHCS to develop and maintain one or more reimbursement methodologies for critical access hospitals that would reimburse participating hospitals at a minimum of 100% of the hospital’s projected reasonable and allowable costs for covered Medi-Cal services. SB 1423 is set for hearing on April 24, 2024 in this Committee.
6. Prior legislation. AB 118 (Committee on Budget, Chapter 42, Statutes on 2023) among other things, created the Medi-Cal Provider Payment Reserve Fund to deposit moneys from the MCO tax for specified purposes, including to increase provider payments and to fund the Distressed Hospital Loan Program Fund.

AB 119 (Committee on Budget, Chapter 13, Statutes of 2023) authorized an MCO tax, effective April 1, 2023 through December 31, 2026, with revenues to be used to support the Medi-Cal program, including new targeted provider rate increases.

AB 1211 (Maienschein, Chapter 483, Statutes of 2015) increased the maximum capacity of CLHFs, except those that are specifically permitted to have larger capacities due to meeting specified exemptions, from 12 to 18 beds.

SB 534 (Hernandez, Chapter 722, Statutes of 2013), among other provisions not related to this bill, permitted multiple CLHFs to exist in one multi-floor building, notwithstanding the requirement that CLHFs be freestanding, if certain conditions were met, including being located on the former McClellen Air Force Base.

SB 620 (Buchannan, Chapter 674, Statues of 2013), required specified health facilities, including CLHFs, to develop and comply with an absentee notification plan for the purpose of addressing issues that arise when a patient, resident, or participant, as applicable, is missing from the facility.

SB 177 (Strickland, Chapter 331, Statutes of 2011), raised the bed limit for CLHFs that serve terminally ill patients in Santa Barbara County from 12 to 25 beds.

SB 666 (Aanestad, Chapter 443, Statutes of 2005), increased the capacity of a CLHF from no more than six beds, to no more than 12 beds. Maintained an exception to allow CLHFs, which serve terminally ill, patients and which are located in counties with 500,000 or more persons to have 25 beds.

AB 3347 (Wright, Chapter 494, Statutes of 1992) deleted the January 1, 1991 deadline for CDPH to adopt regulations for CLHF licensing standards, extended requirements for CLHFs serving the terminally ill or catastrophically disabled to CLHFs serving the mentally alert but physically disabled.

AB 3535 (Wright, Chapter 1459, Statutes of 1986), created the CLHF licensure category, and defined a CLHF as a residential home with a capacity of no more than six beds,
which provides inpatient care to mentally alert, physically disabled residents, who may be ventilator dependent.

1. Support. This bill is sponsored by the Congregate Living Health Facility Association, which states that CLHFs have never received a rate adjustment in the forty years of the model’s existing. CLHFs have not received a single dollar for a cost of living adjustment, supplemental payment, Provider Relief Funds during the pandemic, etc. While the maximum daily rate for a CLHF has been $490 for more than forty years, the costs of skilled labor, medical equipment, food, and license fees have long surpassed the daily rate. The CLHF Association notes that licensing fees alone have increased by more than 700% in that time. A number of individual CLHF providers make similar arguments in support.

SUPPORT AND OPPOSITION:

Support: Congregate Living Health Facility Association (sponsor)

Bel Air Congregate Living

Care Home by RNs

Community Care Solutions

Global Care Solutions

Home of Compassion

Los Angeles Congregate Living

Majesticare Health and Rehab Center of Moorpark

Sunflower CLHF

Oppose: None received

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