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Medi-Cal Fee-For-Service and Non-Medi-Cal Program Provider Payment Reductions

Updated March 11, 2009

This notice provides information about pending changes to provider payments for Medi-Cal fee-for-service (FFS) benefits and non-Medi-Cal programs listed below. Assembly Bill 1183 (the 2008 Health Care Trailer Bill) added to state law Welfare and Institutions (W&I) CodeSection 14105.191, requiring provider payments to be reduced by 1 percent or 5 percent, depending upon the provider type, for dates of service on or after March 1, 2009. These reductions will replace the 10 percent provider payment reductions previously implemented under W&I Code Section 14105.19, which were effective from July 1, 2008, through and including February 28, 2009.

Medi-Cal FFS
The 5 percent payment reduction will apply to Medi-Cal FFS benefits provided by the following:

  • Intermediate Care Facilities (Nursing Facilities – Level A)
  • Distinct Part Skilled Nursing Facilities
  • Distinct Part Subacute Care Units
  • Distinct Part Pediatric Subacute Care Units
  • Adult Day Health Care Centers (Pursuant to a preliminary injunction issued by the U.S. District Court on March 9, 2009, only services provided between March 1 through March 8, 2009, are subject to the payment reduction at this time.)
  • Pharmacies (Prescription drugs and traditional over-the-counter drugs provided by prescription under the Medi-Cal FFS program are exempt from the payment reduction pursuant to a preliminary injunction issued by the U.S. District Court on February 27, 2009. The payment reduction will not be applied to those items at this time.)

Medi-Cal FFS payments to providers other than those identified above will be subject to a 1 percent payment reduction. Providers subject to the 1 percent reduction include, but are not limited to:

  • Physicians
  • Podiatrists
  • Nurse Practitioners
  • Certified Nurse Midwives
  • Nurse Anesthetists
  • Organized Outpatient Clinics
  • Hospital Outpatient Departments
  • Allied Health Providers
  • Dentists
  • Vision Care

Non-Medi-Cal FFS
The 1 percent payment reduction will be applied to services provided by non-Medi-Cal programs listed below. (The court order issued on February 27, 2009, which exempts prescription and traditional over-the-counter drugs provided by prescription from the payment reduction, does not apply to prescriptions issued by the non-Medi-Cal programs listed below.) The preliminary injunction issued by the U.S. District Court on March 9, 2009, exempting adult day health care centers from the payment reduction on or after March 9, 2009, does not apply also to the programs listed below.

  • California Children’s Services (CCS)
  • CCS/Healthy Families
  • Genetically Handicapped Persons Program
  • State-Only Family Planning Program
  • State-Only Child Health and Disability Prevention Program

Due to the system changes needed to implement the applicable payment reductions, the payments to CCS, CCS/Healthy Families, Genetically Handicapped Persons Program, and State-Only Family Planning Services will initially be subject to a 5 percent reduction for pharmacy services and for services provided in a long-term care facility rather than the applicable 1percent reduction provided by statute.

System changes to apply the correct reduction percentage pursuant to W&I Code Section 14105.191 are scheduled to be completed in approximately three months. Once implemented, the Department of Health Care Services (DHCS) will install an Erroneous Payment Correction to adjust the payments made prior to the system changes to reflect the correct reduction percentage.

The following services, facilities and payments are exempt from the 1percent and 5percent provider payment reductions described above:

  • Contracted acute hospital inpatient services
  • Federally Qualified Health Center services
  • Rural health clinic services
  • Long-Term Care Facilities, including:
    • Freestanding skilled nursing facilities
    • Intermediate care nursing facilities for the developmentally disabled
    • Freestanding subacute care units of skilled nursing facilities
  • Facilities owned or operated by the State Department of Mental Health or the State Department of Developmental Services
  • Hospice services
  • Contract services designated by the director of DHCS
  • Payments to providers to the extent the payments are funded by means of a certified public expenditure or intergovernmental transfer
  • Services pursuant to local assistance contracts and interagency agreements to the extent the funding is not included in the funds appropriated to DHCS
  • Payments for Medi-Cal managed care plans for services to consumers transitioning from Agnews Developmental Center into specified counties
  • Breast and Cervical Cancer Treatment Program and Cancer Detection Programs: Every Woman Counts
  • Family Planning, Access, Care and Treatment ( PACT) Waiver Program
  • Small and rural hospitals

None of the reductions described above will apply to payments for services paid with funds appropriated to other departments or agencies.

The 10 percent reductions in Medi-Cal FFS payments for services provided by inpatient hospitals that do not contract with DHCS under the Selective Provider Contracting Program (W&I Code Section 14081 et seq.) are set forth in W&I Code Section 14166.245, effective July 1, 2008, and will continue to remain in effect.  In addition, reimbursement changes to non-contract hospital inpatient services recently mandated by W&I Code Section 14166.245, as amended by Assembly Bill 1183 and effective October 1, 2008, will also remain in effect.