Relates to general hospital reimbursement rates

The provisions of section 2807-c of the Public Health Law (PHL) govern hospital Medicaid rate-setting methodologies. Over many years, provisions of PHL § 2807-c have been amended and extended on numerous occasions, despite the fact that many of its provisions are obsolete and do not reflect current rate-setting methodologies. This bill would repeal obsolete provisions of section 2807-c that no longer serve any function in present day rate-setting.

Summary of Provisions:

Section 1 of the bill would repeal sections of law that are no longer relevant. PHL § 2807-c currently consists of 43 subdivisions. This bill would repeal 27 of these subdivisions leaving 16 re-numbered subdivisions. Of these remaining subdivisions, it is proposed that several subdivisions, especially subdivisions 4 and 11, would have many or most of their paragraphs repealed.

Sections 2 - 45 of the bill would amend multiple sections of the PHL, Social Services Law §§ 365, 366 and 368-a, Insurance Law §§ 335 and 4900, State Finance Law § 92-d and Workers Compensation Law § 13 to provide conforming amendments to the proposed amendments to PHL 2807-c.

Sections 46 - 48 of the bill would repeal the sunset provisions of PHL § 2807-c in conformity with changes made in the text of the statute.

Section 49 of the bill would have the bill take effect immediately.

Existing Law:

The bill would repeal extensive portions of the PHL § 2807-c, which no longer serve any function in the current hospital rate-setting system. The bill would also make conforming amendments to Social Services Law §§ 365, 366 and 368-a, Insurance Law §§ 335 and 4900, State Finance Law § 92-d and Workers Compensation Law § 13.

Legislative History:

This is a new bill.

Statement in Support:

PHL § 2807-c is the primary statute governing Medicaid fee-for-service rate-setting for inpatient hospital services in New York State. It dates back to 1988 and currently prints out to 150 pages of text in McKinney's Consolidated Laws of New York. Approximately 75% of this material is out-of-date and no longer serves any function. Given the significant role served by PHL § 2807-c in the financing of New York's hospital system, it is important that these provisions reflect current practice.

Repealing out-of-date provisions: This proposal is limited to repealing the very extensive portions of statute that no longer serve any function in the current hospital rate-setting system. It is not intended to otherwise make any significant substantive changes to current hospital rate-setting methodologies. The provisions of PHL 2807-c being repealed simply reflect the evolving nature of hospital inpatient rate regulation in New York since 1988 and generally fall into one of the following categories:

*Between 1988 and 1996, hospital rate regulation in New York was governed by a regulatory system generally referred to as New York's Prospective Hospital Reimbursement Methodology. This system regulated not only Medicaid rates, but also Blue Cross and other commercial insurance rates. Since 1997, New York hospital rate regulation has been subject to the "Health Care Reform Act" (HCRA) system. Under HCRA, direct regulation of hospital rates has generally been restricted to Medicaid, thus rendering many existing provisions in 2807-c relating to commercial insurance rates irrelevant, including significant portions of subdivisions 1 and 11 and all of subdivisions 2, 3-a, 12, 13, 27 and 28.

*Many provisions of § 2807-c pertain to raising and disbursing money to pay for the losses that hospitals incur providing care to the uninsured (e.g., "bad debt and charity care losses" or "hospital indigent care expenses"). Over the years, however, these functions have been moved to other statutes, such as PHL § 2807k, which now controls state payments for such hospital indigent care expenses, and PHL § 2807-j, which provides the mechanism for raising the money for such payments. This has made many provisions of § 2807-c obsolete, including subdivisions 14, 14-a, 14-b, 14-c, 14-d, 15, 16-a, 17, 19, 19-a, 22 and 26.

*Another major change in hospital rate-setting took place in 2009 when PHL § 2807-c(35) was enacted. It gave the Commissioner of Health broad authority to establish Medicaid hospital rate-setting methodologies through regulations (see Subpart 86-1 of 10 NYCRR). This new subdivision has thus largely supplanted various pre-existing statutory provisions in PHL § 2807-c, including significant portions of subdivisions 4 and 11 and all of subdivisions 3, 5, 6, 7, 9 and 25.

Providing accurate conforming amendments: Given the proposed re-numbering of PHL § 2807-c, the Department identified 45 sections where conforming amendments to the cited cross-references were needed. Those conforming amendments would make up sections 2 through 45 of the

proposed bill. Most sections are in the Public Health Law or in the Social Services Law, with a few others in the Insurance Law, the State Finance Law and the Workers Compensation Law.

Addressing HCRA sunsets: Certain portions of PHL § 2807-c are subject to "sunset" provisions dating from HCRA's enactment in 1996 and its first major extension in 1999. Those sunset provisions apply to PHL 2807-j, 2807-s, 2807-t in their entirety and to those portions of 2807-c that were added or amended in 1996 and 1999. They have been periodically extended over the years, generally three years at a time. The current sunset date is December 31, 2014. The practical result is that certain provisions continue to be extended even though they are no longer needed. Moreover, a number of important subject areas originally addressed in the "old" provisions of PHL § 2807-c are now controlled by other sections of law.

Budget Implications:

This bill is not anticipated to have a fiscal impact on the State.

Effective Date:

This bill would take effect immediately.