2005 California Welfare and Institutions Code Sections 14166-14166.25 Care Demonstration Project Act

14166.  (a) This article shall be known and may be cited as the
"Medi-Cal Hospital/Uninsured Care Demonstration Project Act."
   (b) The Legislature finds and declares all of the following:
   (1) The preservation of the state's disproportionate share
hospitals and the University of California hospitals is of critical
importance to the health and welfare of the people of the state.
   (2) These hospitals, as well as many nondisproportionate district
hospitals, are facing unprecedented financial challenges. Many are
facing significant budget deficits impeding their ability to continue
serving their essential role in the health care delivery system,
including providing care to Medi-Cal beneficiaries and uninsured
patients.
   (3) The financial viability of these hospitals has been sustained
through funding that has been available for California's
disproportionate share hospital program under Medi-Cal. Without these
funds, many of these hospitals would be unable to keep their doors
open and others would be forced to curtail services, thereby
impacting service to Medi-Cal beneficiaries and other needy
individuals.
   (4) The federal Centers for Medicare and Medicaid Services has
indicated in negotiations with the State Department of Health
Services that it is changing its approach to federal funding of
Medicaid in various respects. For instance, the methodology that many
states, including California, have used to fund their
disproportionate share hospital programs successfully for more than a
decade has become the subject of negative attention by the federal
Centers for Medicare and Medicaid Services, which is refusing to
approve discretionary waivers and state plan amendments that rely on
these funding methods. Accordingly, the State of California has
proposed that the funding mechanism for inpatient hospital services
under Medi-Cal be modified to secure federal approval and address
continued and adequate funding to the University of California and
disproportionate share hospitals. To this end, the state has
negotiated a waiver from various federal Medicaid requirements that
will allow it to implement a demonstration project using modified
funding methodologies. The Medi-Cal Hospital/Uninsured Care
Demonstration Project is intended to make up to $3.3 billion in
additional federal funds available to California safety net hospitals
over a five-year period.
   (5) The methodologies used to fund the Medi-Cal program should
maximize the use of federal funds consistent with federal Medicaid
law in an effort to access all of the increased federal funding
available under the Medi-Cal Hospital/Uninsured Care Demonstration
Project.
   (6) The amount of Medi-Cal funding to the University of California
hospitals and disproportionate share hospitals as a whole should not
be less than the amount of funding for the 2004-05 fiscal year.
Similarly, the amount of Medi-Cal funding for the public
disproportionate share hospitals as a group and for the private
disproportionate share hospitals as a group should not be less than
the amount of funding for the 2004-05 fiscal year.
   (7) The distributions of Medi-Cal funds should provide a
predictable and stable amount of funding for these hospitals in order
to allow them to engage in short-term and long-term planning. The
distribution methodologies should be fair and equitable, and take
into account utilization changes among hospitals.
   (8) The payments of Medi-Cal funds to these hospitals should be
made regularly and periodically throughout the year in order to
provide hospitals with necessary cashflow.
14166.1.  For purposes of this article, the following definitions
shall apply:
   (a) "Allowable costs" means those costs recognized as allowable
under Medicare reasonable cost principles and additional costs
recognized under the demonstration project, including those
expenditures identified in Appendix D to the Special Terms and
Conditions for the demonstration project. Allowable costs under this
subdivision shall be determined in accordance with the Special Terms
and Conditions for the demonstration project and demonstration
project implementation documents approved by the federal Centers for
Medicare and Medicaid Services.
   (b) "Base year private DSH hospital" means a nonpublic hospital,
nonpublic-converted hospital, or converted hospital, as those terms
are defined in paragraphs (26), (27), and (28), respectively, of
subdivision (a) of Section 14105.98, that was an eligible hospital
under paragraph (3) of subdivision (a) of Section 14105.98 for the
2004-05 state fiscal year.
   (c) "Demonstration project" means the Medi-Cal Hospital/Uninsured
Care Demonstration, Number 11-W-00193/9, as approved by the federal
Centers for Medicare and Medicaid Services.
   (d) "Designated public hospital" means any one of the following 22
hospitals identified in Attachment C, "Government-operated Hospitals
to be Reimbursed on a Certified Public Expenditure Basis," to the
Special Terms and Conditions for the demonstration project issued by
the federal Centers for Medicare and Medicaid Services:
   (1) UC Davis Medical Center.
   (2) UC Irvine Medical Center.
   (3) UC San Diego Medical Center.
   (4) UC San Francisco Medical Center.
   (5) UC Los Angeles Medical Center, including Santa Monica/UCLA
Medical Center.
   (6) LA County Harbor/UCLA Medical Center.
   (7) LA County Martin Luther King Jr. Charles R. Drew Medical
Center.
   (8) LA County Olive View UCLA Medical Center.
   (9) LA County Rancho Los Amigos National Rehabilitation Center.
   (10) LA County University of Southern California Medical Center.
   (11) Alameda County Medical Center.
   (12) Arrowhead Regional Medical Center.
   (13) Contra Costa Regional Medical Center.
   (14) Kern Medical Center.
   (15) Natividad Medical Center.
   (16) Riverside County Regional Medical Center.
   (17) San Francisco General Hospital.
   (18) San Joaquin General Hospital.
   (19) San Mateo Medical Center.
   (20) Santa Clara Valley Medical Center.
   (21) Tuolumne General Hospital.
   (22) Ventura County Medical Center.
   (e) "Federal medical assistance percentage" means the federal
medical assistance percentage applicable for federal financial
participation purposes for medical services under the Medi-Cal state
plan pursuant to Section 1396b(a) of Title 42 of the United States
Code.
   (f) "Nondesignated public hospital" means a public hospital
defined in paragraph (25) of subdivision (a) of Section 14105.98,
excluding designated public hospitals.
   (g) "Project year" means the applicable state fiscal year of the
Medi-Cal Hospital/Uninsured Care Demonstration Project.
   (h) "Project year private DSH hospital" means a nonpublic
hospital, nonpublic-converted hospital, or converted hospital, as
those terms are defined in paragraphs (26), (27), and (28),
respectively, of Section 14105.98, that was an eligible hospital
under paragraph (3) of subdivision (a) of Section 14105.98, for the
particular project year.
   (i) "Prior supplemental funds" means the Emergency Services and
Supplemental Payment Fund, the Medi-Cal Medical Education
Supplemental Payment Fund, the Large Teaching Emphasis Hospital and
Children's Hospital Medi-Cal Medical Education Supplemental Payment
Fund, and the Small and Rural Hospital Supplemental Payments Fund,
established under Sections 14085.6, 14085.7, 14085.8, and 14085.9,
respectively.
   (j) "Private hospital" means a nonpublic hospital, nonpublic
converted hospital, or converted hospital, as those terms are defined
in paragraphs (26) to (28), inclusive, respectively, of subdivision
(a) of Section 14105.98.
   (k) "Safety net care pool" means the federal funds available under
the Medi-Cal Hospital/Uninsured Care Demonstration Project to ensure
continued government support for the provision of health care
services to uninsured populations.
   (l) "Uninsured" shall have the same meaning as that term has in
the Special Terms and Conditions issued by the federal Centers for
Medicare and Medicaid Services for the demonstration project.
14166.2.  (a) The demonstration project shall be implemented and
administered pursuant to this article.
   (b) The director may modify any process or methodology specified
in this article to the extent necessary to comply with federal law or
the terms of the demonstration project, but only if the modification
results in the equitable distribution of funding, consistent with
this article, among the hospitals affected by the modification. If
the director, after consulting with affected hospitals, determines
that an equitable distribution cannot be achieved, the director shall
execute a declaration stating that this determination has been made.
The director shall retain the declaration and provide a copy, within
five working days of the execution of the declaration, to the fiscal
and appropriate policy committees of the Legislature. This article
shall become inoperative on the date that the director executes a
declaration pursuant to this subdivision, and as of January 1 of the
following year shall be repealed.
   (c) The director shall administer the demonstration project and
related Medi-Cal payment programs in a manner that attempts to
maximize available payment of federal financial participation,
consistent with federal law, the Special Terms and Conditions for the
demonstration project issued by the federal Centers for Medicare and
Medicaid Services, and this article.
   (d) As permitted by the federal Centers for Medicare and Medicaid
Services, this article shall be effective with regard to services
rendered throughout the term of the demonstration project, and
retroactively, with regard to services rendered on or after July 1,
2005, but prior to the implementation of the demonstration project.
   (e) In the administration of this article, the state shall
continue to make payments to hospitals that meet the eligibility
requirements for participation in the supplemental reimbursement
program for hospital facility construction, renovation, or
replacement pursuant to Section 14085.5 and shall continue to make
inpatient hospital payments not covered by the contract. These
payments shall not duplicate any other payments made under this
article.
   (f) The department shall continue to operate the selective
provider contracting program in accordance with Article 2.6
(commencing with Section 14081) in a manner consistent with this
article. A designated public hospital participating in the certified
public expenditure process shall maintain a selective provider
contracting program contract. These contracts shall continue to be
exempt from Chapter 2 (commencing with Section 10290) of Part 2 of
Division 2 of the Public Contract Code.
   (g) In the event of a final judicial determination made by any
state or federal court that is not appealed in any action by any
party or a final determination by the administrator of the Centers
for Medicare and Medicaid Services that federal financial
participation is not available with respect to any payment made under
any of the methodologies implemented pursuant to this article
because the methodology is invalid, unlawful, or is contrary to any
provision of federal law or regulation, the director may modify the
process or methodology to comply with law, but only if the
modification results in the equitable distribution of demonstration
project funding, consistent with this article, among the hospitals
affected by the modification. If the director, after consulting with
affected hospitals, determines that an equitable distribution cannot
be achieved, the director shall execute a declaration stating that
this determination has been made. The director shall retain the
declaration and provide a copy, within five working days of the
execution of the declaration, to the fiscal and appropriate policy
committees of the Legislature. This article shall become inoperative
on the date that the director executes a declaration pursuant to this
subdivision, and as of January 1 of the following year shall be
repealed.
   (h) (1) The department may adopt regulations to implement this
article. These regulations may initially be adopted as emergency
regulations in accordance with the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
For purposes of this article, the adoption of regulations shall be
deemed an emergency and necessary for the immediate preservation of
the public peace, health, and safety or general welfare. Any
emergency regulations adopted pursuant to this section shall not
remain in effect subsequent to 24 months after the effective date of
this article.
   (2) As an alternative, and notwithstanding the rulemaking
provisions of Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code, or any other
provision of law, the department may implement and administer this
article by means of provider bulletins, manuals, or other similar
instructions, without taking regulatory action. The department shall
notify the fiscal and appropriate policy committees of the
Legislature of its intent to issue a provider bulletin, manual, or
other similar instruction, at least five days prior to issuance.  In
addition, the department shall provide a copy of any provider
bulletin, manual, or other similar instruction issued under this
paragraph to the fiscal and appropriate policy committees of the
Legislature. The department shall consult with interested parties and
appropriate stakeholders, regarding the implementation and ongoing
administration of this article.
   (i) To the extent necessary to implement this article, the
department shall submit, by September 30, 2005, to the federal
Centers for Medicare and Medicaid Services proposed amendments to the
Medi-Cal state plan, including, but not limited to, proposals to
modify inpatient hospital payments to designated public hospitals,
modify the disproportionate share hospital payment program, and
provide for supplemental Medi-Cal reimbursement for certain physician
and nonphysician professional services. The department shall,
subsequent to September 30, 2005, submit any additional proposed
amendments to the Medi-Cal state plan that may be required by the
federal Centers for Medicare and Medicaid Services, to the extent
necessary to implement this article.
   (j) Each designated public hospital shall implement a
comprehensive process to offer individuals who receive services at
the hospital the opportunity to apply for the Medi-Cal program, the
Healthy Families Program, or any other public health coverage program
for which the individual may be eligible, and shall refer the
individual to those programs, as appropriate.
   (k) In any judicial challenge of the provisions of this article,
nothing shall create an obligation on the part of the state to fund
any payment from state funds due to the absence or shortfall of
federal funding.
14166.3.  (a) During the demonstration project term, payment
adjustments to disproportionate share hospitals shall not be made
pursuant to Section 14105.98. Payment adjustments to disproportionate
share hospitals shall be made solely in accordance with this
article.
   (b) Except as otherwise provided in this article, the department
shall continue to make all eligibility determinations and perform all
payment adjustment amount computations under the disproportionate
share hospital payment adjustment program pursuant to Section
14105.98 and pursuant to the disproportionate share hospital
provisions of the Medicaid state plan in effect as of the 2004-05
state fiscal year.
   (c) (1) Notwithstanding Section 14105.98, the federal
disproportionate share hospital allotment specified for California
under Section 1396r-4(f) of Title 42 of the United States Code for
each of federal fiscal years 2006 to 2010, inclusive, shall be
distributed solely among the following hospitals:
   (A) Eligible hospitals, as determined pursuant to Section 14105.98
for each project year in which the particular federal fiscal year
commences, which meet the definition of a public hospital as
specified in paragraph (25) of subdivision (a) of Section 14105.98.
   (B) Hospitals that are licensed to the University of California,
which meet the requirements set forth in Section 1396r-4(d) of Title
42 of the United States Code.
   (2) The federal disproportionate share hospital allotment for each
of the federal fiscal years 2006 to 2010, inclusive, shall be
aligned with the project year in which the applicable federal fiscal
year commences. The payment adjustment year, as used within the
meaning of paragraph (6) of subdivision (a) of Section 14105.98,
shall be the corresponding project year.
   (3) Uncompensated Medi-Cal and uninsured costs as reported
pursuant to Section 14166.8, shall be used by the department as the
basis for determining the hospital-specific disproportionate share
hospital payment limits required by Section 1396r-4(g) of Title 42 of
the United States Code for the hospitals described in paragraph (1).
   (4) The distribution of the federal disproportionate share
hospital allotment to hospitals described in paragraph (1) shall
satisfy the state's payment obligations, if any, with respect to
those hospitals under Section 1396r-4 of Title 42 of the United
States Code.
   (d) Eligible hospitals, as determined pursuant to Section 14105.98
for each project year, which are nonpublic hospitals,
nonpublic-converted hospitals, and converted hospitals, as those
terms are defined in paragraphs (26), (27) and (28), respectively, of
subdivision (a) of Section 14105.98, shall receive Medi-Cal
disproportionate share hospital replacement payment adjustments
pursuant to Section 14166.11. The payment adjustments so provided
shall satisfy the state's payment obligations, if any, with respect
to those hospitals under Section 1396r-4 of Title 42 of the United
States Code. The federal share of these payments shall not be claimed
from the federal disproportionate share hospital allotment described
in subdivision (c).
   (e) The nonfederal share of payments described in subdivisions (c)
and (d) shall be derived from the following sources:
   (1) With respect to the payments described in paragraph (1) of
subdivision (c) that are made to designated public hospitals, the
nonfederal share shall consist of certified public expenditures
described in subparagraphs (A) and (C) of paragraph (2) of
subdivision (a) of Section 14166.9, and intergovernmental transfer
amounts described in paragraph (2) of subdivision (d) of Section
14166.6.
   (2) With respect to the payments described in paragraph (1) of
subdivision (c) that are made to nondesignated public hospitals, the
nonfederal share shall consist solely of state General Fund
appropriations.
   (3) With respect to the payments described in subdivision (d), the
nonfederal share shall consist of state General Fund appropriations.
   (f) (1)  During the term of the demonstration project, for the
2005-06 state fiscal year and any subsequent state fiscal years, no
public entity shall be obligated to make any intergovernmental
transfer pursuant to Section 14163, and all transfer amount
determinations for those state fiscal years shall be suspended.
However, during the demonstration project term, intergovernmental
transfers shall be made with respect to the disproportionate share
hospital payment adjustments made in accordance with paragraph (2) of
subdivision (d) of Section 14166.6.
   (2) During the term of the demonstration project, for the 2005-06
state fiscal year and any subsequent state fiscal years, transfer
amounts from the Medi-Cal Inpatient Payment Adjustment Fund to the
Health Care Deposit Fund, as provided for pursuant to paragraph (2)
of subdivision (d) of Section 14163, are hereby reduced to zero.
Unless otherwise specified in this article, this paragraph shall be
disregarded for purposes of the calculations made under Section
14105.98 during the demonstration project.
14166.35.  (a) For each project year, designated public hospitals
shall be eligible to receive the following:
   (1) Payments for Medi-Cal inpatient hospital services and
supplemental payments for physician and nonphysician practitioner
services, as specified in Section 14166.4.
   (2) Disproportionate share hospital payment adjustments, as
specified in Section 14166.6.
   (3) Safety net care pool funding, as specified in Section 14166.7.
   (4) Stabilization funding, as specified in Section 14166.75.
   (5) Grants to distressed hospitals as negotiated by the California
Medical Assistance Commission pursuant to Section 14199.23.
   (b) Payments under this section shall be in addition to other
payments that may be made in accordance with law.
14166.4.  (a) Notwithstanding Article 2.6 (commencing with Section
14081), and any other provision of law, fee-for-service payments to
the designated public hospitals for inpatient services to Medi-Cal
beneficiaries shall be governed by this section. Each of the
designated public hospitals shall receive as payment for inpatient
hospital services provided to Medi-Cal beneficiaries during any
project year, the hospital's allowable costs incurred in providing
those services, multiplied by the federal medical assistance
percentage. These costs shall be determined, certified, and claimed
in accordance with Sections 14166.8 and 14166.9. All Medicaid federal
financial participation received by the state for the certified
public expenditures of the hospital, or the governmental entity with
which the hospital is affiliated, for inpatient hospital services
rendered to Medi-Cal beneficiaries shall be paid to the hospital.
   (b) With respect to each project year, each of the designated
public hospitals shall receive an interim payment for each day of
inpatient hospital services rendered to Medi-Cal beneficiaries based
upon claims filed by the hospital in accordance with the claiming
process set forth in Division 3 (commencing with Section 50000) of
Title 22 of the California Code of Regulations. The interim per diem
payment amount shall be based on estimated costs, which shall be
derived from statistical data from the following sources and which
shall be multiplied by the federal medical assistance percentage:
   (1) For allowable costs reflected in the Medicare cost report, the
cost report most recently audited by the hospital's Medicare fiscal
intermediary adjusted by a trend factor to reflect increased costs,
as approved by the federal Centers for Medicare and Medicaid Services
for the demonstration project.
   (2) For allowable costs not reflected in the Medicare cost report,
each hospital shall provide hospital-specific cost data requested by
the department. The department shall adjust the data by a trend
factor as necessary to reflect project year allowable costs.
   (c) Until the department commences making payments pursuant to
subdivision (b), the department may continue to make fee-for-service,
per diem payments to the designated public hospitals, pursuant to
the selective provider contracting program in accordance with Article
2.6 (commencing with Section 14081), for services rendered on and
after July 1, 2005, for a period of 120 days following the award of
this demonstration. Per diem payments shall be adjusted retroactively
to the amounts determined under the payment methodology prescribed
in this article.
   (d) No later than April 1 following the end of the project year,
the department shall undertake an interim reconciliation of payments
made pursuant to subdivisions (a) to (c), inclusive, based on
Medicare and other cost and statistical data submitted by the
hospital for the project year and shall adjust payments to the
hospital accordingly.
   (e) (1) The designated public hospitals shall receive supplemental
reimbursement for the costs incurred for physician and nonphysician
practitioner services provided to Medi-Cal beneficiaries who are
patients of the hospital, to the extent that those services are not
claimed as inpatient hospital services under the hospital's Medi-Cal
provider number and the costs of those services are not otherwise
recognized under subdivision (a).
   (2) Expenditures made by the designated public hospital, or a
governmental entity with which it is affiliated, for the services
identified in paragraph (1) shall be reduced by any payments received
pursuant to Article 7 (commencing with Section 51501) of Title 22 of
the California Code of Regulations. The remainder shall be certified
by the appropriate public official and claimed by the department in
accordance with Sections 14166.8 and 14166.9. These expenditures may
include any of the following:
   (A) Compensation to physicians or nonphysician practitioners
pursuant to contracts with the designated public hospital.
   (B) Salaries and related costs for employed physicians and
nonphysician practitioners.
   (C) The costs of interns, residents, and related teaching
physician and supervision costs.
   (D) Administrative costs associated with the services described in
subparagraphs (A) to (C), inclusive, including billing costs.
   (3) Designated public hospitals shall receive federal funding
based on the expenditures identified and certified in paragraph (2).
All federal financial participation received by the department for
the certified public expenditures identified in paragraph (2) shall
be paid to the designated public hospital, or a governmental entity
with which it is affiliated.
   (4) To the extent that the supplemental reimbursement received
under this subdivision relates to services provided to hospital
inpatients, the reimbursement shall be applied in determining whether
the designated public hospital has received full baseline payments
for purposes of paragraph (1) of subdivision (b) of Section 14166.21.
   (5) Supplemental reimbursement under this subdivision may be
distributed as part of the interim payments under subdivision (b), on
a per-visit basis, on a per-procedure basis, or on any other
federally permissible basis.
   (6) The department shall submit for federal approval, by September
30, 2005, a proposed amendment to the Medi-Cal state plan to
implement this subdivision, retroactive to July 1, 2005, to the
extent permitted by the federal Centers for Medicare and Medicaid
Services. If necessary to obtain federal approval, the department may
limit the application of this subdivision to costs determined
allowable by the federal Centers for Medicare and Medicaid Services.
If federal approval is not obtained, this subdivision shall not be
implemented.
14166.5.  (a) With respect to each project year, the director shall
determine a baseline funding amount for each designated public
hospital. A hospital's baseline funding amount shall be an amount
equal to the total amount paid to the hospital for inpatient hospital
services rendered to Medi-Cal beneficiaries during the 2004-05
fiscal year, including the following Medi-Cal payments, but excluding
payments received under the Medi-Cal Specialty Mental Health
Services Consolidation Program:
   (1) Base payments under the selective provider contracting program
as provided for under Article 2.6 (commencing with Section 14081).
   (2) Emergency Services and Supplemental Payments Fund payments as
provided for under Section 14085.6.
   (3) Medi-Cal Medical Education Supplemental Payment Fund payments
and Large Teaching Emphasis Hospital and Children's Hospital Medi-Cal
Medical Education Supplemental Payment Fund payments as provided for
under Sections 14085.7 and 14085.8, respectively.
   (4) Disproportionate share hospital payment adjustments as
provided for under Section 14105.98.
   (5) Administrative day payments as provided for under Section
51542 of Title 22 of the California Code of Regulations.
   (b) The baseline funding amount for each designated public
hospital shall reflect a reduction for the total amount of
intergovernmental transfers made pursuant to Sections 14085.6,
14085.7, 14085.8, 14085.9, and 14163 for the 2004-05 state fiscal
year by the designated public hospital, or the governmental entity
with which it is affiliated.
   (c) With respect to each project year beginning after the 2005-06
project year, the department shall determine an adjusted baseline
funding amount for each designated public hospital to reflect any
increase or decrease in volume. The adjustment for designated public
hospitals shall be calculated as follows:
   (1) Applying the cost-finding methodology approved under the
demonstration project, and applying accounting and reporting
practices consistent with those applied in paragraph (2), the
department shall determine the total allowable costs incurred by the
hospital, or the governmental entity with which it is affiliated, in
rendering hospital services that would be recognized under the
demonstration project to Medi-Cal beneficiaries and the uninsured
during the 2004-05 state fiscal year.
   (2) Applying the cost-finding methodology approved under the
demonstration project, and applying accounting and reporting
practices consistent with those applied in paragraph (1), the
department shall determine the total allowable costs incurred by the
hospital, or the governmental entity with which it is affiliated, in
rendering hospital services under the demonstration project to
Medi-Cal beneficiaries and the uninsured during the state fiscal year
preceding the project year for which the volume adjustment is being
calculated.
   (3) The department shall:
   (A) Calculate the difference between the amount determined under
paragraph (1) and the amount determined under paragraph (2).
   (B) Determine the percentage increase or decrease by dividing the
difference in subparagraph (A) by the amount in paragraph (1).
   (C) Apply the percentage determined in subparagraph (B) to that
amount that results from the hospital's baseline funding amount
determined under subdivision (a) as adjusted by subdivision (b) minus
the amount of disproportionate share hospital payments in paragraph
(4) of subdivision (a).
   (4) The designated public hospital's adjusted baseline for the
project year is the amount determined for the hospital in subdivision
(a) as adjusted by subdivision (b), plus the amount in subparagraph
(C) of paragraph (3).
   (5) Notwithstanding paragraphs (3) and (4), when, as determined by
the department, in consultation with the designated public hospital,
there has been a material reduction in patient services at the
designated public hospital during the project year, and the reduction
has resulted in a diminution of access for Medi-Cal and uninsured
patients and a related reduction in total costs at the designated
public hospital of at least 20 percent, the department may utilize
current or adjusted data that are reflective of the diminution of
access, even if the data are not annual data, to determine the
hospital's adjusted baseline amount.
   (d) The aggregate designated public hospital baseline funding
amount for each project year shall be the sum of all baseline funding
amounts determined under subdivisions (a) and (b), as adjusted in
subdivision (c), as appropriate, for all designated public hospitals.
   (e) (1) The adjustments set forth in subdivision (c) of Section
14166.13 and in subdivision (c) shall not apply if either of the
following conditions exist:
   (A) The difference between the percentage adjustment in
subparagraph (B) of paragraph (3) of subdivision (c) of this section,
computed in the aggregate for designated public hospitals, and
subparagraph (B) of paragraph (3) of subdivision (c) of Section
14166.13 is greater than 3 percentage points.
   (B) The stabilization funding amount from the Health Care Support
Fund, established pursuant to Section 14166.21, as determined in
Section 14166.20 for any project year is less than one hundred
fifty-three million dollars ($153,000,000).
   (2) Notwithstanding paragraph (1), the department may apply the
adjustments set forth in paragraph (5) of subdivision (c).
14166.6.  (a) For the 2005-06 project year and subsequent project
years, each designated public hospital described in subdivision (c)
of Section 14166.3 shall be eligible to receive an allocation of
federal Medicaid funding from the applicable federal disproportionate
share hospital allotment pursuant to this section. The department
shall establish the allocations in a manner that maximizes federal
Medicaid funding to the state during the term of the demonstration
project, and shall consider, at a minimum, all of the following
factors, taking into account all other payments to each hospital
under this article:
   (1) The optimal use of intergovernmental transfer-funded payments
described in subdivision (d).
   (2) Each hospital's pro rata share of the applicable aggregate
designated public hospital baseline funding amount described in
subdivision (d) of Section 14166.5.
   (3) That the allocation under this section, in combination with
the federal share of certified public expenditures for Medicaid
inpatient hospital services for the project year determined under
subdivision (a) of Section 14166.4, any supplemental reimbursement
for professional services rendered to hospital inpatients determined
for the project year under subdivision (e) of Section 14166.4, and
the distribution of safety net care pool funds from the Health Care
Support Fund determined under subdivision (a) of Section 14166.7,
shall not exceed the baseline funding amount or adjusted baseline
funding amount, as appropriate, for the hospital.
   (4) Minimizing the need to redistribute federal funds that are
based on the certified public expenditures of designated public
hospitals as described in subdivision (c).
   (b) Each designated public hospital shall receive its allocation
of federal disproportionate share hospital payments in one or both of
the following forms:
   (1) Distributions from the Demonstration Disproportionate Share
Hospital Fund established pursuant to subdivision (d) of Section
14166.9, consisting of federal funds claimed and received by the
department, pursuant to subparagraphs (A) and (C) of paragraph (2) of
subdivision (a) of Section 14166.9 based on designated public
hospitals' certified public expenditures up to 100 percent of
uncompensated Medi-Cal and uninsured costs.
   (2) Intergovernmental transfer-funded payments, as described in
subdivision (d). For purposes of determining whether the hospital has
received its allocation of federal disproportionate share hospital
payments established under this section, only the federal share of
intergovernmental transfer-funded payments shall be considered.
   (c) The distributions described in paragraph (1) of subdivision
(b) may be made to a designated public hospital independent of the
amount of uncompensated Medi-Cal and uninsured costs certified as
public expenditures by that hospital pursuant to Section 14166.8,
provided that, in accordance with the Special Terms and Conditions
for the demonstration project, the recipient hospital does not return
any portion of the funds received to any unit of government,
excluding amounts recovered by the state or federal government.
   (d) Designated public hospitals that meet the requirement of
Section 1396r-4(b)(1)(A) of Title 42 of the United States Code
regarding the Medicaid inpatient utilization rate or Section 1396r-4
(b)(1)(B) of Title 42 of the United States Code regarding the
low-income utilization rate, may receive intergovernmental
transfer-funded disproportionate share hospital payments as follows:
   (1) The department shall establish the amount of the hospital's
intergovernmental transfer-funded disproportionate share hospital
payment. The total amount of that payment, consisting of the federal
and nonfederal components, shall in no case exceed that amount equal
to 75 percent of the hospital's uncompensated Medi-Cal and uninsured
costs of hospital services, determined in accordance with the Special
Terms and Conditions for the demonstration project.
   (2) A transfer amount shall be determined for each hospital that
is subject to this subdivision, equal to the nonfederal share of the
payment amount established for the hospital pursuant to paragraph
(1). The transfer amount so determined shall be paid by the hospital,
or the public entity with which the hospital is affiliated, and
deposited into the Medi-Cal Inpatient Payment Adjustment Fund
established pursuant to subdivision (b) of Section 14163. The sources
of funds utilized for the transfer amount shall not include
impermissible provider taxes or donations as defined under Section
1396b(w) of Title 42 of the United States Code or other federal
funds. For this purpose, federal funds do not include patient care
revenue received as payment for services rendered under programs such
as Medicare or Medicaid.
   (3) The department shall pay the amounts established pursuant to
paragraph (1) to each hospital using the transfer amounts deposited
pursuant to paragraph (2) as the nonfederal share of those payments.
The total intergovernmental transfer-funded payment amount,
consisting of the federal and nonfederal share, paid to a hospital
shall be retained by the hospital in accordance with the Special
Terms and Conditions for the demonstration project.
   (e) The total federal disproportionate share hospital funds
allocated under this section to designated public hospitals with
respect to each project year, in combination with the federal share
of disproportionate share hospital payment adjustments made to
nondesignated public hospitals pursuant to Section 14166.16 for the
same project year, shall not exceed the applicable federal
disproportionate share hospital allotment.
   (f) Each designated public hospital shall receive quarterly
interim payments of its disproportionate share hospital allocation
during the project year. The determinations set forth in subdivisions
(a) to (e), inclusive, shall be made on an interim basis prior to
the start of each project year, except that, with respect to the
2005-06 project year, the interim determinations shall be made prior
to January 1, 2006. The department shall use the same cost and
statistical data used in determining the interim payments for
Medi-Cal inpatient hospital services under Section 14166.4, and
available payments and uncompensated and uninsured cost data,
including data from the Medi-Cal paid claims file and the hospital's
books and records, for the corresponding period.
   (g) No later than April 1 following the end of the project year,
the department shall undertake an interim reconciliation of payments
based on Medicare and other cost, payment, and statistical data
submitted by the hospital for the project year, and shall adjust
payments to the hospital accordingly.
   (h) Each designated public hospital shall receive its
disproportionate share hospital allocation, as computed pursuant to
subdivisions (a) to (e), inclusive, subject to final audits of all
applicable Medicare and other cost, payment, and statistical data for
the project year.
14166.7.  (a) (1) With respect to each project year, designated
public hospitals, or governmental entities with which they are
affiliated, shall be eligible to receive safety net care pool
payments from the Health Care Support Fund established pursuant to
Section 14166.21. The total amount of these payments, in combination
with the federal share of certified public expenditures for Medicaid
inpatient hospital services determined for the project year under
subdivision (a) of Section 14166.4, any supplemental reimbursement
for physician and nonphysician practitioner services rendered to
hospital inpatients determined for the project year under subdivision
(e) of Section 14166.4, and the federal disproportionate share
hospital allocation determined under Section 14166.6, shall not
exceed the hospital's baseline funding amount or adjusted baseline
funding amount, as appropriate.
   (2) The department shall establish the amount of the safety net
care pool payment described in paragraph (1) for each designated
public hospital in a manner that maximizes federal Medicaid funding
to the state during the term of the demonstration project.
   (3) A safety net care pool payment amount may be paid to a
designated public hospital, or governmental entity with which it is
affiliated, pursuant to this section independent of the amount of
uncompensated Medi-Cal and uninsured costs that is certified as
public expenditures pursuant to Section 14166.8, provided that, in
accordance with the Special Terms and Conditions for the
demonstration project, the recipient hospital does not return any
portion of the funds received to any unit of government, excluding
amounts recovered by the state or federal government.
   (4) In establishing the amount to be paid to each designated
public hospital under this subdivision, the department shall minimize
to the extent possible the redistribution of federal funds that are
based on certified public expenditures as described in paragraph (3).
   (b) Each designated public hospital, or governmental entity with
which it is affiliated, shall receive the amount established pursuant
to subdivision (a) in quarterly interim payments during the project
year. The determination of the interim payments shall be made on an
interim basis prior to the start of each project year, except that,
with respect to the 2005-06 project year, the determination of the
interim payments shall be made prior to January 1, 2006. The
department shall use the same cost and statistical data that is used
in determining the interim payments for Medi-Cal inpatient hospital
services under Section 14166.4 and for the disproportionate share
hospital allocations under Section 14166.6, for the corresponding
period.
   (c) (1) No later than April 1 following the end of the project
year, the department shall undertake an interim reconciliation of the
payment amount established pursuant to subdivision (a) for each
designated public hospital using Medicare and other cost, payment,
and statistical data submitted by the hospital for the project year,
and shall adjust payments to the hospital accordingly.
   (2) The final payment to a designated public hospital for purposes
of subdivision (b) and paragraph (1) of this subdivision, shall be
subject to final audits of all applicable Medicare and other cost,
payment, and statistical data for the project year, and the
distribution priorities set forth in Section 14166.20.
   (d) (1) Each designated public hospital, or governmental entity
with which it is affiliated, shall be eligible to receive additional
safety net care pool payments above the baseline funding amount or
adjusted baseline funding amount, as appropriate, from the Health
Care Support Fund, established pursuant to Section 14166.21, for the
project year in accordance with the stabilization funding
determination for the hospital made pursuant to Section 14166.75.
   (2) Payment of the additional safety net care pool amounts shall
be subject to the distribution priorities set forth in Section
14166.21.
14166.75.  (a) For services provided during the 2005-06 project
year, the amount allocated to designated public hospitals pursuant to
subparagraph (A) of paragraph (2) and subparagraph (A) of paragraph
(5) of subdivision (b) of Section 14166.20 shall be allocated, in
accordance with this section, among the designated public hospitals
and paid as direct grants, which shall not constitute Medi-Cal
payments.
   (b) The baseline funding amount, as determined under Section
14166.5, for San Mateo Medical Center shall be increased by eight
million dollars ($8,000,000) for purposes of this section.
   (c) The following payments shall be made from the amount
identified in subdivision (a), in addition to any other payments due
to the University of California hospitals and health system and
County of Los Angeles hospitals under this section:
   (1) The lower of eleven million dollars ($11,000,000) or 3.67
percent of the amount identified in subdivision (a) to the University
of California hospitals and health system.
   (2) In the event that the one hundred eighty million dollars
($180,000,000) identified in paragraph 41 of the Special Terms and
Conditions for the demonstration project is available in the safety
net care pool for the project year, the lower of twenty-three million
($23,000,000) or 7.67 percent of the amount identified in
subdivision (a) to the County of Los Angeles, Department of Health
Services, hospitals. If an amount less than the one hundred eighty
million dollars ($180,000,000) is available during the project year,
the amount determined under this paragraph shall be reduced
proportionately.
   (d) The amount identified in subdivision (a), as reduced by the
amounts identified in subdivision (c), shall be distributed among the
designated public hospitals as follows:
   (1) Designated public hospitals that are donor hospitals, and
their associated donated certified public expenditures, shall be
identified as follows:
   (A) An initial pro rata allocation of the amount subject to this
subdivision shall be made to each designated public hospital, based
upon the hospital's baseline funding amount determined pursuant to
Section 14166.5, and as further adjusted in subdivision (b). This
initial allocation shall be used for purposes of the calculations
under subparagraph (C) and paragraph (3).
   (B) The federal financial participation amount arising from the
certified public expenditures of each designated public hospital,
including the expenditures of the governmental entity, nonhospital
clinics, and other provider types to which it is affiliated, that
were claimed by the department from the federal disproportionate
share hospital allotment pursuant to subparagraphs (A) and (C) of
paragraph (2) of subdivision (a) of Section 14166.9, and from the
safety net care pool funds pursuant to paragraph (3) of subdivision
(a) of Section 14166.9, shall be determined.
   (C) The amount of federal financial participation received by each
designated public hospital, and by the governmental entity,
nonhospital clinics, and other provider types to which it is
affiliated, based on certified public expenditures from the federal
disproportionate share hospital allotment pursuant to paragraph (1)
of subdivision (b) of Section 14166.6, and from the safety net care
pool payments pursuant to subdivision (a) of Section 14166.7 shall be
identified. The resulting amount shall be increased by amounts
distributed to the hospital pursuant to subdivision (c) of this
section, paragraph (1) of subdivision (b) of Section 14166.20, and
the initial allocation determined for the hospitals in subparagraph
(A).
   (D) If the amount in subparagraph (B) is greater than the amount
determined in subparagraph (C), the hospital is a donor hospital, and
the difference between the two amounts is deemed to be that donor
hospital's associated donated certified public expenditures amount.
   (2) Seventy percent of the total amount subject to this
subdivision shall be allocated pro rata among the designated public
hospitals based upon each hospital's baseline funding amount
determined pursuant to Section 14166.5, and as further adjusted in
subdivision (b).
   (3) The lesser of the remaining 30 percent of the total amount
subject to this subdivision or the total amounts of donated certified
public expenditures for all donor hospitals, shall be distributed
pro rata among the donor hospitals based upon the donated certified
public expenditures amount determined for each donor hospital. Any
amounts not distributed pursuant to this paragraph shall be
distributed in accordance with paragraph (2).
   (e) The department shall consult with designated public hospital
representatives regarding the appropriate distribution of
stabilization funding before stabilization funds are allocated and
paid to hospitals. No later than 30 days after this consultation, the
department shall issue a final allocation of stabilization funding
under this section that shall not be modified for any reason other
than mathematical errors or mathematical omissions on the part of the
department.
14166.8.  (a) Within five months after the end of each project year,
each of the designated public hospitals shall submit to the
department all of the following reports:
   (1) The hospital's Medicare cost report for the project year.
   (2) Other cost reporting and statistical data necessary for the
determination of amounts due the hospital under the demonstration
project, as requested by the department.
   (b) For each project year, the reports shall identify all of the
following:
   (1) The costs incurred in providing inpatient hospital services to
Medi-Cal beneficiaries on a fee-for-service basis and physician and
nonphysician practitioner services costs, as identified in
subdivision (e) of Section 14166.4.
   (2) The amount of uncompensated costs incurred in providing
hospital services to Medi-Cal beneficiaries, including managed care
enrollees.
   (3) The costs incurred in providing hospital services to uninsured
individuals.
   (c) Each designated public hospital, or governmental entity with
which it is affiliated, that operates nonhospital clinics or provides
physician, nonphysician practitioner, or other health care services
that are not identified as hospital services under the Special Terms
and Conditions for the demonstration project, may report and certify
all, or a portion, of the uncompensated Medi-Cal and uninsured costs
of the services furnished. The amount of these uncompensated costs to
be claimed by the department shall be determined by the department
in consultation with the governmental entity so as to optimize the
level of claimable federal Medicaid funding.
   (d) Reports submitted under this section shall include all
allowable costs.
   (e) The appropriate public official shall certify to all of the
following:
   (1) The accuracy of the reports required under this section.
   (2) That the expenditures to meet the reported costs comply with
Section 433.51 of Title 42 of the Code of Federal Regulations.
   (3) That the sources of funds used to make the expenditures
certified under this section do not include impermissible provider
taxes or donations as defined under Section 1396b(w) of Title 42 of
the United States Code or other federal funds. For this purpose,
federal funds do not include patient care revenue received as payment
for services rendered under programs such as Medicare or Medicaid.
   (f) The certification of public expenditures made pursuant to this
section shall be based on a schedule established by the department.
The director may require the designated public hospitals to submit
quarterly estimates of anticipated expenditures, if these estimates
are necessary to obtain interim payments of federal Medicaid funds.
All reported expenditures shall be subject to reconciliation to
allowable costs, as determined in accordance with applicable
demonstration project implementing documents.
   (g) Except as provided in subdivision (c), the director shall seek
Medicaid federal financial participation for all certified public
expenditures recognized under the demonstration project and reported
by the designated public hospitals, to the extent consistent with
Section 14166.9.
   (h) Governmental or public entities other than those that operate
a designated public hospital may, at the request of a governmental or
public entity, certify uncompensated Medi-Cal and uninsured costs in
accordance with this section, subject to the department's discretion
and prior approval of the federal Centers for Medicare and Medicaid
Services.
14166.9.  (a) The department, in consultation with the designated
public hospitals, shall determine the mix of sources of federal funds
for payments to the designated public hospitals in a manner that
provides baseline funding to hospitals and maximizes federal Medicaid
funding to the state during the term of the demonstration project.
Federal funds shall be claimed according to the following priorities:
   (1) The certified public expenditures of the designated public
hospitals for inpatient hospital services and physician and
nonphysician practitioner services, as identified in subdivision (e)
of Section 14166.4, rendered to Medi-Cal beneficiaries.
   (2) Federal disproportionate share hospital allotment, subject to
the federal-hospital specific limit, in the following order:
   (A) Those hospital expenditures that are eligible for federal
financial participation only from the federal disproportionate share
hospital allotment.
   (B) Payments funded with intergovernmental transfers, consistent
with the requirements of the demonstration project, up to the
hospital's baseline funding amount or adjusted baseline funding
amount, as appropriate, for the project year.
   (C) Any other certified public expenditures for hospital services
that are eligible for federal financial participation from the
federal disproportionate share hospital allotment.
   (3) Safety net care pool funds, using the optimal combination of
hospital certified public expenditures and certified public
expenditures of a hospital that operates nonhospital clinics or
provides physician, nonphysician practitioner, or other health care
services that are identified as hospital services under the Special
Terms and Conditions for the demonstration project.
   (4) Health care expenditures of the state that represent alternate
state funding mechanisms approved by the federal Centers for
Medicare and Medicaid Services under the demonstration project as set
forth in Section 14166.22.
   (b) The department shall implement these priorities, to the extent
possible, in a manner that minimizes the redistribution of federal
funds that are based on the certified public expenditures of the
designated public hospitals.
   (c) The department may adjust the claiming priorities to the
extent that these adjustments result in additional federal Medicaid
funding during the term of the demonstration project or facilitate
the objectives of subdivision (b).
   (d) There is hereby established in the State Treasury the
"Demonstration Disproportionate Share Hospital Fund," consisting of
all federal funds received by the department with respect to the
certified public expenditures claimed pursuant to subparagraphs (A)
and (C) of paragraph (2) of subdivision (a). Notwithstanding Section
13340 of the Government Code, the fund shall be continuously
appropriated to the department solely for the purposes specified in
Section 14166.6.
   (e) All federal safety net care pool funds claimed and received by
the department based on health care expenditures incurred by the
designated public hospitals, or the governmental entities with which
they are affiliated, shall be deposited in the Health Care Support
Fund, established pursuant to Section 14166.21.
14166.10.  (a) Payments to private hospitals under the demonstration
project shall include, as applicable, all of the following:
   (1) Payments under selective provider contracts with the
department negotiated by the California Medical Assistance Commission
in accordance with Article 2.6 (commencing with Section 14081).
   (2) Disproportionate share replacement payments under Section
14166.11.
   (3) Supplemental payments under Section 14166.12.
   (4) Payments to distressed hospitals as negotiated by the
California Medical Assistance Commission pursuant to Section
14166.23.
   (b) Payments under subdivision (a) shall be in addition to other
payments that may be made in accordance with law.
14166.11.  (a) The department shall pay to each project year private
DSH hospital the amounts that would have been paid under the
disproportionate share hospital program using the formulas and
methodology in effect for the 2004-05 fiscal year as more
specifically set forth in this section.
   (b) For each project year, the department shall develop and issue
a tentative and final disproportionate share list in accordance with
Section 14105.98.
   (c) For each project year, the department shall perform the
computations set forth in paragraphs (1) to (4), inclusive, and (6)
to (8), inclusive, of subdivision (am) and paragraphs (1) to (3),
inclusive, of subdivision (an) of Section 14105.98, subject to the
following:
   (1) For purposes of these computations, the maximum state
disproportionate share hospital allotment for California for each
project year shall be the allotment effective during the federal
fiscal year beginning during the project year.
   (2) All references to October 1 shall be deemed to be references
to July 1.
   (3) Notwithstanding any other provision of law, the transfer
amounts for the Medi-Cal Inpatient Payment Adjustment Fund to the
Health Care Deposit Fund, as provided for pursuant to paragraph (2)
of subdivision (d) of Section 14163 shall be deemed to be eighty-five
million dollars ($85,000,000) for purposes of the computations under
this subdivision.
   (4) Notwithstanding any other provision of law, the payments made
under this section shall be treated as payment adjustments made under
Section 14105.98 for purposes of computing the OBRA 1993 payment
limitation, as defined in paragraph (24) of subdivision (a) of
Section 14105.98, the low-income utilization rate, and all related
computations.
   (5) Subdivision (m) of Section 14105.98 shall apply to payments
made under this section.
   (d) Interim payments shall be made for the first five months of
each project year as follows:
   (1) Interim payments shall be made to each private hospital
identified on a tentative disproportionate share list for the project
year that was also on the final disproportionate share list for the
prior fiscal year. The interim payment amount per month for each of
these hospitals shall equal one-twelfth of the total payments,
excluding stabilization funds, made to the hospital for the prior
fiscal year under this section or under Section 14105.98. The interim
payment amount may be adjusted to reflect any changes in the total
payment amounts, excluding stabilization funds, projected to be made
under this section for the project year.
   (2) The computation of interim payments described in this
subdivision shall be made promptly after the department issues the
tentative disproportionate share hospital list for the project year.
   (3) The first interim payment for a project year shall be made to
each hospital no later than 60 days after the issuance of the
tentative disproportionate share hospital list for that project year
and shall include the interim payment amounts for all prior months in
the project year. Subsequent interim payments for a project year
shall be made on the last checkwrite of each month made by the
Controller until interim payments for the first five months of the
project year have been made.
   (4) The department may recover any interim payments for a project
year made under this subdivision to a hospital that is not on the
final disproportionate share hospital list for that project year.
These interim payments shall be considered an overpayment. The
department shall issue a demand for repayment to a hospital at least
30 days prior to taking action to recover the overpayment. After the
30-day period, the department may recover the overpayment using any
of the methods set forth in Section 14115.5 or subdivision (c) of
Section 14172.5. Any offset shall be subject to Section 14115.5 or
subdivision (d) of Section 14172.5. No other provision of Section
14172.5 shall be applicable with respect to the recovery of
overpayments under this subdivision. A hospital may appeal the
department's determination of an overpayment under this subdivision
pursuant to the appeal procedures set forth in Sections 51016 to
51047, inclusive, of Title 22 of the California Code of Regulations,
and seek judicial review of the final administrative decision
pursuant to Section 14171, provided that the only issues that may be
raised in this appeal are whether the hospital, but for inadvertent
error by the department, was on the final disproportionate share list
for the project year and whether the department's computation of the
overpayment amount is correct. If the hospital is reinstated on the
final disproportionate share list pursuant to Section 14105.98, the
department shall promptly refund any amount recovered under this
paragraph.
   (e) Tentative adjusted monthly payments shall be made for the
months of December through March of each project year to each private
hospital identified on the final disproportionate share hospital
list for the project year, computed and paid as follows:
   (1) An adjusted payment amount shall be computed for each hospital
equal to the sum of the total payment adjustment amount for the
hospital computed pursuant to subdivision (am) of Section 14105.98,
plus the supplemental lump-sum payment adjustment amount computed
pursuant to subdivision (an) of Section 14105.98, each as most
recently computed by the department, plus any applicable interim
estimated stabilization funding pursuant to subdivision (b) of
Section 14166.14.
   (2) A tentative adjusted monthly payment amount shall be computed
for each hospital equal to the adjusted payment amount for the
hospital, minus the aggregate interim payments made to the hospital
for the project year, divided by seven.
   (3) The computation of tentative adjusted monthly payments
described in this subdivision shall be made promptly after the
department issues the final disproportionate share hospital list for
the project year.
   (4) The first tentative adjusted monthly payment for a project
year shall be made to each hospital by January 15 or within 60 days
after the issuance of the final disproportionate share hospital list
for the project year, whichever is later, and shall include the
tentative adjusted monthly payment amounts for all prior months in
the project year for which those payments are due. Subsequent
tentative adjusted monthly payments for a project year shall be made
on the last checkwrite of each month made by the Controller until
tentative adjusted monthly payments for December through March of the
project year have been made.
   (f) Three data corrected payments shall be made on the last
checkwrite of the month made by the Controller for the months of
April through June of each project year to each private hospital
identified on the final disproportionate share hospital list for the
project year, computed and paid as follows:
   (1) An annual data corrected payment amount shall be computed for
each hospital equal to the sum of the total payment adjustment amount
for the hospital computed pursuant to subdivision (am) of Section
14105.98, plus the supplemental lump-sum payment adjustment amount
computed pursuant to subdivision (an) of Section 14105.98, each as
most recently computed by the department, plus any interim estimated
stabilization funding. The annual data corrected payment amounts
shall reflect data corrections, hospital closures, and other
revisions made by the department to the adjusted payment amounts
computed under paragraph (1) of subdivision (e).
   (2) A monthly data corrected payment amount shall be computed for
each hospital equal to the annual data corrected payment amount for
the hospital, minus both the aggregate interim payments made to the
hospital for the project year and the aggregate tentative adjusted
monthly payments made to the hospital, divided by three.
   (g) Payment under subdivisions (d), (e), and (f) for a month shall
be made only to private hospitals open for patient care through the
15th day of the month.
   (h) The department shall compute a final adjusted payment amount
for each private hospital on the final disproportionate share list
for a project year after the completion of the project year and the
determination of the amount of stabilization funding available to be
paid under this section as follows:
   (1) An amount shall be computed for each hospital equal to the sum
of the total payment adjustment amount for the hospital computed
pursuant to subdivision (am) of Section 14105.98, plus the
supplemental lump-sum payment adjustment amount computed pursuant to
subdivision (an) of Section 14105.98, each as most recently computed
by the department.  These amounts shall reflect data corrections,
hospital closures, and other revisions made by the department to the
annual data corrected payment amounts computed under paragraph (1) of
subdivision (f) in a manner that ensures that any payments not
payable or recouped are redistributed among hospitals eligible for a
final adjusted payment amount in accordance with the calculations
made pursuant to Section 14105.98.
   (2) The department shall add to the amount computed for each
hospital under paragraph (1) a pro rata share of any stabilization
funding to be allocated and paid under this section, allocated based
on the amounts computed under paragraph (1).
   (3) The department shall for each hospital for each project year
reconcile the total amount paid to the hospital for that project year
under subdivisions (d), (e), and (f) with the amount determined
under paragraph (2). The department shall issue a report to each
hospital setting forth the result of the reconciliation that shall
include the department's computation, data, and identification of
data sources. The department shall pay to the hospital any
underpayment determined as a result of this reconciliation and
collect from the hospital any overpayment determined as a result of
this reconciliation pursuant to paragraph (4) of subdivision (d) of
Section 14166.11.
   (4) A hospital may seek to correct the department's data and
computations under this section in accordance with the processes
undertaken by the department to implement Section 14105.98 in effect
during the 2004-05 state fiscal year.
   (i) In accordance with the demonstration project, the following
shall apply:
   (1) Payments under this section shall satisfy the state's
obligation to have a payment adjustment program for disproportionate
share hospitals under Section 1923 of the Social Security Act (42
U.S.C. Sec. 1396r-4).
   (2) Payments under this section and federal financial
participation shall not be counted against the state's allotment of
federal funding for Medicaid disproportionate share payment
adjustments.
   (j) (1) For purposes of this subdivision, "federal
disproportionate share allotment" means the federal Medicaid
disproportionate share hospital allotment specified for California
under Section 1396r-4(f) of Title 42 of the United States Code.
   (2) In the event any hospital, or any party on behalf of a
hospital, shall initiate a case or proceeding in any state or federal
court in which the hospital seeks any relief of any sort whatsoever,
including, but not limited to, monetary relief, injunctive relief,
declaratory relief, or a writ, based in whole or in part on a
contention that the hospital is entitled to, or should receive any
portion of, the federal disproportionate share hospital allotment for
any or all of federal fiscal years 2006 to 2010, inclusive, all of
the following shall apply:
   (A) No payments shall be made to the hospital pursuant to this
section until the case or proceeding is finally resolved, including
the final disposition of all appeals.
   (B) Any amount computed to be payable to the hospital pursuant to
this section for a project year shall be withheld by the department
and shall be paid to the hospital only after the case or proceeding
is finally resolved, including the final disposition of all appeals,
and only if the case or proceeding does not result in any amount
being paid or payable to the hospital from the federal
disproportionate share hospital allotment for any portion of the
project year.
   (C) The hospital shall become ineligible to receive any amount
pursuant to this section for any project year for which it is
determined that the hospital is entitled to be paid any portion of
the federal disproportionate share hospital allotment.
   (D) Any amount that would have been payable to the hospital
pursuant to this section, but is not paid to the hospital because the
hospital has become ineligible to receive payments pursuant to this
section shall be returned to the state General Fund.
   (E) In the event any portion of the federal disproportionate share
hospital allotment is applied to payments to any private hospital,
the department shall make any additional payments that may be
necessary from state funds so that the amount of the disproportionate
share hospital payments that are made to designated public hospitals
or nondesignated public hospitals is not less than the amount that
would have been made if the allotment had not been applied to
payments to any private hospital.
   (F) A hospital's total project year payment amount determined
under this section may be subject to reduction by offset pursuant to
Section 14115.5 or 14172.5.
14166.12.  (a) The California Medical Assistance Commission shall
negotiate payment amounts, in accordance with the selective provider
contracting program established pursuant to Article 2.6 (commencing
with Section 14081), from the Private Hospital Supplemental Fund
established pursuant to subdivision (b) for distribution to private
hospitals that satisfy the criteria of Section 14085.6, 14085.7,
14085.8, or 14085.9.
   (b) The Private Hospital Supplemental Fund is hereby established
in the State Treasury. For purposes of this section, "fund" means the
Private Hospital Supplemental Fund.
   (c) Notwithstanding Section 13340 of the Government Code, the fund
shall be continuously appropriated to the department for the
purposes specified in this section.
   (d) Except as otherwise limited by this section, the fund shall
consist of all of the following:
   (1) One hundred eighteen million four hundred thousand dollars
($118,400,000), which shall be transferred annually from General Fund
amounts appropriated in the annual Budget Act for the Medi-Cal
program.
   (2) Any additional moneys appropriated to the fund.
   (3) All stabilization funding transferred to the fund pursuant to
subdivision (b) of Section 14166.14.
   (4) Any moneys that any county, other political subdivision of the
state, or other governmental entity in the state may elect to
transfer to the department for deposit into the fund, as permitted
under Section 433.51 of Title 42 of the Code of Federal Regulations
or any other applicable federal Medicaid laws.
   (5) All private moneys donated by private individuals or entities
to the department for deposit in the fund as permitted under
applicable federal Medicaid laws.
   (6) Any interest that accrues on amounts in the fund.
   (e) Any public agency transferring moneys to the fund may, for
that purpose, utilize any revenues, grants, or allocations received
from the state for health care programs or purposes, unless otherwise
prohibited by law. A public agency may also utilize its general
funds or any other public moneys or revenues for purposes of
transfers to the fund, unless otherwise prohibited by law.
   (f) The department may accept or not accept moneys offered to the
department for deposit in the fund. If the department accepts moneys
pursuant to this section, the department shall obtain federal
financial participation to the full extent permitted by law. With
respect to funds transferred or donated from private individuals or
entities, the department shall accept only those funds that are
certified by the transferring or donating entity that qualify for
federal financial participation under the terms of the Medicaid
Voluntary Contribution and Provider-Specific Tax Amendments of 1991
(P.L. 102-234) or Section 433.51 of Title 42 of the Code of Federal
Regulations, as applicable. The department may return any funds
transferred or donated in error.
   (g) Moneys in the fund shall be used as the source for the
nonfederal share of payments to hospitals under this section.
   (h) Any funds remaining in the fund at the end of a fiscal year
shall be carried forward for use in the following fiscal year.
   (i) Moneys shall be allocated from the fund by the department and
shall be applied to obtain federal financial participation in
accordance with customary Medi-Cal accounting procedures for purposes
of payments under this section.  Distributions from the fund shall
be supplemental to any other Medi-Cal reimbursement received by the
hospitals, including amounts that hospitals receive under the
selective provider contracting program (Article 2.6 (commencing with
Section 14081)), and shall not affect provider rates paid under the
selective provider contracting program.
   (j) Each private hospital that was a private hospital during the
2002-03 fiscal year, received payments for the 2002-03 fiscal year
from any of the prior supplemental funds, and, during the project
year, satisfies the criteria in Section 14085.6, 14085.7, 14085.8, or
14085.9 to be eligible to negotiate for distributions under any of
those sections, shall receive no less from the Private Hospital
Supplemental Fund for the project year than 100 percent of the amount
the hospital received from the prior supplemental funds for the
2002-03 fiscal year. Each private hospital described in this
subdivision shall be eligible for additional payments from the fund
pursuant to subdivision (k).
   (k) All amounts that are in the fund for a project year in excess
of the amount necessary to make the payments under subdivision (j)
shall be available for negotiation by the California Medical
Assistance Commission, along with corresponding federal financial
participation, for supplemental payments to private hospitals, which
for the project year satisfy the criteria under Section 14085.6,
14085.7, 14085.8, or 14085.9 to be eligible to negotiate for
distributions under any of those sections, and paid for services
rendered during the project year pursuant to the selective provider
contracting program established under Article 2.6 (commencing with
Section 14081).
   (l) The amount of any stabilization funding transferred to the
fund with respect to a project year may in the discretion of the
California Medical Assistance Commission be paid for services
furnished in the same project year regardless of when the
stabilization funds become available, provided the payment is
consistent with other applicable federal or state law requirements
and does not result in a hospital exceeding any applicable
reimbursement limitations.
   (m) The department shall pay amounts due to a private hospital
from the fund for a project year, with the exception of stabilization
funding, in up to four installment payments, unless otherwise
provided in the hospital's contract negotiated with the California
Medical Assistance Commission, except that hospitals that are not
described in subdivision (j) shall not receive the first installment
payment. The first payment shall be made as soon as practicable after
the issuance of the tentative disproportionate share hospital list
for the project year, and in no event later than January 1 of the
project year. The second and subsequent payments shall be made after
the issuance of the final disproportionate hospital list for the
project year, and shall be made only to hospitals that are on the
final disproportionate share hospital list for the project year. The
second payment shall be made by February 1 of the project year or as
soon as practicable after the issuance of the final disproportionate
share hospital list for the project year. The third payment, if
scheduled, shall be made by April 1 of the project year. The fourth
payment, if scheduled, shall be made by June 30 of the project year.
This subdivision does not apply to hospitals that are scheduled to
receive payments from the fund because they meet the criteria under
Section 14085.7 and do not meet the criteria under Section 14085.6,
14085.8, or 14085.9, which shall be paid in accordance with the
applicable contract or contract amendment negotiated by the
California Medical Assistance Commission.
   (n) The department shall pay stabilization funding transferred to
the fund in amounts negotiated by the California Medical Assistance
Commission and shall pay the scheduled payments in accordance with
the applicable contract or contract amendment.
   (o) Payments to private hospitals may be made using funds
transferred from governmental entities to the state, at the option of
the governmental entity. Any payments funded by intergovernmental
transfers shall remain with the private hospital and shall not be
transferred back to any unit of government. An amount equal to 25
percent of the amount of any intergovernmental transfer made in the
project year that results in a supplemental payment made during the
same project year to a project year private DSH hospital located in
the county that made the intergovernmental transfer shall be
deposited in the fund for distribution as determined by the
California Medical Assistance Commission. An amount equal to 75
percent shall be deposited in the fund and distributed to the private
hospitals designated by the counties.
14166.13.  (a) With respect to each project year, the director shall
determine a baseline funding amount for each base year private DSH
hospital that is also a project year private DSH hospital. A private
hospital's baseline funding amount shall be an amount equal to the
total amount paid to the hospital for inpatient hospital services
rendered to Medi-Cal beneficiaries during the 2004-05 state fiscal
year, including the following Medi-Cal payments, but excluding
payments received under the Medi-Cal Specialty Mental Health Services
Consolidation Program:
   (1) Base payments under the selective provider contracting program
as provided for under Article 2.6 (commencing with Section 14081),
or under the Medi-Cal state plan cost reimbursement system for
inpatient hospital services for noncontracting hospitals.
   (2) Emergency Services and Supplemental Payments Fund payments as
provided for under Section 14085.6.
   (3) Medi-Cal Medical Education Supplemental Payment Fund payments
and Large Teaching Emphasis Hospital and Children's Hospital Medi-Cal
Medical Education Supplemental Payment Fund payments as provided for
under Sections 14085.7 and 14085.8, respectively.
   (4) Small and Rural Hospital Supplemental Payments Fund payments
as provided for under Section 14085.9.
   (5) Disproportionate share hospital payment adjustments as
provided for under Section 14105.98.
   (6) Administrative day payments as provided for under Section
51542 of Title 22 of the California Code of Regulations.
   (b) The aggregate project year private DSH hospital baseline
funding amount shall be the sum of all baseline funding amounts
determined under subdivision (a).
   (c) With respect to each project year beginning after the 2005-06
project year, an aggregate project year private hospital adjusted
baseline funding amount shall be determined as follows:
   (1) The department shall determine the aggregate total Medi-Cal
revenue, using amounts determined under subdivision (a), for
inpatient hospital services rendered during the 2004-05 fiscal year
for project year private hospitals, less the total amount of
disproportionate share hospital payments identified in paragraph (5)
of subdivision (a) for those hospitals.
   (2) The department shall determine the aggregate total Medi-Cal
revenue paid or payable under this article, excluding stabilization
funding under Section 14166.14, using amounts determined under
subdivision (a) for inpatient hospital services rendered during the
fiscal year preceding the project year for which the private hospital
adjusted baseline funding amount is being calculated for project
year private hospitals, less the total amount of disproportionate
share hospital replacement payments in Section 14166.11 for those
hospitals.
   (3) The department shall:
   (A) Calculate the difference between the amount determined under
paragraph (1) and the amount determined under paragraph (2).
   (B) Determine the percentage increase or decrease by dividing the
difference in subparagraph (A) by the amount in paragraph (1).
   (C) Apply the percentage in subparagraph (B) to the aggregate
project year private DSH hospital baseline funding amount determined
under subdivision (b), less the total amount of disproportionate
share hospital replacement payments in Section 14166.11 for those
hospitals.
   (4) The aggregate private hospital adjusted baseline funding
amount is the amount determined in paragraph (1), plus the amount
determined in subparagraph (C), plus the amount in paragraph (5) of
subdivision (a).
14166.14.  The amount of any stabilization funding payable to the
project year private DSH hospitals under Section 14166.20 for a
project year, which amount shall not include the amount of
stabilization funding paid or payable to hospitals prior to the
computation of the stabilization funding under Section 14166.20 plus
any amount payable to project year private DSH hospitals under
paragraph (1) of subdivision (b) of Section 14166.21, shall be
allocated as follows:
   (a) (1) To fund any shortfall due under Section 14166.11.
   (2) An amount shall be transferred to the Private Hospital
Supplemental Fund established pursuant to Section 14166.20, as may be
necessary so that the amount for the Private Hospital Supplemental
Fund for the project year, including all funds previously transferred
to, or deposited in, the Private Hospital Supplemental Fund for the
project year, is not less than the Private Hospital Supplemental Fund
base amount determined pursuant to subdivision (j) of Section
14166.12.
   (3) The amounts paid or transferred under paragraphs (1) and (2)
shall be reduced pro rata if there is not sufficient funding
described under paragraphs (1) and (2).
   (b) Of the stabilization funding remaining, after allocations
pursuant to subdivision (a), that are payable to project year private
DSH hospitals, 66.4 percent shall be allocated and distributed among
those hospitals pro rata based on the amounts determined in
accordance with Section 14166.11, and 33.6 percent shall be
transferred to the Private Hospital Supplemental Fund.
14166.15.  (a) Payments to nondesignated public hospitals under the
demonstration project shall include, as applicable, the following:
   (1) Payments under selective provider contracts with the
department negotiated by the California Medical Assistance Commission
in accordance with Article 2.6 (commencing with Section 14081).
   (2) Disproportionate share hospital payments under Section
14166.16.
   (3) Supplemental payments under Section 14166.17.
   (4) Payments to distressed hospitals as negotiated by the
California Medical Assistance Commission pursuant to Section
14166.23.
   (5) Payment of amounts described in Section 14166.19.
   (b) Payments under subdivision (a) shall be in addition to other
payments that may be made in accordance with law.
14166.16.  (a) The department shall compute for each nondesignated
public hospital for a project year, that is an eligible hospital for
the project year as determined under Section 14105.98, payment
adjustment amounts as determined under subdivision (am) of Section
14105.98 and supplemental payment adjustment amounts as determined
under subdivision (an) of Section 14105.98.
   (b) Nondesignated public hospitals shall comply with subdivisions
(a), (b), (d), (e), and (f) of Section 14166.8.
   (c) Interim payments shall be made for the first five months of
each project year as follows:
   (1) Interim payments shall be made to each nondesignated public
hospital identified on a tentative disproportionate share list for
the project year that was also on the final disproportionate share
list for the prior fiscal year. The interim payment amount per month
for the hospital shall be equal to one-twelfth of the total payments,
excluding stabilization funds, made to the hospital for the prior
fiscal year under this section or under Section 14105.98. The interim
payment amount may be adjusted to reflect any changes in the total
amount payments, excluding stabilization funds, projected to be made
under this section for the project year.
   (2) The computation of interim payments described in this
subdivision shall be made promptly after the department issues the
tentative disproportionate share hospital list for the project year.
   (3) The first interim payment to each hospital for a project year
shall be made no later than 60 days after the issuance of the
tentative disproportionate share hospital list for the project year
and shall include the interim payment amounts for all prior months in
the project year. Subsequent interim payments for a project year
shall be made on the last checkwrite of each month made by the
Controller until interim payments for the first five months of the
project year have been made.
   (4) The department may recover any interim payments made under
this subdivision for a project year to a hospital that is not on the
final disproportionate share hospital list for the project year.
These interim payments shall be considered an overpayment. The
department shall issue a demand for repayment to a hospital at least
30 days prior to taking action to recover the overpayment. After the
30-day period, the department may recover the overpayment using any
of the methods set forth in Section 14115.5 or subdivision (c) of
Section 14172.5. Any offset shall be subject to Section 14115.5 or
subdivision (d) of Section 14172.5. No other provision of Section
14172.5 shall be applicable with respect to the recovery of
overpayments under this subdivision. A hospital may appeal the
department's determination of an overpayment under this subdivision
pursuant to the appeal procedures set forth in Sections 51016 to
51047, inclusive, of Title 22 of the California Code of Regulations,
and seek judicial review of the final administrative decision
pursuant to Section 14171, provided that the only issues that may be
raised in the appeal are whether the hospital, but for inadvertent
error by the department, was on the final disproportionate share list
for the project year and whether the department's computation of the
overpayment amount is correct. If the hospital is reinstated on the
final disproportionate share list pursuant to Section 14105.98, the
department shall promptly refund any amount recovered under this
paragraph.
   (d) Tentative adjusted monthly payments shall be made for December
through March of each project year to each nondesignated public
hospital identified on the final disproportionate share hospital list
for the project year, computed and paid as follows:
   (1) An adjusted payment amount shall be computed for each hospital
equal to the sum of the total payment adjustment amount for the
hospital computed pursuant to subdivision (am) of Section 14105.98,
plus the supplemental lump-sum payment adjustment amount computed
pursuant to subdivision (an) of Section 14105.98, each as most
recently computed by the department.
   (2) A tentative adjusted monthly payment amount shall be computed
for each hospital equal to the adjusted payment amount for the
hospital, minus the aggregate interim payments made to the hospital
for the project year, divided by seven.
   (3) The computation of tentative adjusted monthly payments
described in this subdivision shall be made promptly after the
department issues the final disproportionate share hospital list for
the project year.
   (4) The first tentative adjusted monthly payment to each hospital
for a project year shall be made by January 15 or within 60 days
after the issuance of the final disproportionate share hospital list
for the project year, whichever is later, and shall include the
tentative adjusted monthly payment amounts for all prior months in
the project year for which those payments are due. Subsequent
tentative adjusted monthly payments for a project year shall be made
on the last checkwrite of each month made by the Controller until
tentative adjusted monthly payments for December through March of the
project year have been made.
   (e) Three data corrected payments shall be made on the last
checkwrite of the month made by the Controller for the months of
April through June of each project year to each nondesignated public
hospital identified on the final disproportionate share hospital list
for the project year, computed and paid as follows:
   (1) An annual data corrected payment amount shall be computed for
each hospital equal to the sum of the total payment adjustment amount
for the hospital computed pursuant to subdivision (am) of Section
14105.98, plus the supplemental lump-sum payment adjustment amount
computed pursuant to subdivision (an) of Section 14105.98, each as
most recently computed by the department. The annual data corrected
payment amounts shall reflect data corrections, hospital closures,
and other revisions made by the department to the adjusted payment
amounts computed under paragraph (1) of subdivision (d).
   (2) A monthly data corrected payment amount shall be computed for
each hospital equal to the annual data corrected payment amount for
the hospital, minus both the aggregate interim payments made to the
hospital for the project year and the aggregate tentative adjusted
monthly payments made to the hospital, divided by three.
   (f) Payment under subdivisions (c), (d), and (e) for a month shall
be made only to hospitals open for patient care through the 15th day
of the month.
   (g) The department shall compute a final adjusted payment amount
for each nondesignated public hospital on the final disproportionate
share list for a project year after the completion of the project
year and the determination of the amount of stabilization funding
available to be paid under this section as follows:
   (1) An amount shall be computed for each hospital equal to the sum
of the total payment adjustment amount for the hospital computed
pursuant to subdivision (am) of Section 14105.98, plus the
supplemental lump-sum payment adjustment amount computed pursuant to
subdivision (an) of Section 14105.98, each as most recently computed
by the department.  These amounts shall reflect data corrections,
hospital closures, and other revisions made by the department to the
annual data corrected payment amounts computed under paragraph (1) of
subdivision (e) in a manner that ensures that any payments not
payable or recouped are redistributed among hospitals eligible for a
final adjusted payment amount in accordance with the calculations
made pursuant to Section 14105.98.
   (2) The department shall add to the amount computed for each
hospital under paragraph (1) a pro rata share of any stabilization
funding to be allocated and paid under this section allocated based
on the amounts computed under paragraph (1).
   (3) The department shall for each hospital for each project year
reconcile the total amount computed for the hospital for the project
year under subdivisions (c), (d), and (e) with the amount determined
under paragraph (2). The department shall issue a report to each
hospital setting forth the result of the reconciliation that shall
include the department's computation, data, and identification of
data sources. The department shall pay to the hospital any
underpayment determined as a result of this reconciliation and
collect from the hospital any overpayment determined as a result of
this reconciliation.
   (4) A hospital may seek to correct the department's data and
computations under this section in accordance with the processes
undertaken by the department to implement Section 14105.98 in effect
during the 2004-05 fiscal year.
14166.17.  (a) The California Medical Assistance Commission shall
negotiate payment amounts in accordance with the selective provider
contracting program established pursuant to Article 2.6 (commencing
with Section 14081) from the Nondesignated Public Hospital
Supplemental Fund established pursuant to subdivision (b) for
distribution to nondesignated public hospitals that satisfy the
criteria of Section 14085.6, 14085.7, 14085.8, or 14085.9.
   (b) The Nondesignated Public Hospital Supplemental Fund is hereby
established in the State Treasury. For purposes of this section,
"fund" means the Nondesignated Public Hospital Supplemental Fund.
   (c) Notwithstanding Section 13340 of the Government Code, the fund
shall be continuously appropriated to the department for the
purposes specified in this section.
   (d) Except as otherwise limited by this section, the fund shall
consist of all of the following:
   (1) One million nine hundred thousand dollars ($1,900,000), which
shall be transferred annually from General Fund amounts appropriated
in the annual Budget Act for the fund.
   (2) Any additional moneys appropriated to the fund.
   (3) All stabilization funding transferred to the fund.
   (4) All private moneys donated by private individuals or entities
to the department for deposit in the fund as permitted under
applicable federal Medicaid laws.
   (5) Any interest that accrues on amounts in the fund.
   (e) The department may accept or not accept moneys offered to the
department for deposit in the fund. If the department accepts moneys
pursuant to this section, the department shall obtain federal
financial participation to the full extent permitted by law. With
respect to funds transferred or donated from private individuals or
entities, the department shall accept only those funds that are
certified by the transferring or donating entity as qualifying for
federal financial participation under the terms of the Medicaid
Voluntary Contribution and Provider-Specific Tax Amendments of 1991
(P.L. 102-234) or Section 433.51 of Title 42 of the Code of Federal
Regulations, as applicable. The department may return any funds
transferred or donated in error.
   (f) Moneys in the funds shall be used as the source for the
nonfederal share of payments to hospitals under this section.
   (g) Any funds remaining in the fund at the end of a fiscal year
shall be carried forward for use in the following fiscal year.
   (h) Moneys shall be allocated from the fund by the department and
shall be applied to obtain federal financial participation in
accordance with customary Medi-Cal accounting procedures for purposes
of payments under this section.  Distributions from the fund shall
be supplemental to any other Medi-Cal reimbursement received by the
hospitals, including amounts that hospitals receive under the
selective provider contracts negotiated under Article 2.6 (commencing
with Section 14081), and shall not affect provider rates paid under
the selective provider contracting program.
   (i) Each nondesignated public hospital that was a nondesignated
public hospital during the 2002-03 fiscal year, received payments for
the 2002-03 fiscal year from any of the prior supplemental funds,
and, during the project year satisfies the criteria in Section
14085.6, 14085.7, 14085.8, or 14085.9 to be eligible to negotiate for
distributions under any of those sections shall receive no less from
the Nondesignated Public Hospital Supplemental Fund for the project
year than 100 percent of the amount the hospital received from the
prior supplemental funds for the 2002-03 fiscal year. Each hospital
described in this subdivision shall be eligible for additional
payments from the fund pursuant to subdivision (j).
   (j) All amounts that are in the fund for a project year in excess
of the amount necessary to make the payments under subdivision (i)
shall be available for negotiation by the California Medical
Assistance Commission, along with corresponding federal financial
participation, for supplemental payments to nondesignated public
hospitals that for the project year satisfy the criteria under
Section 14085.6, 14085.7, 14085.8, or 14085.9 to be eligible to
negotiate for distributions under any of those sections, and paid for
services rendered during the project year pursuant to the selective
provider contracting program under Article 2.6 (commencing with
Section 14081).
   (k) The amount of any stabilization funding transferred to the
fund with respect to a project year may in the discretion of the
California Medical Assistance Commission to be paid for services
furnished in the same project year regardless of when the
stabilization funds become available, provided the payment is
consistent with other applicable federal or state legal requirements
and does not result in a hospital exceeding any applicable
reimbursement limitations.
   (l) The department shall pay amounts due to a nondesignated
hospital from the fund for a project year, with the exception of
stabilization funding, in up to four installment payments, unless
otherwise provided in the hospital's contract negotiated with the
California Medical Assistance Commission, except that hospitals that
are not described in subdivision (i) shall not receive the first
installment payment. The first payment shall be made as soon as
practicable after the issuance of the tentative disproportionate
share hospital list for the project year, and in no event later than
January 1 of the project year. The second and subsequent payments
shall be made after the issuance of the final disproportionate
hospital list for the project year, and shall be made only to
hospitals that are on the final disproportionate share hospital list
for the project year. The second payment shall be made by February 1
of the project year or as soon as practicable after the issuance of
the final disproportionate share hospital list for the project year.
The third payment, if scheduled, shall be made by April 1 of the
project year. The fourth payment, if scheduled, shall be made by June
30 of the project year. This subdivision does not apply to hospitals
that are scheduled to receive payments from the fund because they
meet the criteria under Section 14085.7 but do not meet the criteria
under Section 14085.6, 14085.8, or 14085.9.
   (m)  The department shall pay stabilization funding transferred to
the fund in amounts negotiated by the California Medical Assistance
Commission and paid in accordance with the applicable contract or
contract amendment.
14166.18.  (a) With respect to each project year, the director shall
determine a baseline funding amount for each nondesignated public
hospital that was an eligible hospital under paragraph (3) of
subdivision (a) of Section 14105.98 for both the 2004-05 fiscal year
and the project year. A hospital's baseline funding amount shall be
an amount equal to the total amount paid to the hospital for
inpatient hospital services rendered to Medi-Cal beneficiaries during
2004-05 fiscal year, including the following Medi-Cal payments, but
excluding payments received under the Medi-Cal Specialty Mental
Health Services Consolidation Program:
   (1) Base payments under the selective provider contracting program
as provided for under Article 2.6 (commencing with Section 14081) or
the Medi-Cal state plan cost reimbursement system for inpatient
hospital services for noncontracting hospitals.
   (2) Emergency Services and Supplemental Payments Fund payments as
provided for under Section 14085.6.
   (3) Medi-Cal Medical Education Supplemental Payment Fund payments
and Large Teaching Emphasis Hospital and Children's Hospital Medi-Cal
Medical Education Supplemental Payment Fund payments as provided for
under Sections 14085.7 and 14085.8, respectively.
   (4) Small and Rural Hospital Supplemental Payments Fund payments
as provided for under Section 14085.9.
   (5) Disproportionate share hospital payment adjustments as
provided for under Section 14105.98.
   (6) Administrative day payments as provided for under Section
51542 of Title 22 of the California Code of Regulations.
   (b) The aggregate nondesignated public hospital baseline funding
amount shall be the sum of all baseline funding amounts determined
under subdivision (a).
   (c) With respect to each project year beginning after the 2005-06
project year, an aggregate nondesignated public hospital adjusted
baseline funding amount shall be determined as follows:
   (1) The department shall determine the aggregate total Medi-Cal
revenue, using amounts determined under subdivision (a), with respect
to inpatient hospital services rendered during the 2004-05 fiscal
year for nondesignated public hospitals that were eligible hospitals
under paragraph (3) of subdivision (a) of Section 14105.98 on the
last day of the project year less the total amount of
disproportionate share hospital payments identified in paragraph (5)
of subdivision (a) for those hospitals.
   (2) The department shall determine the aggregate total Medi-Cal
revenue, using amounts determined under subdivision (a), with respect
to inpatient hospital services rendered during the fiscal year
preceding the project year for which the nondesignated public
hospital adjusted baseline funding amount is being calculated for the
nondesignated pubic hospitals described in paragraph (1), less the
total amount of disproportionate share hospital payments in paragraph
(5) of subdivision (a) for those hospitals.
   (3) The department shall:
   (A) Calculate the difference between the amount determined under
paragraph (1) and the amount determined under paragraph (2).
   (B) Determine the percentage increase or decrease by dividing the
difference in subparagraph (A) by the amount in paragraph (1).
   (C) Apply the percentage in subparagraph (B) to the aggregate
nondesignated public hospital baseline funding amount determined
under subdivision (b) less the total amount of disproportionate share
hospital payments in paragraph (5) of subdivision (a) for those
hospitals.
   (D) The aggregate nondesignated public hospital adjusted baseline
funding amount is the amount determined in subdivision (b), plus the
amount determined in subparagraph (C).
14166.19.  The amount of any stabilization funding payable to the
nondesignated public hospitals under paragraph (4) of subdivision (b)
of Section 14166.20 for a project year, which amount shall not
include the amount of stabilization funding paid or payable to
hospitals prior to the computation of the stabilization funding under
Section 14166.20, shall be allocated in the following priority:
   (a) An amount shall be transferred to the Nondesignated Public
Hospital Supplemental Fund, as may be necessary so that the amount
for the Nondesignated Public Hospital Supplemental Fund for the
project year, including all funds previously transferred to, or
deposited in, the Nondesignated Public Hospital Supplemental Fund for
the project year, is not less than one million nine hundred thousand
dollars ($1,900,000).
   (b) Of the remaining stabilization funding payable to
nondesignated public hospitals, 75 percent shall be allocated,
distributed, and paid in accordance with Section 14166.16, and 25
percent shall be transferred to the Nondesignated Public Hospital
Supplemental Fund.
14166.20.  (a) With respect to each project year, the total amount
of stabilization funding shall be the sum of the following:
   (1) Federal Medicaid funds available in the Health Care Support
Fund, established pursuant to Section 14166.21, reduced by the amount
necessary to meet the baseline funding amount, or the adjusted
baseline funding amount, as appropriate, for project years after the
2005-06 project year for each designated public hospital, project
year private DSH hospitals in the aggregate, and nondesignated public
hospitals in the aggregate as determined in Sections 14166.5,
14166.13, and 14166.18, respectively, taking into account all other
payments to each hospital under this article. This amount shall be
not less than zero.
   (2) The state general funds that were made available due to the
receipt of federal funding for previously state-funded programs
through the safety net care pool and any federal Medicaid hospital
reimbursements resulting from these expenditures, unless otherwise
recognized under paragraph (1).
   (3) To the extent not included in paragraph (1) or (2), the amount
of the increase in state General Fund expenditures for Medi-Cal
inpatient hospital services for the project year for project year
private DSH hospitals and nondesignated public hospitals, including
amounts expended in accordance with paragraph (1) of subdivision (c)
of Section 14166.23 that exceeds the expenditure amount for the same
purpose and the same hospitals in the 2004-05 state fiscal year, and
any direct grants to designated public hospitals for services under
the demonstration project.
   (4) To the extent not included in paragraph (2), federal Medicaid
funds received by the state as a result of the General Fund
expenditures described in paragraph (3).
   (5) The federal Medicaid funds received by the state as a result
of federal financial participation with respect to Medi-Cal payments
for inpatient hospital services made to project year private DSH
hospitals for services rendered during the project year, the state
share of which was derived from intergovernmental transfers or
certified public expenditures of any public entity that does not own
or operate a public hospital.
   (b) With respect to the 2005-06 and 2006-07 project years, the
stabilization funding determined under subdivision (a) shall be
allocated as follows:
   (1) Eight million dollars ($8,000,000) shall be paid to San Mateo
Medical Center.
   (2) (A) Ninety-six million five hundred thousand dollars
($96,500,000) shall be allocated to designated public hospitals to be
paid in accordance with Section 14166.75.
   (B) Forty-two million five hundred thousand dollars ($42,500,000)
shall be allocated to private DSH hospitals to be paid in accordance
with Section 14166.14.
   (C) In the event that stabilization funding is less than one
hundred forty-seven million dollars ($147,000,000), the amounts
allocated to designated public hospitals and private DSH hospitals
under this paragraph shall be reduced proportionately.
   (3) An amount equal to the lesser of 10 percent of the total
amount determined under subdivision (a) of Section 14166.20 or
twenty-three million five hundred thousand dollars ($23,500,000)
shall be made available for additional payments to distressed
hospitals that participate in the selective provider contracting
program under Article 2.6 (commencing with Section 14081), including
designated public hospitals, in amounts to be determined by the
California Medical Assistance Commission. The additional payments to
designated public hospitals shall be negotiated by the California
Medical Assistance Commission, but shall be paid by the department in
the form of a direct grant rather than as Medi-Cal payments.
   (4) An amount equal to 0.56 percent of the total amount determined
under subdivision (a), to nondesignated public hospitals to be paid
in accordance with Section 14166.19.
   (5) The amount remaining after subtracting the amount determined
in paragraphs (1) to (4), inclusive, shall be allocated as follows:
   (A) Sixty percent to designated public hospitals to be paid in
accordance with Section 14166.75.
   (B) Forty percent to project year private DSH hospitals to be paid
in accordance with Section 14166.14.
   (c) By April 1 of the year following the project year for which
the payment is made, and after taking into account final amounts
otherwise paid or payable to hospitals under this article, the
director shall calculate in accordance with subdivision (a), allocate
in accordance with subdivision (b), and pay to hospitals in
accordance with Sections 14166.75, 14166.14, and 14166.19, as
applicable, the stabilization funding.
   (d) For purposes of determining amounts paid or payable to
hospitals under subdivision (c), the department shall apply the
following:
   (1) In determining amounts paid or payable to designated public
hospitals that are based on allowable costs incurred by the hospital,
or the governmental entity with which it is affiliated, the
following shall apply:
   (A) If the final payment amount is based on the hospital's
Medicare cost report, the department shall rely on the cost report
filed with the Medicare fiscal intermediary for the project year for
which the calculation is made, reduced by a percentage that
represents the average percentage change from total reported costs to
final costs for the three most recent cost reporting periods for
which final determinations have been made, taking into account all
administrative and judicial appeals. Protested amounts shall not be
considered in determining the average percentage change unless the
same or similar costs are included in the project year cost report.
   (B) If the final payment amount is based on costs not included in
subparagraph (A), the reported costs as of the date the determination
is made under subdivision (c), shall be reduced by 10 percent.
   (C) In addition to adjustments required in subparagraphs (A) and
(B), the department shall adjust amounts paid or payable to
designated public hospitals by any applicable deferrals or
disallowances identified by the federal Centers for Medicare and
Medicaid Services as of the date the determination is made under
subdivision (c) not otherwise reflected in subparagraphs (A) and (B).
   (2) Amounts paid or payable to project year private DSH hospitals
and nondesignated public hospitals shall be determined by the most
recently available Medi-Cal paid claims data increased by a
percentage to reflect an estimate of amounts remaining unpaid.
   (e) The department shall consult with hospital representatives
regarding the appropriate calculation of stabilization funding before
stabilization funds are paid to hospitals. No later than 30 days
after this consultation, the department shall establish a final
determination of stabilization funding that shall not be modified for
any reason other than mathematical errors or mathematical omissions
on the part of the department.
   (f) The department shall distribute 75 percent of the estimated
stabilization funding on an interim basis throughout the project
year.
14166.21.  (a) The Health Care Support Fund is hereby established in
the State Treasury. Notwithstanding Section 13340 of the Government
Code, the fund shall be continuously appropriated to the department
for the purposes specified in this article.
   (b) Amounts in the Health Care Support Fund shall be paid in the
following order of priority:
   (1) To hospitals for services rendered to Medi-Cal beneficiaries
and the uninsured in an amount necessary to meet the aggregate
baseline funding amount, or the adjusted aggregate baseline funding
amount for project years after the 2005-06 project year, as specified
in subdivision (d) of Section 14166.5, subdivision (b) of Section
14166.13, and Section 14166.18, taking into account all other
payments to each hospital under this article. If the amount in the
Health Care Support Fund is inadequate to provide full aggregate
baseline funding, or adjusted aggregate baseline funding, to all
designated public hospitals, project year private DSH hospitals, and
nondesignated public hospitals, each group's payments shall be
reduced pro rata.
   (2) To the extent necessary to maximize federal funding under the
demonstration project and consistent with Section 14166.22, the
department may obtain safety net care pool funds based on health care
expenditures incurred by the department for uncompensated medical
care costs of medical services provided to uninsured individuals, as
approved by the federal Centers for Medicare and Medicaid Services.
   (3) Stabilization funding, allocated and paid in accordance with
Sections 14166.75, 14166.14, and 14166.19.
   (4) Any amounts remaining after final reconciliation of all
amounts due at the end of a project year shall remain available for
payments in accordance with this section in the next project year.
   (5) The fund shall include any interest that accrues on amounts in
the fund.
14166.22.  (a) To the extent required to maximize available federal
funds under the demonstration project and to the extent authorized by
the Special Terms and Conditions for the demonstration project, the
department may claim federal reimbursement for expenditures,
consistent with the equitable distribution established under this
article, in the following priority order:
   (1) The medically indigent adults long-term care program.
   (2) The Genetically Handicapped Person's Program established
pursuant to Article 1 (commencing with Section 125125) of Chapter 2
of Part 5 of Division 106 of the Health and Safety Code.
   (3) The Breast and Cervical Cancer Treatment Program established
pursuant to Article 1.5 (commencing with Section 104160) of Chapter 2
of Part 1 of Division 103 of the Health and Safety Code.
   (4) The California Children's Services Program established
pursuant to Article 5 (commencing with Section 123800) of Chapter 3
of Part 2 of Division 106 of the Health and Safety Code.
   (b) Notwithstanding any other state law, the federal reimbursement
received as a result of a claim made pursuant to subdivision (a)
shall be used to create General Fund savings solely for the
department for use in support of safety net hospitals under the
demonstration project.
   (c) The federal reimbursement received as a result of a claim made
pursuant to subdivision (a) is hereby appropriated to the department
for the program in which the claimed expenditures were made.
   (d) An amount of General Fund moneys appropriated to the
department for programs specified in subdivision (a) equal to the
amount of federal reimbursement identified pursuant to subdivision
(c) is hereby reappropriated to the Health Care Deposit Fund to be
used for the purposes set forth in this article.
14166.23.  (a) For purposes of this section, "distressed hospitals"
are hospitals that participate in selective providers contracting
under Article 2.6 (commencing with Section 14081) and that meet all
of the following requirements, as determined by the California
Medical Assistance Commission in its discretion:
   (1) The hospital serves a substantial volume of Medi-Cal patients
measured either as a percentage of the hospital's overall volume or
by the total volume of Medi-Cal services furnished by the hospital.
   (2) The hospital is a critical component of the Medi-Cal program's
health care delivery system, such that the Medi-Cal health care
delivery system would be significantly disrupted if the hospital
reduced its Medi-Cal services or no longer participated in the
Medi-Cal program.
   (3) The hospital is facing a significant financial hardship that
may impair its ability to continue its range of services for the
Medi-Cal program.
   (b) The Distressed Hospital Fund is hereby created in the State
Treasury.
   (c) Notwithstanding Section 13340 of the Government Code, the fund
shall be continuously appropriated to the department for the
purposes specified in this section.
   (d) Except as otherwise limited by this section, the fund shall
consist of all of the following:
   (1) The amounts transferred to the fund pursuant to subdivision
(e).
   (2) Any additional amounts appropriated to the fund by the
Legislature.
   (3) Any interest that accrues on amounts in the fund.
   (e) The following amounts shall be transferred to the fund from
the prior supplemental funds at the beginning of each project year.
   (1) Twenty percent of the amount in the prior supplemental funds
on the effective date of this article, less any and all payments for
services rendered prior to July 1, 2005, but paid after July 1, 2005.
   (2) Interest that accrued on the prior supplemental funds during
the prior project year.
   (f) No distributions, payments, transfers, or disbursements shall
be made from the prior supplemental funds except as set forth in this
section.
   (g) Moneys in the fund shall be used as the source for the
nonfederal share of payments to hospitals under this section.
   (h) Except as otherwise provided in subdivision (j), moneys shall
be applied to obtain federal financial participation to the extent
available in accordance with customary Medi-Cal accounting procedures
for purposes of payments under this section. Distributions from the
fund shall be supplemental to any other Medi-Cal reimbursement
received by the hospitals, including amounts that hospitals receive
under the selective provider contracting program, and shall not
affect provider rates paid under the selective provider contracting
program.
   (i) Subject to subdivision (j), all amounts that are in the fund
shall be available for negotiation by the California Medical
Assistance Commission, along with corresponding federal financial
participation, for additional payments to distressed hospitals. These
amounts shall be paid under contracts entered into by the department
and negotiated by the California Medical Assistance Commission
pursuant to Article 2.6 (commencing with Section 14081), provided
that any amounts payable to a designated public hospital shall be
paid in the form of a direct grant of state general funds pursuant to
a contract negotiated by the California Medical Assistance
Commission.
   (j)  After April 1, 2007, in the event that funding under this
article is insufficient to make payments to hospitals under Section
14166.5, 14166.13, or 14166.18, funds under this section shall first
be available for use under contracts negotiated by the California
Medical Assistance Commission for hospitals contracting under the
selective provider contracting program under Article 2.6 (commencing
with Section 14081) that fall below their 2005-06 project year
baseline to the extent funds are available.
   (k) Any funds remaining in the fund at the end of a fiscal year
shall be carried forward for use in the following fiscal year.
14166.24.  (a) Any determination of the amount due a designated
public hospital that is based in whole or in part on costs reported
to or audited by a Medicare fiscal intermediary shall not be deemed
final for purposes of this article unless the hospital has received a
final determination of Medicare payment for the cost reporting for
Medicare purposes. Designated public hospitals shall be entitled to
pursue all administrative and judicial review available under the
Medicare program and any final determination shall be incorporated
into the department's final determination of payment due the hospital
under this article.
   (b) If as a result of an audit performed by the department or any
state or federal agency, the department determines that any hospital
participating in the demonstration project has been overpaid under
the demonstration project, the department shall recoup the
overpayment in accordance with Sections 14172.5 or 14115.5. The
hospital may appeal the overpayment determinations and any related
audit determination in accordance with the appeal procedures set
forth in Sections 51016 to 51047, inclusive, of Title 22 of the
California Code of Regulations. The hospital may seek judicial review
of the final administrative decision as set forth in Section 14171.
   (c) The department shall promptly consult with the affected
governmental entity regarding a dispute between a designated public
hospital and the department regarding the validity of the hospital's
certified public expenditures.  If the department determines that the
hospital's certification is valid, the department shall submit the
claim to obtain federal reimbursement for the certified expenditure
in question.
   (d) (1) Upon receipt of a notice of disallowance or deferral from
the federal government related to the certified public expenditures
or intergovernmental transfers of any governmental entity
participating in the demonstration project, the department shall
promptly notify the affected governmental entity. The governmental
entity that certified the public expenditure shall be the entity
responsible for the federal portion of that expenditure.
   (2) The department and the affected governmental entity shall
promptly consult regarding the proposed disallowance or deferral.
   (3) After consulting with the governmental entity, the department
shall determine whether the disallowance or response to a deferral
should be filed with the federal government. If the department
determines the appeal or response has merit, the department shall
timely appeal. If necessary, the department may request an extension
of the deadline to file an appeal or response to a deferral. The
affected governmental entity may provide the department with the
legal and factual basis for the appeal or response.
14166.25.  Unless this article is repealed pursuant to subdivision
(b) or (g) of Section 14166.2, this article shall become inoperative
on the date that the director executes a declaration, which shall be
retained by the director and provided to the fiscal and appropriate
policy committees of the Legislature, stating that the federal
demonstration project provided for in this article has been
terminated by the federal Centers for Medicare and Medicaid Services,
and shall, six months after the date the declaration is executed, be
repealed.