SECTIONS 14166-14166.26 - California Statutes

WELFARE AND INSTITUTIONS CODE

SECTION 14166-14166.26

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.-Harbor Hospital.
(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 subdivision (a) 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.
(l) Any reference in this article to the "Medicare cost report"
shall be deemed a reference to the Medi-Cal cost report to the extent
that report is approved by the federal Centers for Medicare and
Medicaid Services for any of the uses described in this article.

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 14166.23.
(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 by the hospital 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),
except for the reduction for the amount of intergovernmental
transfers made pursuant to Section 14163, 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) If, with respect to any project year, 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, excluding the percentage adjustment for
any designated public hospital that was not in operation for the
full project year, is greater than five percentage points more than
the aggregate percentage adjustment for private DSH hospitals
determined under subparagraph (B) of paragraph (3) of subdivision (c)
of Section 14166.13, then the aggregate percentage adjustment for
designated public hospitals shall be reduced in the amount necessary
to reduce the difference to five percentage points. The reduction
required by the previous sentence shall be allocated among designated
public hospitals pro rata based on the relationship between each
hospital's percentage determined under subparagraph (B) of paragraph
(3) of subdivision (c) of this section and the aggregate percentage
for designated public hospitals.
(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) (1) 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.
(2) Prior to the distribution of payments in accordance with
paragraph (1) and with subdivision (g) to a designated public
hospital that is part of a hospital system containing multiple
designated public hospitals licensed to the same governmental entity,
the department shall consult with the applicable governmental
entity. The department shall implement any adjustments to the payment
distributions for the hospitals in that hospital system as requested
by the governmental entity if the net effect of the requested
adjustments for those hospitals is zero. These payment
redistributions shall recognize the level of care provided to
Medi-Cal and uninsured patients and shall maintain the viability and
effectiveness of the hospital system. The adjustments made pursuant
to this paragraph with respect to an affected hospital shall be
disregarded in the application of the limitations described in
paragraph (3) of subdivision (a), and in paragraph (1) of subdivision
(a) of Section 14166.7.
(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) (1) 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.
(2) Prior to the distribution of payments in accordance with
paragraph (1) and with subdivision (c) to a designated public
hospital that is part of a hospital system containing multiple
designated public hospitals licensed to the same governmental entity,
the department shall consult with the applicable governmental
entity. The department shall implement any adjustments to the payment
distributions for the hospitals in that hospital system as requested
by the governmental entity if the net effect of the requested
adjustments for those hospitals is zero. These payment
redistributions shall recognize the level of care provided to
Medi-Cal and uninsured patients and shall maintain the viability and
effectiveness of the hospital system. The adjustments made pursuant
to this paragraph with respect to an affected hospital shall be
disregarded in the application of the limitations described in
paragraph (1) of subdivision (a), and in paragraph (3) of subdivision
(a) of Section 14166.6.
(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 and 2006-07
project years, 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. For services provided during the 2007-08, 2008-09,
and 2009-10 project years, amounts allocated to designated public
hospitals as stabilization funding pursuant to any provision of this
article, unless otherwise specified, shall be allocated among the
designated public hospitals in accordance with this section. All
amounts allocated to designated public hospitals in accordance with
this section shall be 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) For each of the 2005-06 and 2006-07 project years, 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 dollars
($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) For the 2005-06 and 2006-07 project years, the amount
identified in subdivision (a), as reduced by the amounts identified
in subdivision (c), shall be distributed among the designated public
hospitals pursuant to this subdivision.
(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 with 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 with 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. With respect to this identification, if a payment
adjustment for a hospital has been made pursuant to paragraph (2) of
subdivision (f) of Section 14166.6, or paragraph (2) of subdivision
(b) of Section 14166.7, the amount of federal financial participation
received by the hospital based on certified public expenditures
shall be determined as though no such payment adjustment had been
made. 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 the same manner as set forth in paragraph (2).
(e) For the 2007-08 and subsequent project years, the amount
identified in subdivision (a), as reduced by the amounts identified
in subdivision (c), shall be distributed among the designated public
hospitals pursuant to this subdivision.
(1) Each designated public hospital that renders inpatient
hospital services under the health care coverage initiative program
authorized pursuant to Part 3.5 (commencing with Section 15900) shall
be allocated an amount equal to the amount of the federal safety net
pool funds claimed and received with respect to the services
rendered by the hospital, including services rendered to enrollees of
a managed care organization, to the extent the amount was included
in the determination of total stabilization funding for the project
year pursuant to Section 14166.20.
(2) Each designated public hospital for which, during the project
year, the sum of the allowable costs incurred in rendering inpatient
hospital services to Medi-Cal beneficiaries and the allowable costs
incurred with respect to supplemental reimbursement for physician and
nonphysician practitioner services rendered to Medi-Cal hospital
inpatients, as specified in Section 14166.4, exceeds the allowable
costs incurred for those services rendered in the prior year, shall
be allocated an amount equal to 60 percent of the difference in the
allowable costs, multiplied by the applicable federal medical
assistance percentage. The allocations under this paragraph, however,
shall be reduced pro rata as necessary to ensure that the total of
those allocations does not exceed 80 percent of the amount subject to
this subdivision after the allocations in paragraph (1). For
purposes of this paragraph, the most recent cost data that are
available at the time of the department's determinations for the
project year pursuant to Section 14166.20 shall be used.
(3) The remaining amount subject to this subdivision that is not
otherwise allocated pursuant to paragraphs (1) and (2) shall be
allocated as set forth below:
(A) Designated public hospitals that are donor hospitals, and
their associated donated certified public expenditures, shall be
identified as follows:
(i) An initial pro rata allocation of the amount subject to this
paragraph shall be made to each designated public hospital, based
upon the total allowable costs incurred by each hospital, or
governmental entity with which it is affiliated, in rendering
hospital services to the uninsured during the project year as
reported pursuant to Section 14166.8. This initial allocation shall
be used for purposes of the calculations under clause (iii) and
subparagraph (C).
(ii) 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 with 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.
(iii) The amount of federal financial participation received by
each designated public hospital, and by the governmental entity,
nonhospital clinics, and other provider types with 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. With respect to this identification, if a payment
adjustment for a hospital has been made pursuant to paragraph (2) of
subdivision (f) of Section 14166.6, or paragraph (2) of subdivision
(b) of Section 14166.7, the amount of federal financial participation
received by the hospital based on certified public expenditures
shall be determined as though no payment adjustment had been made.
The resulting amount shall be increased by amounts distributed to the
hospital pursuant to subdivision (c), paragraphs (1) and (2) of this
subdivision, paragraph (1) of subdivision (b) of Section 14166.20,
and the initial allocation determined for the hospitals in clause
(i).
(iv) If the amount in clause (ii) is greater than the amount
determined in clause (iii), 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.
(B) Fifty percent of the total amount subject to this paragraph
shall be allocated pro rata among the designated public hospitals in
the same manner described in clause (i) of subparagraph (A).
(C) The lesser of the remaining 50 percent of the total amount
subject to this paragraph, the total amounts of donated certified
public expenditures for all donor hospitals or that amount that is 30
percent of the amount subject to this subdivision after the
allocations in paragraph (1), 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 subparagraph shall be distributed in the
same manner as set forth in subparagraph (B).
(D) The federal financial participation amount arising from the
certified public expenditures that has been paid to designated public
hospitals, or the governmental entities with which they are
affiliated, pursuant to subdivision (g) of Section 14166.221 shall be
disregarded for purposes of this paragraph.
(f) 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, or governmental entity with which the
hospital 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, except that certified
public expenditures reported by the County of Los Angeles or its
designated public hospitals shall be the exclusive source of
certified public expenditures for claiming those federal funds
deposited in the South Los Angeles Medical Services Preservation Fund
under Section 14166.25.
(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." 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) shall be transferred to the fund.
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) (1) Except as provided in Section 14166.25, 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 other governmental entities, shall be transferred to the Health
Care Support Fund, established pursuant to Section 14166.21.
(2) The department shall separately identify and account for
federal safety net care pool funds claimed and received by the
department under the health care coverage initiative program
authorized under Part 3.5 (commencing with Section 15900) and under
paragraphs 43 and 44 of the Special Terms and Conditions for the
demonstration project.
(3)