The following payment methodologies and requirements implemented pursuant to Article 5.2 (commencing with Section 14166) shall be applicable as set forth in this section.

(a) (1) (A) For purposes of Section 14166.4, the references to “project year” and “successor demonstration year” shall include references to the demonstration term, as defined under this article, and to any extensions of the prior federal Medicaid demonstration project entitled “California Bridge to Reform Demonstration (Waiver No. 11-W-00193/9).”

(B) For purposes of Section 14166.4, the references to “project year” and “successor demonstration year” shall include references to the CalAIM term, as defined in subdivision (b) of Section 14184.101, and to any extensions of the demonstration project pursuant to this article.

(2) The fee-for-service payment methodologies established and implemented under Section 14166.4 shall continue to apply with respect to designated public hospitals approved under the Medi-Cal State Plan.

(3) For the hospitals identified in clauses (ii) and (iii) of subparagraph (H) of paragraph (1) of subdivision (f) of Section 14184.10, the department shall seek any necessary federal approvals to apply the fee-for-service payment methodologies established and implemented under Section 14166.4 to these identified hospitals effective no earlier than the 2016-17 state fiscal year. This paragraph shall be implemented only to the extent that any necessary federal approvals are obtained and federal financial participation is available and not otherwise jeopardized. Before the effective date of any necessary federal approval obtained pursuant to this paragraph, these identified hospitals shall continue to be considered nondesignated public hospitals for purposes of the fee-for-service methodology authorized pursuant to Section 14105.28 and the applicable provisions of the Medi-Cal State Plan.

(4) The department shall continue to make reimbursement available to qualifying 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 the applicable provisions of the Medi-Cal State Plan. The department shall continue to make inpatient hospital payments for services that were historically excluded from a hospital’s contract under the Selective Provider Contracting Program established under Article 2.6 (commencing with Section 14081) in accordance with the applicable provisions of the Medi-Cal State Plan. These payments shall not duplicate or supplant any other payments made under this article.

(b) During the 2015-16 state fiscal year, and subsequent state fiscal years that commence during the demonstration term or the CalAIM term, payment adjustments to disproportionate share hospitals shall not be made pursuant to Section 14105.98, except as otherwise provided in this article or Article 5.51 (commencing with Section 14184.100). Payment adjustments to disproportionate share hospitals shall be made solely in accordance with this article or Article 5.51 (commencing with Section 14184.100).

(1) Except as otherwise provided in this article or Article 5.51(commencing with Section 14184.100), 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 Medi-Cal State Plan. For purposes of these determinations and computations, which include those made pursuant to Sections 14166.11 and 14166.16, all of the following shall apply:

(A) The federal Medicaid DSH reductions pursuant to Section 1396r-4(f)(7) of Title 42 of the United States Code shall be reflected as appropriate, including, but not limited to, the calculations set forth in subparagraph (B) of paragraph (2) of subdivision (am) of Section 14105.98.

(B) Services that were rendered under the Low Income Health Program authorized pursuant to Part 3.6 (commencing with Section 15909) shall be included.

(2) (A) 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 2016 to 2021, inclusive, shall be aligned with the state fiscal year in which the applicable federal fiscal year commences, and shall be distributed solely for the following purposes:

(i) As disproportionate share hospital payments under the methodology set forth in applicable disproportionate share hospital provisions of the Medi-Cal State Plan, which, to the extent permitted under federal law and the Special Terms and Conditions, or the CalAIM Terms and Conditions, shall be limited to the following hospitals:

(I) Eligible hospitals, as determined pursuant to Section 14105.98 for each state fiscal year in which the particular federal fiscal year commences, that meet the definition of a public hospital, as specified in paragraph (25) of subdivision (a) of Section 14105.98, and that are not participating as GPP systems under the Global Payment Program.

(II) 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.

(ii) As a funding component for payments under the Global Payment Program, as described in subparagraph (A) of paragraph (1) of subdivision (c) of Section 14184.40, or paragraph (1) of subdivision (c) of Section 14184.300, and the Special Terms and Conditions or the CalAIM Terms and Conditions.

(B) The distribution of the federal disproportionate share hospital allotment to hospitals described in this paragraph 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.

(3) (A) During the 2015-16 state fiscal year and subsequent state fiscal years that commence during the demonstration term or the CalAIM term, a public entity shall not 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, intergovernmental transfers shall be made with respect to the disproportionate share hospital payment adjustments made in accordance with clause (ii) of subparagraph (B) of paragraph (6), as applicable.

(B) During the 2015-16 state fiscal year and subsequent state fiscal years that commence during the demonstration term or the CalAIM term, transfer amounts from the Medi-Cal Inpatient Payment Adjustment Fund to the Health Care Deposit Fund, as described in paragraph (2) of subdivision (d) of Section 14163, are hereby reduced to zero. Unless otherwise specified in this article or the applicable provisions of Article 5.2 (commencing with Section 14166), this subparagraph shall be disregarded for purposes of the calculations made under Section 14105.98 during the 2015-16 state fiscal year and subsequent state fiscal years that commence during the demonstration term or the CalAIM term.

(4) (A) During the state fiscal years for which the Global Payment Program under Section 14184.40, or Section 14184.300, is in effect, designated public hospitals that are participating GPP systems shall not be eligible to receive disproportionate share hospital payments pursuant to otherwise applicable disproportionate share hospital provisions of the Medi-Cal State Plan.

(B) Eligible hospitals described in clause (i) of subparagraph (A) of paragraph (2) that are nondesignated public hospitals shall continue to receive disproportionate share hospital payment adjustments as set forth in Section 14166.16.

(C) Hospitals described in clause (i) of subparagraph (A) of paragraph (2) that are licensed to the University of California, except as provided in paragraph (4) of subdivision (b) of Section 14184.300, shall receive disproportionate share hospital payments as follows:

(i) Subject to clause (iii), each hospital licensed to the University of California may draw and receive federal Medicaid funding from the applicable federal disproportionate share hospital allotment on the amount of certified public expenditures for the hospital’s expenditures that are eligible for federal financial participation as reported in accordance with Section 14166.8 and the applicable disproportionate share hospital provisions of the Medi-Cal State Plan.

(ii) Subject to clause (iii) and to the extent the hospital meets the requirement in 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, each hospital shall receive intergovernmental transfer-funded direct disproportionate share hospital payments as provided for under the applicable disproportionate share hospital provisions of the Medi-Cal State Plan. The total amount of these payments to the hospital, 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 as reported in accordance with Section 14166.8.

(iii) Unless the provisions of subparagraph (D) apply, the aggregate amount of the federal disproportionate share hospital allotment with respect to payments for an applicable state fiscal year to hospitals licensed to the University of California shall be limited to an amount calculated as follows:

(I) The maximum amount of federal disproportionate share hospital allotment for the state fiscal year, less the amounts of federal disproportionate share hospital allotment associated with payments to nondesignated public hospitals under subparagraph (B) and other payments, if any, required to be made from the federal disproportionate share hospital allotment, shall be determined.

(II) For the 2015-16 state fiscal year, the amount determined in subclause (I) shall be multiplied by 26.296 percent, resulting in the maximum amount of the federal disproportionate share hospital allotment available as disproportionate share hospital payments for the state fiscal year to hospitals that are licensed to the University of California.

(III) For the 2016-17 state fiscal year, the amount determined in subclause (I) shall be multiplied by 24.053 percent, resulting in the maximum amount of the federal disproportionate share hospital allotment available as disproportionate share hospital payments for the state fiscal year to hospitals that are licensed to the University of California.

(IV) For the 2017-18 state fiscal year, the amount determined in subclause (I) shall be multiplied by 23.150 percent, resulting in the maximum amount of the federal disproportionate share hospital allotment available as disproportionate share hospital payments for the state fiscal year to hospitals that are licensed to the University of California.

(V) For each of the 2018-19 and 2019-20 state fiscal years, the amount determined in subclause (I) shall be multiplied by 21.896 percent, resulting in the maximum amount of the federal disproportionate share hospital allotment available as disproportionate share hospital payments for the state fiscal year to hospitals that are licensed to the University of California.

(VI) For the 2020-21 state fiscal year, and subsequent state fiscal years or portions thereof during the CalAIM Term, the amount determined in subclause (I) shall be multiplied by a percentage as determined by the department, in consultation with designated public hospitals and consistent with the applicable federal terms and conditions, that will be used to determine the maximum amount of the federal disproportionate share hospital allotment available as disproportionate share hospital payments for the state fiscal year to hospitals that are licensed to the University of California. The percentage shall be communicated in writing to all of the designated public hospitals.

(VII) To the extent the limitations set forth in this clause result in payment reductions for the applicable year, those reductions shall be applied pro rata, subject to clause (vii).

(iv) Each hospital licensed to the University of California shall receive quarterly interim payments of its disproportionate share hospital allocation during the applicable state fiscal year. The determinations set forth in clauses (i) to (iii), inclusive, shall be made on an interim basis before the start of each state fiscal year, except that the determinations for the 2015-16 state fiscal year shall be made as soon as practicable. 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, to the extent permitted under the Medi-Cal State Plan.

(v) No later than April 1 following the end of the relevant reporting period for the applicable state fiscal year, the department shall undertake an interim reconciliation of payments based on Medi-Cal, Medicare, and other cost, payment, discharge, and statistical data submitted by the hospital for the applicable state fiscal year, and shall adjust payments to the hospital accordingly.

(vi) Except as otherwise provided in this article or Article 5.51 (commencing with Section 14184.100), each hospital licensed to the University of California shall receive disproportionate share hospital payments subject to final audits of all applicable Medi-Cal, Medicare, and other cost, payment, discharge, and statistical data submitted by the hospital for the applicable state fiscal year.

(vii) Before the interim and final distributions of payments pursuant to clauses (iv) to (vi), inclusive, the department shall consult with the University of California, and implement any adjustments to the payment distributions for the hospitals as requested by the University of California, so long as the aggregate net effect of the requested adjustments for the affected hospitals is zero.

(D) With respect to any state fiscal year commencing during the demonstration term or the CalAIM term for which the Global Payment Program pursuant to Section 14184.40 or 14184.300 is not in effect, designated public hospitals that are eligible hospitals as determined pursuant to Section 14105.98, and hospitals described in clause (i) of subparagraph (A) of paragraph (2) that are licensed to the University of California, shall claim disproportionate share hospital payments in accordance with the applicable disproportionate share hospital provisions of the Medi-Cal State Plan. The allocation of federal Medicaid funding from the applicable federal disproportionate share hospital allotment shall be made in accordance with the methodology set forth in Section 14166.61.

(5) For each applicable state fiscal year during the demonstration term or the CalAIM term, eligible hospitals, as determined pursuant to Section 14105.98, 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 continue to receive Medi-Cal disproportionate share hospital replacement payment adjustments pursuant to Section 14166.11 and other provisions of this article or Article 5.51 (commencing with Section 14184.100) and applicable provisions of the Medi-Cal State Plan. 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 provisions of subdivision (j) of Section 14166.11 shall continue to apply with respect to the 2015-16 state fiscal year and subsequent state fiscal years commencing during the demonstration term or the CalAIM term. Except as may otherwise be required by federal law, the federal share of these payments shall not be claimed from the federal disproportionate share hospital allotment.

(6) The nonfederal share of disproportionate share hospital payments and disproportionate share hospital replacement payment adjustments described in paragraphs (4) and (5) shall be derived from the following sources:

(A) With respect to the payments described in subparagraph (B) of paragraph (4) that are made to nondesignated public hospitals, the nonfederal share shall consist solely of state General Fund appropriations.

(B) With respect to the payments described in subparagraph (C) or (D), as applicable, of paragraph (4) that are made to designated public hospitals, the nonfederal share shall consist of both of the following:

(i) Certified public expenditures incurred by the hospitals for hospital expenditures eligible for federal financial participation as reported in accordance with Section 14166.8.

(ii) Intergovernmental transfer amounts for direct disproportionate share hospital payments provided for under subparagraph (C) or (D) of paragraph (4) and the applicable disproportionate share hospital provisions of the Medi-Cal State Plan. A transfer amount shall be determined for each hospital that is eligible for these payments, equal to the nonfederal share of the payment amount established for the hospital. The transfer amount 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, as permitted under Section 433.51 of Title 42 of the Code of Federal Regulations or any other applicable federal Medicaid laws.

(C) With respect to the payments described in paragraph (5), the nonfederal share shall consist of state General Fund appropriations.

(7) The Demonstration Disproportionate Share Hospital Fund established in the State Treasury pursuant to subdivision (d) of Section 14166.9 shall be retained during the demonstration term and the CalAIM term. All federal funds received by the department with respect to the certified public expenditures claimed pursuant to subparagraph (C), and, as applicable in subparagraph (D), of paragraph (4) shall be transferred to the fund and disbursed to the eligible designated public hospitals pursuant to those applicable provisions. Notwithstanding § 13340 of the Government Code, moneys deposited in the fund shall be continuously appropriated, without regard to fiscal year, to the department solely for the purposes specified in this article and Article 5.51 (commencing with Section 14184.100).

(c) (1) Disproportionate share hospital payment allocations under Sections 14166.3 and 14166.61, and safety net care pool payment allocations under Section 14166.71, that were paid to designated public hospitals with respect to the period July 1, 2015, through October 31, 2015, or for subsequent periods pursuant to Section 14166.253, shall be reconciled to amounts payable to the hospitals under this article as set forth in this subdivision.

(2) The disproportionate share hospital payments and safety net care pool payments described in paragraph (1) that were paid to a designated public hospital participating in a GPP system under Section 14184.40 shall be deemed to be interim payments under the Global Payment Program for GPP program year 2015-16, and will be reconciled to and offset against the interim payment amount due to the GPP system under subparagraph (B) of paragraph (4) of subdivision (d) of Section 14184.40, consistent with the Special Terms and Conditions.

(3) The disproportionate share hospital payments described in paragraph (1) that were paid to designated public hospitals licensed to the University of California shall be reconciled to and offset against the disproportionate share hospital payments payable to the hospitals under subparagraph (C) of paragraph (4) of subdivision (b) for the 2015-16 state fiscal year.

(4) The safety net care pool payments described in paragraph (1) that were paid to designated public hospitals licensed to the University of California shall be recouped and included as available funding under the Global Payment Program for the 2015-16 GPP program year described in subparagraph (B) of paragraph (1) of subdivision (c) of Section 14184.40.

(d) During the 2015-16 state fiscal year, and subsequent state fiscal years that commence during the demonstration term or the CalAIM term, costs shall continue to be determined and reported for designated public hospitals in accordance with Sections 14166.8 and 14166.24, except as follows:

(1) (A) The provisions of subdivision (c) of Section 14166.8 shall not apply.

(B) Notwithstanding subparagraph (A), the department may require the reporting of any data the department deems necessary to satisfy reporting requirements pursuant to the Special Terms and Conditions or the CalAIM Terms and Conditions.

(2) The provisions of Sections 14166.221 and 15916 shall not apply with respect to any costs reported for the demonstration term or the CalAIM term pursuant to Section 14166.8.

(e) (1) Notwithstanding subdivision (h) of Section 14166.61 and subdivision (c) of Section 14166.71, the disproportionate share hospital allocation and safety net care pool payment determinations and payments for the 2013-14 and 2014-15 state fiscal years shall be deemed final as of the April 30 that is 22 months following the close of the respective state fiscal year, to the extent permitted under federal law and subject to recoupment pursuant to subdivision (f) if it is later determined that federal financial participation is unavailable for any portion of the applicable payments.

(2) The determinations and payments shall be finalized using the best available data, including unaudited data, and reasonable current estimates and projections submitted by the designated public hospitals. The department shall accept all appropriate revisions to the data, estimates, and projections previously submitted, including revised cost reports, for purposes of this subdivision, to the extent these revisions are submitted in a timely manner as determined by the department.

(f) Upon receipt of a notice of disallowance or deferral from the federal government related to the certified public expenditures or intergovernmental transfers of a designated public hospital or governmental entity with which it is affiliated for disproportionate share hospital payments or safety net care pool payments claimed and distributed pursuant to Section 14166.61, 14166.71, or 15916 for the 2013-14 or 2014-15 state fiscal year, the department shall promptly notify the designated public hospitals and proceed as follows:

(1) To the extent there are additional certified public expenditures for the applicable state fiscal year for which federal funds have not been received, but for which federal funds could have been received had additional federal funds been available, including any subsequently allowable expenditures for designated state health programs, the department shall first respond to the deferral or disallowance by substituting the additional certified public expenditures or allowable expenditures for those deferred or disallowed, consistent with the claiming optimization priorities set forth in Section 14166.9, in consultation with the designated public hospitals, but only to the extent that any necessary federal approvals are obtained or these actions are otherwise permitted by federal law.

(2) The department shall consult with the designated public hospitals and proceed in accordance with paragraphs (2) and (3) of subdivision (d) of Section 14166.24.

(3) If the department elects to appeal pursuant to paragraph (3) of subdivision (d) of Section 14166.24, the department shall not implement any recoupment of payments from the affected designated public hospitals, until a final disposition has been made regarding the deferral or disallowance, including the conclusion of applicable administrative and judicial review, if any.

(4) (A) Upon final disposition of the federal deferral or disallowance, the department shall determine the resulting aggregate repayment amount of federal funds for each affected state fiscal year.

(B) The department shall determine the ratio of the aggregate repayment amount to the total amount of the federal share of payments finalized and distributed pursuant to Sections 14166.61 and 14166.71 and subdivision (e) for each affected state fiscal year, expressed as a percentage.

(5) Notwithstanding paragraph (1) of subdivision (d) of Section 14166.24, the responsibility for repayment of the federal portion of any deferral of disallowance for each affected year shall be determined as follows:

(A) The provisions of subdivision (g) of Section 15916 shall be applied to determine the department’s repayment responsibility amount with respect to any deferral or disallowance related to safety net care pool payments, which shall be in addition to amounts determined under subparagraph (E).

(B) Using the most recent data for the applicable fiscal year, and reflecting modifications to the applicable initial DSH claiming ability and initial SNCP claiming ability for individual hospitals resulting from the deferral or disallowance, the department shall perform the calculations and determinations for each designated public hospital as set forth in Sections 14166.61 and 14166.71. For this purpose, the calculations and determinations shall assume no reduction in the available federal disproportionate share hospital allotment or in the amount of available safety net care pool payments as a result of the deferral or disallowance.

(C) For each designated public hospital, the revised determinations of disproportionate share hospital and safety net care pool payment amounts under subparagraph (B) shall be combined and compared to the combined disproportionate share hospital and safety net care pool payment amounts determined and received by the hospital pursuant to subdivision (e). For this purpose and purposes of subparagraph (D), the applicable data for designated public hospitals described in subparagraph (G) of paragraph (1) of subdivision (f) of Section 14184.10 shall be combined, and the applicable data for designated public hospitals described in subparagraphs (E) and (F) of paragraph (1) of subdivision (f) of Section 14184.10 shall be combined.

(D) (i) Subject to subparagraph (E), the repayment of the federal portion of the deferral of disallowance, less the department’s responsibility amount for safety net care pool payments, if any, determined in subparagraph (A), shall be first allocated among each of those designated public hospitals for which the combined revised disproportionate share hospital and safety net care pool payments as determined in subparagraph (B) are less than the combined disproportionate share hospital and safety net care pool payment amounts determined and received pursuant to subdivision (e). Repayment shall be allocated under this initial stage among these hospitals pro rata on the basis of each hospital’s relative reduction as reflected in the revised calculations performed under subparagraph (B), but in no case shall the allocation to a hospital exceed the limit in clause (iii). Repayment amounts that are not allocated due to this limitation shall be allocated pursuant to clause (ii).

(ii) Subject to subparagraph (E), any repayment amounts that were unallocated to hospitals due to the limitation in clause (iii) shall be allocated in a second stage among each of the remaining designated public hospitals that has not reached its applicable repayment limit, including the hospitals that were not subject to the allocations under clause (i), based pro rata on the amounts determined and received by the hospital pursuant to subdivision (e), except that no repayment amount for a hospital shall exceed the limitation under clause (iii). The pro rata allocation process will be repeated in subsequent stages with respect to any repayment amounts that cannot be allocated in a prior stage to hospitals due to the limitation under clause (iii), until the entire federal repayment amount has been allocated among the hospitals.

(iii) The repayment amount allocated to a designated public hospital pursuant to this subparagraph shall not exceed an amount equal to the percentage of the combined payments determined and received by the hospital pursuant to subdivision (e) that is twice the percentage computed in subparagraph (B) of paragraph (4).

(E) Notwithstanding any other law, if the affiliated governmental entity for the designated public hospital is a county subject to the provisions of Article 12 (commencing with Section 17612.1) of Chapter 6 of Part 5, the department, in consultation with the affected designated public hospital, and the Department of Finance, shall determine how to account for whether any repayment amount determined for the designated public hospital pursuant to subparagraph (D) for the 2013-14 and 2014-15 state fiscal years would otherwise have affected, if at all, the applicable county’s redirection obligation for the applicable state fiscal year pursuant to paragraphs (4) and (5) of subdivision (a) of Section 17612.3 and shall determine what adjustments, if any, are necessary to either the repayment amount or the applicable county’s redirection obligation. For purposes of this subparagraph, the provisions of subdivision (f) of Section 17612.2 and paragraph (7) of subdivision (e) of § 101853 of the Health and Safety Code shall apply.

(g) The provisions of Article 5.2 (commencing with Section 14166) shall remain in effect until all payments authorized pursuant to that article have been paid, finalized, and settled, and to the extent its provisions are retained for purposes of this article or Article 5.51 (commencing with Section 14184.100).

(h) For purposes of this article, commencing January 1, 2021, and thereafter, any references to “Designated Public Hospital,” “CalAIM term,” or “CalAIM Terms and Conditions” have the same meanings as set forth in Section 14184.101.

(Amended by Stats. 2021, Ch. 143, Sec. 400. (AB 133) Effective July 27, 2021.)