STAND. COM. REP. NO. 120-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2534
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Health, to which was referred H.B. No.
2534 entitled: 

     "A BILL FOR AN ACT RELATING TO CRITICAL ACCESS HOSPITALS,"

begs leave to report as follows:

     The purpose of this bill is to increase funding for Hawaii's
rural hospitals by reimbursing Critical Access Hospitals (CAH) on
a cost basis under the Medicaid program using matching federal
funds.

     The Departments of Health (DOH) and Human Services (DHS),
the Hawaii Health Systems Corporation (Corporation), the Hawaii
State Primary Care Association, Lanai Community Hospital, the
Healthcare Association of Hawaii (Healthcare Association), Kahuku
Hospital, the Executive Management Advisory Committee (MAC), Maui
MAC, Maui Memorial Medical Hospital, and numerous residents of
Ka'u district testified in support of this measure.

     The Hawaii Government Employees Association testified in
support of the intent of this measure.  The Hawaii Long Term Care
Association (LTC Association) agreed with the CAH concept but
could not support this measure in its current form.  Wilcox
Health System opposed this measure.

     Your Committee finds that the federal Balanced Budget Act of
1997, as amended by the recent Balanced Budget Refinement Act of
1999, created the CAH, which is also known as the Medicare Rural
Hospital Flexibility Program (Program).  The Program offers

 
 
                                 STAND. COM. REP. NO. 120-00
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federal financial relief for rural hospitals by allowing
facilities to claim cost reimbursement under the Medicare
program.  This measure allows the Medicaid program to adopt
Medicare's reimbursement methodology for CAHs.

     The LTC Association testified that while the Medicaid cost-
based reimbursement system for CAHs should not reduce
reimbursements to other long-term care providers, funding to keep
Medicaid "whole" must come from appropriations approved by the
Legislature.  This measure also states that the State's share of
matching funds will be provided to the extent funding is
available.  The concerns raised included whether:

     (1)  Appropriations from one program will be reduced or
          eliminated to fund another; and

     (2)  There would be consequences if funding was not
          available.

     To address these concerns, the LTC Association, the
Healthcare Association, the Corporation, DHS, and DOH jointly
submitted amended language agreed to by all parties.  It
clarifies that the intent is to provide rural areas access to
health care, but not at the expense of other health care
providers.

     Your Committee has amended this measure by:

     (1)  Clarifying that if funding is not available, Medicaid
          reimbursements to CAHs will revert back to existing
          Medicaid payment methodologies;

     (2)  Allowing designated CAHs other than those under the
          Corporation's management to obtain Medicaid cost-based
          reimbursement;

     (3)  Incorporating the definition of CAH in the appropriate
          statutory sections so that the definition is codified;
          and

     (4)  Making technical, nonsubstantive amendments for
          purposes of clarity and style.

     As affirmed by the record of votes of the members of your
Committee on Health that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2534, as amended herein, and recommends that it pass Second
Reading in the form attached hereto as H.B. No. 2534, H.D. 1, and
be referred to the Committee on Finance.

 
                                 STAND. COM. REP. NO. 120-00
                                 Page 3

 
                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Health,



                                   ______________________________
                                   ALEXANDER C. SANTIAGO, Chair