STAND. COM. REP. NO. 2837

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 2534
                                        H.D. 2




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Health and Human Services, to which was
referred H.B. No. 2534, H.D. 2, entitled: 

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

begs leave to report as follows:

     The purpose of this measure is to clarify payments from the
State to critical access hospitals.

     Your Committee received testimony in support of this measure
from the Department of Health (DOH), Department of Human
Services, Hawaii Health Systems Corporation, Hawaii Long Term
Care Association, Healthcare Association of Hawaii, HGEA-AFSCME,
and a private individual.

     Critical access hospitals are hospitals included in the
federal Rural Plan by the federal Health Care Financing
Administration and approved as a critical access hospital by the
DOH in accordance with federal law.  The purpose of the program
is to preserve rural hospitals by increasing the Medicare
reimbursement for rural hospitals converting to critical access
hospitals.

     The Balanced Budget Act of 1997 (Public Law 105-33)
established the Medicare Rural Hospital Flexibility Program
(RHFP) to assist states and rural communities in improving access
to essential health services through the establishment of limited
services hospitals and rural health networks.  The program
created the critical access hospital as a limited service

 
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hospital eligible for Medicare certification and reimbursement.
Medicare reimbursement will be for "reasonable costs" which is
anticipated to be greater than the current reimbursement formula.
In response to the program, the State has develop a rural health
plan to guide the implementation of the RHFP.

     This measure is intended to optimize the benefits of the
RHFP by changing the methodology for calculating Medicaid
reimbursements to critical access hospitals to a cost basis,
using Medicare reasonable cost principles.

     As affirmed by the record of votes of the members of your
Committee on Health and Human Services that is attached to this
report, your Committee is in accord with the intent and purpose
of H.B. No. 2534, H.D. 2, and recommends that it pass Second
Reading and be referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Health and Human
                                   Services,



                                   ______________________________
                                   SUZANNE CHUN OAKLAND, Chair

 
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