SB588.DOC

SECTION 1. The legislature finds that the contribution of rural hospitals and federally qualified health centers is essential for the health care of the State. All health care providers are hurt by reimbursement trends and rural hospital facilities and federally qualified health centers are especially hurt. The former serves a low volume of patients but incurs high costs to provide care in remote areas and the latter cares for underserved populations with complex health and socio-economic needs.

In recognition, the federal government enacted two measures that specifically support rural hospitals and federally qualified health centers. The first measure is the medicare rural hospital flexibility program, a national program designed to assist states and rural communities in improving access to essential health care services through the establishment of limited service hospitals and rural health networks. The program creates the critical access hospital as a limited service hospital eligible for medicare certification and reimbursement, and supports the development of rural health networks consisting of critical access hospitals, acute general hospitals, and other health care providers. The second measure established federally qualified health centers as a category of provider that specializes in comprehensive primary health care for underserved communities. Among the mandated provisions for federally qualified health centers is cost-related reimbursement for medicaid and medicare services.

Section 346D-1, Hawaii Revised Statutes, defines critical access hospital as a hospital located in the State that is included in Hawaii's rural health plan approved by the federal Health Care Financing Administration and approved as a critical access hospital by the department of health as provided in Hawaii's rural health plan and as defined in 42 U.S.C. section 1395i-4. The U.S. Department of Health and Human Services Centers for Medicare and Medicaid Services is the successor organization to the Health Care Financing Administration.

The Centers for Medicare and Medicaid Services pays critical access hospitals on the basis of one hundred and one per cent of costs for acute care inpatients and outpatient services. The department of human services calculates payments to critical access hospitals on a cost basis for acute inpatient and long-term care services to beneficiaries of the medicaid program. Federally qualified health centers as defined in section 1905(1) of the Social Security Act (42 U.S.C. 1396 et seq.) are paid for medicaid services through a prospective payment system methodology based on average costs in 1999 and 2000, adjusted annually according to the medical economic index.

The purpose of this Act is to enhance the federal medicare rural hospital flexibility program and federally qualified health center program by requiring health plans other than government payers licensed to do business in Hawaii, including but not limited to health maintenance organizations, insurers, nonprofit hospital and medical service corporations, mutual benefit societies, and other entities responsible for the payment of benefits or provision of services under a group contract, to reimburse critical access hospitals at one hundred and one per cent of costs, consistent with medicare, and to reimburse federally qualified health centers at prospective payment system rates.

SECTION 2. Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to article 10A to be appropriately designated and to read as follows:

"§431:10A- Cost-based payments to critical access hospitals and federally qualified health centers; rules. (a) Any other law to the contrary notwithstanding, each employer group health policy, contract, plan, or agreement other than government payers, issued, amended, or renewed in this State after December 31, 2009, shall pay:

(1) Critical access hospitals, as defined in section 346D-1, no less than one hundred and one per cent of costs, consistent with medicare, for all services rendered to health plan beneficiaries; and

(2) Federally qualified health centers no less than their respective prospective payment system rates.

(b) The insurance commissioner may adopt rules in accordance with chapter 91 to require health insurers other than government payers to demonstrate compliance annually with this section, including but not limited to validation of payment rates in line with medicare interim rate letters. Nothing in this section shall set a maximum for the amount a health insurer other than a government payer may pay a critical access hospital or federally qualified health center for services provided to plan beneficiaries. Critical access hospitals and federally qualified health centers shall provide all information as requested by the insurance commissioner to clarify, supplement, or rebut information supplied by a health insurer other than a government payer."

SECTION 3. Chapter 432, Hawaii Revised Statutes, is amended by adding a new section to article 1 to be appropriately designated and to read as follows:

"§432:1- Cost-based payments to critical access hospitals and federally qualified health centers; rules. (a) Any other law to the contrary notwithstanding, each individual and group hospital or medical service plan, policy, contract, or agreement issued, amended, or renewed in this State after December 31, 2009, by mutual benefit societies shall pay:

(1) Critical access hospitals, as defined in section 346D-1, no less than one hundred and one per cent of costs, consistent with medicare, for all services provided to members; and

(2) Federally qualified health centers, as defined in section 1905(1) of the Social Security Act (42 U.S.C. 1396 et seq.) no less than their respective prospective payment system rates.

(b) The insurance commissioner may adopt rules in accordance with chapter 91 to require mutual benefit societies to demonstrate compliance annually with this section, including but not limited to validation of payment rates in line with medicare interim rate letters. Nothing in this section shall set a maximum for the amount a mutual benefit society may pay a critical access hospital or federally qualified health center for services to members. Critical access hospitals and federally qualified health centers shall provide all information as requested by the insurance commissioner to clarify, supplement, or rebut information supplied by a mutual benefit society."

SECTION 4. Chapter 432, Hawaii Revised Statutes, is amended by adding a new section to article 2 to be appropriately designated and to read as follows:

"§432:2- Cost-based payments to critical access hospitals and federally qualified health centers; rules. (a) Any other law to the contrary notwithstanding, each individual and group hospital or medical service plan, policy, contract, or agreement issued, amended, or renewed in the State after December 31, 2009, by fraternal benefit societies shall pay:

(1) Critical access hospitals, as defined in section 346D-1, no less than one hundred and one per cent of costs, consistent with medicare, for all services provided to members; and

(2) Federally qualified health centers, as defined in section 1905(1) of the Social Security Act (42 U.S.C. 1396 et seq.) no less than their respective prospective payment system rates.

(b) The insurance commissioner may adopt rules in accordance with chapter 91 to require fraternal benefit societies to demonstrate compliance annually with this section, including but not limited to validation of payment rates in line with medicare interim rate letters. Nothing in this section shall set a maximum for the amount a fraternal benefit society may pay a critical access hospital or federally qualified health center for services to members. Critical access hospitals and federally qualified health centers shall provide all information as requested by the insurance commissioner to clarify, supplement, or rebut information supplied by a fraternal benefit society."

SECTION 5. Chapter 432D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§432D- Cost-based payments to critical access hospitals and federally qualified health centers; rules. (a) Any other law to the contrary notwithstanding, each policy, contract, plan, or agreement issued, amended, or renewed in the State after December 31, 2009, by health maintenance organizations pursuant to this chapter shall pay:

(1) Critical access hospitals, as defined in section 346D-1, no less than one hundred and one per cent of costs, consistent with medicare, for all services provided to members; and

(2) Federally qualified health centers, as defined in section 1905(1) of the Social Security Act (42 U.S.C. 1396 et seq.) no less than their respective prospective payment system rates.

(b) The insurance commissioner may adopt rules in accordance with chapter 91 to require health maintenance organizations to demonstrate compliance annually with this section, including but not limited to validation of payment rates in line with medicare interim rate letters. Nothing in this section shall set a maximum for the amount a health maintenance organization may pay a critical access hospital or federally qualified health center for services to members. Critical access hospitals and federally qualified health centers shall provide all information as requested by the insurance commissioner to clarify, supplement, or rebut information supplied by a health maintenance organization."

SECTION 6. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	588
TWENTY-FIFTH LEGISLATURE, 2009
STATE OF HAWAII