COUNTY OF SAN MATEO

Inter-Departmental Correspondence

San Mateo Medical Center

DATE:

July 17, 2006

BOARD MEETING DATE:

August 1, 2006

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Nancy J. Steiger, Chief Executive Officer, San Mateo Medical Center

SUBJECT

Annual Increase of Rates in the San Mateo Medical Center Charge Master (fee schedule for all hospital services)

RECOMMENDATION:

Adopt Resolution:

1)

authorizing the Board of Supervisors to implement an average increase to ancillary service fee structures, by selected line item, of:

39% for Laboratory services;

39% for Pharmacy services;

20% for Rehabilitation services;

21% for Clinic procedure services;

12% for Radiology services;

62% for Emergency room technical (non-physician) services.

2)

delegating the following to the Chief Executive Officer (CEO) of San Mateo Medical Center:

a.

authority to implement the FY 2006-07 rate increase

b.

authority to adjust/add/delete rates within the Medical Center’s rate structure, but only as dictated by federal and state regulation changes or requirements, with the stipulation that any future adjustment to FY 2006-07 rates, not withstanding federal or state regulation changes or requirements, greater than 15% requires prior Board approval

c.

authority to negotiate discounts with non-federal, non-state, non-contracted third party health care insurance carriers and self pay individuals.

VISION ALIGNMENT:

Commitment: Responsive, effective and collaborative government

Goal 20: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.

Increasing the rates in San Mateo Medical Center’s Charge Description Master (CDM) contributes to this commitment by making it possible for San Mateo Medical Center to maintain competitive pricing for its services in order to meet the revenue target for the Medical Center’s FY2006-07 Budget, to avoid losing a significant amount of revenue from the federal and state governments, and to ensure recovery of appropriate reimbursement from commercial payors.

Performance Measure:

Measure

FY 2005-06
Estimated Actual

FY 2006-07
Projected

Net Patient Revenue

$90,672,296

$91,000,000

BACKGROUND:

The Charge Description Master (CDM) is a fee schedule that delineates thousands of hospital charges for all medical services. Pursuant to law, all hospitals must maintain a CDM.

The federal rules prohibit the Medi-Cal (Medicaid) program from making aggregate payments that may exceed the total charges for these services. In the event that aggregate payments exceed charges, the federal government will recoup the amounts over and above this charge ceiling. A rate increase is recommended to allow SMMC to participate in any expansions of reimbursement from the Medi-Cal program.

The overall CDM rates for the SMMC were last increased by 5% in September 2005 to help offset increases in the Medical Center’s wages, pharmaceuticals and other operating costs. Despite this increase, based on a study of the Medical Center’s rate/fee structure conducted in April 2006, it was determined that the Medical Center’s CDM rate/fee structure is still significantly below the average of all private and county hospitals, for ancillary services.

The practice of discounting of services is common practice throughout the health care industry. Prior to the Medical Center’s CEO exercising this delegated authority, the Medical Center’s CEO will receive a thorough three-tiered evaluation on each claim prior to making a decision. Staff experienced in claims processing, evaluation of individual financial situation, and collections will perform the initial evaluation.

DISCUSSION:

The County Ordinance Code empowers and authorizes the Board of Supervisors to set all Medical Center rates, after performing a “study”. SMMC staff conducted a comparative analysis study in April 2006 of the Medical Center’s CDM with comparable hospitals and found the following:

§ Laboratory’s fee structure was 39% below comparable hospitals;

§ Pharmacy’s fee structure was 39% below comparable hospitals;

§ Rehabilitation Services’ fee structure was 20% below comparable hospitals;

§ Procedures’ fee structure for procedures performed in the Clinic setting was 21% below comparable hospitals;

§ Radiology’s fee structure was 12% below comparable hospitals;

§ Emergency room technical charges fee structure was 62% below comparable hospitals.

FISCAL IMPACT:

This rate increase is expected to net an estimated additional $200,000 in revenue in FY 2006-07. It will not increase co-pays, deductibles, and annual fees for patient categories within the WELL Program, nor will it impact payors that currently reimburse patient services using fixed per-diems or case rates, such as Medicare and Medi-Cal. However, it will impact payors that use a percent-of-charge reimbursement such as non-contracted third party payers and self pay patients. Self pay patients will be afforded the opportunity to participate in the ability to pay determination process prior to final payment obligation being established.