COUNTY OF SAN MATEO

Inter-Departmental Correspondence

San Mateo Medical Center

 

DATE:

July 20, 2007

BOARD MEETING DATE:

September 11, 2007

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

 

TO:

Honorable Board of Supervisors

FROM:

Sang-ick Chang, MD, Interim 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:

 

A.

Authorizing an average rate increase of 16% to San Mateo Medical Center’s Charge Master (fee structure, by selected line item, for all hospital services).

 

B.

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

 
 

1.

authority to implement the FY 2007-08 rate increase

 
 

2.

authority to adjust/add/delete rates within the Medical Center’s rate structure as dictated by federal and state regulation changes or requirements, with the stipulation that any future adjustment to FY 2007-08 rates, not withstanding federal or state regulation changes or requirements, greater than 15% requires prior Board approval

 
 

3.

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 FY2007-08 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 2006-07
Estimated Actual

FY 2007-08
Projected

Net A/R Patient Revenue

$90,260,227

$91,000,000

 

BACKGROUND:

The 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 set forth in a hospital’s CDM. In the event that aggregate payments exceed charges, reflected on the CDM, 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 in September 2006 to help offset increases in the Medical Center’s wages, pharmaceuticals and other operating costs.

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 vests this Board with authority to set all Medical Center’s rates. SMMC staff conducted a recent study of the hospital’s ratio of cost to charges (RCC) and noted that in certain instances the RCC was greater than 100% (i.e. costs exceeded the charges for services in some cases). Because of federal reimbursement regulations, it is important to maintain an RCC of less than 100% i.e. costs that are less than charges. SMMC’s costs are anticipated to increase 5.5% in the budget year 2007-08 indicating another reason to implement a rate increase in order to stay aligned with federal regulations.

FISCAL IMPACT:

This rate increase is expected to net an estimated additional $800,000 in revenue in FY 2007-08. 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.