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F I S C A L I M P A C T R E P O R T

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

2/21/07

3/7/2007 HB 1253/aHCPAC

SHORT TITLE County Supported Health Care Financing

SB

ANALYST Weber

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Health Policy Commission

SUMMARY

Synopsis of HCPAC Amendment

The House Consumer and Public Affairs Committee Amendments to House Bill 1253 restore the

original definition of indigent patient. Then the following Section 2 is added at the end of the

bill.

"

Section 2. TEMPORARY PROVISION--CONTINGENCY.--The tax increment authorized in

Subsection D of Section 7-20E-9 NMSA 1978 for the purpose of funding the Indigent Hospital

and County Health Care Act shall be distributed directly to the sole community provider fund

during the second and third quarters of fiscal year 2008 if at any time during fiscal year 2008 the

federal law or regulations prohibit or impede the ability of the state to accept intergovernmental

transfers for the purpose of matching medicaid sole community provider funds

.".,

A Medicaid-related revenue source for hospitals is the Sole Community Provider Program. For

FY06, this program had a total of $98.3 million available for participating New Mexico

hospitals. Of this total $27.6 million is generated at the county and $70.7 million is federal

match. The federal government is the final arbiter for hospital participation, but the basic

criterion is being the only hospital in a 35 mile radius. For that reason, no Albuquerque hospitals

House Bill 1253/aHCPAC – Page

2

are included. A formula in federal regulations determines the maximum each hospital may

receive and the maximum for the state. The county funding source is the indigent fund raised

through gross receipts tax. In New Mexico 27 hospitals and 27 counties participate. As an

example, for FY06 St. Vincent in Santa Fe County will receive almost $22 million from the

program. This amounts to almost 12 percent of the facility’s total revenue.

A “sister" program to sole community provider program is the Upper Payment Limit Program

that essentially allows through a formula a payment that partially compensates for the lower

reimbursements for hospital patient care paid by state Medicaid. St. Vincent receives another

$5.3 million under this program boosting total payments for the two programs to almost $27

million.

Regulation requires federal funds for the sole community provider hospital be matched only by

state funds or the equivalent in county taxes then transferred to the state by what is know as an

“intergovernmental transfer". There is speculation federal regulation these intergovernmental

transfers will be will subjected to closer scrutiny to ensure their legitimacy as government and

not private funds. If this takes place federal sole community hospital funds may be in jeopardy.

For many hospitals, as noted in the example above for St. Vincent, these funds provide a

substantial portion of operating income.

The following statutory citation notes the authorized uses of indigent funds.

27-5-2. Purpose of Indigent Hospital and County Health Care Act. (1997)

The purpose of the Indigent Hospital and County Health Care Act [Chapter 27, Article 5

NMSA 1978] is:

A. to recognize that the individual county of this state is the responsible agency for

ambulance transportation or the hospital care or the provision of health care to

indigent patients domiciled in that county for at least three months or for such

period of time, not in excess of three months, as determined by resolution of the

board of county commissioners, and to provide a means whereby each county can

discharge this responsibility through a system of payments to ambulance

providers, hospitals or health care providers for the care and treatment of, or the

provision of health care services to, indigent patients;

B. to recognize that the counties of the state are also responsible for supporting

indigent patients by providing local revenues to match federal funds for the state

medicaid program, including the provision of matching funds for payments to sole

community provider hospitals and the transfer of funds to the county-supported

medicaid fund pursuant to the Statewide Health Care Act [27-10-1 to 27-10-4

NMSA 1978]; and

C. to recognize that the counties of the state can improve the provision of health care

to indigent patients by providing local revenues for countywide or multicounty

health planning.

HB 1253 as amended anticipates the problem that would be created by federal disqualification of

certain transfer arrangements and the potential problem of reduced funds to the hospitals. The

total taxes rose under Section 7-20E-9 NMSA 1978 for the second and third quarter of FY08 will

flow directly to the Sole Community Provider Hospital Fund bypassing any questionable

intergovernmental transfer arrangement but also the other purposes outlined in the statute above.

House Bill 1253/aHCPAC – Page

3

However, it is unclear what entity will decide if “federal law or regulations prohibit or impede

the ability of the state to accept intergovernmental transfers for the purpose of matching

Medicaid sole community provider funds" have been implemented.

Synopsis of Original Bill

House Bill 1253 amends the Indigent Hospital and County Health Care Act at 27-5-2 NMSA

1978 to revise the definition of “indigent". The bill removes existing language that permits a

county indigent hospital board of directors and county health care board to adopt a resolution

increasing the standard of indigent to eliminate persons whose annual income together with that

of their spouse totaled 50 percent more than the per capita personal income for New Mexico.

FISCAL IMPLICATIONS

No identified state fiscal impact.

SIGNIFICANT ISSUES

The current statute allows the county health care board, by resolution, to declare a person not to

be eligible for indigent benefits whose annual income totals an amount that is fifty percent

greater than the per capita personal income for New Mexico as shown for the most recent year

available in the survey of current business published by the United States Department of

Commerce. This change eliminates the authority of a county to set income eligibility

requirements on the reimbursement process. This leaves the following as the definition of

indigent patient:

"indigent patient" means a person to whom an ambulance service, a hospital or a health

care provider has provided medical care, ambulance transportation or health care services

and who can normally support [himself] the person's self

and [his] the person's

dependents on present income and liquid assets available to [him] the person

but, taking

into consideration this income and those assets and [his] the person's

requirement for

other necessities of life for [himself] the person

and [his] the person's

dependents, is

unable to pay the cost of the ambulance transportation or medical care administered or

both

.

This leaves the definition a rather subjective definition of a person “who can normally support

[himself] the person's self

and [his] the person's

dependents on present income and liquid assets

available".

DFA reports that the revision in item E changes the word “shall" to “may". Santa Fe County

reports that this may not seem significant, however, it is actually contains the largest impact in

the bill. Hospitals had typically been able to charge the indigent funds whatever rate they

wanted unless there was an agreement between the county and hospital to the contrary. In Santa

Fe County, an arrangement with out-of-town hospitals was formulated to pay 50% of billed

charges. The county never knew what the charges were going to be. For example, the county

could have 5 clients go to 5 different hospitals for the same procedure and get billed 5 different

amounts. As a result this created budget issues since forecasting into this scenario did not

include language that would standardize the rates for procedures at a health provider. If HB-

1253 is approved, hospitals will again be able to set their own respective rates for procedures.

House Bill 1253/aHCPAC – Page

4

OTHER SUBSTANTIVE ISSUES

The Health Policy Commission contributes the following background informatiom.

In 2005, New Mexico counties collected $52.9 million for County Indigent Funds primarily

through gross receipts taxes (HPC’s County Financing of Health care 2006 report). Statewide,

the Sole Community Provider Fund has grown from $19 million to $130 million in 2005,

according to the state Human Services Department, which administers the fund for the U.S.

Centers for Medicare and Medicaid Services.

POSSIBLE QUESTIONS

What is the purpose of this change.

MW/nt