Fiscal Note - SB 0102 - Repeals Missouri's Certificate of Need Laws
L.R. NO. 0522-01
BILL NO. SB 102
SUBJECT: Certificate of Need; Department of Health
TYPE: Original
DATE: January 31, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue $48,271 ($3,401,072) ($5,748,146)
Total Estimated
Net Effect on All
State Funds $48,271 ($3,401,072) ($5,748,146)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Medicaid $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials from the Office of Governor, the Office of State Courts
Administrator, and the Office of Attorney General assume this proposal would
not fiscally impact their agencies.
Department of Health (DOH) officials state the projected General Revenue Fund
revenues of $300,000 annually would not be collected as a result of this
proposal. DOH states that this proposal would eliminate $238,760 (8 FTE) in
personal service costs, related fringe benefits costs, and $67,691 in expense
and equipment costs. These would be savings to the General Revenue Fund.
Officials from the Department of Social Services (DOS) state that currently a
new institutional health service needs a certificate of need (CON) before it
can be developed or offered within the state. DOS assumes that repeal of the
CON process for hospitals would result in an increase in new and expanded
services and new facilities which would increase payments to facilities
through increased per diems. Per DOH, it is estimated that 100 hospital
projects are not done each year because of the current CON process. DOS
estimates, that if hospitals would be exempt from the CON process, 100
additional projects would be started each year.
DOS states the prospective reimbursement plan provides for per diem rate
increases for hospitals which meet certain requirements. DOS may grant
special rate increases for new or expanded services. DOS currently grants
rate increases to 75% of the special rate increase requests. DOS assumes
that the percentage would remain constant. DOS assumes a one year lag for
construction/inspection/licensure with fiscal impact to first occur in FY99.
DOS estimates the FY99 average special rate increase to be $15.98. DOS
states the current average increase is $15.05 and was adjusted for projected
increases of 2.975% in FY98, 3.1% in FY99, and 3.1% in FY00. DOS states the
average Medicaid paid days per hospital (adjusted for managed care) is 891
days. DOS assumes the occupancy would remain constant. DOS projects the
annual cost for the increase in projects for new or expanded services to be
$1,067,864 in FY99 and $1,101,276 in FY00.
In addition, DOS estimates that four new hospital facilities would be built.
DOS estimates that the additional facilities would not increase hospital
utilization but would increase the per diem paid for patient days. DOS
states the Medicaid per diem for new facilities is initially set at 120% of
the state-wide average Medicaid per diem. The increase in cost would result
from the rate being set at 20% over the average. DOS states the current
weighted average rate $841.69 was adjusted by the same percentages as the
special rate increases to arrive at the projected weighted average rate of
$921.3 for FY00. DOS assumes two years would be needed for
construction/inspection/licensure. DOS states the average Medicaid paid days
per hospital (adjusted for manage care) is 891 days. DOS projects the annual
cost for the increase in cost from new facilities to be $656,703 in FY00.
DOS assumes the federal Medicaid assistance percentage would be 60.68%.
Officials from DOS state that currently a CON is needed by intermediate care
facilities, skilled nursing facilities, and residential care facilities I and
II before new facilities/beds could be built. DOS assumes that repeal of the
CON process for will bee able to build new facilities or add additional beds
with the CON review process. Per DOH, it is estimated that 1000 beds are not
built each year because of the current CON process. DOS estimates, that if
the CON process is discontinued, 1000 beds would be started each year. It is
assumed by DOS that construction would begin on or after September 1, 1997
and that these new facilities would start entering the Medicaid program May
1, 1998. DOS assumes a nine month time schedule for construction,
inspection, and enrollment in the Medicaid program. DOS states the current
interim rate given to new facilities ($83.31) was inflated by 3.4% annually
to arrive at the Medicaid interim rate used in their estimates. The
inflation factor is the percent of change from the second quarter of 1997 to
the second quarter of 1998 of the Health Care Financing Administration
Nursing Home without capital market basket. Projected patient surplus was
subtracted from the interim rate to arrive at the estimated Medicaid payment
by DOS. DOS states that Medicaid certified beds comprise 81% of currently
licensed beds and the current Medicaid occupancy is 59%. Therefore, DOS
estimates that 478 of the 1,000 new beds would be Medicaid eligible. DOS
assumes a twelve month phase-in of new beds with a one month payment lag. As
a result, DOS estimates costs of the new beds to be $86,394 in FY98,
$7,816,181 in FY 99, and $13,121,050 in FY00.
DOS assumes no fiscal impact on residential care facilities I or II as a
result of this proposal. DOS states that room and board charges for
residential care facilities I or II levels of care are not a covered Medicaid
service. The only Medicaid service that may be provided in a RCF I or II is
personal care which can be provided in the recipient's home.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
GENERAL REVENUE FUND
Savings - Department of Health
Personal service (8 FTE) $244,729 $250,847 $257,118
Fringe benefits $69,821 $71,565 $73,356
Expense and equipment $67,691 $69,722 $71,814
Total Savings - Department of Health $382,241 $392,134 $402,288
Loss - Department of Health
Application fees for
projects not filed ($300,000) ($300,000) ($300,000)
Costs - Department of Social Services
Increase in services and facilities ($33,970) ($3,493,206) ($5,850,434)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND $48,271 ($3,401,072) ($5,748,146)
FEDERAL FUNDS
Income - Department of Social Services
Additional Medicaid reimbursements $52,424 $5,390,839 $9,028,595
Costs - Department of Social Services
Increase in services and facilities ($52,424) ($5,390,839) ($9,028,595)
ESTIMATED NET EFFECT ON
FEDERAL FUNDS $0 $0 $0
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
$0 $0 $0
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that
they would incur less administrative costs due to this proposal.
DESCRIPTION
This proposal would repeal all of Missouri's current statutory Certificate of
Need language.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Health
Department of Social Services
Office of Governor
Office of Attorney General
Office of State Courts Administrator
This Fiscal Note is not an official copy and should not be quoted or cited.