Section 14165.50.

(a) To facilitate the financial viability of a new private nonprofit hospital that will serve the population of South Los Angeles that was formerly served by the Los Angeles County Martin Luther King, Jr.-Harbor Hospital, Medi-Cal funding shall, at a minimum, be made available, as specified in this section, or pursuant to mechanisms that provide equivalent funding under successor or modified Medi-Cal payment systems.

(b) (1) (A) Payment for Medi-Cal inpatient hospital services provided by the new hospital, including, but not limited to, supplemental payments, may be negotiated under the selective provider contracting program, as set forth in Article 2.6 (commencing with Section 14081). The negotiations for per diem payments shall include consideration of the new hospital's projected Medi-Cal costs for providing the services and level of Medi-Cal reimbursement thereof, exclusive of any supplemental payments, necessary for the financial viability of the new hospital, and all other factors allowable under Section 14083.

(B) Notwithstanding any other provision of law, Medi-Cal supplemental payment for debt service costs shall be made to the new hospital pursuant to Section 14085.5 with respect to capital projects located at the site of the new hospital that previously were determined eligible under Section 14085.5 based on the debt service costs incurred by the County of Los Angeles, and if applicable, the new hospital. Alternatively, the rate required to be paid to the new hospital pursuant to subparagraph (A) may be increased to take into account the amount of the supplemental payments for debt service during the time the payments would be due. Nothing in this subparagraph shall be construed to increase the department's obligations set forth in paragraph (2) of subdivision (g) of Section 14085.5.

(2) Notwithstanding any other provision of law, in the event the new hospital does not enter into a contract under the selective provider contracting program as described in paragraph (1), all of the following shall apply:

(A) Health facility planning area 935, or a successor health facility planning area, that includes the area in which the new hospital will operate, shall be opened to enable the cost-based reimbursement methodology for Medi-Cal inpatient hospital services set forth in the Medi-Cal state plan to apply with respect to services provided by the new hospital.

(B) The department shall seek federal approval, as necessary, to enable the new hospital to receive Medi-Cal supplemental payments in addition to the cost-based reimbursement provided for in subparagraph (A). The nonfederal share of the supplemental payments may be funded with public funds that are transferred to the state from the County of Los Angeles, at the county's election, pursuant to Section 14164.

(C) (i) Any public funds transferred to the state as described in subparagraph (B) for supplemental payments to the new hospital with respect to a fiscal period shall be expended solely for the nonfederal share of the supplemental payments, except for an amount that may be retained by the state for the benefit of the Medi-Cal program negotiated between the department and the County of Los Angeles, limited as follows:

(I) For each fiscal year before the 2017–18 fiscal year, the retained amount shall not be more than the amount of the nonfederal share of the reimbursement, exclusive of any supplemental payments, for the fiscal year to be paid pursuant to the cost-based reimbursement methodology described in subparagraph (A) that exceeds 77 percent of the new hospital's projected Medi-Cal costs.

(II) For the 2017–18 fiscal year and each subsequent fiscal year, the retained amount shall not be more than the amount of the nonfederal share of the reimbursement, exclusive of any supplemental payments, for the fiscal year to be paid pursuant to the cost-based reimbursement methodology described in subparagraph (A) that exceeds 72 percent of the new hospital's projected Medi-Cal costs.

(ii) For purposes of this subparagraph, the new hospital's projected Medi-Cal costs shall be based on the cost finding principles applied under subdivision (b) of Section 14166.4, and are not subject to the reimbursement limitations set forth in Article 7.5 (commencing with Section 51536) of Chapter 3 of Subdivision 1 of Division 3 of Title 22 of the California Code of Regulations. The new hospital's projected Medi-Cal costs may take into account audit adjustments to allowable costs for prior periods.

(D) Reimbursement under this paragraph shall be available to the new hospital only if the necessary federal approval described in subparagraph (B) is obtained. If the necessary federal approval is not obtained, the new hospital shall be reimbursed for Medi-Cal inpatient hospital services as set forth in paragraph (1) and the per diem payments shall reimburse the hospital at no less than 72 percent of the hospital's projected Medi-Cal costs for providing the services, exclusive of any supplemental payments and the payments described in subparagraph (B) of paragraph (1).

(3) Notwithstanding any other provision of law, and only to the extent federal approval is obtained, the new hospital shall be reimbursed for Medi-Cal outpatient services under the cost-based reimbursement methodology established in Section 14105.24. The department shall seek federal approval, as necessary, to expand the methodology to include outpatient services provided to Medi-Cal beneficiaries by the new hospital.

(c) Nothing in this section shall be construed to preclude the new hospital from receiving any other payment for which it is eligible in addition to the payments provided for by this section.

(d) Notwithstanding the rulemaking provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement this section by means of all-facility letters, all-county letters, or similar instructions, without taking further regulatory action. Nothing in this section shall be construed to preclude the department from adopting regulations.

(e) (1) Except as otherwise provided herein, this section shall be implemented only if, and to the extent that, federal financial participation is available and this section does not jeopardize the federal financial participation available for any other state program.

(2) This section shall be implemented only if, and to the extent that, necessary approval from the federal Centers for Medicare and Medicaid Services is obtained.

(f) For purposes of this article, "new hospital" means a health facility that is certified under Title XVIII and Title XIX of the federal Social Security Act, and is licensed pursuant to Chapter 2 (commencing with Section 1250) of Division 2 of the Health and Safety Code to provide acute inpatient hospital services, and includes all components of the facility, with an inpatient hospital service location on the campus of the former Los Angeles County Martin Luther King, Jr.-Harbor Hospital.

(Amended by Stats. 2011, Ch. 296, Sec. 330. Effective January 1, 2012.)