(a) There shall be imposed on each general acute care hospital that is not an exempt facility a quality assurance fee, provided that a quality assurance fee under this article shall not be imposed on a converted hospital.

(b) The quality assurance fee shall be computed starting on July 1, 2011, and continue through and including December 31, 2013.

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(c) Subject to Section 14169.34, upon receipt of federal approval, the following shall become operative:

(1) Within 10 business days following receipt of the notice of federal approval from the federal government, the department shall send notice to each hospital subject to the quality assurance fee, and publish on its Internet Web site, the following information:

(A) The date that the state received notice of federal approval.

(B) The fee percentage for each subject fiscal year.

(2) The notice to each hospital subject to the quality assurance fee shall also state the following:

(A) The aggregate quality assurance fee after the application of the fee percentage for each subject fiscal year.

(B) The aggregate quality assurance fee.

(C) The amount of each payment due from the hospital with respect to the aggregate quality assurance fee.

(D) The date on which each payment is due.

(3) The hospitals shall pay the aggregate quality assurance fee after application of the fee percentage for all subject fiscal years in 10 installments. The department shall establish the date that each installment is due, provided that the first installment shall be due no earlier than 20 days following the department sending the notice pursuant to paragraph (1), and the installments shall be paid at least one month apart, but if possible, the installments shall be paid on a quarterly basis.

(4) Notwithstanding any other provision of this section, the amount of each hospital’s aggregate quality assurance fee after the application of the fee percentage for each subject fiscal year that has not been paid by the hospital before December 15, 2013, pursuant to paragraphs (3) and (8), shall be paid by the hospital no later than December 15, 2013.

(5) (A) Notwithstanding subdivision (l) of Section 14169.31, for the purpose of determining the installments under paragraph (3), the department shall use an interim fee percentage as follows:

(i) One hundred percent for subject fiscal year 2011-12 until the federal government has approved or disapproved additional capitation payments described in Section 14169.5 for that subject fiscal year.

(ii) One hundred percent for subject fiscal year 2012-13 until the federal government has approved or disapproved additional capitation payments described in Section 14169.5 for that subject fiscal year.

(iii) Fifty percent for subject fiscal year 2013-14 until the federal government has approved or disapproved additional capitation payments described in Section 14169.5 for that subject fiscal year.

(B) The director may use a lower interim fee percentage for each subject fiscal year under this paragraph as the director, in his or her discretion, determines is reasonable in order to generate sufficient but not excessive installment payments to make the payments described in subdivision (b) of Section 14169.33.

(6) The director shall determine the final fee percentage for each subject fiscal year within 15 days of the approval or disapproval, in whole or in part, by the federal government of all changes to the capitation rates of managed health care plans requested by the department to implement Section 14169.5 for that subject fiscal year, but in no event later than December 1, 2013. At the time the director determines the final fee percentage for a subject fiscal year, the director shall also determine the amount of future installment payments of the quality assurance fee for each hospital subject to the fee, if any are due. The amount of each future installment payment shall be established by the director with the objective that the total of the installment payments of the quality assurance fee due from a hospital shall equal the director’s estimate for each subject fiscal year for the hospital of the aggregate quality assurance fee after the application of the fee percentage.

(7) The director, within 15 days of determining the final fee percentage for a subject fiscal year pursuant to paragraph (6), shall send notice to each hospital subject to the quality assurance fee of the following information:

(A) The final fee percentage for each subject fiscal year for which the final fee percentage has been determined.

(B) The fee percentage determined under paragraph (5) for each subject fiscal year for which the final fee percentage has not been determined.

(C) The aggregate quality assurance fee after application of the fee percentage for each subject fiscal year.

(D) The director’s estimate of total quality assurance fee payments due from the hospital under this article whether or not paid. This amount shall be the sum of the aggregate quality assurance fee after application of the fee percentage for each subject fiscal year using the fee percentages contained in the notice.

(E) The total quality assurance fee payments that the hospital has made under this article.

(F) The amount, if any, by which the total quality assurance fee payments due from the hospital under this article as described in subparagraph (C) exceed the total quality assurance fee payments that the hospital has made under this article.

(G) The amount of each remaining installment of the quality assurance fee, if any, due from the hospital and the date each installment is due. This amount shall be the amount described in subparagraph (F) divided by the number of installment payments remaining.

(8) Each hospital that is sent a notice under paragraph (7) shall pay the additional installments of the quality assurance fee that are due, if any, in the amounts and at the times set forth in the notice unless superseded by a subsequent notice from the department.

(9) The department shall refund to a hospital paying the quality assurance fee the amount, if any, by which the total quality assurance fee payments that the hospital has made under this article for all subject fiscal years exceed the total quality assurance fee payments due from the hospital under this article within 30 days of the date on which the notice is sent to the hospital under paragraph (7).

(d) The quality assurance fee, as paid pursuant to this section, shall be paid by each hospital subject to the fee to the department for deposit in the Hospital Quality Assurance Revenue Fund. Deposits may be accepted at any time and will be credited toward the program period.

(e) This section shall become inoperative if the federal Centers for Medicare and Medicaid Services denies approval for, or does not approve before July 1, 2014, the implementation of the quality assurance fee pursuant to this article or the supplemental payments to private hospitals described in Sections 14169.2 and 14169.3, and either or both provisions cannot be modified by the department pursuant to subdivision (d) of Section 14169.33 in order to meet the requirements of federal law or to obtain federal approval.

(f) In no case shall the aggregate fees collected in a federal fiscal year pursuant to this section and Sections 14167.32 and 14168.32 exceed the maximum percentage of the annual aggregate net patient revenue for hospitals subject to the fee that is prescribed pursuant to federal law and regulations as necessary to preclude a finding that an indirect guarantee has been created.

(g) (1) Interest shall be assessed on quality assurance fees not paid on the date due at the greater of 10 percent per annum or the rate at which the department assesses interest on Medi-Cal program overpayments to hospitals that are not repaid when due. Interest shall begin to accrue the day after the date the payment was due and shall be deposited in the Hospital Quality Assurance Revenue Fund.

(2) In the event that any fee payment is more than 60 days overdue, a penalty equal to the interest charge described in paragraph (1) shall be assessed and due for each month for which the payment is not received after 60 days.

(h) When a hospital fails to pay all or part of the quality assurance fee on or before the date that payment is due, the department may immediately begin to deduct the unpaid assessment and interest from any Medi-Cal payments owed to the hospital, or, in accordance with § 12419.5 of the Government Code, from any other state payments owed to the hospital until the full amount is recovered. All amounts, except penalties, deducted by the department under this subdivision shall be deposited in the Hospital Quality Assurance Revenue Fund. The remedy provided to the department by this section is in addition to other remedies available under law.

(i) The payment of the quality assurance fee shall not be considered as an allowable cost for Medi-Cal cost reporting and reimbursement purposes.

(j) The department shall work in consultation with the hospital community to implement this article and Article 5.228 (commencing with Section 14169.1).

(k) This subdivision creates a contractually enforceable promise on behalf of the state to use the proceeds of the quality assurance fee, including any federal matching funds, solely and exclusively for the purposes set forth in this article as they existed on September 16, 2011, to limit the amount of the proceeds of the quality assurance fee to be used to pay for the health care coverage of children to the amounts specified in this article, to limit any payments for the department’s costs of administration to the amounts set forth in this article on September 16, 2011, to maintain and continue prior reimbursement levels as set forth in Section 14169.12 on September 16, 2011, and to otherwise comply with all its obligations set forth in Article 5.228 (commencing with Section 14169.1) and this article provided that amendments that arise from, or have as a basis, a decision, advice, or determination by the federal Centers for Medicare and Medicaid Services relating to federal approval of the quality assurance fee or the payments set forth in this article or Article 5.228 (commencing with Section 14169.1) shall control for the purposes of this subdivision.

(l) (1) Effective January 1, 2014, the rates payable to hospitals and managed health care plans under Medi-Cal shall be the rates then payable without the supplemental and increased capitation payments set forth in Article 5.228 (commencing with Section 14169.1).

(2) The supplemental payments and other payments under Article 5.228 (commencing with Section 14169.1) shall be regarded as quality assurance payments, the implementation or suspension of which does not affect a determination of the adequacy of any rates under federal law.

(m) (1) Subject to paragraph (2), the director may waive any or all interest and penalties assessed under this article in the event that the director determines, in his or her sole discretion, that the hospital has demonstrated that imposition of the full quality assurance fee on the timelines applicable under this article has a high likelihood of creating a financial hardship for the hospital or a significant danger of reducing the provision of needed health care services.

(2) Waiver of some or all of the interest or penalties under this subdivision shall be conditioned on the hospital’s agreement to make fee payments, or to have the payments withheld from payments otherwise due from the Medi-Cal program to the hospital, on a schedule developed by the department that takes into account the financial situation of the hospital and the potential impact on services.

(3) A decision by the director under this subdivision is not subject to judicial review.

(4) If fee payments are remitted to the department after the date determined by the department to be the final date for calculating the final supplemental payments under this article and Article 5.228 (commencing with Section 14169.1), the fee payments shall be retained in the fund for purposes of funding supplemental payments supported by a hospital quality assurance fee program implemented under subsequent legislation, provided, however, that if supplemental payments are not implemented under subsequent legislation, then those fee payments shall be deposited in the Distressed Hospital Fund.

(5) If during the implementation of this article, fee payments that were due under Article 5.21 (commencing with Section 14167.1) and Article 5.22 (commencing with Section 14167.31), or Article 5.227 (commencing with Section 14168.31), are remitted to the department under a payment plan or for any other reason, and the final date for calculating the final supplemental payments under those articles has passed, those fee payments shall be deposited in the fund to support the uses established by this article.

(Amended by Stats. 2013, Ch. 76, Sec. 220. (AB 383) Effective January 1, 2014. Conditionally inoperative as provided in subd. (e). Conditionally inoperative as provided in Sections 14169.38 (subd. (d), para. (1)) and 14169.40, or on date prescribed in Section 14169.41. Repealed on or after January 1, 2015, as provided in Section 14169.41.)