This report is a follow-up to the Joint Commission on Health Care's (JCHC) recent activities related to Virginia's Certificate of Public Need (COPN) program. In December 2000, the JCHC issued a report entitled "A Plan to Eliminate the Certificate of Public Need Program Pursuant to Senate Bill 337." Following publication of that report, the JCHC introduced legislation during the 2001 Session (SB 1084 and HB 2155) which would have substantially eliminated the state's COPN program in three separate phases. Among the provisions of that legislation concerning providers of deregulated services was language directing the JCHC, during Phase 1 of deregulation, to "design a proposal for incorporating deregulated services into the Indigent Health Care Trust Fund or a new indigent care program." While the JCHC's deregulation plan (as provided in SB 1084/HB 2155) was not approved by the 2001 Session of the General Assembly, at its May 1, 2001 meeting, the JCHC directed staff to complete this study.

Based on our research and analysis during this review, we concluded the following concerning the Indigent Health Care Trust Fund (IHCTF) and its possible modification to incorporate providers of deregulated specialty services:

• The IHCTF attempts to equalize the burden of providing charity care among hospitals.

• The IHCTF is administered by DMAS.

• Historically, the IHCTF has been able to reimburse about 40 percent of qualifying charity care costs above the statewide median level of charity care.

• The total state appropriation to the IHCTF is $12 million. However, this amount has consistently been underspent. Only $3.7 million of the $6 million non-general fund (i.e., hospital contribution) appropriation is spent.

• State appropriations to the IHCTF comprise a very small part of state spending on indigent health care.

• DMAS staff describe the IHCTF as being expensive and labor-intensive to administer.

• Establishing the purpose of a new or revised IHCTF should be the first step in any design process to incorporate providers of deregulated specialty services. Other elements of a design process could include:

* Expanding the definition of indigent care,

* Establishing data collection and reporting requirements,

* Recognizing financial differences between physician practices and hospitals,

* Establishing an indigent care benchmark, and

* Determining whether there should be any constraints of the size of the fund.

• The JCHC received four preliminary design proposals, which are summarized in this report.

A number of policy options were offered for consideration by the Joint Commission on Health Care regarding the issues discussed in this report. These policy options are listed on page 35.

Our review process on this topic included an initial staff briefing, which comprises the body of this report. This was followed by a public comment period during which time interested parties forwarded written comments to us regarding the report. The public comments (attached at Appendix A) provide additional insight into the various issues covered in this report.

On behalf of the Joint Commission on Health Care and its staff, I would like to thank the Department of Medical Assistance Services, the Virginia Hospital and Healthcare Association, the Medical Society of Virginia, the Virginia Association of Regional Health Planning Agencies, and Kemper Consulting for their cooperation and assistance during this study.

Patrick W. Finnerty
Executive Director
December 2001