The California Department of Health Care Services (DHCS) submitted the DRAFT Hospital Quality Assurance Fee Program (HQAF) to the Center for Medicare and Medicaid Services (CMS) on Friday, March 28th. The submitted request to CMS is for a program covering Calendar Year 2025 with an annual net benefit of approximately $7.9B. This is an increase of approximately 50 percent annually over the HQAF 8 (prior) program, largely due to an increase in the size of the Medi-Cal Managed Care Directed Payment pool as allowed by Federal regulation issued in April 2024. As previously reported, DHCS has allocated much of the new funding for outpatient services. Individual hospital net benefit will vary based on utilization, especially the Managed Care Directed Payments which will only be for in-network eligible inpatient and outpatient encounters provided during CY25.

 

While it is unknown how long approval may take, historically it has taken 6-9 months to receive approval from CMS. It is unlikely that any actual transactions under the program would occur prior to early CY2026. 

 

As a reminder, the review with CMS often results in changes in the timing and size of the program. We will keep members appraised if changes of any significance are required prior to approval. Notably, the DRAFT Model assumes no changes in available Federal Medicaid Funding that are currently being contemplated by Congress and the Administration. A copy of the DRAFT model and submitted State Plan Amendments is located below.

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• SPA 25-0012 and 25-0013 HQAF IX Broad Based Waiver Letter

• SPA 25-0012 Inpatient Appendix 12 to Attachment 4.19-A

• 25-0013 Outpatient- Supplement 41 to Att 4.19-B

• HQAF IX Fee and Payment Model

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