REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
February 11, 2025
FROM
ANDREW GOLDFRACH, ARMC Chief Executive Officer, Arrowhead Regional Medical Center
SUBJECT
Title
Agreement with Toyon Associates, Inc. to Pursue the Rural Floor Wage Index Appeal Relating to Medicare Reimbursement Rates for Federal Fiscal Years 2019, and 2021 Through 2023
End
RECOMMENDATION(S)
Recommendation
Approve Agreement with Toyon Associates, Inc., including a non-standard term, to pursue an appeal for the Centers for Medicare and Medicaid Services to correct its calculation of the rural floor wage index, relating to Medicare reimbursements for federal fiscal years 2019, and 2021 through 2023, in an amount not to exceed $808,000, effective February 11, 2025 until terminated by either party or the appeals are resolved.
(Presenter: Andrew Goldfrach, ARMC Chief Executive Officer, 580-6150)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
Provide for the Safety, Health and Social Service Needs of County Residents.
FINANCIAL IMPACT
Approval of this item will not result in the use of Discretionary General Funding (Net County Cost). Under the agreement with Toyon Associates, Inc. (Agreement), the County must pay a $2,000 filing fee, for each cost reporting year, and a contingency fee of up to 12.5% of any additional Medicare reimbursement, or reduction in outstanding liability that Arrowhead Regional Medical Center (ARMC) obtains as a result of Toyon’s successful appeal; with a total not-to-exceed cost of $808,000 based on the estimated maximum potential recovery. The costs under this Agreement will be funded by State Medi-Cal, Federal Medicare, private insurances, and other departmental revenue. Funding sources may change in the future pending any legislative activity related to the repeal and/or replacement of the Affordable Care Act. Adequate appropriation and revenue have been included in ARMC’s 2024-25 budget and will be included in future recommended budgets.
BACKGROUND INFORMATION
The Agreement with Toyon Associates, Inc. (Toyon) will allow ARMC to utilize the services provided by Toyon to pursue an appeal to have the Centers for Medicare and Medicaid Services (CMS) to correct its calculation of the rural floor wage index (Index). Medicare pays hospitals for inpatient services provided to Medicare patients based on the Inpatient Prospective Payment System (IPPS). The IPPS takes into account various factors to determine reimbursement amounts, including the Index. This Index is determined by a complex formula, but the IPPS requires the CMS ensure that urban hospitals in a state will not have a lower Index than rural hospitals in that state. The appeal relates to federal fiscal years 2019 and 2021 through 2023. The appeal would not involve federal fiscal year 2020 as ARMC is currently participating in a separate appeal for that time period that will preclude ARMC from pursuing this appeal.
The appeals process that Toyon will pursue on behalf of ARMC involves the filing of an administrative appeal with the Provider Reimbursement Review Board (PRRB). If Toyon is unable to reach a resolution in the PRRB, Toyon will, at its own cost, retain a law firm to pursue the appeal in federal court. ARMC is required to pursue an administrative appeal in the PRRB before seeking relief from the federal court.
On February 11, 2025, in closed session, the Board of Supervisors (Board) authorized the County to pursue the appeal relating to the Index for federal fiscal years 2019 and 2021 through 2023. This Agreement with Toyon formalizes that approval.
The Agreement is Toyon’s standard commercial contract, negotiated by the parties, which includes a term that differs from the standard County contract and omits certain County standard contract terms as follows:
The Agreement remains in effect until terminated or the appeals are resolved.
• County Policies 11-05 and 11-06SP1 do not permit indefinite terms except for end user license agreements, software/hardware licenses and subscriptions, and master services agreements or unless approved by the Board.
• Potential Impact: There is no end term to the Agreement and the County is indefinitely bound to the terms and conditions of the Agreement until the County gives notice of termination or the appeals are resolved.
ARMC recommends the approval of the Agreement, including the non-standard term, to provide for the safety, health and social service needs of County residents by additional resources for patient care.
PROCUREMENT
The Purchasing Department supports this non-competitive procurement based on specialized credentials and expertise as Toyon has unique expertise in preparation and consultation of specific reports related to the CMS. Additionally, Toyon currently prepares all of ARMC’s CMS cost reports, and therefore, has the experience needed to file the appeal on behalf of the hospital.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Charles Phan, Supervising Deputy County Counsel, 387-5455) on January 10, 2025; Purchasing (Veronica Pedace, Buyer III, 387-2464) on January 15, 2025; ARMC Finance (Chen Wu, Finance and Budget Officer, 580-3165) on January 17, 2025; Finance (Jenny Yang, Administrative Analyst, 387-4884) on January 22, 2025; and County Finance and Administration (Valerie Clay, Deputy Executive Officer, 387-5423) on January 23, 2025.