Agenda Report
Fullerton City Council
MEETING DATE: FEBRUARY 4, 2025
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: adam loeser, fire chief
PREPARED BY: andrew yang, administrative analyst ii
SUBJECT: Medi-Cal Voluntary Rate range Program participation for Emergency Medical Services Cost Recovery
SUMMARY
Fire Department requests City Council authorization to participate in the Medi-Cal Voluntary Rate Range Program (VRRP) Intergovernmental Transfer (IGT), execute agreements with the California Department of Health Care Services (DHCS) and CalOptima Health and appropriate funds for participation.
PROPOSED MOTION
Authorize Fire Department to pursue initial and ongoing participation in the Medi-Cal VRRP IGT.
Authorize City Manager, or designee, to execute agreements and documents with the DHCS and CalOptima Health for VRRP participation, contingent upon finalizing agreement terms, in a form approved by City Attorney.
ALTERNATIVE OPTIONS
Approve the Proposed Motion
Do not approve the Proposed Motion
Other options brought by City Council.
STAFF RECOMMENDATION
Staff recommends the Proposed Motion.
CITY MANAGER REMARKS
The City Manager recommends approval.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statements:
Fiscal and Organizational Stability
Public Safety.
FISCAL IMPACT
Medi-Cal Voluntary Rate Range Program participation for Calendar Year (CY) 2024 requires an upfront financial contribution from the City in Fiscal Year (FY) 2025-26, including a 20% administrative fee to the DHCS. CalOptima Health would remit a lump-sum payment to the City from the federally matched funds to recover costs for emergency medical services provided to Medi-Cal patients, while deducting a 2% administrative fee. The following summarizes projected financial outcome from program participation City Contribution to DHCS
Base Contribution: $1,500,000
DHCS Administrative Fee (20%): $300,000
Total City Contribution to DHCS: $1,800,000
Disbursement from DHCS to CalOptima
Base Contribution Matched with Federal Funds: $3,600,00 CalOptima Administrative Fee (2%): ($72,000)
Total Disbursement to Fullerton: $3,528,000 CalOptima Distribution to Fullerton Total Disbursement from CalOptima: $3,528,000
Less Initial City Contribution to DHCS: ($1,800,000)
Net Cost Recovery Revenue: $1,728,000.
Staff projects the City base contribution to range between $1 million and $2.5 million, based on Medi-Cal utilization rates, with administrative fees ranging from $200,000 to $500,000. The most likely scenario with a $1.8 million total contribution, including a $300,000 administrative fee, would yield a $3.5 million disbursement from CalOptima within 60 days of initial payment, resulting in $1.73 million net revenue – a 96% return on investment.
A scenario with lower Medi-Cal utilization (fewer eligible services), could decrease the base City contribution to $1 million, with a $200,000 administrative fee (totaling $1.2 million), resulting in a $2.4 million disbursement and $1.15 million net revenue. Conversely, a higher utilization scenario (greater service levels), could raise the City contribution as high as $2.5 million, with a $500,000 administrative fee (totaling $3 million), resulting in a $5.88 million disbursement and $2.88 million net revenue.
Program outcomes are subject to DHCS reconciliation The City could need to make additional contributions to meet federal matching requirements or refund a portion of the disbursement for adjustment required after reconciliation. Staff would monitor program performance and return to City Council should amendments become necessary.
Staff expects participation in the VRRP IGT program to serve as a significant cost recovery tool regardless of the scenario. This analysis reflects one-time revenue for FY 2025-26, though future program participation may yield different outcomes. Staff would incorporate gross projected revenue and expenses in the proposed FY 2025-26 budget should City Council and DHCS approve this item.
BACKGROUND AND DISCUSSION
The Medi-Cal VRRP IGT provides local government agencies an opportunity to recover a portion of unreimbursed costs associated with providing Medi-Cal services. Local funds transferred to the DHCS draw down federal matching dollars, which are then distributed to participating agencies through Medi-Cal managed care providers such as CalOptima Health.
The Fire Department is exploring the VRRP IGT program as a cost recovery tool for the EMS program. The department provides ground emergency medical transport services to all individuals regardless of insurance status or ability to pay and incurs significant uncompensated costs when treating Medi-Cal patients due to low reimbursement rates. The Fire Department provided pre-hospital emergency care to 2,252 Medi-Cal patients in 2024, representing approximately 22.5% of the total 10,027 annual medical responses. The City incurred approximately $2.25 million in uncompensated costs for these services. Participation in the VRRP IGT program would allow the City to recover these costs through enhanced federal Medi-Cal capitation rates, providing critical funding to offset operational expenses.
Program Process
The City transfers funds, representing a portion of unreimbursed Medi-Cal expenses, to DHCS along with a 20% administrative fee.
DHCS uses these funds to draw down federal matching dollars distributed to CalOptima Health.
CalOptima retains a 2% administrative fee and returns the remaining funds to the City within 60 days of receipt.
Staff anticipates program participation would generate substantial financial benefits and projects CalOptima disbursements to yield net revenues ranging from $1.15 million to $2.88 million, depending on Medi-Cal utilization rates.
Approximate Timeline Provided by DHCS
Late Q1 2025: City executes agreements with DHCS and CalOptima.
Early Q2 2025: Agreements finalized.
Mid Q3 2025: City wires required funds to DHCS.
Early Q4 2025: Federal matching dollars secured and disbursed by DHCS to CalOptima.
Late Q4 2025: City receives net reimbursement from CalOptima, completing the CY 2024 program process. The VRRP IGT program represents a significant opportunity for the City to recover a portion of unreimbursed costs associated with providing Medi-Cal services. Other municipalities, such as Newport Beach and Huntington Beach, have successfully implemented this program however this would represent Fullerton’s first-time endeavor to participate. Participation aligns with City fiscal stability and maintaining high-quality public safety services objectives. Revenue generated would offset operational costs and support the Fire Department EMS program.
Attachments:
Attachment 1 – Draft Letter of Interest to California DHCS cc: City Manager Eric J. Levitt
Medi-Cal Voluntary Rate Range Program Participation
February 4, 2025 - Page 2