Inpatient Contract Negotiations

Prior to the inception of the Selective Provider Contracting Program (SPCP) in 1982, California hospitals served the Medi-Cal population under a cost-based reimbursement system.  Two major issues in 1982 drove the State Legislature to look at alternative reimbursement methods--a large State budget deficit and a significant excess capacity of hospital inpatient beds in the State.  In order to ensure continued access to hospital inpatient care for Medi-Cal beneficiaries and at the same time contain overall Medi-Cal costs for hospital inpatient services, the SPCP was established.

Through the SPCP, the Department of Health Care Services contracts on a competitive basis with those hospitals that desire to provide inpatient services to Medi-Cal beneficiaries at a negotiated per diem rate for all hospital inpatient services.  In utilizing principles of competition and the negotiation process, the Department of Health Care Services is able to optimize the availability of cost-effective hospital inpatient services under the Medi-Cal program.  In contrast to a cost-based model, the competitive contracting process provides contracted hospitals with incentives to better manage and control their costs.  In addition, by selectively contracting with hospitals, the Department of Health Care Services can take advantage of the economies of scale.  SPCP operates under a federal waiver in accordance with section 1115(a) of the Social Security Act.

The California Medical Assistance Commission (CMAC) was the agency established to negotiate with hospitals on behalf of the Department of Health Care Services from 1983 until July 1, 2012. On July 1, 2012 CMAC was eliminated and the SPCP was transferred to the Department of Health Care Services for negotiation and administration until the SPCP is replaced by the implementation of the new discharge-based diagnosis-related groups (DRG) hospital inpatient payment methodology scheduled for July 1, 2013.

The SPCP has operated successfully for over 29 years, and the competitive contracting process has assured continued hospital access for Medi-Cal beneficiaries.  In fiscal year 2011-12, SPCP saved the State General Fund an estimated $770.8 million in Medi-Cal hospital inpatient payments.  Since the inception of SPCP, the program has saved the State General Fund $12.7 billion.

For more information please contact:

Office of Selective Provider Contracting Program
CA Department of Health Care Services
1501 Capitol Avenue, MS 4000
Sacramento, CA  95899-7413
(916) 324-2726 office
(916) 440-7570 fax
SPCPContact@dhcs.ca.gov