(a) To the extent authorized under a federal waiver or demonstration project described in Section 14180 that is approved by the federal Centers for Medicare and Medicaid Services, the department shall establish a program of investment, improvement, and incentive payments for designated public hospitals and, to the extent federal approval is obtained pursuant to subdivision (c) of Section 14166.155, for nondesignated public hospitals to encourage and incentivize delivery system transformation and innovation in preparation for the implementation of federal health care reform.

(b) The Public Hospital Investment, Improvement, and Incentive Fund is hereby established in the State Treasury. Notwithstanding Section 13340 of the Government Code, moneys in the fund shall be continuously appropriated, without regard to fiscal years, to the department for the purposes specified in this section.

(c) The fund shall consist of any moneys that a county, other political subdivision of the state, or other governmental entity in the state that may elect to transfer to the department for deposit into the fund, as permitted under Section 433.51 of Title 42 of the Code of Federal Regulations or any other applicable federal Medicaid laws.

(d) Moneys in the fund shall be used as the source for the nonfederal share of investment, improvement, and incentive payments as authorized under a federal waiver or demonstration project to participating designated public hospitals and, to the extent federal approval is obtained pursuant to subdivision (c) of Section 14166.155, to nondesignated public hospitals, defined in subdivisions (d) and (f) of Section 14166.1 respectively, and the governmental entities with which they are affiliated, that provide the intergovernmental transfers for deposit into the fund.

(e) The department shall obtain federal financial participation for moneys in the fund to the full extent permitted by law. Moneys shall be allocated from the fund by the department and used as the nonfederal share for claiming federal funds in accordance with the Special Terms and Conditions of the waiver or demonstration project and Sections 14166.77 and 14166.155, to the extent federal approval is obtained pursuant to subdivision (c) of Section 14166.151, as applicable. The moneys disbursed from the fund, and all associated federal financial participation, shall be distributed only to the designated public hospitals and the governmental entities with which they are affiliated, and to the extent federal approval is obtained pursuant to subdivision (c) of Section 14166.155, to nondesignated public hospitals as described in subdivision (a) and the governmental entities with which they are affiliated.

(f) Participation under this section is voluntary on the part of the county or other political subdivision for purposes of all applicable federal laws. As part of its voluntary participation in the nonfederal share of payments under this section, the county or other political subdivision agrees to reimburse the state for the nonfederal share of state staffing or administrative costs directly attributable to implementation of this section. This section shall be implemented only to the extent federal financial participation is not jeopardized.

(g) Notwithstanding the rulemaking provisions of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may clarify, interpret, or implement the provisions of this section by means of provider bulletins or similar instructions. The department shall notify the fiscal and appropriate policy committees of the Legislature of its intent to issue instructions under this section at least five days in advance of the issuance.

(Amended by Stats. 2012, Ch. 23, Sec. 109. (AB 1467) Effective June 27, 2012.)