Bill Text

Bill Information

PDF |Add To My Favorites |Track Bill | print page

SB-503 Medi-Cal: managed care plan: subcontracts.(2019-2020)

SHARE THIS:share this bill in Facebookshare this bill in Twitter
Date Published: 06/18/2019 09:00 PM
SB503:v97#DOCUMENT

Amended  IN  Assembly  June 18, 2019
Amended  IN  Senate  March 25, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 503


Introduced by Senator Pan

February 21, 2019


An act to amend Sections 14304 and 14452 of the Welfare and Institutions Code, relating to Medi-Cal.


LEGISLATIVE COUNSEL'S DIGEST


SB 503, as amended, Pan. Medi-Cal: managed care plan: subcontracts.
Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services either through a fee-for-service or managed care delivery system. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Existing law authorizes the department to enter into various types of contracts for the provision of services to beneficiaries, including contracts with prepaid health plans. Existing law requires the Director of Health Care Services, in accordance with specified procedures, to either terminate a contract with or impose one or more specified sanctions, including civil penalties pursuant to federal law, on a prepaid health plan or Medi-Cal managed care plan if the department makes a finding of noncompliance or for other good cause. Existing law defines “good cause” to include 3 repeated and uncorrected findings of serious deficiencies, which potentially endanger patient care and are identified in medical audits conducted by the department.
This bill would instead authorize “good cause” to be based on findings of serious deficiencies that have the potential to endanger patient care and are identified in the specified medical audits, and would conform the civil penalties to federal law.
Existing law requires subcontracts entered into by a prepaid health plan to contain the amount of compensation or other consideration that a subcontractor will receive under the terms of the subcontract with the prepaid health plan, and to meet specified requirements, including compliance with the Knox-Keene Health Care Service Plan Act of 1975.
This bill would require a Medi-Cal managed care plan to conduct conduct, commencing January 1, 2020, specified audits of its subcontractors, including an annual medical audit of any subcontract involving medical or administrative services. subcontractor that performs delegated functions involving medical review and decisionmaking. The bill would authorize a Medi-Cal managed care plan to conduct additional medical audits of a subcontract, for good cause, and to contract with a professional organization to perform medical audits. The bill would require a Medi-Cal managed care plan to report to the department the findings of and certificate of completion of, and any deficiencies discovered by, the finalized annual medical audit, and to make available the finalized medical audit upon the department’s request. The bill would require the department to post the annual medical report on its internet website. website, to develop a standardized process for Medi-Cal managed care plan audits that meets specified requirements, including requirements related to corrective action validation, and to provide this guidance to the Medi-Cal managed care plans by means of an all-plan letter.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 14304 of the Welfare and Institutions Code is amended to read:

14304.
 (a) The director shall terminate a contract with a prepaid health plan or a Medi-Cal managed care plan if the director finds that the standards prescribed in this chapter, the regulations, or the contract are not being complied with, that claims accrued or to accrue have not or will not be recompensed, or for other good cause shown. Good cause includes any findings of serious deficiencies that have the potential to endanger patient care, as defined by the department in accordance with this section, identified in the medical audits conducted by the department. Except in the event that the director determines there is an immediate threat to the health of Medi-Cal beneficiaries enrolled in the plan, at the request of the plan, the department shall hold a public hearing to commence 30 days after notice of intent to terminate the contract has been received by the plan. The department shall present evidence at the hearing showing good cause for the termination. The department shall assign an administrative law judge who shall provide a written recommendation to the department on the termination of the contract within 30 days after conclusion of the hearing. Reasonable notice of the hearing shall be given to the plan, to Medi-Cal beneficiaries enrolled in the plan, and others who may be directly interested, including any other persons and organizations as the director may deem necessary. The notice shall state the effective date of, and the reason for, the termination.
(b) In lieu of contract termination specified in subdivision (a), the director shall have the power and authority to take one or more of the following sanctions against a contractor for noncompliance with the findings by the director as specified in subdivision (a):
(1) Suspend enrollment and marketing activities.
(2) Require the contractor to suspend or terminate contractor personnel or subcontractors.
(3) Impose civil penalties pursuant to Section 438.704 of Title 42 of the Code of Federal Regulations, as follows:
(A) A limit of twenty-five thousand dollars ($25,000) for each determination of the following:
(i) The contractor fails substantially to provide medically necessary services that the contractor is required to provide, under law or under its contract with the department, to an enrollee covered under the contract.
(ii) The contractor misrepresents or falsifies information that is furnished to an enrollee, potential enrollee, or health care provider.
(iii) The contractor distributes directly, or indirectly through any agent or independent contractor, marketing materials that have not been approved by the department or that contain false or materially misleading information.
(iv) The contractor fails to comply with the requirements for physician incentive plans, as set forth in Sections 422.208 and 422.210 of Title 42 of the Code of Federal Regulations.
(B) A limit of one hundred thousand dollars ($100,000) for each determination of the following:
(i) The contractor conducts any act of discrimination against an enrollee on the basis of their health status or need for health care services. This includes termination of enrollment or refusal to reenroll a Medi-Cal beneficiary, except as permitted under the Medicaid program, or any practice that would reasonably be expected to discourage enrollment by beneficiaries whose medical condition or history indicates probable need for substantial future medical services.
(ii) The contractor misrepresents or falsifies information that it furnishes to the federal Centers for Medicare and Medicaid Services or to the department.
(C) A limit of fifteen thousand dollars ($15,000) for each Medi-Cal beneficiary the department determines was not enrolled because of a discriminatory practice under clause (i) of subparagraph (B) of paragraph (3). This sanction is subject to the overall limit of one hundred thousand dollars ($100,000) under subparagraph (B) of paragraph (3).
(4) (A) Notwithstanding the penalties assessed for the violations set forth in subparagraphs (A), (B), and (C) of paragraph (3), the director may impose civil penalties in accordance with this section, as follows:
(i) The contractor violates any federal or state statute or regulation.
(ii) The contractor violates any provision of its contract with the department.
(B) The civil penalties under this paragraph shall be assessed as follows:
(i) Five thousand dollars ($5,000) for the first violation.
(ii) Ten thousand dollars ($10,000) for the second violation.
(iii) Up to twenty-five thousand dollars ($25,000) for each subsequent violation.
(5) Make one or more of the temporary suspension orders set out in subdivision (d).
(6) Take other appropriate action as determined necessary by the department.
The director shall give reasonable notice of the director’s intention to apply any of the sanctions authorized by this subdivision to the plan and others who may be directly interested, including any other persons and organizations as the director may deem necessary. The notice shall include the effective date, the duration of, and the reason for each sanction proposed by the director. The penalties described in paragraphs (3) and (4) may be separately and independently assessed. Unless imposed in error, the penalties described in paragraphs (3) and (4) shall not be returned to the plan.
(c) Notwithstanding subdivision (b), the director shall terminate a contract with a prepaid health plan which the United States Secretary of Health and Human Services has determined does not meet the requirements for participation in the Medicaid program contained in Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code.
(d) (1) The department may make one or more of the following temporary suspension orders as an immediate sanction: temporarily suspend enrollment activities, temporarily suspend marketing activities, require the contractor temporarily to suspend specified personnel of the contractor, or require the contractor temporarily to suspend participation by a specified subcontractor. The temporary suspension orders must be effective no earlier than 20 days after the notice specified in subdivision (b).
(2) If the department issues a temporary suspension order as an immediate sanction, it shall notify the contractor of the nature and effective date of the temporary suspension and at the same time shall serve the provider with an accusation. Upon receipt of a notice of defense filed by the contractor, and within 15 days of the department’s receipt of the notice, the department shall set the matter for a hearing, which shall be held as soon as possible, but not later than 30 days after receipt of the notice of hearing by the contractor. The hearing may be continued at the request of the contractor if a continuance is necessary to permit presentation of an adequate defense. The temporary suspension order shall remain in effect until the hearing is completed and the department has made a final determination on the merits. However, the temporary suspension order shall be deemed vacated if the director fails to make a final determination on the merits within 60 days after the original hearing has been completed.
(e) A contractor may request a hearing in connection with any sanctions applied pursuant to subdivision (b), other than those contained in a temporary suspension order, within 15 working days after the notice of the effective date of the sanctions has been given, by sending a letter so stating to the address specified in the notice. The department shall stay implementation of the sanction upon receipt of the request for a hearing. Implementation of the sanction shall remain stayed until the effective date of the final decision of the department.
(f) Except as otherwise provided in this section, a hearing to review the imposition of sanctions, including a temporary suspension order, shall be held pursuant to the procedures set forth in Section 100171 of the Health and Safety Code.
(g) The director may collect civil penalties by withholding the amount from capitation owed to the plan.
(h) For purposes of this section, a “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries, including pursuant to any of the following:
(1) Article 2.7 (commencing with Section 14087.3).
(2) Article 2.8 (commencing with Section 14087.5).
(3) Article 2.81 (commencing with Section 14087.96).
(4) Article 2.82 (commencing with Section 14087.98).
(5) Article 2.91 (commencing with Section 14089).
(6) Chapter 3 (commencing with Section 101675) of Part 4 of Division 101 of the Health and Safety Code.

SEC. 2.

 Section 14452 of the Welfare and Institutions Code is amended to read:

14452.
 (a) (1) Any subcontract that a Medi-Cal managed care plan enters into with a subcontractor shall comply with the requirements of the Knox-Keene Health Care Service Plan Act of 1975, or the requirements of Part 2 (commencing with Section 10110) of Division 2 of the Insurance Code, as appropriate, and federal law. A subcontract shall be in writing, and a copy of the subcontract shall be transmitted to the department.
(2) A Medi-Cal managed care plan contractor shall ensure compliance with the provisions of Chapter 7 (commencing with Section 14000) and this chapter, and this obligation shall not be waived if the contractor either subcontracts with or delegates any duties to a medical group, independent practice association, or other entity. A Medi-Cal managed care plan contractor bears the ultimate responsibility for adherence to, and compliance with, the terms and conditions of the Medi-Cal managed care plan contract.
(b) A subcontract shall contain the amount of compensation or other consideration that the subcontractor will receive under the terms of the subcontract with the Medi-Cal managed care plan. These provisions shall not apply to a provider who is employed or salaried by the Medi-Cal managed care plan. Unless the department objects, a Medi-Cal managed care plan may enter into a subcontract in which consideration is determined by a percentage of the payment that it receives from the department. This subdivision shall not be construed to prohibit any subcontract in which consideration is determined on a capitation basis.
(c) A subcontract between a Medi-Cal managed care plan and the subcontractor shall be public records on file with the department. The names of the officers and owners of the subcontractor, stockholders owning more than 10 percent of the stock issued by the subcontractor, and major creditors holding more than 5 percent of the debt of the subcontractor shall be submitted by each Medi-Cal managed care plan to the department and shall be public records on file with the department.
(d) A Medi-Cal managed care plan that is not a qualified health maintenance organization pursuant to Title XIII of the federal Public Health Service Act shall submit all provider and management subcontracts to the department for approval prior to the subcontract taking effect.
(e) A subcontract shall require that the subcontractor make its books and records pertaining to the goods and services furnished under the terms of the subcontract available for inspection, examination, or copying by the department during normal working hours at the subcontractor’s place of business, or another mutually agreeable location in California.

(f)(1)If a Medi-Cal managed care plan subcontracts with an entity to provide medical or administrative services, the Medi-Cal managed care plan shall conduct an annual medical audit of the subcontract.

(2)A Medi-Cal managed care plan shall conduct, on an annual basis, and without prior notice to the subcontractor, a medical audit of at least 10 percent of its subcontracts.

(f) (1) Commencing January 1, 2020, a Medi-Cal managed care plan shall conduct an annual medical audit of any subcontractor that performs, as part of their delegated duties, medical review and decisionmaking.
(2) Commencing January 1, 2022, a Medi-Cal managed care plan shall conduct at least 10 percent of the annual audits, as specified in paragraph (1), without prior notice to the subcontractors.
(3) (A) A In addition to the annual medical audit specified in paragraph (1), a Medi-Cal managed care plan may conduct, with or without prior notice to the subcontractor, any additional medical additional audits of a subcontract, subcontractor, for good cause.
(B) For purposes of subparagraph (A), “good cause” means, but is not limited to, any irregularities in enrollment, service denial rates, utilization rates, quality performance, and grievance and appeals.

(4)Any medical audit conducted pursuant to this subdivision shall consider the standards and criteria of the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code), as appropriate.

(5)

(4) A Medi-Cal managed care plan may contract with a professional organization, as appropriate, organization to perform medical audits on its behalf of any subcontractor. The Medi-Cal managed care plan or entity performing the medical audit, audit shall make a finding of fact for each subcontractor with respect to the subcontractor’s compliance with legal and contractual obligations of the contractor that have been delegated to the subcontractor, including, but not limited to, the ability to provide quality health care services, effectiveness of peer review and utilization control mechanisms, and the overall performance of the subcontractor in providing health care benefits to enrollees.

(6)

(5) A Medi-Cal managed care plan shall report to the department the findings, including any discovered deficiencies, of findings of, deficiencies discovered by, and the certificate of completion of, the finalized annual medical audit, as described in paragraph (1), as soon as possible, but no later than 90 days following the completion of any corrective action plan initiated pursuant to the annual medical audit, if any, unless the department determines, in the discretion of the director, that additional time is reasonably necessary to fully and fairly report the results of the annual medical audit. discovered deficiencies. A Medi-Cal managed care plan shall make available to the department any finalized medical audit of any subcontractor upon the department’s request.

(7)

(6) The department shall publish the report, as described in paragraph (6), (5), on its internet website.
(g) A Medi-Cal managed care plan shall include in its grievances and appeals records and related reports, as described in Section 438.416 of Title 42 of the Code of Federal Regulations and Section 1368 of the Health and Safety Code, the identification of any subcontractor responsible for making the determination of medical necessity in the case and any subcontractor responsible for delivering the services at issue.
(h) (1) By January 1, 2021, the department shall develop a standardized process for Medi-Cal managed care plan medical audits of its subcontractors, and provide guidance to the Medi-Cal managed care plans by means of an all-plan letter.
(2) In developing the standardized audit process, the department shall consider the standards and criteria of the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code).
(3) The department shall ensure that the standardized process defines requirements in the audit, including, but not limited to, all of the following domains:
(A) Measurements of performance.
(B) Audit documentation.
(C) Findings validation.
(D) Corrective action validation.
(4) The department shall require Medi-Cal managed care plans to adopt the standardized process developed by the department, as specified in paragraph (1), by January 1, 2022.

(h)

(i) (1) The requirements of this section apply to all Medi-Cal managed care plans.
(2) “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries, including pursuant to any of the following:
(A) Article 2.7 (commencing with Section 14087.3).
(B) Article 2.8 (commencing with Section 14087.5).
(C) Article 2.81 (commencing with Section 14087.96).
(D) Article 2.82 (commencing with Section 14087.98).
(E) Article 2.91 (commencing with Section 14089).
(F) Chapter 3 (commencing with Section 101675) of Part 4 of Division 101 of the Health and Safety Code.
(j) For purposes of this section, the following definitions apply:
(1) “Medical audit” means a survey conducted to ensure compliance with all legal and contractual obligations of the Medi-Cal managed care plan that has been delegated to the subcontractor.
(2) “Subcontractor” means an individual or entity that has a contract with a Medi-Cal managed care plan that relates directly to the performance of the plan’s obligations under its contract with the department. A network provider is not a subcontractor by virtue of the network provider agreement with the Medi-Cal managed care plan.