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

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Date Published: 09/12/2019 09:00 PM
SB503:v95#DOCUMENT

Enrolled  September 12, 2019
Passed  IN  Senate  September 10, 2019
Passed  IN  Assembly  September 09, 2019
Amended  IN  Assembly  September 03, 2019
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 Section 14452 of the Welfare and Institutions Code, relating to Medi-Cal.


LEGISLATIVE COUNSEL'S DIGEST


SB 503, 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 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, commencing January 1, 2022, specified audits of its subcontractors, including an annual medical audit of any 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, to contract with a professional organization to perform medical audits, and to collaborate or share medical audit findings with another Medi-Cal managed care plan if 2 or more Medi-Cal managed care plans subcontract with the same subcontractor in lieu of completing separate audits. The bill would require a Medi-Cal managed care plan to report to the department the findings 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, 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 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 subcontractor. 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) Commencing January 1, 2022, a Medi-Cal managed care plan shall conduct an annual medical audit, in accordance with the standardized process established in subdivision (h), of any subcontractor that performs, as part of their delegated duties, medical review, and decisionmaking.
(2) Commencing January 1, 2023, 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) 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, additional audits of a subcontractor, for good cause.
(B) For purposes of subparagraph (A), “good cause” includes, but is not limited to, any irregularities in service denial rates, utilization rates, quality performance, or grievance and appeals.
(4) A Medi-Cal managed care plan may contract with a professional organization to perform medical audits on its behalf of any subcontractor. The Medi-Cal managed care plan or entity performing the medical 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.
(5) In instances where two or more Medi-Cal managed care plans subcontract with the same subcontractor, a Medi-Cal managed care plan may collaborate or share medical audit findings with another Medi-Cal managed care plan in lieu of completing two or more separate audits.
(6) A Medi-Cal managed care plan shall report to the department, in a manner and format specified by the department, 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. This time limit shall not be waived unless the department determines, in the discretion of the director, that additional time is reasonably necessary to fully and fairly report 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) The department shall publish the report, as described in paragraph (6), 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. These records and reports shall be submitted in a manner and format specified by the department.
(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.
(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, 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 8 (commencing with Section 14200).
(G) 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 or indirectly 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 alone.