BILL NUMBER: SB 810	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 23, 2009

INTRODUCED BY   Senator Leno
   (Principal coauthor: Senator Alquist)
   (Principal coauthors: Assembly Members Ammiano, Huffman, and
Yamada)
   (Coauthors: Senators Cedillo, Corbett, DeSaulnier, Florez,
Hancock, Lowenthal, Padilla, Pavley, Romero, Steinberg, Wiggins, and
Yee)
   (Coauthors: Assembly Members Bass, Beall, Block, Blumenfield,
Brownley, Chesbro, Coto, Davis, De La Torre, Eng, Evans, Feuer, 
Fong,  Hayashi, Jones,  Lieu,  Bonnie Lowenthal, Ma,
Mendoza,  Monning,  Nava, Price, Ruskin,  Salas, 
Skinner, Solorio, Swanson, Torlakson, and Torrico)

                        FEBRUARY 27, 2009

   An act to add Division 114 (commencing with Section 140000) to the
Health and Safety Code, relating to health care coverage.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 810, as amended, Leno. Single-payer health care coverage.
   Existing law does not provide a system of universal health care
coverage for California residents. Existing law provides for the
creation of various programs to provide health care services to
persons who have limited incomes and meet various eligibility
requirements. These programs include the Healthy Families Program
administered by the Managed Risk Medical Insurance Board, and the
Medi-Cal program administered by the State Department of Health Care
Services. Existing law provides for the regulation of health care
service plans by the Department of Managed Health Care and health
insurers by the Department of Insurance.
   This bill would establish the California Healthcare System to be
administered by the newly created California Healthcare Agency under
the control of a Healthcare Commissioner appointed by the Governor
and subject to confirmation by the Senate. The bill would make all
California residents eligible for specified health care benefits
under the California Healthcare System, which would, on a
single-payer basis, negotiate for or set fees for health care
services provided through the system and pay claims for those
services. The bill would provide that a resident of the state with a
household income, as specified, at or below 200% of the federal
poverty level would be eligible for the type of benefits provided
under the Medi-Cal program. The bill would require the commissioner
to seek all necessary waivers, exemptions, agreements, or legislation
to allow various existing federal, state, and local health care
payments to be paid to the California Healthcare System, which would
then assume responsibility for all benefits and services previously
paid for with those funds.
   The bill would create the Healthcare Policy Board to establish
policy on medical issues and various other matters relating to the
system. The bill would create the Office of Patient Advocacy within
the agency to represent the interests of health care consumers
relative to the system. The bill would create within the agency the
Office of Health Planning to plan for the health care needs of the
population, and the Office of Health Care Quality, headed by a chief
medical officer, to support the delivery of high quality care and
promote provider and patient satisfaction. The bill would create the
Office of Inspector General for the California Healthcare System
within the Attorney General's office, which would have various
oversight powers. The bill would prohibit health care service plan
contracts or health insurance policies from being issued for services
covered by the California Healthcare System. The bill would create
the Healthcare Fund and the Payments Board to administer the finances
of the California Healthcare System. The bill would create the
California Healthcare Premium Commission (Premium Commission) to
determine the cost of the California Healthcare System and to develop
a premium structure for the system that complies with specified
standards. The bill would require the Premium Commission to recommend
a premium structure to the Governor and the Legislature on or before
January 1,  2011   2012  , and to make a
draft recommendation to the Governor, the Legislature, and the public
90 days before submitting its final premium structure
recommendation. The bill would specify that only its provisions
relating to the Premium Commission would become operative on January
1, 2010, with its remaining provisions becoming operative on the date
the Secretary of California Health and Human Services notifies the
Legislature, as specified, that sufficient funding exists to
implement the California Healthcare System. The bill would require
that system to be operative within 2 years of that date and would
provide for various transition processes for that period.
   The bill would extend the application of certain insurance fraud
laws to providers of services and products under the system, thereby
imposing a state-mandated local program by revising the definition of
a crime. The bill would enact other related provisions relative to
budgeting, regional entities, federal preemption, subrogation,
collective bargaining agreements, compensation of health care
providers, conflict of interest, patient grievances, independent
medical review, and associated matters.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Division 114 (commencing with Section 140000) is added
to the Health and Safety Code, to read:

      DIVISION 114.  CALIFORNIA UNIVERSAL HEALTHCARE ACT


      CHAPTER 1.  GENERAL PROVISIONS


   140000.  There is hereby established in state government the
California Healthcare System, which shall be administered by the
California Healthcare Agency, an independent agency under the control
of the Healthcare Commissioner.
   140000.6.  No health care service plan contract or health
insurance policy, except for the California Healthcare System plan,
may be sold in California for services provided by the system.
   140001.  This division shall be known and may be cited as the
California Universal Healthcare Act.
   140002.  This division shall be liberally construed to accomplish
its purposes.
   140003.  The California Healthcare Agency is hereby created and
designated as the single state agency with full power to supervise
every phase of the administration of the California Healthcare System
and to receive grants-in-aid made by the United States government,
by the state, or by other sources in order to secure full compliance
with the applicable provisions of state and federal law.
   140004.  The California Healthcare Agency shall be comprised of
the following entities:
   (a) The Healthcare Policy Board.
   (b) The Office of Patient Advocacy.
   (c) The Office of Health Planning.
   (d) The Office of Health Care Quality.
   (e) The Healthcare Fund.
   (f) The Public Advisory Committee.
   (g) The Payments Board.
   (h.) Partnerships for Health.
   140005.  The Legislature finds and declares all of the following:
   (a) An estimated 6.6 million Californians were uninsured in 2006,
representing over 20 percent of the nonelderly population.
   (b) In California, 763,000 children are currently uninsured, and
an additional 300,000 are significantly at risk for losing their
coverage.
   (c) Health care spending has continuously grown two to three times
faster than California's economy, while health insurance premiums
have grown significantly faster than overall health care spending.
   (d) Since 2000, health care costs have outpaced increases in wages
by a ratio of four to one.
   (e) One-third of California's State Budget is devoted to health
care, including direct public programs as well as employee health
benefits. The imbalanced growth in health spending relative to
economic growth which drives public revenues greatly hinders
California's ability to maintain a balanced budget.
   (f) On average, the United States spends more than twice as much
as all other industrial nations on health care, both per person and
as a percentage of its gross domestic product. Additionally, the rate
of health care inflation significantly outpaces other industrial
nations.
   (g) Despite this high spending, United States healthcare outcomes
consistently rank at the bottom of all industrial nations and the
United States Institute of Medicine has declared an epidemic of
substandard health-care throughout the nation.
   (h) Instead of effectively containing costs, costs have been
increasingly shifted to working Californians in the form of a
continual decline in employer-offered coverage, dramatic increases in
premiums, copayments, and deductibles, declining clinical quality,
overall reductions in benefits, and inappropriate utilization review
procedures that deny patients access to needed care.
   (i) As a result, one-half of all bankruptcies in the United States
now relate to medical costs, though three-fourths of bankrupted
families had health care coverage at the time of sustaining the
injury or illness.
   (j) More than one-half of all Americans report forgoing
recommended health care because of the cost, and Americans are more
likely to report difficulty seeing a doctor on the day they sought.
   (k) Health plans and insurers compete to construct patient pools
consisting of the healthiest segments of the population, leaving
higher risk patients to public programs or uninsured.
   (l) Segregating patients into groups based on actuarial
assessments of their medical risk guarantees the continuation of
entrenched health care disparities in access and quality, and drives
health care resources toward healthier populations who least need it
for whom more care often does more harm than good.
   (m) The Institute of Medicine estimates that 18,000 people die
annually in the United States because of lack of access to care and
that 30,000 die from overtreatment.
   (n) The RAND Institute estimates that one-third of clinical
procedures performed are of questionable clinical benefit.
   (o) Quantitative analyses performed by the Congressional Budget
Office, the General Accounting Office, the Lewin Group, and the
Legislative Analyst's Office indicate that under a single payer
health care coverage system, the amount currently spent for health
care is adequate to finance comprehensive high quality health care
coverage for every resident of the state.
   (p) According to these reports and numerous other studies, by
simplifying administration, achieving bulk purchase discounts on
pharmaceuticals, reducing the use of emergency facilities for primary
care, and better managing health care resources, California could
divert billions of dollars toward direct health care.
   (q) Enactment of a single payer universal health care system would
create 2.6 million jobs in the United States, while infusing three
hundred seventeen billion dollars ($317,000,000,000) in new business
and public revenues and one hundred billion dollars
($100,000,000,000) in wages into the United States economy according
to a recent study by the Institute for Health and Socioeconomic
Policy.
   (r) Single payer health care, exhibited by Medicare and the
Veterans Administration, along with virtually every other industrial
nation in the world, is a well tested model that has been proven to
contain the growth in health care spending while promoting quality
improvements and maintaining comprehensive coverage.
   140005.1.  (a) It is the intent of the Legislature to establish a
system of universal health care coverage in this state that provides
all residents with comprehensive health care benefits, guarantees a
single standard of care for all residents, stabilizes the growth in
health care spending, and improves the quality of health care for all
residents.
   (b) It is the intent of the Legislature that, in order to ensure
an adequate supply and distribution of direct care providers in the
state, a just and fair return for providers electing to be
compensated by the health care system, and a uniform system of
payments, the state shall actively supervise and regulate a system of
payments whereby groups of fee-for-service physicians are authorized
to select representatives of their specialties to negotiate with the
health care system, pursuant to Section 140209. Nothing in this
division shall be construed to allow collective action against the
health care system.
   140006.  This division shall have all of the following purposes:
   (a) To provide affordable and comprehensive health care coverage
with a single standard of care for all California residents.
   (b) To control health care costs and the growth of health care
spending, subject to the obligation described in subdivision (a).
   (c) To achieve measurable improvement in the quality of care and
the efficiency of care delivery.
   (d) To prevent disease and disability and to improve or maintain
health and functionality.
   (e) To increase health care provider, consumer, employee, and
employer satisfaction with the health care system.
   (f) To implement policies that strengthen and improve culturally
and linguistically sensitive care and sensitive care provided to
disabled persons.
   (g) To develop an integrated population-based health care database
to support health care planning.
   (h) To provide information and care in an appropriate and
accessible format.
   140007.  As used in this division, the following terms have the
following meanings:
   (a) "Agency" means the California Healthcare Agency.
   (b) "Clinic" means an organized outpatient health facility that
provides direct medical, surgical, dental, optometric, or podiatric
advice, services, or treatment to patients who remain less than 24
hours, and that may also provide diagnostic or therapeutic services
to patients in the home as an alternative to care provided at the
clinic facility, and includes those facilities defined under Sections
1200 and 1200.1.
   (c) "Commissioner" means the Healthcare Commissioner.
   (d) "Direct care provider" means any licensed health care
professional that provides health care services through direct
contact with the patient, either in person or using approved
telemedicine modalities as identified in Section 2290.5 of the
Business and Professions Code.
   (e) "Essential community provider" means a health facility that
has served as part of the state's health care safety net for
low-income and traditionally underserved populations in California
and that is one of the following:
   (1) A "community clinic" as defined under subparagraph (A) of
paragraph (1) of subdivision (a) of Section 1204.
   (2) A "free clinic" as defined under subparagraph (B) of paragraph
(1) of subdivision (a) of Section 1204.
   (3) A "federally qualified health center" as defined under Section
1395x (aa)(4) or 1396d (l)(2) of Title 42 of the United States Code.

   (4) A "rural health clinic" as defined under Section 1395x (aa)(2)
or 1396d (l)(1) of Title 42 of the United States Code.
   (5) Any clinic conducted, maintained, or operated by a federally
recognized Indian tribe or tribal organization, as defined in Section
1603 of Title 25 of the United States Code.
   (6) Any clinic exempt from licensure under subdivision (h) of
Section 1206.
   (f) "Health care provider" means any professional person, medical
group, independent practice association, organization, health
facility, or other person or institution licensed or authorized by
the state to deliver or furnish health care services.
   (g) "Health facility" means any facility, place, or building that
is organized, maintained, and operated for the diagnosis, care,
prevention, and treatment of human illness, physical or mental,
including convalescence and rehabilitation and including care during
and after pregnancy, or for any one or more of these purposes, for
one or more persons, and includes those facilities defined under
subdivision (b) of Section 15432 of the Government Code.
   (h) "Hospital" means all health facilities to which persons may be
admitted for a 24-hour stay or longer, as defined in Section 1250,
with the exception of nursing, skilled nursing, intermediate care,
and congregate living health facilities.
   (i) "Integrated health care delivery system" means a provider
organization that meets both of the following criteria:
   (1) Is fully integrated operationally and clinically to provide a
broad range of health care services, including preventative care,
prenatal and well-baby care, immunizations, screening diagnostics,
emergency services, hospital and medical services, surgical services,
and ancillary services.
   (2) Is compensated using capitation or facility budgets, except
for copayments, for the provision of health care services.
   (j) "Large employer" means a person, firm, proprietary or
nonprofit corporation, partnership, public agency, or association
that is actively engaged in business or service, that, on at least 50
percent of its working days during the preceding calendar year
employed at least 50 employees, or, if the employer was not in
business during any part of the preceding calendar year, employed at
least 50 employees on at least 50 percent of its working days during
the preceding calendar quarter.
   (k) "Premium Commission" means the California Healthcare Premium
Commission.
   (l) "Primary care provider" means a direct care provider that is a
family physician, internist, general practitioner, pediatrician, an
obstetrician-gynecologist, or a family nurse practitioner or
physician assistant practicing under supervision as defined in
California codes or essential community providers who employ primary
care providers.
   (m) "Small employer" means a person, firm, proprietary or
nonprofit corporation, partnership, public agency, or association
that is actively engaged in business or service and that, on at least
50 percent of its working days during the preceding calendar year
employed at least two but no more than 49 employees, or, if the
employer was not in business during any part of the preceding
calendar year, employed at least two but no more than 49 eligible
employees on at least 50 percent of its working days during the
preceding calendar quarter.
   (n) "System" means the California Healthcare System.
   140008.  The definitions contained in Section 140007 shall govern
the construction of this division, unless the context requires
otherwise.
      CHAPTER 2.  GOVERNANCE


   140100.  (a) (1) The commissioner shall be appointed by the
Governor on or before March 1, 2010, subject to confirmation by the
Senate. If in session, the Senate shall act on the appointment within
30 days of the appointment date. If the Senate does not act on the
appointment within that period, the nominee shall be deemed confirmed
and may take office. If the Senate is not in session at the time of
the appointment, the Senate shall act on the appointment within 30
days of the commencement of the next legislative session. If the
Senate does not act on the appointment within that period, the
appointee shall be deemed confirmed and may take office.
   (2) If the Senate by a vote fails to confirm the nominee for
commissioner, the Governor shall make a new appointment within 30
days of the Senate's vote. The appointment is subject to confirmation
by the Senate, and the procedures described in paragraph (1) shall
apply to the confirmation process.
   (b) The commissioner is exempt from the State Civil Service Act
(Part 2 (commencing with Section 18500) of Division 5 of Title 2 of
the Government Code).
   (c) The commissioner may not be a state legislator or a Member of
the United States Congress while holding the position of
commissioner.
   (d) The commissioner shall not have been employed in any capacity
by a for-profit insurance, pharmaceutical, or medical equipment
company that sells products to the system for a period of two years
prior to appointment as commissioner.
   (e) For two years after completing service in the system, the
commissioner may not receive payments of any kind from, or be
employed in any capacity or act as a paid consultant to, a for-profit
insurance, pharmaceutical, or medical equipment company that sells
products to the system.
   (f) The compensation and benefits of the commissioner shall be
established by the California Citizens Compensation Commission in
accordance with Section 8 of Article III of the California
Constitution.
   (g) The commissioner shall be subject to Title 9 (commencing with
Section 81000) of the Government Code.
   140101.  (a) The commissioner shall be the chief officer of the
agency and shall administer all aspects of the agency.
   (b) The commissioner shall be responsible for the performance of
all duties, the exercise of all power and jurisdiction, and the
assumption and discharge of all responsibilities vested by law in the
agency. The commissioner shall perform all duties imposed upon him
or her by this division and other laws related to health care, and
shall enforce the execution of those related to the system, and shall
enforce the execution of those provisions and laws to promote their
underlying aims and purposes. These broad powers shall include, but
are not limited to, the power to establish the system's budget and to
set rates, to establish the system's goals, standards, and
priorities, to hire, fire, and fix the compensation of agency
personnel, to make allocations and reallocations to the health
planning regions, and to promulgate generally binding regulations
concerning any and all matters related to the implementation of this
division and its purposes.
   (c) The commissioner shall appoint a deputy commissioner, the
Director of the Healthcare Fund, the patient advocate of the Office
of Patient Advocacy, the chief medical officer, the Director of the
Payments Board, the Director of the Office of Health Planning, the
Director of the Partnerships for Health, the regional health planning
directors, the chief enforcement counsel, and legal counsel in any
action brought by or against the commissioner under or pursuant to
any provision of any law under the commissioner's jurisdiction, or in
which the commissioner joins or intervenes as to a matter within the
commissioner's jurisdiction, as a friend of the court or otherwise,
and stenographic reporters to take and transcribe the testimony in
any formal hearing or investigation before the commissioner or before
a person authorized by the commissioner.
   (d) The commissioner, in accordance with the State Civil Service
Act (Part 2 (commencing with Section 18500) of Division 5 of Title 2
of the Government Code), may appoint and fix the compensation of
clerical, inspection, investigation, evaluation, and auditing
personnel as may be necessary to implement this division.
   (e) The personnel of the agency shall perform duties as assigned
to them by the commissioner. The commissioner shall designate certain
employees by the rule or order that are to take and subscribe to the
constitutional oath within 15 days after their appointments, and to
file that oath with the Secretary of State. The commissioner shall
also designate those employees that are to be subject to Title 9
(commencing with Section 81000) of the Government Code.
   (f) The commissioner shall adopt a seal bearing the inscription:
"Commissioner, California Healthcare Agency, State of California."
The seal shall be affixed to or imprinted on all orders and
certificates issued by him or her and other instruments as he or she
directs. All courts shall take notice of this seal.
   (g) The administration of the agency shall be supported from the
Healthcare Fund created pursuant to Section 140200.
   (h) The commissioner, as a general rule, shall publish or make
available for public inspection any information filed with or
obtained by the agency, unless the commissioner finds that this
availability or publication is contrary to law. No provision of this
division authorizes the commissioner or any of the commissioner's
assistants, clerks, or deputies to disclose any information withheld
from public inspection except among themselves or when necessary or
appropriate in a proceeding or investigation under this division or
to other federal or state regulatory agencies. No provision of this
division either creates or derogates from any privilege that exists
at common law or otherwise when documentary or other evidence is
sought under a subpoena directed to the commissioner or any of his or
her assistants, clerks, and deputies.
   (i) It is unlawful for the commissioner or any of his or her
assistants, clerks, or deputies to use for personal benefit any
information that is filed with, or obtained by, the commissioner and
that is not then generally available to the public.
   (j) The commissioner shall avoid political activity that may
create the appearance of political bias or impropriety. Prohibited
activities shall include, but not be limited to, leadership of, or
employment by, a political party or a political organization; public
endorsement of a political candidate; contribution of more than five
hundred dollars ($500) to any one candidate in a calendar year or a
contribution in excess of an aggregate of one thousand dollars
($1,000) in a calendar year for all political parties or
organizations; and attempting to avoid compliance with this
prohibition by making contributions through a spouse or other family
member.
   (k) The commissioner shall not participate in making or in any way
attempt to use his or her official position to influence a
governmental decision in which he or she knows or has reason to know
that he or she or a family or a business partner or colleague has a
financial interest.
   (l) The commissioner, in pursuit of his or her duties, shall have
unlimited access to all nonconfidential and all nonprivileged
documents in the custody and control of the agency.
   (m) The Attorney General shall render to the commissioner opinions
upon all questions of law, relating to the construction or
interpretation of any law under the commissioner's jurisdiction or
arising in the administration thereof, that may be submitted to the
Attorney General by the commissioner and upon the commissioner's
request shall act as the attorney for the commissioner in actions and
proceedings brought by or against the commissioner or under or
pursuant to any provision of any law under the commissioner's
jurisdiction.
   140102.  The commissioner shall do all of the following:
   (a) Oversee the establishment, as part of the administration of
the agency, of all of the following:
   (1) The Healthcare Policy Board, pursuant to Section 140103.
   (2) The Office of Patient Advocacy, pursuant to Section 140105.
   (3) The Office of Health Planning, pursuant to Section 140602.
   (4) The Office of Healthcare Quality, pursuant to Section 140605.
   (5) The Healthcare Fund, pursuant to Section 140200.
   (6) The Public Advisory Committee, pursuant to Section 140104.
   (7) The Payments Board, pursuant to Section 140208.
   (8) Partnerships for Health.
   (b) Determine goals, standards, guidelines, and priorities for the
system.
   (c) Establish health planning regions, pursuant to Section 140112.

   (d) Oversee the establishment of locally based integrated service
networks, including those that provide services through medical
technologies such as telemedicine, that include physicians in
fee-for-service, solo and group practice, essential community, and
ancillary care providers and facilities in order to pool and align
resources and form interdisciplinary teams that share responsibility
and accountability for patient care and provide a continuum of
coordinated high quality primary to tertiary care to all California
residents while preserving patient choice. This shall be accomplished
in collaboration with the chief medical officer, the Director of the
Office of Health Planning, the regional medical officers, the
regional planning boards, and the patient advocate.
   (e) Annually assess projected revenues and expenditures and assure
financial solvency of the system pursuant to Section 140203.
   (f) Develop the system's budget pursuant to Section 140206 to
ensure adequate funding to meet the health care needs of the
population. Review all budgets and locations annually to ensure they
address disparities in service availability and health care outcomes
and for sufficiency of rates, fees, and prices.
   (g) Establish a capital management framework for the system
pursuant to Section 140216, including, but not limited to, a
standardized process and format for the development and submission of
regional operating and regional capital budget requests and ensure a
smooth transition to system oversight.
   (h) Establish standards and criteria for the development and
submission of provider operating and capital budget requests.
   (i) Establish standards and criteria for the allocation of funds
from the Healthcare Fund as described in Chapter 3 (commencing with
Section 140200).
   (j) During transition and annually thereafter, determine the
appropriate level for a reserve fund for the system and implement
policies needed to establish the appropriate reserve.
   (k) Establish an enrollment system that ensures all eligible
California residents, including those who travel out of state; those
who have disabilities that limit their mobility, hearing, or vision
or their mental or cognitive capacity; those who cannot read; and
those who do not speak or write English are aware of their right to
health care and are formally enrolled in the system. The commissioner
may contract with a third party for eligibility and enrollment
services if the commissioner finds that doing so would meet the
system's goals and standards, and result in greater efficiency and
cost savings to the system.
   (l) Establish an electronic claims and payments system for the
system where all claims under the system shall be filed and paid, and
implement, to the extent permitted by federal law, standardized
claims and reporting methods. The commissioner may contract with a
third party for claims and payment services if the commissioner finds
that doing so would meet the system's goals and standards, and
result in greater efficiency and cost savings to the system.
   (m) Establish a system of secure electronic medical records that
comply with state and federal privacy laws and that are compatible
across the system.
   (n) Establish an electronic referral system that is accessible to
providers and to patients.
   (o) Establish standards based on clinical efficacy to guide
delivery of care and a process to identify areas where no such
standards exist, set priorities and a timetable for their
development, and ensure a smooth transition to clinical
decisionmaking under statewide standards.
   (p) Implement policies to ensure that all Californians receive
culturally and linguistically sensitive care, pursuant to Section
140604, and that all disabled Californians receive care in accordance
with the federal Americans with Disabilities Act (42 U.S.C. Sec.
12101 et seq.) and Section 504 of the Rehabilitation Act of 1973 (29
U.S.C. Sec. 794) and develop mechanisms and incentives to achieve
these purposes and a means to monitor the effectiveness of efforts to
achieve these purposes.
   (q) Create a systematic approach to the measurement, management,
and accountability for care quality and access, including a system of
performance contracts that contain measurable goals and outcomes and
appropriate statewide and regional health care databases to assure
the delivery of quality care to all patients.
   (r) Establish standards for mandatory reporting by health care
providers and penalties for failure to report.
   (s) Develop methods and a framework to measure the performance of
health care coverage and health delivery system upper level managers,
including a system of performance contracts that contain measurable
goals and outcomes.
   (t) Implement policies to ensure that all residents of this state
have access to medically appropriate, coordinated mental health
services.
                                                 (u) Ensure the
establishment of policies that support the public health.
   (v) Meet regularly with the chief medical officer, the patient
advocate for the Office of Patient Advocacy, the Public Advisory
Committee, the Director of the Office of Health Planning, the
Director of the Payments Board, the Director of the Partnerships for
Health, regional planning directors, and regional medical officers to
review the impact of the agency and its policies on the health of
the population and on satisfaction with the system.
   (w) Negotiate for or set rates, fees, and prices involving any
aspect of the system and establish procedures thereto.
   (x) Establish a formulary based on clinical efficacy for all
prescription drugs and durable and nondurable medical equipment for
use by the system.
   (y) Establish guidelines for prescribing medications and durable
medical equipment that are not included in the system's formularies.
   (z) Utilize the purchasing power of the state to negotiate price
discounts for prescription drugs and durable and nondurable medical
equipment for use by the system.
   (aa) Ensure that use of state purchasing power achieves the lowest
possible prices for the system without adversely affecting needed
pharmaceutical research.
   (ab) Create incentives and guidelines for research needed to meet
the goals of the system and disincentives for research that does not
achieve the system goals.
   (ac) Implement eligibility standards for the system, including
guidelines to prevent an influx of persons to the state for the
purpose of obtaining medical care.
   (ad) Determine an appropriate level of, and provide support during
the transition for, training and job placement for persons who are
displaced from employment as a result of the initiation of the
system.
   (ae) Oversee the establishment of a system for resolution of
disputes pursuant to Sections 140608 and 140610.
   (af) Investigate the costs and benefits to the health of the
population of advances in information technology, including those
that support data collection, analysis, and distribution.
   (ag) Ensure that consumers of health care have access to
information needed to support their choice of a physician.
   (ah) Collaborate with the licensing entities of health facilities
to ensure that facility performance is monitored and that deficient
practices are recognized and corrected in a timely fashion and that
consumers and providers of health care have access to information
needed to support their choice of facility.
   (ai) Establish an Internet Web site that provides information to
the public about the system that includes, but is not limited to,
information that supports choice of providers and facilities, informs
the public about meetings of state and regional health planning
boards and activities of the Partnerships for Health.
   (aj) Procure funds, including loans, for the system, enter into
leases, and obtain insurance for the system and its employees and
agents.
   (ak) Collaborate with state and local authorities, including
regional planning directors, to plan for needed earthquake retrofits
in a manner that does not disrupt patient care.
   (a) Establish a process that is accessible to all Californians for
the system to receive the concerns, opinions, ideas, and
recommendation of the public regarding all aspects of the system.
   (am) Annually report to the Legislature and the Governor, on or
before October of each year and at other times pursuant to this
division, on the performance of the system, its fiscal condition and
need for rate adjustments, consumer copayments or consumer deductible
payments, recommendations for statutory changes, receipt of payments
from the federal government and other sources, whether current year
goals and priorities are met, future goals, and priorities, and major
new technology or prescription drugs or other circumstances that may
affect the cost of health care.
   140103.  (a) The commissioner shall establish a Healthcare Policy
Board and shall serve as the president of the board.
   (b) The board shall do all of the following:
   (1) Establish goals and priorities for the system, including
research and capital investment priorities.
   (2) Establish the scope of services to be provided to the
population in accordance with Chapter 5 (commencing with Section
140500).
   (3) Establish guidelines for evaluating the performance of the
system, its officers, health planning regions, and health care
providers.
   (4) Establish guidelines for ensuring public input on the system's
policy, standards, and goals.
   (c) The board shall consist of the following members:
   (1) The commissioner.
   (2) The deputy commissioner.
   (3) The Director of the Healthcare Fund.
   (4) The patient advocate of the Office of Patient Advocacy.
   (5) The chief medical officer.
   (6) The Director of the Office of Health Planning.
   (7) The Director of the Partnerships for Health.
   (8) The Director of the Payments Board.
   (9) The State Public Health Officer.
   (10) One member of the Public Advisory Committee who shall serve
on a rotating basis to be determined by the Public Advisory
Committee.
   (11) Two representatives from regional planning boards.
   (A) A regional representative shall serve a term of one year and
terms shall be rotated in order to allow every region to be
represented within a five-year period.
   (B) A regional planning director shall appoint the regional
representative to serve on the board.
   (d) It is unlawful for the board members or any of their
assistants, clerks, or deputies to use for personal benefit any
information that is filed with or obtained by the board and that is
not then generally available to the public.
   140104.  (a) The commissioner shall establish the Public Advisory
Committee to advise the Healthcare Policy Board on all matters of
policy for the system.
   (b) Members of the Public Advisory Committee shall include all of
the following:
   (1) Four physicians all of whom shall be board certified in their
field and at least one of whom shall be a psychiatrist. The Senate
Committee on Rules and the Governor shall each appoint one member.
The Speaker of the Assembly shall appoint two of these members, both
of whom shall be primary care providers.
   (2) One registered nurse, to be appointed by the Senate Committee
on Rules.
   (3) One licensed vocational nurse, to be appointed by the Senate
Committee on Rules.
   (4) One licensed allied health practitioner, to be appointed by
the Speaker of the Assembly.
   (5) One mental health care provider, to be appointed by the Senate
Committee on Rules.
   (6) One dentist, to be appointed by the Governor.
   (7) One representative of private hospitals, to be appointed by
the Governor.
   (8) One representative of public hospitals, to be appointed by the
Governor.
   (9) One representative of an integrated health care delivery
system, to be appointed by the Governor.
   (10) Four consumers of health care. The Governor shall appoint two
of these members, one of whom shall be a member of the disability
community. The Senate Committee on Rules shall appoint a member who
is 65 years of age or older. The Speaker of the Assembly shall
appoint the fourth member.
   (11) One representative of organized labor, to be appointed by the
Speaker of the Assembly.
   (12) One representative of essential community providers, to be
appointed by the Senate Committee on Rules.
   (13) One union member, to be appointed by the Senate Committee on
Rules.
   (14) One representative of small business, to be appointed by the
Governor.
   (15) One representative of large business, to be appointed by the
Speaker of the Assembly.
   (16) One pharmacist, to be appointed by the Speaker of the
Assembly.
   (c) In making appointments pursuant to this section, the Governor,
the Senate Committee on Rules, and the Speaker of the Assembly shall
make good faith efforts to assure that their appointments, as a
whole, reflect, to the greatest extent feasible, the social and
geographic diversity of the state.
   (d) Any member appointed by the Governor, the Senate Committee on
Rules, or the Speaker of the Assembly shall serve a four-year term.
These members may be reappointed for succeeding four-year terms.
   (e) Vacancies that occur shall be filled within 30 days after the
occurrence of the vacancy, and shall be filled in the same manner in
which the vacating member was initially selected or appointed. The
commissioner shall notify the appropriate appointing authority of any
expected vacancies on the board.
   (f) Members of the Public Advisory Committee shall serve without
compensation, but shall be reimbursed for actual and necessary
expenses incurred in the performance of their duties to the extent
that reimbursement for those expenses is not otherwise provided or
payable by another public agency or agencies, and shall receive one
hundred dollars ($100) for each full day of attending meetings of the
committee. For purposes of this section, "full day of attending a
meeting" means presence at, and participation in, not less than 75
percent of the total meeting time of the committee during any
particular 24-hour period.
   (g) The Public Advisory Committee shall meet at least six times a
year in a place convenient to the public. All meetings of the board
shall be open to the public, pursuant to the Bagley-Keene Open
Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1
of Part 1 of Division 3 of Title 2 of the Government Code).
   (h) The Public Advisory Committee shall elect a chair who shall
serve for two years and who may be reelected for an additional two
years.
   (i) Appointed committee members shall have worked in the field
they represent on the committee for a period of at least two years
prior to being appointed to the committee.
   (j) The Public Advisory Committee shall elect a member to serve on
the Healthcare Policy Board. The elected member shall serve for one
year, and may be recalled by the Public Advisory Committee for cause.
In that case, a new member shall be elected to serve on that board.
The Public Advisory Committee representative shall represent to the
board the views of the committee members.
   (k) It is unlawful for the committee members or any of their
assistants, clerks, or deputies to use for personal benefit any
information that is filed with or obtained by the committee and that
is not generally available to the public.
   140105.  (a) (1) There is within the agency an Office of Patient
Advocacy to represent the interests of the consumers of health care.
The goal of the office shall be to help residents of the state secure
the health care services and benefits to which they are entitled
under the laws administered by the agency and to advocate on behalf
of and represent the interests of consumers in governance bodies
created by this division and in other forums.
   (2) The office shall be headed by a patient advocate appointed by
the commissioner.
   (3) The patient advocate shall establish an office in the City of
Sacramento and other offices throughout the state that shall provide
convenient access to residents.
   (b) The patient advocate shall do all the following:
   (1) Administer all aspects of the Office of Patient Advocacy.
   (2) Assure that services of the Office of Patient Advocacy are
available to all California residents.
   (3) Serve on the Healthcare Policy Board and participate in the
regional Partnerships for Health.
   (4) Oversee the establishment and maintenance of the grievance
process pursuant to Sections 140608 and 140610.
   (5) Participate in the grievance process and independent medical
review system on behalf of consumers pursuant to Section 140610.
   (6) Receive, evaluate, and respond to consumer complaints about
the system.
   (7) Provide a means to receive recommendations from the public
about ways to improve the system and hold public hearings at least
once annually to discuss problems and receive recommendations from
the public.
   (8) Develop educational and informational guides for consumers
describing their rights and responsibilities and informing them about
effective ways to exercise their rights to secure health care
services and to participate in the system. The guides shall be easy
to read and understand, available in English and other languages,
including Braille and formats suitable for those with hearing
limitations, and shall be made available to the public by the agency,
including access on the agency's Internet Web site and through
public outreach and educational programs, and displayed in provider
offices and health care facilities.
   (9) Establish a toll-free telephone number, including a TDD
number, to receive complaints regarding the agency and its services.
Those with hearing and speech limitations may use the California
Relay Service's toll-free telephone numbers to contact the Office of
Patient Advocacy. The agency's Internet Web site shall have complaint
forms and instructions on their use.
   (10) Report annually to the public, the commissioner, and the
Legislature about the consumer perspective on the performance of the
system, including recommendations for needed improvements.
   (c) Nothing in this division shall prohibit a consumer or class of
consumers or the patient advocate from seeking relief through the
judicial system.
   (d) The patient advocate in pursuit of his or her duties shall
have unlimited access to all nonconfidential and all nonprivileged
documents in the custody and control of the agency.
   (e) It is unlawful for the patient advocate or any of his or her
assistants, clerks, or deputies to use for personal benefit any
information that is filed with, or obtained by, the agency and that
is not then generally available to the public.
   140106.  (a) There is within the Office of the Attorney General an
Office of the Inspector General for the California Healthcare
System. The Inspector General shall be appointed by the Governor and
subject to Senate confirmation.
   (b) The Inspector General shall have broad powers to investigate,
audit, and review the financial and business records of individuals,
public and private agencies and institutions, and private
corporations that provide services or products to the system, the
costs of which are reimbursed by the system.
   (c) The Inspector General shall investigate allegations of
misconduct on the part of an employee or appointee of the agency and
on the part of any health care provider of services that are
reimbursed by the system and shall report any findings of misconduct
to the Attorney General.
   (d) The Inspector General shall investigate patterns of medical
practice that may indicate fraud and abuse related to over or under
utilization or other inappropriate utilization of medical products
and services.
   (e) The Inspector General shall arrange for the collection and
analysis of data needed to investigate the inappropriate utilization
of these products and services.
   (f) The Inspector General shall conduct additional reviews or
investigations of financial and business records when requested by
the Governor or by any Member of the Legislature and shall report
findings of the review or investigation to the Governor and the
Legislature.
   (g) The Inspector General shall establish a telephone hotline for
anonymous reporting of allegations of failure to make health
insurance premium payments established by this division. The
Inspector General shall investigate information provided to the
hotline and shall report any findings of misconduct to the Attorney
General.
   (h) The Inspector General shall annually report recommendations
for improvements to the system or the agency to the Governor, the
Legislature, and the commissioner.
   140107.  The provisions of the Insurance Frauds Prevention Act
(Chapter 12 (commencing with Section 1871) of Part 2 of Division 1 of
the Insurance Code), and the provisions of Article 6 (commencing
with Section 650) of Chapter 1 of Division 2 of the Business and
Professions Code shall be applicable to health care providers who
receive payments for services through the system under this division.

   140108.  (a) Nothing contained in this division is intended to
repeal any legislation or regulation governing the professional
conduct of any person licensed by the State of California or any
legislation governing the licensure of any facility licensed by the
State of California.
   (b) All federal legislation and regulations governing referral
fees and fee-splitting, including, but not limited to, Sections
1320a-7b and 1395nn of Title 42 of the United States Code, shall be
applicable to all health care providers of services reimbursed under
this division, whether or not the health care provider is paid with
funds coming from the federal government.
   140110.  (a) The system shall be operational no later than two
years after the date this division, other than Article 2 (commencing
with Section 140230) of Chapter 3, becomes operative, as described in
Section 140700.
   (b) The commissioner shall assess health plans and insurers for
care provided by the system in those cases in which a person's health
care coverage extends into the time period in which the new system
is operative.
   (c) The commissioner shall implement means to assist persons who
are displaced from employment as a result of the initiation of the
system, including determination of the period of time during which
assistance shall be provided and possible sources of funds, including
funds from the system, to support retraining and job placement. That
support shall be provided for a period of five years from the date
that this division becomes operative.
   140111.  (a) The commissioner shall appoint a transition advisory
group, which shall include, but not be limited to, the following
members:
   (1) The commissioner.
   (2) The patient advocate of the Office of Patient Advocacy.
   (3) The chief medical officer.
   (4) The Director of the Office of Health Planning.
   (5) The Director of the Healthcare Fund.
   (6) The State Public Health Officer.
   (7) Experts in health care financing and health care
administration.
   (8) Direct care providers.
   (9) Representatives of retirement boards.
   (10) Employer and employee representatives.
   (11) Hospital, integrated health care delivery system, essential
community provider, and long-term care facility representatives.
   (12) Representatives from state departments and regulatory bodies
that shall or may relinquish some or all parts of their delivery of
health care services to the system.
   (13) Representatives of counties.
   (14) Consumers of health care services.
   (b)  The transition advisory group shall advise the commissioner
on all aspects of the implementation of this division.
   (c) The transition advisory group shall make recommendations to
the commissioner, the Governor, and the Legislature on how to
integrate health care delivery services and responsibilities relating
to the delivery of the services of the following departments and
agencies into the system:
   (1) The State Department of Health Care Services.
   (2) The Department of Managed Health Care.
   (3) The Department of Aging.
   (4) The Department of Developmental Services.
   (5) The Health and Welfare Data Center.
   (6) The State Department of Mental Health.
   (7) The State Department of Alcohol and Drug Programs.
   (8) The Department of Rehabilitation.
   (9) The Emergency Medical Services Authority.
   (10) The Managed Risk Medical Insurance Board.
   (11) The Office of Statewide Health Planning and Development.
   (12) The Department of Insurance.
   (13) The State Department of Public Health.
   (d) The transition advisory group shall make recommendations to
the Governor, the Legislature, and the commissioner regarding
research needed to support transition to the system.
   140112.  (a)  The transition advisory group shall make
recommendations to the commissioner relative to how the system shall
be regionalized for the purposes of local and community-based
planning for the delivery of high quality cost-effective care and
efficient service delivery.
   (b) The commissioner, in consultation with the Director of the
Office of Health Planning, shall establish up to 10 health planning
regions composed of geographically contiguous counties grouped on the
basis of the following considerations:
   (1) Patterns of utilization of health care services.
   (2) Health care resources, including workforce resources.
   (3) Health needs of the population, including public health needs.

   (4) Geography.
   (5) Population and demographic characteristics.
   (6) Other considerations as determined by the commissioner, the
Director of the Office of Health Planning, or the chief medical
officer.
   (c) The commissioner shall appoint a director for each region.
Regional planning directors shall serve at the will of the
commissioner and may serve up to two eight-year terms to coincide
with the terms of the commissioner.
   (d) Each regional planning director shall appoint a regional
medical officer.
   (e) Compensation for officers of the system and appointees who are
exempt from the civil service shall be established by the California
Citizens Commission in accordance with Section 8 of Article III of
the California Constitution, and shall take into consideration
regional differences in the cost of living.
   (f) The regional planning director and the regional medical
officer shall be subject to Title 9 (commencing with Section 81000)
of the Government Code and shall comply with the qualifications for
office described in subdivisions (c), (d), and (e) of Section 140100
and subdivisions (j) and (k) of Section 140101.
   140113.  (a) Regional planning directors shall administer the
health planning region. The regional planning director shall be
responsible for all duties, the exercise of all powers and
jurisdiction, and the assumptions and discharge of all
responsibilities vested by law in the regional agency. The regional
planning director shall perform all duties imposed upon him or her by
this division and by other laws related to health care, and shall
enforce execution of those provisions and laws to promote their
underlying aims and purposes.
   (b) The regional planning director shall reside in the region in
which he or she serves.
   (c) The regional planning director shall do all of the following:
   (1) Establish and administer a regional office of the state
agency. Each regional office shall include, at minimum, an office of
each of the following: Patient Advocacy, Health Care Quality, Health
Planning, and Partnerships for Health.
   (2) Appoint regional planning board members and serve as president
of the board.
   (3) Identify and prioritize regional health care needs and goals,
in collaboration with the regional medical officer, regional health
care providers, the regional planning board, and regional director of
Partnerships for Health pursuant to the priorities and goals of the
system established by the commissioner.
   (4) Regularly assess projected revenues and expenditures to ensure
fiscal solvency of the regional planning system and advise the
commissioner of potential revenue shortfalls and the possible need
for cost controls.
   (5) Assure that regional administrative costs meet standards
established by the division and seek innovative means to lower the
costs of administration of the regional planning office and those of
regional providers.
   (6) Plan for the delivery of, and equal access to, high quality
and culturally and linguistically sensitive care and such care for
disabled persons that meets the needs of all regional residents
pursuant to standards established by the commissioner.
   (7) Seek innovative and systemic means to improve care quality and
efficiency of care delivery and to achieve access to programs for
all state residents.
   (8)  Recommend means to and implement policies established by the
commissioner to provide support to persons displaced from employment
as a result of the initiation of the new system.
   (9) Make needed revenue sharing arrangements so that
regionalization does not limit a patient's choice of provider.
   (10) Implement procedures established by the commissioner for the
resolution of disputes.
   (11) Implement processes established by the commissioner and
recommend needed changes to permit the public to share concerns,
provide ideas, opinions, and recommendations regarding all aspects of
the system's policies.
   (12) Report regularly to the public and, at intervals determined
by the commissioner and pursuant to this division, to the
commissioner on the status of the regional planning system, including
evaluating access to care, quality of care delivered, and provider
performance, and other issues related to regional health care needs,
and recommending needed improvements.
   (13) Identify or establish guidelines for providers to identify,
maintain, and provide to the regional planning director inventories
of regional health care assets.
   (14) Establish and maintain regional health care databases that
are coordinated with other regional and statewide databases.
   (15) In collaboration with the regional medical officer, enforce
reporting requirements established by the system and make
recommendations to the commissioner, the Director of the Office of
Health Planning, and the chief medical officer for needed changes in
reporting requirements.
   (16) Establish and implement a regional capital management plan
pursuant to the capital management plan established by the
commissioner for the system.
   (17) Implement standards and formats established by the
commissioner for the development and submission of operating and
capital budget requests and make recommendations to the commissioner
and the Director of the Office of Health Planning for needed changes.

   (18) Support regional providers in developing operating and
capital budget requests.
   (19) Receive, evaluate, and prioritize provider operating and
capital budget requests pursuant to standards and criteria
established by the commissioner.
   (20) Prepare a three-year regional operating and capital budget
request that meets the health care needs of the region pursuant to
this division, for submission to the commissioner.
   (21) Establish a comprehensive three-year regional planning budget
using funds allocated to the region by the commissioner.
   140114.  The regional medical officers shall do all of the
following:
   (a) Administer all aspects of the regional office of health care
quality.
                                                              (b)
Serve as a member of the regional planning board.
   (c) In collaboration with the commissioner, the chief medical
officer, the regional medical officer, regional planning boards, the
patient advocate of the Office of Patient Advocacy, regional
providers, and patients, oversee the establishment of integrated
service networks, including those that provide services through
medical technologies such as telemedicine, that include physicians in
fee-for-service, solo and group practice, essential community, and
ancillary care providers and facilities that pool and align resources
and form interdisciplinary teams that share responsibility and
accountability for patient care and provide a continuum of
coordinated high quality primary to tertiary care to all residents of
the region.
   (d) Assure the evaluation and measurement of the quality of care
delivered in the region, including assessment of the performance of
individual providers, pursuant to standards and methods established
by the chief medical officer to ensure a single standard of high
quality care is delivered to all state residents.
   (e) In collaboration with the chief medical officer and regional
providers, evaluate standards of care in use at the time the system
becomes operative.
   (f) Ensure a smooth transition toward use of standards based on
clinical efficacy that guide clinical decisionmaking. Identify areas
of medical practice where standards have not been established and
collaborated with the chief medical officer and health care
providers, to establish priorities in developing needed standards.
   (g) Support the development and distribution of user-friendly
software for use by providers in order to support the delivery of
high quality care.
   (h) Provide feedback to, and support and supervision of, health
care providers to ensure the delivery of high quality care pursuant
to standards established by the system.
   (i) Collaborate with the regional Partnerships for Health to
develop patient education to assist consumers in evaluating and
appropriately utilizing health care providers and facilities.
   (j) Collaborate with regional public health officers to establish
regional health policies that support the public health.
   (k) Establish a regional program to monitor and decrease medical
errors and their causes pursuant to standards and methods established
by the chief medical officer.
   (l) Support the development and implementation of innovative means
to provide high quality care and assist providers in securing funds
for innovative demonstration projects that seek to improve care
quality.
   (m) Establish means to assess the impact of the system's policies
intended to assure the delivery of high quality care.
   (n) Collaborate with the chief medical officer, the Director of
the Office of Health Planning, the regional planning director, and
health care providers in the development and maintenance of regional
health care databases.
   (o) Ensure the enforcement of, and recommend needed changes in,
the system's reporting requirements.
   (p) Support providers in developing regional budget requests.
   (q) Annually report to the commissioner, the public, the regional
planning board, and the chief medical officer on the status of
regional health care programs, needed improvements, and plans to
implement and evaluate delivery of care improvements.
   140115.  (a) Each region shall have a regional planning board
consisting of 13 members who shall be appointed by the regional
planning director. Members shall serve eight-year terms that coincide
with the term of the regional planning director and may be
reappointed for a second term.
   (b) Regional planning board members shall have resided for a
minimum of two years in the region in which they serve prior to
appointment to the board.
   (c) Regional planning board members shall reside in the region
they serve while on the board.
   (d) The board shall consist of the following members:
   (1) The regional planning director, the regional medical officer,
the regional director of the Partnerships for Health, and a public
health officer from one of the counties in the region.
   (2) When there is more than one county in a region, the public
health officer board position shall rotate among the public health
county officers on a timetable to be established by each regional
planning board.
   (3) A representative from the Office of Patient Advocacy.
   (4) One expert in health care financing.
   (5) One expert in health care planning.
   (6) Two members who are direct care providers in the region, one
of whom shall be a registered nurse.
   (7) One member who represents ancillary health care workers in the
region.
   (8) One member representing hospitals in the region.
   (9) One member representing essential community providers in the
region.
   (10) One member representing the public.
   (e) The regional planning director shall serve as chair of the
board.
   (f) The purpose of the regional planning boards is to advise and
make recommendations to the regional planning director on all aspects
of regional health policy.
   (g) Meetings of the board shall be open to the public pursuant to
the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section
11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the
Government Code).
   140116.  The following conflict-of-interest prohibitions shall
apply to all appointees of the commissioner or transition advisory
group, including, but not limited to, the patient advocate, the
Director of the Healthcare Fund, the purchasing director, the
Director of the Office of Health Planning, the Director of the
Payments Board, the chief medical officer, the Director of
Partnerships for Health, regional planning directors, and the
Inspector General:
   (a) The appointee shall not have been employed in any capacity by
a for-profit insurance, pharmaceutical, or medical equipment company
that sells products to the system for a period of two years prior to
appointment.
   (b) For two years after completing service in the system, the
appointee may not receive payments of any kind from, or be employed
in any capacity or act as a paid consultant to, a for-profit
insurance, pharmaceutical, or medical equipment company that sells
products to the system.
   (c) The appointee shall avoid political activity that may create
the appearance of political bias or impropriety. Prohibited
activities shall include, but not be limited to, leadership of, or
employment by, a political party or a political organization; public
endorsement of a political candidate; contribution of more than five
hundred dollars ($500) to any one candidate in a calendar year or a
contribution in excess of an aggregate of one thousand dollars
($1,000) in a calendar year for all political parties or
organizations; and attempting to avoid compliance with this
prohibition by making contributions through a spouse or other family
member.
   (d) The appointee shall not participate in making or in any way
attempt to use his or her official position to influence a
governmental decision in which he or she or a family or a business
partner or colleague has a financial interest.
      CHAPTER 3.  FUNDING



      Article 1.  General Provisions


   140200.  (a) In order to support the agency effectively in the
administration of this division, there is hereby established in the
State Treasury the Healthcare Fund. The fund shall be administered by
a director appointed by the commissioner.
   (b) All moneys collected, received, and transferred pursuant to
this division shall be transmitted to the State Treasury to be
deposited to the credit of the Healthcare Fund for the purpose of
financing the California Healthcare System.
   (c) Moneys deposited in the Healthcare Fund shall be used
exclusively to support this division.
   (d) All claims for health care services rendered pursuant to the
system shall be made to the Healthcare Fund through an electronic
claims and payment system. The commissioner shall investigate the
costs, benefits, and means of supporting health care providers in
obtaining electronic systems for claims and payments transactions;
however, alternative provisions shall be made for health care
providers without electronic systems.
   (e) All payments made for health care services shall be disbursed
from the Healthcare Fund through an electronic claims and payments
system; however, alternative provisions shall be made for health care
providers without electronic systems.
   (f) The director of the fund shall serve on the Healthcare Policy
Board.
   140201.  (a) The Director of the Healthcare Fund shall establish
the following accounts within the Healthcare Fund:
   (1) A system account to provide for all annual state expenditures
for health care.
   (2) A reserve account.
   (b) Premiums collected each year shall be roughly sufficient to
cover that year's projected costs.
   (c) The system shall at all times hold an actuarially sound
reserve that is consistent with appropriate risk-based capital
standards to assure financial solvency of the system.
   (d) During the transition, the commissioner shall work with the
Department of Insurance, the Department of Managed Health Care, and
other experts to determine an appropriate level of reserves for the
system for the first year and for future years of its operation.
   (e) Moneys currently held in reserve by state health programs,
city and county contributions as determined by the commissioner
pursuant to subdivision (c) of Section 140240, and federal moneys for
health care held in reserve in federal trust accounts shall be
transferred to the reserve account when the state assumes financial
responsibility for health care under this division that is currently
provided by those programs.
   (f) The commissioner may implement arrangements to self-insure the
system against unforeseen expenditures or revenue shortfalls not
covered by reserves and may borrow funds to cover temporary revenue
shortfalls not covered by system reserves, including the issuance of
bonds for this purpose, whichever is the more cost effective.
   (g) Funds held in the reserve account and other Healthcare Fund
accounts may be prudently invested to increase their value according
to the Department of Managed Health Care's standards for financial
solvency.
   140203.  (a) The Director of the Healthcare Fund shall immediately
notify the commissioner when regional or statewide revenue and
expenditure trends indicate that expenditures may exceed revenues.
   (b) If the commissioner determines that statewide revenue trends
indicate the need for statewide cost control measures, the
commissioner shall convene the Healthcare Policy Board to discuss the
need for cost control measures and shall immediately report to the
Legislature and the public regarding the possible need for cost
control measures.
   (c) Cost control measures include any or all of the following:
   (1) Changes in the system or health facility administration that
improve efficiency.
   (2) Changes in the delivery of health care services that improve
efficiency and care quality.
   (3) Postponement of introduction of new benefits or benefit
improvements.
   (4) Seeking statutory authority for a temporary decrease in
benefits.
   (5) Postponement of planned capital expenditures.
   (6) Adjustments of health care provider payments to correct for
deficiencies in care quality and failure to meet compensation
contract performance goals, pursuant to subdivisions (a) to (f),
inclusive, of Section 140106, paragraph (4) of subdivision (a) of
Section 140204, subdivision (a) of Section 140213, and subdivisions
(c) and (d) of Section 140606.
   (7) Adjustments to the compensation of managerial employees and
upper level managers under contract with the system to correct for
deficiencies in management and failure to meet contract performance
goals.
   (8) Limitations on the reimbursement budgets of the system's
providers and upper level managers whose compensation is determined
by the Payments Board.
   (9) Limitations on aggregate reimbursements to manufacturers of
pharmaceutical and durable and nondurable medical equipment.
   (10) Deferred funding of the reserve account.
   (11) Imposition of copayments or deductible payments. Any
copayment or deductible payments imposed under this section shall be
subject to all of the following requirements:
   (A) No copayment or deductible may be established when prohibited
by federal law.
   (B) All copayments and deductibles shall meet federal guidelines
for copayments and deductible payments that may lawfully be imposed
on persons with low income.
   (C) The commissioner shall establish standards and procedures for
waiving copayments or deductible payments and a waiver card that
shall be issued to a patient or to a family to indicate the waiver.
Procedures for copayment waiver may include a determination by a
patient's primary care provider that imposition of a copayment would
be a financial hardship. Copayment and deductible waivers shall be
reviewed annually by the regional planning director.
   (D) Waivers shall not affect the reimbursement of health care
providers.
   (E) Any copayments or deductible payments established pursuant to
this section shall be transmitted to the Treasurer to be deposited to
the credit of the Healthcare Fund.
   (12) Imposition of an eligibility waiting period and other means
if the commissioner determines that large numbers of people are
immigrating to the state for the purpose of obtaining health care
through the system.
   (d) Nothing in this division shall be construed to diminish the
benefits that an individual has under a collective bargaining
agreement or statute.
   (e) Nothing in this division shall preclude employees from
receiving benefits available to them under a collective bargaining
agreement or other employee-employer agreement or a statute that are
superior to benefits under this division.
   (f) Cost control measures implemented by the commissioner and the
Healthcare Policy Board shall remain in place in the state until the
commissioner and the Healthcare Policy Board determine that the cause
of a revenue shortfall has been corrected.
   (g) If the Healthcare Policy Board determines that cost control
measures described in subdivision (c) will not be sufficient to meet
a revenue shortfall, the commissioner shall report to the Legislature
and to the public on the causes of the shortfall and the reasons for
the failure of cost controls and shall recommend measures to correct
the shortfall, including an increase in premium payments to the
system.
   140204.  (a) If the commissioner or a regional planning director
determines that regional revenue and expenditure trends indicate a
need for regional cost control measures, the regional planning
director shall convene the regional planning board to discuss the
possible need for cost control measures and to make a recommendation
about appropriate measures to control costs. These may include any of
the following:
   (1) Changes in the administration of the system or in health
facility administration that improve efficiency.
   (2) Changes in the delivery of health care services and health
system management that improve efficiency or care quality.
   (3) Postponement of planned regional capital expenditures.
   (4) Adjustment of payments to health care providers to reflect
deficiencies in care quality and failure to meet compensation
contract performance goals and payments to upper level managers to
reflect deficiencies in management and failure to meet compensation
contract performance goals.
   (5) Adjustment of payments to health care providers and upper
level managers above a specified amount of aggregate billing.
   (6) Adjustment of payments to pharmaceutical and medical equipment
manufacturers and others selling goods and services to the system
above a specified amount of aggregate billing.
   (b) If a regional planning board is convened to implement cost
control measures, the commissioner shall participate in the regional
planning board meeting.
   (c) The regional planning director, in consultation with the
commissioner, shall determine if cost control measures are warranted
and those measures that shall be implemented.
   (d) Imposition of copayments or deductibles, postponement of new
benefits or benefit improvements, deferred funding of the reserve
account, establishment of eligibility waiting periods, and increases
in premium payments under the system may occur on a statewide basis
only and with the concurrence of the commissioner and the Healthcare
Policy Board.
   (e) If a regional planning director and regional planning board
are considering imposition of cost control measures, the regional
planning director shall immediately report to the residents of the
region regarding the possible need for cost control measures.
   (f) Cost control measures shall remain in place in a region until
the regional planning director and the commissioner determine that
the cause of a revenue shortfall has been corrected.
   140205.  (a) If, on June 30 of any year, the Budget Act for the
fiscal year beginning on July 1 has not been enacted, all moneys in
the reserve account of the Healthcare Fund shall be used to implement
this division until funds are available through the Budget Act.
   (b) Notwithstanding any other provision of law and without regard
to fiscal year, if the annual Budget Act is not enacted by June 30 of
any fiscal year preceding the fiscal year to which the budget would
apply and if the commissioner determines that funds in the reserve
account are depleted, the following shall occur:
   (1) The Controller shall annually transfer from the General Fund,
in the form of one or more loans, an amount to the Healthcare Fund
for the purpose of making payments to health care providers and to
persons and businesses under contract with the system or with health
care providers to provide services, medical equipment, and
pharmaceuticals to the system.
   (2) Upon enactment of the Budget Act in any fiscal year to which
paragraph (1) applies, the Controller shall transfer all expenditures
and unexpected funds loaned to the Healthcare Fund to the
appropriate Budget Act item.
   (3) The amount of any loan made pursuant to paragraph (1) for
which moneys were expended from the Healthcare Fund shall be repaid
by debiting the appropriate Budget Act item in accordance with
procedures prescribed by the Department of Finance.
   140206.  (a) The commissioner annually shall prepare a budget for
the system that includes all expenditures, specifies a limit on total
annual state expenditures, and establishes allocations for each
health care region that shall cover a three-year period and that
shall be disbursed on a quarterly basis.
   (b) The commissioner shall limit the growth of spending on a
statewide and on a regional basis, by reference to average growth in
state domestic product across multiple years; population growth,
actuarial demographics and other demographic indicators; differences
in regional costs of living; advances in technology and their
anticipated adoption into the benefit plan; improvements in
efficiency of administration and care delivery; improvements in the
quality of care; and projected future state domestic product growth
rates.
   (c) The commissioner shall adjust the system's budget so that
aggregate spending in the state on health care shall not exceed
spending under this division by more than 5 percent.
   (d) The commissioner shall project the system's revenues and
expenditures for 3, 6, 9, and 12 years pursuant to parameters
prescribed in subdivision (f).
   (e) The budget for the system shall include all of the following:
   (1) Transition budget.
   (2) Providers and managers budget.
   (3) Capitated operating budgets.
   (4) Noncapitated operating budgets.
   (5) Capital investment budget.
   (6) Purchasing budget, including prescription drugs and durable
and nondurable medical equipment pursuant to Section 140220.
   (7) Research and innovation budget pursuant to Section 140221.
   (8) Workforce training and development budget pursuant to Section
140222.
   (9) Reserve account pursuant to Section 140223.
   (10) System administration budget pursuant to Section 140224.
   (11) Regional budgets.
   (f)  In establishing budgets, the commissioner shall make
adjustments based on all of the following:
   (1) Costs of transition to the new system.
   (2) Projections regarding the health care services anticipated to
be used by California residents.
   (3) Differences in cost of living between the regions, including
the overhead costs of maintaining medical practices.
   (4) Health risk of enrollees.
   (5) Scope of services provided.
   (6) Innovative programs that improve care quality, administrative
efficiency, and workplace safety.
   (7) Unrecovered cost of providing care to persons who are not
enrollees of the system. The commissioner shall seek to recover the
costs of care provided to persons who are not enrollees of the
system.
   (8) Costs of workforce training and development.
   (9) Costs of correcting health outcome disparities and the unmet
needs of previously uninsured and underinsured enrollees.
   (10) Relative usage of different health care providers.
   (11) Needed improvements in access to care.
   (12) Projected savings in administrative costs.
   (13) Projected savings due to provision of primary and preventive
care to the population, including savings from decreases in
preventable emergency room visits and hospitalizations.
   (14) Projected savings from improvements in care quality.
   (15) Projected savings from decreases in medical errors.
   (16) Projected savings from systemwide management of capital
expenditures.
   (17) Cost of incentives and bonuses to support the delivery of
high quality care, including incentives and bonuses needed to recruit
and retain an adequate supply of needed providers and managers and
to attract health care providers to medically underserved areas.
   (18) Costs of treating complex illnesses, including disease
management programs.
   (19) Cost of implementing standards of care, care coordination,
electronic medical records, and other electronic initiatives.
   (20) Costs of new technology.
   (21) Technology research and development costs and costs related
to the system's use of new technologies.
   (g) Moneys in the reserve account shall not be considered as
available revenues for the purposes of preparing the system's budget,
except when the annual Budget Act has not been enacted by June 30 of
any fiscal year.
   140207.  The commissioner shall annually establish the total funds
to be allocated for provider and manager compensation pursuant to
this section. In establishing the provider and manager budgets, the
commissioner shall allot sufficient funds to assure that California
can attract and retain those providers and managers needed to meet
the health care needs of the population. In establishing provider and
manager budgets, the commissioner shall allocate funds for both
salaries, incentives, bonuses, and benefits to be provided to
officers and upper level managers of the system who are exempt from
state civil service statutes.
   140208.  (a) The commissioner shall establish the Payments Board
and shall appoint a director and members of the board.
   (b) The commissioner shall retain the authority to review,
approve, reject, and modify all payment contracts and compensation
plans established pursuant to this section.
   (c) The Payments Board shall be composed of experts in health care
finance and insurance systems, a designated representative of the
commissioner, a designated representative of the Healthcare Fund, and
a representative of the regional planning directors. The position of
regional representative shall rotate among the directors of the
regional planning boards every two years.
   (d) The board shall establish and supervise a uniform payments
system for health care providers and managers and shall maintain a
compensation plan for all of the following health care providers and
managers pursuant to the provider and manager budget established by
the commissioner:
   (1) Upper level managers employed by, or under contract with,
private health care facilities, including, but not limited to,
hospitals, integrated health care delivery systems, group and solo
medical practices, and essential community facilities.
   (2) Managers and officers of the system who are exempt from
statutes governing civil service employment.
   (3) Health care providers including, but not limited to,
physicians, osteopathic physicians, dentists, podiatrists, nurse
practitioners, physician assistants, chiropractors, acupuncturists,
psychologists, social workers, marriage, family and child counselors,
and other professional health care providers who are required by law
to be licensed to practice in California and who provide services
pursuant to the system.
   (4) Compensation for employees of the system that was determined
through employer-union negotiations before implementation of this
division shall be determined by negotiations between the system and
the unions after implementation of this division.
   (5) Health care providers licensed and accredited to provide
services in California may choose to be compensated for their
services either by the system or by a person to whom they provide
services.
   (6) Health care providers electing to be compensated by the system
shall enter into a contract with the system pursuant to provisions
of this section.
   (7) Health care providers electing to be compensated by persons to
whom they provide services, instead of by the system, may establish
charges for their services.
   (8) Health care providers who accept any payment from the system
under this division shall not bill a patient for any covered service,
except as authorized by the commissioner.
   (e) Health care providers licensed or accredited to provide
services in California, who choose to be compensated by the system
instead of by patients to whom they provide services, may choose how
they wish to be compensated under this division, as fee-for-service
providers or as providers employed by, or under contract with, health
care systems that provide comprehensive, coordinated services.
   (f) Notwithstanding provisions of the Business and Professions
Code, nurse practitioners, physician assistants, and others who under
California law must be supervised by a physician and surgeon, an
osteopathic physician, a dentist, or a podiatrist, may choose
fee-for-service compensation while under lawfully required
supervision. However, nothing in this section shall interfere with
the right                                          of a supervising
health care provider to enter into a contractual arrangement that
provides for salaried compensation for employees who must be
supervised under the law by a physician and surgeon, an osteopathic
physician, a dentist, or a podiatrist.
   (g) The compensation plan shall include all of the following:
   (1) Actuarially sound payments that include a just and fair return
for health care providers in the fee-for-service sector and for
health care providers working in health systems where comprehensive
and coordinated services are provided, including the actuarial basis
for the payment.
   (2) Payment schedules that shall be in effect for three years.
   (3) Bonus and incentive payments, including, but not limited to,
all the following:
   (A) Bonus payments for health care providers and upper level
managers who, in providing services and managing facilities,
practices, and integrated health systems pursuant to this division,
meet performance standards and outcome goals established by the
system.
   (B) Incentive payments for health care providers and upper level
managers who provide services to the system in areas identified by
the Office of Health Planning as medically underserved.
   (C) Incentive payments required to achieve the ratio of generalist
to specialist health care providers needed in order to meet the
standards of care and health needs of the population.
   (D) Incentive payments required to recruit and retain nurse
practitioners and physician assistants in order to provide primary
and preventive care to the population.
   (E)  No bonus or incentive payment may be made in excess of the
total allocation for health care provider and manager incentive and
bonus reimbursement established by the commissioner in the system's
budget.
   (F) No incentive may adversely affect the care a patient receives
or the care a health care provider recommends.
   (h) Health care providers shall be paid for all services provided
pursuant to this division, including care provided to persons who are
subsequently determined to be ineligible for the system.
   (i) Licensed health care providers who deliver services not
covered under the system may establish rates and charge patients for
those services.
   (j) Reimbursement to health care providers and compensation to
managers may not exceed the amount allocated by the commissioner to
provider and manager annual budgets.
   140209.  (a) Fee-for-service health care providers shall choose
representatives of their specialties to negotiate reimbursement rates
with the Payments Board on their behalf.
   (b) The Payments Board shall establish a uniform system of
payments for all services provided pursuant to this division.
   (c) Payment schedules shall be available to health care providers
in printed and in electronic documents.
   (d) Payment schedules shall be in effect for three years, at which
time payment schedules may be renegotiated. Payment adjustments may
be made at the discretion of the Payments Board to meet the goals of
the system.
   (e) In establishing a uniform system of payments, the Payments
Board shall collaborate with regional planning directors and health
care providers and shall take into consideration regional differences
in the cost of living and the need to recruit and retain skilled
health care providers in the region.
   (f) Fee-for-service health care providers shall submit claims
electronically to the Healthcare Fund and shall be paid within 30
business days for claims filed in compliance with procedures
established by the Healthcare Fund.
   140210.  (a) Compensation for health care providers and upper
level managers employed by, or under contract with, integrated health
care delivery systems, group medical practices, and essential
community providers that provide comprehensive, coordinated services
shall be determined according to the following guidelines:
   (b) Health care providers and upper level managers employed by, or
under contract with, systems that provide comprehensive, coordinated
health care services shall be represented by their respective
employers or contractors for the purposes of negotiating
reimbursement with the Payments Board.
   (c) In negotiating reimbursement with systems providing
comprehensive, coordinated services, the Payments Board shall take
into consideration the need for comprehensive systems to have
flexibility in establishing health care provider and upper level
manager reimbursement.
   (d) Payment schedules shall be in effect for three years. However,
payment adjustments may be made at the discretion of the Payments
Board to meet the goals of the system.
   (e) The Payments Board shall take into consideration regional
differences in the cost of living and the need to recruit and retain
skilled health care providers and upper level managers to the
regions.
   (f) The Payments Board shall establish a timetable for
reimbursement for fee-for-service health care provider's
negotiations. If an agreement on reimbursement is not reached
according to the timetable established by the Payments Board, the
Payments Board shall establish reimbursement rates, which shall be
binding.
   (g) Reimbursement negotiations shall be conducted consistent with
the state action doctrine of the antitrust laws.
   140211.  (a) The Payments Board shall annually report to the
commissioner on the status of health care provider and upper level
manager reimbursement, including satisfaction with reimbursement
levels and the sufficiency of funds allocated by the commissioner for
provider and upper level manager reimbursement. The Payments Board
shall recommend needed adjustments in the allocation for health care
provider payments.
   (b) The Office of Health Care Quality shall annually report to the
commissioner on the impact of the bonus payments in improving
quality of care, health outcomes, and management effectiveness. The
Payments Board shall recommend needed adjustments in bonus
allocations.
   (c) The Office of Health Planning shall annually report to the
commissioner on the impact of the incentive payments in recruiting
health care providers and upper level managers to underserved areas,
in establishing the needed ratio of generalist to specialist health
care providers and in attracting and retaining nurse practitioners
and physician assistants to the state and shall recommend needed
adjustments.
   140212.  (a) The commissioner shall establish an allocation for
each region to fund regional operating and capital budgets for a
period of three years. Allocations shall be disbursed to the regions
on a quarterly basis.
   (b) Integrated health care delivery systems, essential community
providers, and group medical practices that provide comprehensive,
coordinated services may choose to be reimbursed on the basis of a
capitated system operating budget or a noncapitated system operating
budget that covers all costs of providing health care services.
   (c) Health care providers choosing to function on the basis of a
capitated or a noncapitated system operating budget shall submit
three-year operating budget requests to the regional planning
director, pursuant to standards and guidelines established by the
commissioner.
   (1) Health care providers may include in their operating budget
requests reimbursement for ancillary health care or social services
that were previously funded by money now received and disbursed by
the Healthcare Fund.
   (2) No payment may be made from a capitated or noncapitated budget
for a capital expense except as provided in Section 140216.
   (d) Regional planning directors shall negotiate operating budgets
with regional health care entities, which shall cover a period of
three years.
   (e) Operating and capitated budgets shall include health care
workforce labor costs other than those described in paragraphs (1),
(2), and (3) of subdivision (d) of Section 140208. If unions
represent employees working in systems functioning under capitated or
noncapitated budgets, unions shall represent those employees in
negotiations with the regional planning director and the Payments
Board for the purpose of establishing their reimbursement.
   140213.  (a) Health systems and medical practices functioning
under capitated and noncapitated operating budgets shall immediately
report any projected operating deficit to the regional planning
director. The regional planning director shall determine whether
projected deficits reflect appropriate increases in expenditures, in
which case the director shall make an adjustment to the operating
budget. If the director determines that deficits are not justifiable,
no adjustment shall be made.
   (b) If a regional planning director determines that adjustments to
operating budgets will cause a regional revenue shortfall and that
cost control measures may be required, the regional planning director
shall report the possible revenue shortfall to the commissioner and
take actions required pursuant to Section 140203.
   140215.  (a) Margins generated by a facility operating under a
system operating budget may be retained and used to meet the health
care needs of the population.
   (b) No margin may be retained if that margin was generated through
inappropriate limitations on access to health care or compromises in
the quality of care or in any way that adversely affected or is
likely to adversely affect the health of the persons receiving
services from a facility, integrated health care delivery system,
group medical practice, or essential community provider functioning
under a system operating budget.
   (1) The chief medical officer shall evaluate the source of margin
generation and report violations of this section to the commissioner.

   (2) The commissioner shall establish and enforce penalties for
violations of this section.
   (3) Penalty payments collected pursuant to violations of this
section shall be remitted to the Healthcare Fund for use in the
California Healthcare System.
   (c) Facilities operating under system operating budgets of the
California Healthcare System may raise and expend funds from sources
other than the system including, but not limited to, private or
foundation donors for purposes related to the goals of this division
and in accordance with provisions of this division.
   140216.  (a) During the transition, the commissioner shall develop
a capital management plan that shall include conflict-of-interest
standards and that shall govern all capital investments and
acquisitions undertaken in the system. The plan shall include a
framework, standards, and guidelines for all of the following:
   (1) Standards whereby the Office of Health Planning shall oversee,
assist in the implementation of, and ensure that the provisions of
the capital management plan are enforced.
   (2) Assessment and prioritization of short- and long-term capital
needs of the system on statewide and regional bases.
   (3) Assessment of capital health care assets and capital health
care asset shortages on a regional and statewide basis at the time
this division is first implemented.
   (4) Development by the commissioner of a multiyear system capital
development plan that supports the system's goals, priorities, and
performance standards and meets the health care needs of the
population.
   (5) Development, as part of the system's capital budget, of
regional capital allocations that shall cover a period of three
years.
   (6)  Evaluation of, and support for, noninvestment means to meet
health care needs, including, but not limited to, improvements in
administrative efficiency, care quality, and innovative service
delivery, use, adaptation or refurbishment of existing land and
property, and identification of publicly owned land or property that
may be available to the system and that may meet a capital need.
   (7) Development and maintenance of capital inventories on a
regional basis, including the condition, utilization capacity,
maintenance plan and costs, deferred maintenance of existing capital
inventory, and excess capital capacity.
   (8) A process whereby those intending to make capital investments
or acquisitions shall prepare a business case for making the
investment or acquisition, including the full life cycle costs of the
project or acquisition, an environmental impact report that meets
existing state standards, and a demonstration of how the investment
or acquisition meets the health care needs of the population it is
intended to serve. Acquisitions include, but are not limited to, the
acquisition of land, operational property, or administrative office
space.
   (9) Standards and a process whereby the regional planning
directors shall evaluate, accept, reject, or modify a business plan
for a capital investment or acquisition. Decisions of a regional
planning director may be appealed through a dispute resolution
process established by the commissioner.
   (10) Standards for binding project contracts between the system
and the party developing a capital project or making a capital
acquisition that shall govern all terms and conditions of capital
investments and acquisitions, including terms and conditions for
grants, loans, lines of credit, and lease-purchase arrangements by
the system.
   (11) A process and standards whereby the Director of the
Healthcare Fund shall negotiate terms and conditions of the liens,
grants, lines of credit, and lease-purchase arrangements for capital
investments and acquisitions by the system. Terms and conditions
negotiated by the Director of the Healthcare Fund shall be included
in project contracts.
   (12) A plan for the commissioner and for the regional planning
directors to issue requests for proposals and to oversee a process of
competitive bidding for the development of capital projects that
meet the needs of the system and to fund, partially fund, or
participate in seeking funding for, those capital projects.
   (13) Responses to requests for proposals and competitive bids
shall include a description of how a project meets the service needs
of the region and addresses the environmental impact report and shall
include the full life cycle costs of a capital asset.
   (14) Requests for proposals shall address how intellectual
property will be handled and shall include conflict-of-interest
guidelines that meet standards established by the commissioner as
part of the capital management plan.
   (15) A process and standards for periodic revisions in the capital
management plan, including annual meetings in each region to discuss
the plan and make recommendations for improvements in the plan.
   (16) Standards for determining when a violation of these
provisions shall be referred to the Attorney General for
investigation and possible prosecution of the violation.
   (b) No registered lobbyist shall participate in or in any way
attempt to influence the request for proposals or competitive bid
process.
   (c) Development of performance standards and a process to monitor
and measure performance of those making capital health care
investments and acquisitions, including those making capital
investments pursuant to a state competitive bidding process.
   (d) A process for earned autonomy from state capital investment
oversight for those who demonstrate the ability to manage capital
investment and capital assets effectively in accordance with the
system's standards, and standards for loss of earned autonomy when
capital management is ineffective.
   (e) Terms and conditions of capital project oversight by the
system shall be based on the performance history of the project
developer. Health care providers may earn autonomy from oversight if
they demonstrate effective capital planning and project management,
pursuant to the goals and guidelines established by the commissioner.
Health care providers who do not demonstrate such proficiency shall
remain subject to oversight by the regional planning director or
shall lose autonomy from oversight.
   (f) In general, no capital investment may be made from an
operating budget. However, guidelines shall be established for the
types and levels of small capital investments that may be undertaken
from an operating budget without the approval of the regional
planning director.
   (g) Any capital investments required for compliance with federal,
state, or local regulatory requirements or quality assurance
standards shall be exempt from paragraph (2) of subdivision (c) of
Section 140212.
   140217.  (a) Regional planning directors shall develop a regional
capital development plan pursuant to the system's capital management
plan established by the commissioner. In developing the regional
capital development plan, the regional planning director shall do all
of the following:
   (1) Implement the standards and requirements of the capital
management plan established by the commissioner.
   (2) Develop a multiyear regional capital health management plan
that supports regional goals and the state capital management plan.
   (3) Assist regional health care providers to develop capital
budget requests pursuant to the regional capital budget plan and the
system's capital management plan established by the commissioner.
   (4) Receive and evaluate capital budget requests from regional
health care providers.
   (5) Establish ranking criteria to assess competing demands for
capital.
   (6) Participate in planning for needed earthquake retrofits.
However, the cost of mandatory earthquake retrofits of health care
facilities shall not be the responsibility of the system.
   (7) Conduct ongoing project evaluation to assure that terms and
conditions of project funding are met.
   (b) Services provided as a result of capital investments or
acquisitions that do not meet the terms of the regional capital
development plan and the capital management plan developed by the
commissioner shall not be reimbursed by the system.
   140218.  (a) Assets financed by state grants, loans, lines of
credit, and lease-purchase arrangements shall be owned, operated, and
maintained by the recipient of the grant, loan, line of credit, or
lease-purchase arrangement, according to terms established at the
time of issuance of the grant, loan,  or  line of
credit, or lease-purchase arrangement.
   (b) Assets financed under long-term leases with the system shall
be transferred to public ownership at the end of the lease, unless
the commissioner determines that an alternative disposition would be
of greater benefit to the system, in which case the commissioner may
authorize an alternative disposition.
   (c) When an asset, which was in whole or in part financed by the
system, is to be sold or transferred by a party that received
financing from the system for purchase, lease, or construction of the
asset, an impartial estimate of the fair market value of the asset
shall be undertaken. The system shall receive a share of the fair
market value of the asset at the time of its sale or transfer that is
in proportion to the system's original investment. The system may
elect to postpone receipt of its share of the value of the asset if
the commissioner determines that the postponement meets the needs of
the system.
   140219.  The regional planning directors shall make financial
information available to the public when the system's contribution to
a capital project is greater than twenty-five million dollars
($25,000,000). Information shall include the purpose of the project
or acquisition, its relation to the system's goals, the project
budget and the timetable for completion, environmental impact
reports, any terms-related conflicts of interest, and performance
standards and benchmarks.
   140220.  (a) The commissioner shall establish a budget for the
purchase of prescription drugs and durable and nondurable medical
equipment for the system.
   (b) The commissioner shall use the purchasing power of the state
to obtain the lowest possible prices for prescription drugs and
durable and nondurable medical equipment.
   (c) The commissioner shall make discounted prices available to all
California residents, licensed and accredited providers and
facilities under the terms of their licenses and accreditation,
health care providers, prescription drug and medical equipment
wholesalers, and retailers of products approved for use and included
in the benefit package of the system.
   140221.  (a) The commissioner shall establish a budget to support
research and innovation that has been recommended by the chief
medical officer, the Director of the Office of Health Planning, the
patient advocates, the Partnerships for Health, and others as
required by the commissioner.
   (b) The research and innovation budget shall support the goals and
standards of the system.
   140222.  (a) The commissioner shall establish a budget to support
the training, development, and continuing education of health care
providers and the health care workforce needed to meet the health
care needs of the population and the goals and standards of the
system.
   (b)  During the transition, the commissioner shall determine an
appropriate level and duration of spending to support the retraining
and job placement of persons who have been displaced from employment
as a result of the transition to the system.
   (c) The commissioner shall establish guidelines for giving special
consideration for employment to persons who have been displaced as a
result of the transition to the system.
   140223.  (a) The commissioner shall establish a reserve account
pursuant to this section.
   (b) The reserve budget may be used only for purposes set forth in
this division.
   140224.  (a) The commissioner shall establish a budget that covers
all costs of administering the system.
   (b) Administrative costs on a systemwide basis shall be limited to
10 percent of system costs within five years of completing the
transition to the system.
   (c) Administrative costs on a systemwide basis shall be limited to
5 percent of system costs within 10 years of completing the
transition to the system.
   (d) The commissioner shall ensure that the percentage of the
budget allocated to support system administration stays within the
allowable limits and shall continually seek means to lower system
administrative costs.
   (e) The commissioner shall report to the public, the regional
planning directors, and others attending the annual system revenue
and expenditure conference pursuant to Section 140206 on the costs of
administering the system and the regions and shall make
recommendations for reducing administrative costs and receive
recommendations for reducing administrative costs.

      Article 2.  California Healthcare Premium Commission


   140230.  (a) There is hereby created the California Healthcare
Premium Commission, referred to in this division as the Premium
Commission.
   (b) The Premium Commission shall be composed of the following
members:
   (1) Three health economists with experience relevant to the
functions of the Premium Commission. One shall be appointed by the
Speaker of the Assembly, one shall be appointed by the Senate
Committee on Rules, and one shall be appointed by the Governor.
   (2) Two representatives of California's business community, with
one representing small business. One shall be appointed by the
Governor, and the representative of small business shall be appointed
by the Senate Committee on Rules.
   (3) Two representatives from organized labor. One shall be
appointed by the Senate Committee on Rules, and one shall be
appointed by the Speaker of the Assembly.
   (4) Two representatives of nonprofit organizations whose principal
purpose includes promoting the establishment of a system of
universal health care in California. One shall be appointed by the
Senate Committee on Rules and one shall be appointed by the Speaker
of the Assembly.
   (5) One representative of a nonprofit advocacy organization with
expertise in taxation policy whose principal purpose includes
advocating for sustainable funding for the public infrastructure.
This person shall be appointed by the Speaker of the Assembly.
   (6) Two members of the Legislature. One shall be appointed by the
Senate Committee on Rules and one shall be appointed by the Speaker
of the Assembly.
   (7) The Executive Officer of the Franchise Tax Board.
   (8) The Chair of the State Board of Equalization.
   (9) The Director of the Employment Development Department.
   (10) The Legislative Analyst.
   (11) The Secretary of California Health and Human Services.
   (12) The Director of the Department of Finance.
   (13) The Controller.
   (14) The Treasurer.
   (15) The Lieutenant Governor.
   (c) Upon appointment, the Premium Commission shall meet at least
once a month. The Premium Commission shall elect a chair from its
membership during its first meeting. The Premium Commission shall
receive public comments during a portion of each of its meetings, and
all of its meetings shall be conducted pursuant to the Bagley-Keene
Open Meeting Act (Article 9 (commencing with Section 11120) of
Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code).

   140231.  (a) The Premium Commission shall perform the following
functions:
   (1) Determine the aggregate costs of providing health care
coverage pursuant to this division.
   (2) Develop an equitable and affordable premium structure that
will generate adequate revenue for the Healthcare Fund established
pursuant to Section 140200 and ensure stable and actuarially sound
funding for the system.
   (b) The Premium Commission shall perform the functions described
in this section by considering existing financial simulations and
analyses of universal health care proposals, including, but not
limited to, the analysis completed by the Lewin Group in January
2005, of Senate Bill 921 of the 2003-04 Regular Session.
   140232.  (a) The premium structure developed by the Premium
Commission shall satisfy the following criteria:
   (1) Be means-based and generate adequate revenue to implement this
division.
   (2) To the greatest extent possible, ensure that all income
earners and all employers contribute a premium amount that is
affordable and that is consistent with existing funding sources for
health care in California.
   (3) Maintain the current ratio for aggregate health care
contributions among the traditional health care funding sources,
including employers, individuals, government, and other sources.
   (4) Provide a fair distribution of monetary savings achieved from
the establishment of a universal health care system.
   (5) Coordinate with existing, ongoing funding sources from federal
and state programs.
   (6) Be consistent with state and federal requirements governing
financial contributions for persons eligible for existing public
programs.
                                                              (7)
Comply with federal requirements.
   (8) Include an exemption for employers and employees who are
subject to a collective bargaining agreement and participate in a
Taft-Hartley Trust Fund that pays the employer and employee share of
the premium to the Healthcare Fund.
   (b) The Premium Commission shall seek expert and legal advice
regarding the best method to structure premium payments consistent
with existing employer-employee health care financing structures.
   140233.  The Premium Commission may take all of the following
actions:
   (a) Obtain grants from, and contract with, individuals and
private, local, state, and federal agencies, organizations, and
institutions, including institutions of higher education.
   (b) Receive charitable contributions or any other source of income
that may be lawfully received.
   140234.  (a) The Premium Commission may consult with additional
persons, advisory entities, governmental agencies, Members of the
Legislature, and legislative staff as it deems necessary to perform
its functions.
   (b) The Premium Commission shall seek structured input from
representatives of stakeholder organizations, policy institutes, and
other persons with expertise in health care, health care financing,
or universal health care models in order to ensure that it has the
necessary information, expertise, and experience to perform its
functions.
   (c) The Premium Commission shall be supported by a reasonable
amount of staff time, which shall be provided by the state agencies
with membership on the Premium Commission. The Premium Commission may
request data from, and utilize the technical expertise of, other
state agencies.
   140235.  (a) On or before January 1,  2011  
2012  , the Premium Commission shall submit to the Governor and
the Legislature a detailed recommendation for a premium structure.
   (b) The Premium Commission shall submit a draft recommendation to
the Governor, Legislature, and the public at least 90 days prior to
submission of the final recommendation described in subdivision (a).
The Premium Commission shall seek input from the public on the draft
recommendation.
   140236.  The Premium Commission shall be funded upon an
appropriation by the Legislature in the Budget Act of 2010.

      Article 3.  Governmental Payments


   140240.  (a) (1) The commissioner shall seek all necessary
waivers, exemptions, agreements, or legislation, so that all current
federal payments to the state for health care services be paid
directly to the system, which shall then assume responsibility for
all benefits and services previously paid for by the federal
government with those funds.
   (2) In obtaining the waivers, exemptions, agreements, or
legislation, the commissioner shall seek from the federal government
a contribution for health care services in California that shall not
decrease in relation to the contribution to other states as a result
of the waivers, exemptions, agreements, or legislation.
   (b) (1) The commissioner shall seek all necessary waivers,
exemptions, agreements, or legislation, so that all current state
payments for health care services shall be paid directly to the
system, which shall then assume responsibility for all benefits and
services previously paid for by state government with those funds.
   (2) In obtaining the waivers, exemptions, agreements, or
legislation, the commissioner shall seek from the Legislature a
contribution for health care services that shall not decrease in
relation to state government expenditures for health care services in
the year that this division was enacted, except that it may be
corrected for change in state gross domestic product, the size and
age of population, and the number of residents living below the
federal poverty level.
   (c) The commissioner shall establish formulas for equitable
contributions to the system from all California counties and other
local government agencies.
   (d) The commissioner shall seek all necessary waivers, exemptions,
agreements, or legislation, so that all county or other local
government agency payments shall be paid directly to the system.
   140241.  The system's responsibility for providing health care
services shall be secondary to existing federal, state, or local
governmental programs for health care services to the extent that
funding for these programs is not transferred to the Healthcare Fund
or that the transfer is delayed beyond the date on which initial
benefits are provided under the system.
   140242.  In order to minimize the administrative burden of
maintaining eligibility records for programs transferred to the
system, the commissioner shall strive to reach an agreement with
federal, state, and local governments in which their contributions to
the Healthcare Fund shall be fixed to the rate of change of the
state gross domestic product, the size and age of population, and the
number of residents living below the federal poverty level.
   140243.  If and to the extent that federal law and regulations
allow the transfer of Medi-Cal program funding to the system, the
commissioner shall pay from the Healthcare Fund all premiums,
deductible payments, and coinsurance for qualified beneficiaries who
are receiving benefits pursuant to Chapter 3 (commencing with Section
12000) of Part 3 of Division 9 of the Welfare and Institutions Code.

   140244.  If and to the extent that the commissioner obtains
authorization to incorporate Medicare revenues into the Healthcare
Fund, Medicare Part B payments that previously were made by
individuals or the commissioner shall be paid by the system for all
individuals eligible for both the system and the Medicare Program.

      Article 4.  Federal Preemption


   140300.  (a) The commissioner shall pursue all reasonable means to
secure a repeal or a waiver of any provision of federal law that
preempts any provision of this division.
   (b) If a repeal or a waiver of law or regulations cannot be
secured, the commissioner shall exercise his or her powers to
promulgate rules and regulations, or seek conforming state
legislation, consistent with federal law, in an effort to best
fulfill the purposes of this division.
   140301.  (a) To the extent permitted by federal law, an employee
entitled to health or related benefits under a contract or plan that,
under federal law, preempts provisions of this division, shall first
seek benefits under that contract or plan before receiving benefits
from the system under this division.
   (b) No benefits shall be denied under the system created by this
division unless the employee has failed to take reasonable steps to
secure like benefits from the contract or plan, if those benefits are
available.
   (c) Nothing in this section shall preclude a person from receiving
benefits from the system under this division that are superior to
benefits available to the person under an existing contract or plan.
   (d) Nothing in this division is intended, nor shall this division
be construed, to discourage recourse to contracts or plans that are
protected by federal law.
   (e) To the extent permitted by federal law, a health care provider
shall first seek payment from the contract or plan, before
submitting bills to the system.

      Article 5.  Subrogation


   140302.  (a) It is the intent of this division to establish a
single public payer for all health care services in the State of
California. However, until such time as the role of all other payers
for health care services has been terminated, costs for health care
services shall be collected from collateral sources whenever health
care services provided to an individual are, or may be, covered
services under a policy of insurance, health care service plan, or
other collateral source available to that individual, or for which
the individual has a right of action for compensation to the extent
permitted by law.
   (b) As used in this article, collateral source includes all of the
following:
   (1) Insurance policies written by insurers, including the medical
components of automobile, homeowners, and other forms of insurance.
   (2) Health care service plans and pension plans.
   (3) Employers.
   (4) Employee benefit contracts.
   (5) Government benefit programs.
   (6) A judgment for damages for personal injury.
   (7) Any third party who is or may be liable to an individual for
health care services or costs.
   (c) "Collateral source" does not include either of the following:
   (1) A contract or plan that is subject to federal preemption.
   (2) Any governmental unit, agency, or service, to the extent that
subrogation is prohibited by law. An entity described in subdivision
(b) is not excluded from the obligations imposed by this article by
virtue of a contract or relationship with a governmental unit,
agency, or service.
   (d) The commissioner shall attempt to negotiate waivers, seek
federal legislation, or make other arrangements to incorporate
collateral sources in California into the system.
   140303.  Whenever an individual receives health care services
under the system and he or she is entitled to coverage,
reimbursement, indemnity, or other compensation from a collateral
source, he or she shall notify the health care provider and provide
information identifying the collateral source, the nature and extent
of coverage or entitlement, and other relevant information. The
health care provider shall forward this information to the
commissioner. The individual entitled to coverage, reimbursement,
indemnity, or other compensation from a collateral source shall
provide additional information as requested by the commissioner.
   140304.  (a) The system shall seek reimbursement from the
collateral source for services provided to the individual and may
institute appropriate action, including suit, to recover the
reimbursement. Upon demand, the collateral source shall pay to the
Healthcare Fund the sums it would have paid or expended on behalf of
the individual for the health care services provided by the system.
   (b) In addition to any other right to recovery provided in this
article, the commissioner shall have the same right to recover the
reasonable value of benefits from a collateral source as provided to
the Director of Health Care Services by Article 3.5 (commencing with
Section 14124.70) of Chapter 7 of Part 3 of Division 9 of the Welfare
and Institutions Code, in the manner so provided.
   140305.  (a) If a collateral source is exempt from subrogation or
the obligation to reimburse the system as provided in this article,
the commissioner may require that an individual who is entitled to
health care services from the source first seek those services from
that source before seeking those services from the system.
   (b) To the extent permitted by federal law, contractual retiree
health benefits provided by employers shall be subject to the same
subrogation as other contracts, allowing the system to recover the
cost of health care services provided to individuals covered by the
retiree benefits, unless and until arrangements are made to transfer
the revenues of the benefits directly to the system.
   140306.  (a) Default, underpayment, or late payment of any tax or
other obligation imposed by this division shall result in the
remedies and penalties provided by law, except as provided in this
section.
   (b) Eligibility for benefits under Chapter 4 (commencing with
Section 140400) shall not be impaired by any default, underpayment,
or late payment of any tax or other obligation imposed by this
chapter.
   140307.  The agency and the commissioner shall be exempt from the
regulatory oversight and review of the Office of Administrative Law
pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code. Actions taken by the
agency, including, but not limited to, the negotiating or setting of
rates, fees, or prices, and the promulgation of any and all
regulations, shall be exempt from any review by the Office of
Administrative Law, except for Sections 11344.1, 11344.2, 11344.3,
and 11344.6 of the Government Code, addressing the publication of
regulations.
   140308.  The agency shall adopt regulations to implement the
provisions of this division. The regulations may initially be adopted
as emergency regulations in accordance with the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code), but those emergency
regulations shall be in effect only from the effective date of this
division until the conclusion of the transition period.
      CHAPTER 4.  ELIGIBILITY


   140400.  All California residents shall be eligible for the
system. Residency shall be based upon physical presence in the state
with the intent to reside. The commissioner shall establish standards
and a simplified procedure to demonstrate proof of residency.
   140401.  The commissioner shall establish a procedure to enroll
eligible residents and provide each eligible individual with
identification that can be used by health care providers to determine
eligibility for services.
   140402.  (a) It is the intent of the Legislature for the system to
provide health care coverage to California residents who are
temporarily out of the state. The commissioner shall determine
eligibility standards for residents temporarily out of state for
longer than 90 days who intend to return and reside in California and
for nonresidents temporarily employed in California. The
commissioner may establish financial arrangements with medical
providers in other states and foreign countries in order to
facilitate coverage for California residents who are temporarily out
of the state.
   (b) Coverage for emergency care obtained out of state shall be at
prevailing local rates. Coverage for nonemergency care obtained out
of state shall be according to rates and conditions established by
the commissioner. The commissioner may require that a resident be
transported back to California when prolonged treatment of an
emergency condition is necessary and when that transport will not
adversely affect a patient's care or condition.
   140403.  Visitors to California shall be billed for all services
received under the system. The commissioner may establish
intergovernmental arrangements with other states and countries to
provide reciprocal coverage for temporary visitors.
   140404.  All persons eligible for health care benefits from
California employers but who are working in another jurisdiction
shall be eligible for health care benefits under this division
providing that they make payments equivalent to the payments they
would be required to make if they were residing in California.
   140404.1.  All persons who under an employer-employee contract or
under statute are eligible for retiree health care benefits,
including retirees who elect to reside outside of California, shall
remain eligible for those benefits in accordance with the contract or
the statute.
   140405.  Unmarried, unemancipated minors shall be deemed to have
the residency of their parent or guardian. If a minor's parents are
deceased and a legal guardian has not been appointed, or if a minor
has been emancipated by court order, the minor may establish his or
her own residency.
   140406.  (a) An individual shall be presumed to be eligible if he
or she arrives at a health facility and is unconscious, comatose, or
otherwise unable, because of his or her physical or mental condition,
to document eligibility or to act  in   on
 his or her own behalf, or if the patient is a minor, the
patient shall be presumed to be eligible, and the health facility
shall provide care as if the patient were eligible.
   (b) Any individual shall be presumed to be eligible when brought
to a health facility pursuant to any provision of Section 5150 of the
Welfare and Institutions Code.
   (c) Any individual involuntarily committed to an acute psychiatric
facility or to a hospital with psychiatric beds pursuant to any
provision of Section 5150 of the Welfare and Institutions Code,
providing for involuntary commitment, shall be presumed eligible.
   (d) All health facilities subject to state and federal provisions
governing emergency medical treatment shall continue to comply with
those provisions.
   (e) In the event of an influx of people into the state for the
purposes of receiving medical care, the commissioner shall establish
an eligibility waiting period and other criteria needed to ensure the
fiscal stability of the system.
      CHAPTER 5.  BENEFITS


   140500.  Any eligible individual may choose to receive services
under the system from any willing professional health care provider
participating in the system. No health care provider may refuse to
care for a patient solely on any basis that is specified in the
prohibition of employment discrimination contained in the Fair
Employment and Housing Act (Part 2.8 (commencing with Section 12900)
of Division 3 of Title 2 of the Government Code).
   140500.01.  A resident of the state in a family with an annual or
monthly net nonexempt household income equal to or less than 200
percent of the federal poverty level is eligible for no-cost Medi-Cal
and shall be entitled to not less than the full scope of benefits
available under the Medi-Cal program, pursuant to Section 14021 of,
and Article 4 (commencing with Section 14131) of Chapter 7 of
Division 9 of, the Welfare and Institutions Code, as provided on
January 1, 2009.
   140501.  Covered benefits under this chapter shall include all
medical care determined to be medically appropriate by the individual'
s health care provider, but are subject to limitations set forth in
Section 140503. Covered benefits include, but are not limited to, all
of the following:
   (a) Inpatient and outpatient health facility services.
   (b) Inpatient and outpatient professional health care provider
services by licensed health care professionals.
   (c) Diagnostic imaging, laboratory services, and other diagnostic
and evaluative services.
   (d) Durable medical equipment, appliances, and assistive
technology, including prosthetics, eyeglasses, and hearing aids and
their repair.
   (e) Rehabilitative care.
   (f) Emergency transportation and necessary transportation for
health care services for disabled and indigent persons.
   (g) Language interpretation and translation for health care
services, including sign language for those unable to speak, or hear,
or who are language impaired, and Braille translation or other
services for those with no or low vision.
   (h) Child and adult immunizations and preventive care.
   (i) Health education.
   (j) Hospice care.
   (k) Home health care.
   () Prescription drugs that are listed on the system's formulary.
Nonformulary prescription drugs may be included if standards and
criteria established by the commissioner are met.
   (m) Mental and behavioral health care.
   (n) Dental care.
   (o) Podiatric care.
   (p) Chiropractic care.
   (q) Acupuncture.
   (r) Blood and blood products.
   (s) Emergency care services.
   (t) Vision care.
   (u) Adult day care.
   (v) Case management and coordination to ensure services necessary
to enable a person to remain safely in the least restrictive setting.

   (w) Substance abuse treatment.
   (x) Care of up to 100 days in a skilled nursing facility following
hospitalization.
   (y) Dialysis.
   (z) Benefits offered by a bona fide church, sect, denomination, or
organization whose principles include healing entirely by prayer or
spiritual means provided by a duly authorized and accredited
practitioner or nurse of that bona fide church, sect, denomination,
or organization.
   (aa) Chronic disease management.
   (ab) Family planning services and supplies.
   (ac) For persons under 21 years of age, early and periodic
screening, diagnosis, and treatment services, as defined in Section
1396d(r) of Title 42 of the United States Code, whether or not those
services are covered benefits for persons who are 21 years of age or
older.
   140502.  The commissioner may expand benefits beyond the minimum
benefits described in this chapter when expansion meets the intent of
this division and when there are sufficient funds to cover the
expansion.
   140503.  The following health care services shall be excluded from
coverage by the system:
   (a) Health care services determined to have no medical indication
by the commissioner and the chief medical officer.
   (b) Surgery, dermatology, orthodontia, prescription drugs, and
other procedures primarily for cosmetic purposes, unless required to
correct a congenital defect, restore or correct a part of the body
that has been altered as a result of injury, disease, or surgery, or
determined to be medically necessary by a qualified, licensed health
care provider in the system.
   (c) Private rooms in inpatient health facilities where appropriate
nonprivate rooms are available, unless determined to be medically
necessary by a qualified, licensed health care provider in the
system.
   (d) Services of a health care provider or facility that is not
licensed or accredited by the state except for approved services
provided to a California resident who is temporarily out of the
state.
   140504.  (a) During the initial two years of the system's
operation, the commissioner shall not impose a deductible payment or
copayment other than for treatment by a specialist if no referral was
made by the primary care provider pursuant to Section 140601. The
commissioner shall determine the amount of the copayment or
deductible imposed pursuant to this subdivision. The commissioner and
the Healthcare Policy Board shall review the deductible and
copayment provisions annually, commencing in the third year of the
system's operation, to determine whether they should be included in
the system.
   (b) Commencing in the third year of the system's operation, the
commissioner may impose a deductible payment and copayment pursuant
to the determination made under subdivision (a)  , except as
specified under subdivisions (c) and (d)  . The amount of the
deductible payment and the copayment combined shall not exceed two
hundred fifty dollars ($250) per person each year and five hundred
dollars ($500) per family each year, except the deductible payment
and copayment for treatment by a specialist without a referral from
the primary care provider pursuant to Section 140601 shall not be
subject to this limitation and shall be established by the
commissioner.
   (c) No copayments or deductible payments may be established for
preventive care as determined by a patient's primary care provider.
   (d) No copayments or deductible payments may be established when
prohibited by federal law.
   (e) No deductible payments or copayments may be imposed on a
person who is eligible for benefits under the Medi-Cal program
(Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of
the Welfare and Institutions Code), except for treatment by a
specialist without a referral from the primary care provider pursuant
to Section 140601.
   (f) The commissioner shall establish standards and procedures for
waiving copayments or deductible payments for a person who
demonstrates, to the commissioner's satisfaction, that the person
lacks the financial means to pay the copayment or deductible. Waivers
of copayments or deductible payments shall not affect the
reimbursement of health care providers.
   (g) Any copayments established pursuant to this section and
collected by health care providers shall be transmitted to the
Treasurer to be deposited to the credit of the Healthcare Fund.
   (h) Nothing in this division shall be construed to diminish the
benefits that an individual has under a collective bargaining
agreement.
   (i) Nothing in this division shall preclude employees from
receiving benefits available to them under a collective bargaining
agreement or other employee-employer agreement that are superior to
benefits under this division.
      CHAPTER 6.  DELIVERY OF CARE


   140600.  (a) All health care providers licensed or accredited to
practice in California may participate in the system.
   (b) No health care provider whose license or accreditation is
suspended or revoked may participate in the system.
   (c) If a health care provider is on probation, the licensing or
the accrediting agency shall monitor the health care provider in
question, pursuant to applicable California law. The licensing or
accrediting agency shall report to the chief medical officer at
intervals established by the chief medical officer, on the status of
health care providers who are on probation and on measures undertaken
to assist health care providers to return to practice and to resolve
complaints made by patients.
   (d) Health care providers may accept eligible persons for care
according to the health care provider's ability to provide services
needed by the patient and according to the number of patients a
health care provider can treat without compromising safety and care
quality. A health care provider may accept patients in the order of
time of application.
   (e) A health care provider shall not refuse to care for a patient
solely on any basis that is specified in the prohibition of
employment discrimination contained in the Fair Employment and
Housing Act (Part 2.8 (commencing with Section 12900) of Division 3
of Title 2 of the Government Code).
   (f) Choice of health care provider:
   (1) Persons eligible for health care services under this division
may choose a primary care provider.
   (A) Primary care providers include family practitioners, general
practitioners, internists and pediatricians, nurse practitioners and
physician assistants practicing under supervision as defined in
California codes, and doctors of osteopathy licensed to practice as
general doctors.
   (B) Women may choose an obstetrician-gynecologist, in addition to
a primary care provider.
   (2) Persons who choose to enroll with integrated health care
delivery systems, group medical practices, or essential community
providers that offer comprehensive services, shall retain membership
for at least one year after an initial three-month evaluation period
during which time they may withdraw for any reason.
   (A) The three-month period shall commence on the date when an
enrollee first sees a primary care provider.
   (B) Persons who want to withdraw after the initial three-month
period shall request a withdrawal pursuant to dispute resolution
procedures established by the commissioner and may request assistance
from the patient advocate in the dispute process. The dispute shall
be resolved in a timely fashion and shall have no adverse effect on
the care a patient receives.

             (3) Persons needing to change primary care providers
because of health care needs that their primary care provider cannot
meet may change primary care providers at any time.
   140601.  (a) Primary care providers shall coordinate the care a
patient receives or shall ensure that a patient's care is
coordinated.
   (b) (1) Patients shall have a referral from their primary care
provider, or from a health care provider rendering care to them in
the emergency room or other accredited emergency setting, or from a
health care provider treating a patient for an emergency condition in
any setting, or from their obstetrician-gynecologist, to see a
physician or nonphysician specialist whose services are covered by
this division, unless the patient agrees to assume the costs of care
or pay a copayment, if implemented by the commissioner pursuant to
Section 140504. A referral shall not be required to see a dentist or
to see an ophthalmologist or optometrist for a routine vision
examination.
   (2) Referrals shall be based on the medical needs of the patient
and on guidelines, which shall be established by the chief medical
officer to support clinical decisionmaking.
   (3) Referrals shall not be restricted or provided solely because
of financial considerations. The chief medical officer shall monitor
referral patterns and intervene as necessary to assure that referrals
are neither restricted nor provided solely because of financial
considerations.
   (4) For the first six months of the system's operation, no
specialist referral or copayment shall be required for patients who
had been receiving care from a specialist prior to the initiation of
the system. Beginning with the seventh month of the system's
operation, all patients shall be required to obtain a referral from a
primary or emergency care provider for specialty care if the care is
to be paid for by the system. No referral is required if a patient
pays the full cost of the specialty care and the specialist accepts
that payment arrangement.
   (5) Where referral processes are in place prior to the initiation
of the system, the chief medical officer shall review the referral
processes to assure that they meet the system's standards for care
quality and shall assure needed changes are implemented so that all
Californians receive the same standards of care quality and access to
specialty care.
   (6) A specialist may serve as the primary care provider if the
patient and the provider agree to this arrangement and if the
provider agrees to coordinate the patient's care or to ensure that
the care the patient receives is coordinated.
   (7) The commissioner shall establish or ensure the establishment
of a computerized referral registry to facilitate the referral
process and to allow a specialist and a patient to easily determine
whether a referral has been made pursuant to this division.
   (8) A patient may appeal the denial of a referral through the
dispute resolution procedures established by the commissioner and may
request the assistance of the patient advocate during the dispute
resolution process.
   140602.  (a) The purpose of the Office of Health Planning is to
plan for the short- and long-term health care needs of the population
pursuant to the health care and finance standards established by the
commissioner and by this division.
   (b) The office shall be headed by a director appointed by the
commissioner. The director shall serve pursuant to provisions of
subdivisions (c), (d), and (e) of Section 140100 and subdivisions (j)
and (k) of Section 140101.
   (c) The director shall do all the following:
   (1) Administer all aspects of the Office of Health Planning.
   (2) Serve on the Healthcare Policy Board.
   (3) Establish performance criteria in measurable terms for health
care goals in consultation with the chief medical officer, the
regional planning directors, and regional medical officers and others
with experience in health care outcomes measurement and evaluation.
   (4) Evaluate the effectiveness of performance criteria in
accurately measuring quality of care, administration, and planning.
   (5) Assist the health care regions to develop operating and
capital requests pursuant to health care and financial guidelines
established by the commissioner and by this division. In assisting
regions, the director shall do all of the following:
   (A) Identify medically underserved areas and health care service
and asset shortages.
   (B) Identify disparities in health outcomes.
   (C) Establish conventions for the definition, collection, storage,
analysis, and transmission of data for use by the system.
   (D) Establish electronic systems that support dissemination of
information to health care providers and patients about integrated
health network and integrated health care delivery systems and
community-based health care resources.
   (E) Support establishment of comprehensive health care databases
using uniform methodology that is compatible among the regions and
between the regions and the agency.
   (F) Provide information to support effective regional planning and
innovation.
   (G) Provide information to support interregional planning,
including planning for access to specialized centers that perform a
high volume of procedures for conditions requiring highly specialized
treatments, including emergency and trauma, and other interregional
access to needed care, and planning for coordinated interregional
capital investment.
   (H) Provide information for, and participate in, earthquake
retrofit planning.
   (I) Evaluate regional budget requests and make recommendations to
the commissioner about regional revenue allocations.
   (6) Estimate the health care workforce required to meet the health
care needs of the population pursuant to the standards and goals
established by the commissioner, the costs of providing the needed
workforce, and, in collaboration with regional planners, educational
institutions, the Governor, and the Legislature, develop short- and
long-term plans to meet those needs, including a plan to finance
needed training.
   (7) Estimate the number and types of health facilities required to
meet the short- and long-term health care needs of the population
and the projected costs of needed facilities. In collaboration with
the commissioner, regional planning directors and regional medical
officers, the chief medical officer, the Governor, and the
Legislature, develop plans to finance and build needed facilities.
   140603.  The Technology Advisory Group shall explore the
feasibility and the value to the health of the population of the
following electronic initiatives:
   (a) Establish integrated statewide health care databases to
support health care planning and determine which databases should be
established on a statewide basis and which should be established on a
regional basis.
   (b) Assure that databases have uniform methodology and formats
that are compatible among the regions and between the regions and the
agency.
   (c) Establish mandatory database reporting requirements and
penalties for noncompliance. Monitor the effectiveness of reporting
and make needed improvements.
   (d) Establish means for anonymous reporting to the chief medical
officer and regional medical officers of medical errors and other
related problems, and for anonymous reporting to the commissioner and
regional planning directors of problems related to ineffective
management, and establish guidelines for the protection of persons
coming forward to report these problems.
   (e) In collaboration with the chief medical officer, the Office of
Patient Advocacy, and regional patient advocates, investigate the
costs and benefits of electronic and online scheduling systems and
means of health care provider-patient communication that allow for
electronic visits, and make recommendations to the chief medical
officer regarding the use of these concepts in the system.
   (f) In collaboration with the chief medical officer, establish
electronic systems and other means that support the use of standards
of care based on clinical efficacy to guide clinical decisionmaking
by all who provide services in the system.
   (g) In collaboration with the chief medical officer, support the
development of disease management programs and their use in the
system.
   (h) Establish electronic initiatives that reduce administration
costs.
   (i) Collaborate with the chief medical officer and regional
medical officers to assure the development of software systems that
link clinical guidelines to individual patient conditions, and guide
clinicians through diagnosis and treatment algorithms derived from
research based on clinical efficacy and best medical practices.
   (j) Collaborate with the chief medical officer and regional
medical officers to assure the development of software systems that
offer health care providers access to guidelines that are appropriate
for their specialty and that include current information on
prevention and treatment of disease.
   (k) In collaboration with the Partnerships for Health and regional
medical officers, establish Web-based, patient-centered information
systems that assist people to promote and maintain health and provide
information on health conditions and recent developments in
treatment.
   (l) Establish electronic systems and other means to provide
patients with easily understandable information about the performance
of health care providers. This shall include, but not be limited to,
information about the experience that health care providers have in
the field or fields in which they deliver care, the number of years
they have practiced in their field and, in the case of medical and
surgical procedures, the number of procedures they have performed in
their area or areas of specialization.
   (m) Establish electronic systems that facilitate health care
provider continuing medical education that meets licensure
requirements.
   (n) Recommend to the commissioner means to link health care
research with the goals and priorities of the system.
   140604.  (a) The Director of the Office of Health Planning shall
establish standards for culturally and linguistically competent care,
which shall include, but not be limited to, all of the following:
   (1) State Department of Health Care Services and the Department of
Managed Care guidelines for culturally and linguistically sensitive
care.
   (2) Medi-Cal Managed Care Division (MMCD) Policy Letters 99-01 to
99-04 and MMCD All Plan Letter 99005.
   (3) Subchapter 5 of the Civil Rights Act of 1964 (42 U.S.C. Sec.
2000d).
   (4) United States Department of Health and Human Services' Office
of Civil Rights; Title VI of the Civil Rights Act of 1964; Policy
Guidance on Prohibition Against National Origin Discrimination as It
Affects Persons with Limited English Proficiency (February 1, 2002).
   (5) United States Department of Health and Human Services' Office
of Minority Health; National Standards on Culturally and
Linguistically Appropriate Services (CLAS) in Health Care--Final
Report (December 22, 2000).
   (b) The director shall annually evaluate the effectiveness of
standards for culturally and linguistically competent care and make
recommendations to the commissioner, the Office of Patient Advocacy,
and the chief medical officer for needed improvements. In evaluating
the standards for culturally and linguistically sensitive care, the
director shall establish a process to receive concerns and comments
from consumers.
   (c) The director shall pursue available federal financial
participation for the provision of a language services program that
supports the system's goals.
   140605.  (a) Within the agency, the commissioner shall establish
the Office of Health Care Quality.
   (b) The office shall be headed by the chief medical officer who
shall serve pursuant to provisions of subdivisions (c), (d), and (e)
of Section 140100 and subdivisions (j) and (k) of Section 140101
regarding qualifications for appointed officers of the system.
   (c) The purpose of the Office of Health Care Quality is the
following:
   (1) Support the delivery of high quality, coordinated health care
services that enhance health; prevent illness, disease, and
disability; slow the progression of chronic diseases; and improve
personal health management.
   (2) Promote efficient care delivery.
   (3) Establish processes for measuring, monitoring, and evaluating
the quality of care delivered in the system, including the
performance of individual health care providers.
   (4) Establish means to make changes needed to improve health care
quality, including innovative programs that improve quality.
   (5) Promote patient, health care provider, and employer
satisfaction with the system.
   (6) Assist regional planning directors and medical officers in the
development and evaluation of regional operating and capital budget
requests.
   140606.  (a) In supporting the goals of the Office of Health Care
Quality, the chief medical officer shall do all of the following:
   (1) Administer all aspects of the office.
   (2) Serve on the Healthcare Policy Board.
   (3) Collaborate with regional medical officers, regional planning
directors, health care providers, consumers, the Director of the
Office of Health Planning, the patient advocate of the Office of
Patient Advocacy, and directors of Partnerships for Health to develop
community-based networks of solo providers, small group practices,
essential community providers, and providers of patient care support
services in order to offer comprehensive, multidisciplinary,
coordinated services to patients.
   (4) Establish standards of care based on clinical efficacy for the
system that shall serve as guidelines to support health care
providers in the delivery of high quality care. Standards shall be
based on the best evidence available at the time and shall be
continually updated. Standards are intended to support the clinical
judgment of individual health care providers, not to replace it, and
to support clinical decisions based on the needs of individual
patients.
   (b) In establishing standards, the chief medical officer shall do
all of the following:
   (1) Draw on existing standards established by California health
care institutions, on peer-created standards, and on standards
developed by  others  institutions that have had a
positive impact on care quality, such as the Centers for Disease
Control  and Prevention  , the National Quality Forum, and
the Agency for Health Care Quality and Research.
   (2) Collaborate with regional medical officers in establishing
regional goals, priorities, and a timetable for implementation of
standards of care.
   (3) Assure a process for patients to provide their views on
standards of care to the patient advocate of the Office of Patient
Advocacy who shall report those views to the chief medical officer.
   (4) Collaborate with the Director of the Office of Health Planning
and regional medical officers to support the development of computer
software systems that link clinical guidelines to individual patient
conditions, guide clinicians through diagnosis and treatment
algorithms based on research and best medical practices based on
clinical efficacy, offer access to guidelines appropriate to each
medical specialty and to current information on disease prevention
and treatment, and that support continuing medical education.
   (5) Where referral processes for access to specialty care are in
place prior to the initiation of the system, the chief medical
officer shall review the referral processes to assure that they meet
the system's standards for care quality and shall assure that needed
changes are implemented so that all Californians receive the same
standards of care quality.
   (c) In collaboration with the Director of the Office of Health
Planning and regional medical officers, the chief medical officer
shall implement means to measure and monitor the quality of care
delivered in the system. Monitoring systems shall include, but shall
not be limited to, peer and patient performance reviews.
   (d) The chief medical officer shall establish means to support
individual health care providers and health systems in correcting
quality of care problems, including timeframes for making needed
improvements and means to evaluate the effectiveness of
interventions.
   (e) In collaboration with regional medical officers, regional
planning directors, and the Director of the Office of Health
Planning, the chief medical officer shall establish means to identify
medical errors and their causes and develop plans to prevent them.
Means shall include a process for anonymous reporting of errors and
guidelines to protect those who report the errors against
recrimination, including job demotion, promotion discrimination, or
job loss.
   (f) The chief medical officer shall convene an annual statewide
conference to discuss medical errors that occurred during the year,
their causes, means to prevent errors, and the effectiveness of
efforts to decrease errors.
   (g) The chief medical officer shall recommend to the commissioner
a benefits package based on clinical efficacy for the system,
including priorities for needed benefit improvements. In making
recommendations, the chief medical officer shall do all of the
following:
   (1) Identify safe and effective treatments.
   (2) Evaluate and draw on existing benefit packages.
   (3) Receive comments and recommendations from health care
providers about benefits that meet the needs of their patients.
   (4) Receive comments and recommendations made directly by patients
or indirectly through the Office of Patient Advocacy.
   (5) Identify and recommend to the commissioner and the Healthcare
Policy Board innovative approaches to health promotion, disease and
injury prevention, education, research, and care delivery for
possible inclusion in the benefit package.
   (6) Identify complementary and alternative modalities that have
been shown by the National Institutes of Health, Division of
Complementary and Alternative Medicine to be safe and effective for
possible inclusion as covered benefits.
   (7) Recommend to the commissioner and update as appropriate,
pharmaceutical and durable and nondurable medical equipment
formularies based on clinical efficacy. In establishing the
formularies, the chief medical officer shall establish a Pharmacy and
Therapeutics Committee composed of pharmacy and health care
providers, representatives of health facilities and organizations
having system formularies in place at the time the system is
implemented, and other experts that shall do all the following:
   (A) Identify safe and effective pharmaceutical agents for use in
the system.
   (B) Draw on existing standards and formularies.
   (C) Identify experimental drugs and drug treatment protocols for
possible inclusion in the formulary.
   (D) Review formularies in a timely fashion to ensure that safe and
effective drugs are available and that unsafe drugs are removed from
use.
   (E) Assure the timely dissemination of information needed to
prescribe safely and effectively to all California health care
providers and the development and utilization of electronic
dispensing systems that decrease pharmaceutical dispensing errors.
   (8) Establish standards and criteria and a process for health care
providers to seek authorization for prescribing pharmaceutical
agents and durable and nondurable medical equipment that are not
included in the system's formulary. No standard or criteria shall
impose an undue administrative burden on patients or health care
providers, including pharmacies and pharmacists, and none shall delay
care a patient needs.
   (9) Develop standards and criteria and a process for health care
providers to request authorization for services and treatments,
including experimental treatments that are not included in the system'
s benefit package.
   (A) Where such processes are in place when the system is
initiated, the chief medical officer shall review those processes to
assure that they meet the system's standards for care quality and
shall assure that needed changes are implemented so that all
Californians receive the same standards of care quality.
   (B) No standard or criteria shall impose an undue administrative
burden on a health care provider or a patient and none shall delay
the care a patient needs.
   (10) In collaboration with the Director of the Office of Health
Planning, regional planning directors and regional medical officers,
identify on a regional basis appropriate ratios of general medical
providers to specialty medical providers and appropriate ratios of
medical providers to patients in order to meet the health care needs
of the population and the goals of the system.
   (11) Recommend to the commissioner and to the Payments Board,
financial and nonfinancial incentives and other means to achieve
recommended provider ratios.
   (12) Collaborate with the Director of the Office of Health
Planning and regional medical officers and patient advocates in the
development of electronic initiatives, pursuant to Section 140603.
   (13) Collaborate with the commissioner, the regional medical
officers, and the directors of the Payments Board and the Healthcare
Fund to formulate a health care provider reimbursement model that
promotes the delivery of coordinated, high quality health care
services in all sectors of the system and creates financial and other
incentives for the delivery of high quality health care.
   (14) Establish or assure the establishment of continuing medical
education programs about advances in the delivery of high quality
health care.
   (15) Annually report to the commissioner, the Healthcare Policy
Board, and the public on the quality of health care delivered in the
system, including improvements that have been made and problems that
have been identified during the year, goals for care improvement in
the coming year, and plans to meet these goals.
   (h) No person working within the agency or a member of the
Pharmacy and Therapeutics Committee or serving as a consultant to the
agency or to the Pharmacy and Therapeutics Committee, may receive
fees or remuneration of any kind from a pharmaceutical company.
   140607.  (a) The patient advocate of the Office of Patient
Advocacy, in collaboration with the chief medical officer, the
regional patient advocates, medical officers, and planning directors
shall establish a program in the agency and in each region called the
Partnerships for Health.
   (b) The purpose of the Partnerships for Health is to improve
health through community health initiatives, to support the
development of innovative means to improve health care quality, to
promote efficient coordinated care delivery, and to educate the
public about the following:
   (1) Personal maintenance of health.
   (2) Prevention of disease.
   (3) Improvement in communication between patients and providers.
   (4) Improving quality of care.
   (c) The patient advocate shall work with the community and health
care providers in proposing Partnerships for Health projects and in
developing project budget requests that shall be included in the
regional budget request to the commissioner.
   (d) In developing educational programs, the Partnerships for
Health shall collaborate with educators in the region.
   (e) Partnerships for Health shall support the coordination of
system and public health programs.
   140610.  (a) The patient advocate of the Office of Patient
Advocacy, in consultation with the chief medical officer, shall
establish a grievance system for all grievances involving the delay,
denial, or modification of health care services. The patient advocate
shall do all of the following with regard to the grievance regarding
delay, denial, or modification of health care services:
   (1) Establish and maintain a grievance system approved by the
commissioner under which enrollees of the system may submit their
grievances to the system. The system shall provide reasonable
procedures that shall ensure adequate consideration of enrollee
grievances and rectification when appropriate.
   (2) Inform enrollees upon enrollment in the system and annually
hereafter of the procedure for processing and resolving grievances.
The information shall include the location and telephone number where
grievances may be submitted.
   (3) Provide printed and electronic access for enrollees who wish
to register grievances. The forms used by the system shall be
approved by the commissioner in advance as to format.
   (4) (A) Provide for a written acknowledgment within five calendar
days of the receipt of a grievance. Grievances received by telephone,
by facsimile, by e-mail, or online through the system's Internet Web
site that are resolved by the next business day following receipt
are exempt from the requirements of this subparagraph and paragraph
(5). The acknowledgment shall advise the complainant of the
following:
   (i) That the grievance has been received.
   (ii) The date of receipt.
   (iii) The name, telephone number, and address of the system
representative who may be contacted about the grievance.
   (B) The patient advocate shall maintain a log of all grievances.
The log shall be periodically reviewed by the patient advocate and
shall include the following information for each complaint:
   (i) The date of the call.
   (ii) The name of the enrollee.
   (iii) The enrollee's system identification number.
   (iv) The nature of the grievance.
   (v) The nature of the resolution.
   (vi) The name of the system representative who took the call and
resolved the grievance.
   (5) Provide enrollees of the system with written responses to
grievances, with a clear and concise explanation of the reasons for
the system's response. The system response shall describe the
criteria used and the clinical reasons for its decision, including
all criteria and clinical reasons related to medical necessity.
   (6) Keep in its files copies of all grievances, and the responses
thereto, for a period of five years.
   (7) Establish and maintain an Internet Web site that shall provide
an online form that enrollees of the system can use to file with a
grievance online.
   (b) In any case determined by the patient advocate to be a case
involving an imminent and serious threat to the health of the
enrollee, including, but not limited to, severe pain or the potential
loss of life, limb, or major bodily function, or in any other case
where the patient advocate determines that an earlier review is
warranted, an enrollee shall not be required to complete the
grievance process.
   (c) If the enrollee is a minor, or is incompetent or
incapacitated, the parent, guardian, conservator, relative, or other
designee of the
enrollee, as appropriate, may submit the grievance to the patient
advocate as a designated agent of the enrollee. Further, a health
care provider may join with, or otherwise assist, an enrollee, or the
agent, to submit the grievance to the patient advocate. In addition,
following submission of the grievance to the patient advocate, the
enrollee, or the agent, may authorize the health care provider to
assist, including advocating on behalf of the enrollee. For purposes
of this section, a "relative" includes the parent, stepparent,
spouse, domestic partner, adult son or daughter, grandparent,
brother, sister, uncle, or aunt of the enrollee.
   (d) The patient advocate shall review the written documents
submitted with the enrollee's grievance. The patient advocate may ask
for additional information, and may hold an informal meeting with
the involved parties, including health care providers who have joined
in submitting the grievance or who are otherwise assisting or
advocating on behalf of the enrollee. If after reviewing the record,
the patient advocate concludes that the grievance, in whole or in
part, is eligible for review under the independent medical review
system, the patient advocate shall immediately notify the enrollee of
that option and shall, if requested orally or in writing, assist the
enrollee in participating in the independent medical review system.
   (e) The patient advocate shall send a written notice of the final
disposition of the grievance, and the reasons therefor, to the
enrollee, to any health care provider that has joined with or is
otherwise assisting the enrollee, and to the commissioner within 30
calendar days of receipt of the grievance, unless the patient
advocate, in his or her discretion, determines that additional time
is reasonably necessary to fully and fairly evaluate the grievance.
In any case not eligible for independent medical review, the patient
advocate's written notice shall include, at a minimum, the following:

   (1) A summary of findings and the reasons why the patient advocate
found the system to be, or not to be, in compliance with any
applicable laws, regulations, or orders of the commissioner.
   (2) A discussion of the patient advocate's contact with any health
care provider, or any other independent expert relied on by the
patient advocate, along with a summary of the views and
qualifications of that health care provider or expert.
   (3) If the enrollee's grievance is sustained in whole or in part,
information about any corrective action taken.
   (f) The patient advocate's order shall be binding on the system.
   (g) The patient advocate shall establish and maintain a system of
aging of grievances that are pending and unresolved for 30 days or
more that shall include a brief explanation of the reasons each
grievance is pending and unresolved for 30 days or more.
   (h) The grievance or resolution procedures authorized by this
section shall be in addition to any other procedures that may be
available to any person, and failure to pursue, exhaust, or engage in
the procedures described in this section shall not preclude the use
of any other remedy provided by law.
   (i) Nothing in this section shall be construed to allow the
submission to the patient advocate of any health care provider
grievance under this section. However, as part of a health care
provider's duty to advocate for medically appropriate health care for
his or her patients pursuant to Sections 510 and 2056 of the
Business and Professions Code, nothing in this subdivision shall be
construed to prohibit a health care provider from contacting and
informing the patient advocate about any concerns he or she has
regarding compliance with or enforcement of this division.
   140612.  (a) The patient advocate shall establish an independent
medical review system to act as an independent, external medical
review process for the system to provide timely examinations of
disputed health care services and coverage decisions regarding
experimental and investigational therapies to ensure the system
provides efficient, appropriate, high quality health care, and that
the system is responsive to enrollee disputes.
   (b) For the purposes of this section, "disputed health care
service" means any health care service eligible for coverage and
payment under the system that has been denied, modified, or delayed
by a decision of the system, or by one of its contracting health care
providers, in whole or in part due to a finding that the service is
not medically necessary. A decision regarding a disputed health care
service relates to the practice of medicine and is not a coverage
decision. If the system, or one of its contracting providers, issues
a decision denying, modifying, or delaying health care services,
based in whole or in part on a finding that the proposed health care
services are not a covered benefit under the system, the statement of
decision shall clearly specify the provisions of the system that
exclude coverage.
   (c) For the purposes of this section, "coverage decision" means
the approval or denial of the system, or by one of its contracting
entities, substantially based on a finding that the provision of a
particular service is included or excluded as a covered benefit under
the terms and conditions of the system.
   (d) Coverage decisions regarding experimental or investigational
therapies for individual enrollees who meet all of the following
criteria are eligible for review by the independent medical review
system:
   (1) (A) The enrollee has a life-threatening or seriously
debilitating condition.
   (B) For purposes of this section, "life-threatening" means either
or both of the following:
   (i) Diseases or conditions where the likelihood of death is high
unless the course of the disease is interrupted.
   (ii) Diseases or conditions with potentially fatal outcomes, where
the end point of clinical intervention is survival.
   (C) For purposes of this section, "seriously debilitating" means
diseases or conditions that cause major irreversible morbidity.
   (2) The enrollee's physician certifies that the enrollee has a
condition, as defined in paragraph (1), for which standard therapies
have not been effective in improving the condition of the enrollee,
for which standard therapies would not be medically appropriate for
the enrollee, or for which there is no more beneficial standard
therapy covered by the system than the therapy proposed pursuant to
paragraph (3).
   (3) Either (A) the enrollee's physician, who is under contract
with the system, has recommended a drug, device, procedure, or other
therapy that the physician certifies in writing is likely to be more
beneficial to the enrollee than any available standard therapies, or
(B) the enrollee, or the enrollee's physician who is a licensed,
board-certified or board-eligible physician qualified to practice in
the area of practice appropriate to treat the enrollee's condition,
has requested a therapy that, based on two documents from the medical
and scientific evidence, is likely to be more beneficial for the
enrollee than any available standard therapy. The physician
certification pursuant to this section shall include a statement of
the evidence relied upon by the physician in certifying his or her
recommendation. Nothing in this subdivision shall be construed to
require the system to pay for the services of a nonparticipating
physician provided pursuant to this division, that are not otherwise
covered pursuant to the system's benefits package.
   (4) The enrollee has been denied coverage by the system for a
drug, device, procedure, or other therapy recommended or requested
pursuant to paragraph (3).
   (5) The specific drug, device, procedure, or other therapy
recommended pursuant to paragraph (3) would be a covered service,
except for the system's determination that the therapy is
experimental or investigational.
   (e) (1) All enrollee grievances involving a disputed health care
service are eligible for review under the independent medical review
system if the requirements of this section are met. If the patient
advocate finds that a grievance involving a disputed health care
service does not meet the requirements of this section for review
under the independent medical review system, the enrollee's grievance
shall be treated as a request for the patient advocate to review the
grievance. All other enrollee grievances, including grievances
involving coverage decisions, remain eligible for review by the
patient advocate.
   (2) In any case in which an enrollee or health care provider
asserts that a decision to deny, modify, or delay health care
services was based, in whole or in part, on consideration of medical
appropriateness, the patient advocate shall have the final authority
to determine whether the grievance is more properly resolved pursuant
to an independent medical review as provided under this section.
   (3) The patient advocate shall be the final arbiter when there is
a question as to whether an enrollee grievance is a disputed health
care service or a coverage decision. The patient advocate shall
establish a process to complete an initial screening of an enrollee
grievance. If there appears to be any medical appropriateness issue,
the grievance shall be resolved pursuant to an independent medical
review.
   (f) For purposes of this chapter, an enrollee may designate an
agent to act on his or her behalf. The agent may join with or
otherwise assist the enrollee in seeking an independent medical
review, and may advocate on behalf of the enrollee.
   (g) The independent medical review process authorized by this
section is in addition to any other procedures or remedies that may
be available.
   (h) The office of the patient advocate shall prominently display
in every relevant informational brochure, on copies of the system's
procedures for resolving grievances, on letters of denials issued by
either the system or its contracting providers, on the grievance
forms, and on all written responses to grievances, information
concerning the right of an enrollee to request an independent medical
review in cases where the enrollee believes that health care
services have been improperly denied, modified, or delayed by the
system, or by one of its contracting providers.
   (i) An enrollee may apply to the patient advocate for an
independent medical review when all of the following conditions are
met:
   (1) (A) The enrollee's health care provider has recommended a
health care service as medically appropriate.
   (B) The enrollee has received urgent care or emergency services
that a health care provider determined was medically appropriate.
   (C) The enrollee seeks coverage for experimental or
investigational therapies.
   (D) The enrollee, in the absence of a health care provider
recommendation under subparagraph (A) or the receipt of urgent care
or emergency services by a health care provider under subparagraph
(B), has been seen by a system health care provider for the diagnosis
or treatment of the medical condition for which the enrollee seeks
independent review. The system shall expedite access to a system
health care provider upon request of an enrollee. The system health
care provider need not recommend the disputed health care service as
a condition for the enrollee to be eligible for an independent
medical review.
   (2) The disputed health care service has been denied, modified, or
delayed by the system, or by one of its contracting providers, based
in whole or in part on a decision that the health care service is
not medically appropriate.
   (3) The enrollee has filed a grievance with the patient advocate
and the disputed decision is upheld or the grievance remains
unresolved after 30 days. The enrollee shall not be required to
participate in the system's grievance process for more than 30 days.
In the case of a grievance that requires expedited review, the
enrollee shall not be required to participate in the system's
grievance process for more than three days.
   (j) An enrollee may apply to the patient advocate for an
independent medical review of a decision to deny, modify, or delay
health care services, based in whole or in part on a finding that the
disputed health care services are not medically appropriate, within
six months of any of the qualifying periods or events. The patient
advocate may extend the application deadline beyond six months if the
circumstances of a case warrant the extension.
   (k) The enrollee shall pay no application or processing fees of
any kind.
   (l) Upon notice from the patient advocate that the enrollee has
applied for an independent medical review, the system or its
contracting providers shall provide to the independent medical review
organization designated by the patient advocate a copy of all of the
following documents within three business days of the system's
receipt of the patient advocate's notice of a request by an enrollee
for an independent medical review:
   (1) (A) A copy of all of the enrollee's medical records in the
possession of the system or its contracting providers relevant to
each of the following:
   (i) The enrollee's medical condition.
   (ii) The health care services being provided by the system and its
contracting providers for the condition.
   (iii) The disputed health care services requested by the enrollee
for the condition.
   (B) Any newly developed or discovered relevant medical records in
the possession of the system or its contracting providers after the
initial documents are provided to the independent medical review
organization shall be forwarded immediately to the independent
medical review organization. The system shall concurrently provide a
copy of medical records required by this subparagraph to the enrollee
or the enrollee's health care provider, if authorized by the
enrollee, unless the offer of medical records is declined or
otherwise prohibited by law. The confidentiality of all medical
record information shall be maintained pursuant to applicable state
and federal laws.
   (2) A copy of all information provided to the enrollee by the
system and any of its contracting providers concerning their
decisions regarding the enrollee's condition and care, and a copy of
any materials the enrollee or the enrollee's health care provider
submitted to the system and to the system's contracting providers in
support of the enrollee's request for disputed health care service.
This documentation shall include the written response to the enrollee'
s grievance. The confidentiality of any enrollee medical information
shall be maintained pursuant to applicable state and federal laws.
   (3) A copy of any other relevant documents or information used by
the system or its contracting providers in determining whether
disputed health care services should have been provided, and any
statements by the system and its contracting providers explaining the
reasons for the decision to deny, modify, or delay disputed health
care services on the basis of medical necessity. The system shall
concurrently provide a copy of documents required by this paragraph,
except for any information found by the patient advocate to be
legally privileged information, to the enrollee and the enrollee's
health care provider.
   The patient advocate and the independent review organization shall
maintain the confidentiality of any information found by the patient
advocate to be the proprietary information of the system.
   140614.  (a) If there is an imminent and serious threat to the
health of the enrollee, all necessary information and documents shall
be delivered to an independent medical review organization within 24
hours of approval of the request for review. In reviewing a request
for review, the patient advocate may waive the requirement that the
enrollee follow the system's grievance process in extraordinary and
compelling cases, if the patient advocate finds that the enrollee has
acted reasonably.
   (b) The patient advocate shall expeditiously review requests and
immediately notify the enrollee in writing as to whether the request
for an independent medical review has been approved, in whole or in
part, and, if not approved, the reasons therefor. The system shall
promptly issue a notification to the enrollee, after submitting all
of the required material to the independent medical review
organization that includes an annotated list of documents submitted
and offer the enrollee the opportunity to request copies of those
documents from the system. The patient advocate shall promptly
approve an enrollee's request whenever the system has agreed that the
case is eligible for an independent medical review. To the extent an
enrollee's request for independent review is not approved by the
patient advocate, the enrollee's request shall be treated as an
immediate request for the patient advocate to review the grievance.
   (c) An independent medical review organization shall conduct the
review in accordance with a process approved by the patient advocate.
The review shall be limited to an examination of the medical
necessity of the disputed health care services and shall not include
any consideration of coverage decisions or other issues.
   (d) The patient advocate shall contract with one or more
independent medical review organizations in the state to conduct
reviews for purposes of this section. The independent medical review
organizations shall be independent of the system. The patient
advocate may establish additional requirements, including
conflict-of-interest standards, consistent with the purposes of this
section that an organization shall be required to meet in order to
qualify for participation in the independent medical review system
and to assist the patient advocate in carrying out its
responsibilities.
   (e) The independent medical review organizations and the medical
professionals retained to conduct reviews shall be deemed to be
medical consultants for purposes of Section 43.98 of the Civil Code.
   (f) The independent medical review organization, any experts it
designates to conduct a review, or any officer, patient advocate, or
employee of the independent medical review organization shall not
have any material professional, familial, or financial affiliation,
as determined by the patient advocate, with any of the following:
   (1) The system.
   (2) Any officer or employee of the system.
   (3) A physician, the physician's medical group, or the independent
practice association involved in the health care service in dispute.

   (4) The facility or institution at which either the proposed
health care service, or the alternative service, if any, recommended
by the system, would be provided.
   (5) The development or manufacture of the principal drug, device,
procedure, or other therapy proposed by the enrollee whose treatment
is under review, or the alternative therapy, if any, recommended by
the system.
   (6) The enrollee or the enrollee's immediate family.
   (g) In order to contract with the patient advocate for purposes of
this section, an independent medical review organization shall meet
all of the requirements pursuant to subdivision (d) of Section
1374.32.
   140616.  (a) Upon receipt of information and documents related to
a case, the medical professional reviewer or reviewers selected to
conduct the review by the independent medical review organization
shall promptly review all pertinent medical records of the enrollee,
provider reports, as well as any other information submitted to the
organization as authorized by the patient advocate or requested from
any of the parties to the dispute by the reviewers. If reviewers
request information from any of the parties, a copy of the request
and the response shall be provided to all of the parties. The
reviewer or reviewers shall also review relevant information related
to the criteria set forth in subdivision (b).
   (b) Following its review, the reviewer or reviewers shall
determine whether the disputed health care service was medically
appropriate based on the specific medical needs of the patient and
any of the following:
   (1) Peer-reviewed scientific and medical evidence regarding the
effectiveness of the disputed service.
   (2) Nationally recognized professional standards.
   (3) Expert opinion.
   (4) Generally accepted standards of medical practice.
   (5) Treatments likely to provide a benefit to an enrollee for
conditions for which other treatments are not clinically efficacious.

   (c) The organization shall complete its review and make its
determination in writing, and in layperson's terms to the maximum
extent practicable, within 30 days of the receipt of the application
for review and supporting documentation, or within less time as
prescribed by the patient advocate. If the disputed health care
service has not been provided and the enrollee's health care provider
or the patient advocate certifies in writing that an imminent and
serious threat to the health of the enrollee may exist, including,
but not limited to, serious pain, the potential loss of life, limb,
or major bodily function, or the immediate and serious deterioration
of the health of the enrollee, the analyses and determinations of the
reviewers shall be expedited and rendered within three days of the
receipt of the information. Subject to the approval of the patient
advocate, the deadlines for analyses and determinations involving
both regular and expedited reviews may be extended by the patient
advocate for up to three days in extraordinary circumstances or for
good cause.
   (d) The medical professionals' analyses and determinations shall
state whether the disputed health care service is medically
appropriate. Each analysis shall cite the enrollee's medical
condition, the relevant documents in the record, and the relevant
findings associated with the provisions of subdivision (b) to support
the determination. If more than one medical professional reviews the
case, the recommendation of the majority shall prevail. If the
medical professionals reviewing the case are evenly split as to
whether the disputed health care service should be provided, the
decision shall be in favor of providing the service.
   (e) The independent medical review organization shall provide the
patient advocate, the system, the enrollee, and the enrollee's health
care provider with the analyses and determinations of the medical
professionals reviewing the case, and a description of the
qualifications of the medical professionals. The independent medical
review organization shall keep the names of the reviewers
confidential in all communications with entities or individuals
outside the independent medical review organization, except in cases
where the reviewer is called to testify and in response to court
orders. If more than one medical professional reviewed the case and
the result was differing determinations, the independent medical
review organization shall provide each of the separate reviewer's
analyses and determinations.
   (f) The patient advocate shall immediately adopt the determination
of the independent medical review organization and shall promptly
issue a written decision to the parties that shall be binding on the
system.
   (g) After removing the names of the parties, including, but not
limited to, the enrollee and all medical providers, the patient
advocate's decisions adopting a determination of an independent
medical review organization shall be made available by the patient
advocate to the public upon request, at the patient advocate's cost
and after considering applicable laws governing disclosure of public
records, confidentiality, and personal privacy.
   140618.  (a) Upon receiving the decision adopted by the patient
advocate that a disputed health care service is medically
appropriate, the system shall promptly implement the decision. In the
case of reimbursement for services already rendered, the health care
provider or enrollee, whichever applies, shall be paid within five
working days. In the case of services not yet rendered, the system
shall authorize the services within five working days of receipt of
the written decision from the patient advocate, or sooner if
appropriate for the nature of the enrollee's medical condition, and
shall inform the enrollee and health care provider of the
authorization.
   (b) The system shall not engage in any conduct that has the effect
of prolonging the independent medical review process.
   (c) The patient advocate shall require the system to promptly
reimburse the enrollee for any reasonable costs associated with those
services when the patient advocate finds that the disputed health
care services were a covered benefit and the services are found by
the independent medical review organization to have been medically
appropriate and the enrollee's decision to secure the services
outside of the system was reasonable under the emergency or urgent
medical circumstances.
   140619.  (a) The patient advocate shall utilize a competitive
bidding process and use any other information on program costs
reasonable to establish a per case reimbursement schedule to pay the
costs of independent medical review organization reviews, which may
vary depending on the type of medical condition under review and on
other relevant factors.
   (b) The costs of the independent medical review system for
enrollees shall be borne by the system.
   140620.  The patient advocate shall, on a biannual basis, report
to the chief medical officer on the number, types, and outcomes of
all patient grievances relating to the denial, delay, or modification
of health care services.
      CHAPTER 7.  OTHER PROVISIONS


   140700.  Notwithstanding any other provisions of law, the
operative date of this division, other than Article 2 (commencing
with Section 140230) of Chapter 3, shall be the date the Secretary of
California Health and Human Services notifies the Secretary of the
Senate and the Chief Clerk of the Assembly that he or she has
determined that the Healthcare Fund will have sufficient revenues to
fund the costs of implementing this division.
   No state entity shall incur any transition or planning costs prior
to that date. However, this prohibition shall not apply to
activities of the California Healthcare Premium Commission, and
Article 2 (commencing with Section 140230) of Chapter 3 of this
division shall become operative on January 1, 2010.
   SEC. 2.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556
                                        of the Government Code, or
changes the definition of a crime within the meaning of Section 6 of
Article XIII B of the California Constitution.