BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1529| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1529 Author: Alquist (D) Amended: 4/24/12 Vote: 21 SENATE HEALTH COMMITTEE : 6-2, 4/18/12 AYES: Hernandez, Alquist, De León, DeSaulnier, Rubio, Wolk NOES: Harman, Anderson NO VOTE RECORDED: Blakeslee SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/7/12 AYES: Kehoe, Alquist, Lieu, Price, Steinberg NOES: Walters, Dutton SUBJECT : Medi-Cal: providers: fraud SOURCE : Author DIGEST : This bill makes a number of changes to state law governing the Medi-Cal fee for service program to conform with federal requirements designed to reduce fraud. The bill makes changes to the code sections that deal with enrollment in Medi-Cal by providers, claims for reimbursement by providers, and investigation of allegations of fraud. ANALYSIS : Existing federal and state law includes many provisions designed to prevent billing fraud in the Medi-Cal program. Existing law puts into place requirements on health care providers wising to enroll in CONTINUED SB 1529 Page 2 Medi-Cal to provide services to Medi-Cal clients. Existing law also puts in place a process for investigating alleged instances of fraud by the Department of Health Care Services (DHCS). The federal Patient Protection and Affordable Care Act made a variety of changes to federal law in this area, with the overall purpose of reducing fraud. Existing state law contains a higher standard than the new federal standard of "a credible allegation of fraud" for health care programs administered by DHCS. For example, existing state law: 1.Requires the DHCS Director, when a letter or order of denial of continued enrollment or suspension of any type or duration, based upon fraud or abuse, or when a withholding of payments, based upon "reliable evidence of fraud or willful misrepresentation," is issued by DHCS to a provider, to review the evidence supporting the denial of continued enrollment, suspension, or withholding of payments. 2.Permits the Director to deny continued enrollment, suspend, or withhold payments to the provider with respect to those other health care programs if, in the opinion of the Director, the evidence shows "a pattern or practice of fraud, abuse, or willful misrepresentation" that, if replicated in any other health care program administered by DHCS, could cause either fiscal loss to the state or harm to any participant. 3.Permits the Director to deny the application of an applicant or provider to participate in any health care program administered by DHCS when, based upon fraud or abuse, the applicant or provider has been denied continued enrollment in, or suspended from, any health care program administered by DHCS, or has had payments withheld based upon reliable evidence of fraud or willful misrepresentation in connection with any health care program administered by DHCS, and remains ineligible to participate. This bill makes a variety of changes to the code sections that deal with fraud prevention in the Medi-Cal fee for SB 1529 Page 3 service program. Specifically, the bill: 1. Changes the standard for taking action against a provider to "a credible allegation of fraud" which is considered a lower standard than existing law. 2. Requires claims for reimbursement to identify the prescribing or ordering provider. 3. Expands the definition of Medi-Cal provider, to include ordering, referring, or prescribing individuals. 4. Requires applicants, providers, and owners of facilities that claim Medi-Cal reimbursement to provide additional information such as taxpayer identification numbers and all related business addresses. 5. Requires an application fee to be paid by Medi-Cal providers. 6. Requires the Department to deny an application by a provider if the provider fails to submit fingerprints for a background check. 7. Gives the Department discretion when deciding when to deactivate a provider's participation in Medi-Cal when certain conditions of enrollment or reenrollment have not been met. 8. Allows a provider that has been terminated from Medicare or another state's Medicaid program to reapply for enrollment only when a temporary suspension has been lifted after the resolution of an investigation for fraud or abuse. 9. Allows the Department to lift a temporary suspension when the resolution of an investigation occurs. 10. Requires the Department to make use of federal designations of risk based on provider type when screening applications for enrollment by providers. 11. Allows the Department to deactivate all of a SB 1529 Page 4 provider's business addresses if the provider does not remediate discrepancies found during pre-enrollment. 12. Puts into place restrictions on the Department's ability to institute temporary moratoria on provider types. 13. Authorizes unannounced visits to provider facilities by the Department. 14. Limits the issues that can be considered in the appeal of a suspension of payment. 15. Allows the Department to use provider bulletins (rather than the adoption of regulations) to implement the enrollment fee and provider risk classification system. 16. Deletes a requirement that the Department meet and confer with a provider that has had payment withheld within 30 days of a request. 17. Authorizes the Department to enter into contracts with audit recovery contractors. 18. When the Department refers allegations of fraud to the Department of Justice or local law enforcement agencies for investigation, the bill requires those agencies to report quarterly to the Department on the status of open investigations. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: No additional costs to screen Medi-Cal providers. (The Department of Health Care Services received five temporary positions in the 2011-12 Budget Act to perform additional screening required by federal law and this bill.) Unknown potential program savings due to reduced Medi-Cal billing fraud (50% General Fund, 50% federal funds). SB 1529 Page 5 Unknown, but likely minor, local mandate claims due to reporting requirements on local law enforcement agencies investigating fraud allegations (General Fund). Whether or not local law enforcement agencies will make reimbursement claims is unknown. However, given the limited information that such a report is required to contain, costs to any individual law enforcement agency are likely to be minor. Estimated annual licensing fee revenues of $600,000 (General Fund). SUPPORT : (Verified 5/8/12) Department of Health Care Services (source) California Advocates of Nursing Home Reform OPPOSITION : (Verified 5/8/12) California Medical Association ARGUMENTS IN SUPPORT : This bill is sponsored by DHCS to align California's state law with the ACA-related changes to federal regulations, as it relates to screening, enrollment, payment suspensions, overpayment recovery and sanctions of Medi-Cal providers. DHCS states this bill would provide DHCS with the authority to establish procedures for California to comply with ACA provisions required by federal regulations. DHCS states CMS believes the new screening requirements will move Medicare and Medicaid from a "pay and chase" model to one that will prevent fraudulent providers from enrolling as Medicare and Medicaid providers. DHCS continues that the intent of this bill is to prevent fraud from occurring in the Medi-Cal program, and the federal regulations require states to implement these measures and ensure compliance. Currently, California statutes provide authority to DHCS and other state departments to take actions to protect the fiscal integrity of the Medi-Cal program but the new federal regulatory requirements are not provided for in existing California statutes or regulations. Therefore, California statute must be amended in order for the state to have the necessary legal authority and comply with federal requirements. DHCS states this bill would make only the SB 1529 Page 6 minimally-required amendments to existing law to gain the statutory authority to carry out the federal requirements. Given California has had standards of participation more rigid than the federal requirements in the past, minimal changes to California codes are necessary for a majority of the new requirements established by the regulations. As the state Medicaid agency, if DHCS does not comply with the regulations, there is the potential loss of federal financial participation program-wide. ARGUMENTS IN OPPOSITION : The California Medical Association (CMA) writes it is opposed to this bill unless it is amended. CMA writes that it understands that the bulk of the content of this bill was contained in the ACA and its implementing regulations, and that it is necessary to make changes to California statute to comport with these new federal requirements. CMA states that, though it supports efforts to stem fraud, if these efforts are overly punitive, could severely impact the financial solvency of a medical practice, and CMA urges they be used sparingly and with the utmost discretion. CMA indicates there appears to be some room in the ACA's provisions that allow some flexibility for states in their interpretation of the code, and CMA is currently drafting amendments to ensure that the bill's requirements are as targeted as possible in order to avoid the unintended but potentially significant impacts this bill could have on individual physician offices seeing a high volume of Medi-Cal and Medicare patients. CTW:nl 5/9/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****