BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  SB 1529|
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                                 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 
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          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 







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          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 







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              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).







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           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 







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          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

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