BILL ANALYSIS Ó
SB 1529
Page 1
SENATE THIRD READING
SB 1529 (Alquist)
As Amended August 7, 2012
Majority vote
SENATE VOTE :26-11
HEALTH 11-4 APPROPRIATIONS 12-5
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|Ayes:|Monning, Atkins, Bonilla, |Ayes:|Gatto, Blumenfield, |
| |Eng, Gordon, Hayashi, | |Bradford, |
| |Roger Hernández, Bonnie | |Charles Calderon, Campos, |
| |Lowenthal, Mitchell, Pan, | |Davis, Fuentes, Hall, |
| |Williams | |Hill, Cedillo, Mitchell, |
| | | |Solorio |
|-----+--------------------------+-----+--------------------------|
|Nays:|Logue, Garrick, Mansoor, |Nays:|Harkey, Donnelly, |
| |Nestande | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Revises various provisions related to the screening,
enrollment, disenrollment, suspensions, and other sanctions
against fee-for service (FFS) providers and suppliers
participating in the Medi-Cal Program to conform to requirements
of the Patient Protection and Affordable Care Act (Public Law
111-148), as amended by the Health Care and Education
Reconciliation Act of 2010 (Public Law 111- 152) (collectively
known as the Affordable Care Act or ACA). Specifically, this
bill :
1) Lowers the threshold for imposing the sanction of a Medi-Cal
payment suspension from the current standard of "reliable
evidence of fraud or willful misrepresentation" to "credible
allegation of fraud."
2)Specifies that an allegation of fraud is considered credible
if it exhibits indicia of reliability as recognized by state
and federal courts or by other law sufficient to meet
constitutional prerequisite to a law enforcement search or
seizure of comparable business assets.
3)Revises current provisions relating to the suspension of a
provider pending an investigation for fraud or for any other
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authorized reason, to require the provider to be temporarily
placed under a payment suspension, unless it is determined
that a good cause exception applies not to suspend the payment
or to suspend the payments only in part.
4)Defines a good cause exception, by reference to federal
regulations effective March 25, 2011, as follows and specifies
circumstances that qualify as good cause to suspend payments.
5)Revises current provisions relating to the temporary
suspension of a provider who is under investigation for fraud
or abuse by authorizing the Department of Health Care Services
(DHCS) to lift the temporary suspension when a resolution of
the investigation occurs.
6)Adds a definition of "resolution of an investigation for fraud
or abuse" as meaning there is no documentation to indicate
either that a charge or accusation has been filed against the
provider and the investigation has not been active at any time
during the previous 12 months or DHCS has been unable to
contact an investigator or any agency investigating the
provider.
7)Adds an exception to the current requirement of a notice to
providers within five days of a payment suspension authorizing
a 30 day delay if there is a request in writing by any law
enforcement agency and authorizes the delay to be renewed in
writing up to two times for a maximum of 90 days.
8)Revises the basis of an appeal from a suspension from the
current "issue of the reliability of the evidence" to the
"credibility of the allegation" and deletes the current
language that the appeal may not encompass "fraud or abuse"
and replaces it with "investigation or adjudication of the
allegation."
9)Effective upon approval of a State Plan Amendment (SPA) as
required by the ACA, requires DHCS to deny enrollment to or
terminate, including deactivation of the provider's enrollment
number, any provider upon discovery that the provider has been
terminated under the Medicare Program, the Medicaid Program,
or the Children's Health Insurance Program. Exempts providers
terminated under this provision from the three year bar on
reapplying.
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10)Effective upon approval of a SPA as required by the ACA, adds
ordering, referring, or prescribing providers to the
definition of Medi-Cal provider and applicant with the
following consequences:
a) Requires ordering, referring, or prescribing providers
to become enrolled as participating providers in the
Medi-Cal Program and applies existing provider enrollment
requirements to this new category; or,
b) With some exceptions, will add a requirement that all
Medi-Cal provider reimbursement claims must specify the
ordering, referring, or prescribing provider and include
the providers National Provider Identifier (NPI).
11)Adds new information to the existing information that
applicants, providers, and persons with an ownership or
control interest, as specified, must submit to DHCS in order
to be enrolled or continue to be enrolled for the purposes of
verification and data base checks.
12)Effective upon approval of a SPA as required by the ACA and
implementing regulations, authorizes DHCS to begin collecting
an annual Medi-Cal application fee from providers applying for
enrollment, including enrollment at a new location or change
in location. Exempts individual physicians and nonphysician
practitioners who are enrolled in Medicare, another state's
Medicaid or Children's Health Insurance Programs; or providers
who have paid the fee to a Medicare contractor, to another
state or are exempt or are otherwise subject to a waiver or
exemption.
13)Effective upon approval of a SPA as required by the ACA and
implementing regulations, authorizes DHCS to deactivate
currently enrolled specified Medi-Cal providers, not only a
provider applying for continued enrollment or to operate a new
location, under specified circumstances, including failure to
remediate discrepancies.
14)Effective upon approval of a SPA as required by the ACA and
implementing regulations, requires providers to be classified
as "limited," "moderate," or "high" risk according to
categories of provider types established by federal
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regulations.
15)Effective upon approval of a SPA as required by the ACA and
implementing regulations, if any provider, including currently
enrolled providers are designated as a "high" categorical risk
pursuant to 14) above, requires DHCS to conduct a criminal
background check, including requiring the submission of
fingerprints as required by the Department of Justice,
including any person with a 5% direct or indirect ownership
interest.
16)Effective upon approval of a SPA as required by the ACA and
implementing regulations, adds failure to submit fingerprints
as required by federal regulations as grounds to deny an
application for enrollment, continued enrollment, or
enrollment at a new location.
17)Effective upon approval of a SPA as required by the ACA and
implementing regulations, revises existing authority of DHCS
to make unannounced site visits to applicants or providers, to
also require enrolled providers to permit access to any and
all of their provider locations and requires DHCS, if a
provider fails to permit access for any site visit, to deny
the provider's application, and requires the provider to be
subject to deactivation.
18)Effective upon approval of a SPA as required by the ACA and
implementing regulations, when the Centers for Medicare and
Medicaid Services CMS establishes a temporary moratorium on
provider enrollment, authorizes DHCS to impose a corresponding
temporary moratorium on the same provider types and for the
same time period even if the provider types are exempt from
the state moratorium provisions, unless DHCS determines that
the moratorium will adversely impact beneficiaries access to
medical assistance.
19)Effective January 1, 2012, authorizes DHCS to enter into
contracts with Medicaid Recovery Audit Contractors.
20)Deletes the requirement that a provider must request a meet
and confer process within 30 days of a notice of payment or
temporary suspension, in effect allowing the request at any
time.
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21)Upon approval of the SPA required to implement the provisions
of this bill, requires the DHCS Director to execute a
declaration stating that approval has been obtained and the
effective date. Requires the declaration to be posted on the
DHCS Web site and transmitted to the Legislature.
22)Authorizes the DHCS Director to implement and interpret the
provisions of this bill by means of provider bulletins or
similar instructions, without formal adoption of regulations
pursuant to the Administrative Procedures Act.
23)Makes other technical and clarifying changes.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Negligible additional costs to DHCS. In general, the
adjustments to the screening, enrollment, and investigation
process required by this bill are required to comply with
federal law.
2)Estimated annual fee revenues of $600,000 collected pursuant
to federal law, and specified by this bill, will offset some
General Fund costs related to provider screening and
enrollment of providers.
3)This bill requires the Department of Justice (DOJ), as well as
any other law enforcement agency that has accepted referrals
for investigation from DHCS, to provide DHCS quarterly reports
listing each referral and investigation status. Costs to DOJ
are expected to be minor and absorbable. There is a potential
for state-reimbursable mandate costs related to this
requirement, but as the reporting requirement is minimal, any
costs are expected to be minor.
COMMENTS : According to the author, this bill is sponsored by
DHCS to conform state Medi-Cal fraud law to the ACA by
conforming state law to federal law in the areas of screening,
enrollment, payment suspensions, overpayment recovery, and
provider sanctions, DHCS will maintain California's eligibility
for federal funds. DHCS states that these new actions are not
provided for in existing California statutes or regulations.
Therefore, this bill is necessary to grant the legal authority
to implement the provisions that exceed or conflict with current
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authority.
In March of 2012, the U.S. Supreme Court held three days of
testimony on the constitutionality of two major provision of the
ACA arising out of two cases in the 11th Circuit Court of
Appeals, National Federation of Independent Business v.
Sebelius, and Florida v. Department of Health and Human Services
(2011) 11th Circuit Nos. 11-11021 & 11-11067. The two
provisions under review were the individual mandate and the
Medicaid expansion. With regard to the individual mandate, the
ACA requires most people, with some exceptions, to maintain
minimum essential coverage for themselves and their dependents.
The mandate can be satisfied by obtaining coverage through
employer-sponsored insurance, an individual insurance plan,
including those offered through a health benefit exchange, a
grandfathered health plan, or government sponsored coverage. On
June 28, 2012, the U.S. Supreme Court, in a 5-4 decision upheld
the individual mandate provisions of the ACA, but ruled
unconstitutional the mandatory nature of the Medicaid expansion
provisions. With regard to the individual mandate, the Court
determined that it must be construed as imposing a tax on those
who do not have health insurance and as such may be upheld as
within Congress's power under the Taxing Clause. The Court also
determined the Medicaid expansion violates the Constitution by
threatening states with the loss of their existing Medicaid
funding if they decline to comply with the expansion. However,
because of the Severability Clause in Medicaid, the
constitutional violation is fully remedied by precluding the
federal Secretary of the Department of Health and Human Services
(HHS) from applying the provision to withdraw existing Medicaid
funds for failure to comply with the expansion requirements, but
instead allowing the expansion as a state option.
The provisions of the ACA being implemented by this bill apply
to a state's existing Medicaid programs. As such, they remain
intact in light of the court's decision. The ACA includes
numerous provisions designed to increase program integrity in
Medicaid, including terminating providers from Medicaid that
have been terminated in other programs, suspending Medicaid
payments based on pending investigations of credible allegations
of fraud, and preventing inappropriate payment of claims under
Medicaid. CMS issued final rules, effective March 25, 2011, to
implement many of these provisions. These included procedures
under which screening is conducted for providers of medical or
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other services and supplier in Medicaid and in the Children's
Health Insurance Program (CHIP); an application fee imposed on
institutional providers and suppliers; temporary moratoria that
may be imposed if necessary to prevent or combat fraud, waste,
and abuse under the Medicare and Medicaid programs, and CHIP;
guidance for states regarding termination of providers from
Medicaid and CHIP if terminated by Medicare or another Medicaid
state plan or CHIP and requirements for suspension of payments
pending an investigation of credible allegations of fraud in the
Medicare and Medicaid programs. The state is required to file a
SPA to document Medi-Cal Program compliance to CMS. As a
consequence, many of the provisions are contingent upon approval
of the SPA.
The ACA imposed a new fee on each provider of medical services
in Medicare, Medicaid, and CHIP to be used by the Secretary of
HHS to cover the cost of screening and other program integrity
efforts. The ACA excludes eligible professionals, such as
physicians and nurse practitioners from the fee. According to
CMS, because the purpose of the application fee is to, in part,
cover the costs of conducting the provider and supplier
screening activities, a provider or supplier enrolled in more
than one program (that is, Medicare and Medicaid or CHIP, or all
three programs) would only be subject to the application fee
under Medicare and the fee would cover screening activities for
enrollment in all programs. However, if a provider has not paid
the fee to enroll in Medicare or in another state Medicaid or
CHIP program, this bill provides the statutory authority for
DHCS to collect the fee and conduct the necessary screening.
The ACA set the base fee as $500 in 2010 with an adjustment
based on the consumer price index. The application fee for
calendar year 2012 is $523.00. The proceeds are shared with the
state when the state collects the fee. The ACA also permits the
HHS Secretary to grant, on a case-by-case basis, exceptions to
the application fee in the Medicare and Medicaid programs and
CHIP if the HHS Secretary determines that imposition of the fee
would result in a hardship. According to CMS, one instance that
might support a request for hardship exception is in the event
of a national public health emergency where a provider or
supplier is enrolling for purposes of furnishing services
required as a result of the national public health emergency
situation. Such requests will be considered on a case-by-case
basis, as required by the statute.
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The ACA required the HHS Secretary to establish levels of
screening of providers and suppliers according to the risk of
fraud, waste, and abuse the Secretary determines is posed by
particular provider and supplier categories. In considering how
to establish consistent screening standards, CMS proposed to
designate provider and supplier categories that are subject to
certain screening procedures based on its assessment of fraud,
waste and abuse risk of the provider or supplier category,
taking into consideration a variety of factors. These factors
included its own experience with claims data used to identify
fraudulent billing practices as well as the expertise developed
by contractors charged with investigating and identifying
instances of Medicare fraud across a broad spectrum of
providers. In addition, CMS has relied on insights gained from
numerous studies conducted by the HHS-Office of Inspector
General (OIG), the Government Accounting Office and other
sources. Based on this, CMS set three levels of screening and
associated risk: ''limited,'' ''moderate,'' and ''high'' and
each provider/supplier category is assigned to one of these
three screening levels. The state agency must adjust the
categorical risk level from ''limited'' or ''moderate'' to
''high'' when any of the following occurs: 1) The state
Medicaid agency imposes a payment suspension on a provider based
on credible allegation of fraud, waste, or abuse, the provider
has an existing Medicaid overpayment, or the provider has been
excluded by the OIG or another state's Medicaid program within
the previous 10 years; or, 2) The state Medicaid agency or CMS
in the previous six months lifted a temporary moratorium for the
particular provider type and a provider that was prevented from
enrolling based on the moratorium applies for enrollment as a
provider at any time within six months from the date the
moratorium was lifted.
Examples of providers that are considered "limited" risk are
physician or nonphysician practitioners, medical groups or
clinics; ambulatory surgical centers; end-stage renal disease
facilities; Federally Qualified Health Centers; and, hospitals,
including critical access hospitals and skilled nursing
facilities. Providers in this category are required to be
screened for verification of provider specific requirements,
license verification and are required to have identifying
information run through specified database checks. The
"moderate" category includes comprehensive outpatient
rehabilitation facilities, hospice organizations; independent
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diagnostic testing facilities, independent clinical
laboratories; and, ambulance services suppliers. This category
is subject to a pre-enrollment and post-enrollment site visits
and required to allow unannounced on-site inspections of any and
all provider locations, in addition to those screening tools
applicable to the limited level of screening.
Providers and suppliers in the "high" category are also required
to submit fingerprints and are subject to criminal background
checks in addition to the screening tools applicable to moderate
and limited risk providers. This category includes newly
enrolling home health agencies, and providers of durable medical
equipment, prosthetics, orthotics, and supplies. The screening
requirements apply to all individuals who maintain a 5% or
greater direct or indirect ownership interest in the provider or
supplier. In addition, the regulations allow for denial of
billing privileges to newly enrolled providers and suppliers and
revocation of billing privileges for revalidating providers and
suppliers if owners or officials of providers or suppliers
refuse to submit fingerprints when requested to do so. This
bill revises the existing provider enrollment provisions to
conform to these requirements such as requiring fingerprints
from certain providers, requiring additional identifying
information such as taxpayer identification numbers, and expands
DHCS authority to sanction a noncompliant provider by denying
continued enrollment.
DHCS, sponsor of this bill writes in support that this bill
would align California's state law with the Federal Regulations
as it relates to screening, enrollment, payment suspensions,
overpayment suspensions, overpayment recovery, and sanctions of
Medi-Cal providers. According to DHCS, these new actions are
not provided for in existing statutes or regulations. DHCS
argues in support that California statute must be amended in
order for the state to have the necessary legal authority to
comply with federal requirements and the ACA. DHCS states that
this bill would make only the minimally required amendments to
existing law given that California has held standards of
participation more rigid than the federal requirements in the
past. According to DHCS, noncompliance could result in loss of
federal financial participation funding program wide.
Analysis Prepared by : Marjorie Swartz / HEALTH / (916)
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319-2097
FN: 0005115