BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 1967 AUTHOR: Pan AMENDED: April 10, 2014 HEARING DATE: June 25, 2014 CONSULTANT: Bain SUBJECT : Drug Medi-Cal. SUMMARY : Requires the Department of Health Care Services (DHCS) to promptly notify each county that currently contracts with a Drug Medi-Cal provider that an investigation has commenced, if DHCS commences an investigation of a certified Drug Medi-Cal provider. Existing law: 1.Establishes the Medi-Cal program, which is administered by DHCS, under which qualified low-income individuals receive health care services. Defines Drug Medi-Cal reimbursable services for purposes of these provisions. 2.Establishes the Drug Medi-Cal Treatment Program (Drug Medi-Cal) under which DHCS is authorized to enter into contracts with counties for various drug treatment services to Medi-Cal recipients, or is required to directly arrange for these services if a county elects not to do so. 3.Requires a county to negotiate contracts only with providers certified to provide Drug Medi-Cal services. This bill: 1.Requires DHCS, if it commences an investigation of a certified Drug Medi-Cal provider, to promptly notify each county that currently contracts with the provider for Drug Medi-Cal services that an investigation has commenced. 2.Requires DHCS to promptly notify each county that currently contracts with the provider for Drug Medi-Cal services that an investigation has concluded, if DHCS concludes an investigation of a certified provider. FISCAL EFFECT : According to the Assembly Appropriations Committee analysis, negligible state fiscal effect. DHCS has already committed to improved communication with counties for Continued--- AB 1967 | Page 2 purposes of program integrity in the Drug Medi-Cal program. PRIOR VOTES : Assembly Health: 19- 0 Assembly Appropriations:17- 0 Assembly Floor: 73-0 COMMENTS : 1.Author's statement. According to the author, in July 2013, an investigation by the Center for Investigative Reporting (CIR) and CNN uncovered allegations of widespread fraud in the Drug Medi-Cal program. The investigative report alleged that, over the past two fiscal years, the program paid $94 million to 56 drug and alcohol rehabilitation clinics in Southern California that have shown signs of deceptive or questionable billing. In September 2013, the Assembly Health Committee and Accountability and Administrative Review Committee held a joint oversight hearing to examine current oversight of the Drug Medi-Cal program by DHCS. One issue highlighted at the hearing was the lack of information sharing between the state and county entities that are responsible for monitoring and auditing clinics. In particular, counties expressed a concern that individuals who were being investigated in one county could simply move operations to a new county in order to avoid further investigation. This bill is intended to improve oversight and prevent fraud in the Drug Medi-Cal program by requiring the state to share information with counties related to providers under investigation. 2.Background on Drug Medi-Cal. Per the state's Medicaid State Plan, substance use disorder services are to stabilize and rehabilitate Medi-Cal beneficiaries diagnosed as having a substance-related disorder. Drug Medi-Cal services are reimbursed on a fee-for-service basis at rates set by the state, and are not provided through Medi-Cal managed care plans. These services are carved out from the regular Medi-Cal program and are delivered by providers certified by the state rather than through participating health plans. Funding for pre-2014 Drug Medi-Cal services was realigned to the counties as part of 2011 Public Safety Realignment, with counties putting up the state match to draw down federal Medicaid matching funds. Counties can choose to contract with DHCS and AB 1967 | Page 3 administer the program directly. Thirteen smaller counties (Alpine, Amador, Calaveras, Colusa, Del Norte, Inyo, Modoc, Mono, Plumas, Sierra, Siskiyou, Trinity, and Tuolumne) do not participate in Drug Medi-Cal. 3.Fraud in Drug Medi-Cal. Beginning in July 2013, CIR published a series of reports on fraud in the Drug Medi-Cal program in conjunction with a three-part series on CNN entitled "Rehab Racket." The reports alleged that Drug Medi-Cal paid $94 million over the prior two fiscal years to 56 Southern California providers with histories of questionable billing practices and inadequate program oversight. These include: a. The state failing to inform counties of providers who had been convicted of Medi-Cal fraud; b. Drug Medi-Cal providers billing for patients who did not go to therapy, including teens from foster care homes who did not have addictions; c. Drug Medi-Cal providers fabricating counseling notes; d. Drug Medi-Cal providers paying kickbacks for patients from board and care homes, and paying patients to attend therapy sessions; e. The state failing to require criminal background checks for clinic leaders; and, f. Drug Medi-Cal providers falsifying patient charts and billing for care by counselors who were not working. 4.DHCS Action in Response to Drug Medi-Cal Fraud. In July 2013, DHCS began reviewing Drug Medi-Cal providers and ordering temporary suspensions due to credible allegations of fraud. In January 2014, DHCS announced it had suspended payments to 68 providers operating 177 drug treatment facilities. DHCS indicated all 68 of these cases have been referred to the California Department of Justice for criminal prosecution based on the credible allegations of fraud. DHCS also completed an assessment of the Drug Medi-Cal program, which included a program audit conducted by its Audits and Investigations Division, and DHCS' plan for implementing the recommended changes to ensure integrity in the Drug Medi-Cal program. These included: a. Requiring all 816 Drug Medi-Cal providers that are actively billing to submit to a recertification process. Providers that have not billed Drug Medi-Cal in the last 12 months will be decertified, beginning January 2014; AB 1967 | Page 4 b. Amending the state-county contract for fiscal year 2014-15 to increase county monitoring of Drug Medi-Cal providers, in order to ensure that appropriate services are provided by qualified providers to individuals who genuinely need them; c. Continuing to direct investigative staff, including trained auditors, nurse evaluators and peace officers to continue to root out and eliminate complex scams aimed at profiting from Medi-Cal, rather than providing vital services that low-income individuals need; d. Extensive mining and analyzing of data to identify suspicious Drug Medi-Cal providers, designating them as "high risk" providers who will be subject to additional onsite visits, fingerprinting and background checks; and, e. Developing emergency regulations that strengthen Drug Medi-Cal program integrity by clarifying the requirements and responsibilities of Drug Medi-Cal providers, Drug Medi-Cal Medical Directors, and other provider personnel. 5.Related legislation. AB 1644 (Medina) would require Drug Medi-Cal providers to be designated as a "high" categorical risk, and be subject to criminal background checks as a condition of Drug Medi-Cal certification. SB 1339 (Cannella) would require a certified DMC provider's owner and medical director to submit to the Department of Justice fingerprint images and related information required by the Department of Justice for the purpose of obtaining information as to the existence and content of a record of state and federal convictions and arrests. 6.Prior legislation. SB 1529 (Alquist), Chapter 797, Statutes of 2012, revised screening, enrollment, disenrollment, suspensions, and other sanctions for fee-for-service Medi-Cal providers and suppliers to conform to the federal Patient Protection and Affordable Care Act. SB 857 (Speier), Chapter 601, Statutes of 2003, made numerous changes to the Medi-Cal program intended to address provider fraud, including establishing new Medi-Cal application requirements for new providers, existing providers at new locations, and providers applying for continued enrollment. AB 106 (Committee on Budget), Chapter 32, Statutes of 2011, required the transfer of the administration of Drug Medi-Cal from the Department of Alcohol and Drug Programs to DHCS on AB 1967 | Page 5 July 1, 2012. 7.Support. The County Alcohol and Drug Program Administrators Association of California (CADPAAC) writes in support that this bill would improve oversight and prevent fraud in Drug Medi-Cal by requiring the state to share information with counties related to providers under investigation. CADPAAC states that, with the expansion of substance use disorder treatment benefits in the state's Medi-Cal program, there will be upwards of 116,000 beneficiaries that are newly-eligible for substance use disorder treatment by 2019. Given the importance of these services, CADPAAC states it is crucial that the integrity of the program be preserved and that vital services not be jeopardized by bad actors. CADPAAC writes that this bill will help the state and counties maintain good providers in the Drug Medi-Cal program and preserve the integrity of these needed services. 8.DHCS proposed amendments. This bill has been put over by committee twice so the committee could consider forthcoming DHCS amendments. DHCS provided amendments on June 19th which would require DHCS notification to the counties of a preliminary criminal investigation of a certified DMC provider. A "preliminary criminal investigation" is defined as an investigation to gather information to determine if criminal laws or statutes have been violated. The amendments would require the shared information to be maintained in a manner to ensure protection of the confidentiality of the criminal investigation, and counties would be prohibited from taking any adverse action against a provider based solely upon the criminal investigation information disclosed. SUPPORT AND OPPOSITION : Support: California Opioid Maintenance Providers County Alcohol & Drug Program Administrators Association of California Los Angeles County Board of Supervisors Oppose: None received -- END -- AB 1967 | Page 6