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---



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          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  




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            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; 




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             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  




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            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


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