BILL ANALYSIS Ó SB 1339 Page 1 Date of Hearing: June 24, 2014 ASSEMBLY COMMITTEE ON HEALTH Richard Pan, Chair SB 1339 (Cannella) - As Amended: May 27, 2014 SENATE VOTE : 36-0 SUBJECT : Medi-Cal: Drug Medi-Cal Treatment Program providers. SUMMARY : Requires the Department of Health Care Services (DHCS) or a county to obtain a criminal background check for the owner and medical director of a Drug Medi-Cal (DMC) provider prior to entering into a contract. Specifically, this bill : 1)Requires a county or DHCS, before contracting with a certified DMC provider, to require a certified DMC provider's owner and medical director to undergo a criminal background check administered by the Department of Justice (DOJ). 2)Requires DOJ to forward the fingerprint images and related information received, as defined, to the Federal Bureau of Investigation (FBI) and request a federal summary of criminal information. 3)Requires DOJ to review the information returned from the FBI and compile and disseminate a response to the county or DHCS, as specified. 4)Requires either the county or DHCS which is contracting with a DMC provider to request subsequent arrest notification service from DOJ, as specified. 5)Requires DOJ to charge a fee sufficient to cover the cost of processing the requests described, and requires payment of the fee to be the responsibility to the DMC provider's owner or medical director, as applicable. 6)Prohibits, except as provided by federal law, a DMC provider from being excluded from contracting with a county or DHCS based solely on the existence of a past criminal record of the DMC provider's owner or medical director. EXISTING LAW SB 1339 Page 2 1)Establishes the Medi-Cal program, administered by DHCS, under which qualified low-income persons receive health care benefits. Medi-Cal is California's version of the federal Medicaid program and is jointly funded by the state and federal government. 2)Establishes the DMC program, which provides substance use disorder services to Medi-Cal recipients. 3)Allows DHCS to enter into contracts with counties for the provision of DMC services. If a county declines to contract with DHCS, existing law requires DHCS to contract for services in the county to ensure beneficiary access. 4)Requires each county to fund the nonfederal share for DMC services through realignment funds, as specified. 5)Requires providers of DMC services to obtain certification from DHCS to provide those services. 6)Authorizes DHCS to complete a background check on Medi-Cal provider applicants to verify application information and to prevent fraud and abuse. Allows the background check to include onsite inspections, reviews of business records, and data searches. 7)In conformity with federal law, requires DHCS to designate Medi-Cal provider types as limited, moderate, or high categorical risk based on lists and guidelines in federal regulations. Requires DHCS to conduct a fingerprint-based criminal background check for any high categorical risk provider and any person with a 5% ownership interest in the provider, in conformity with federal regulations. 8)Requires DHCS to adopt emergency regulations governing the DMC program by July 1, 2014. FISCAL EFFECT : According to the Senate Appropriations Committee: 1)One-time costs up to $140,000 for initial background checks by DOJ (private funds) and minor costs ongoing. There are about 1,000 active DMC providers and the cost for a background check is $65. After the initial round of background checks, ongoing costs to perform background checks should be minor for new SB 1339 Page 3 providers or new medical directors. 2)Likely administrative costs up to $75,000 in the first year to coordinate background checks with DMC providers and DOJ by DHCS (General Fund and federal funds). COMMENTS : 1)PURPOSE OF THIS BILL . According to the author, weak, ineffective oversight has facilitated a rehabilitation racket. Individuals on the federal list of excluded providers work for clinics, collecting money and committing fraud. This list includes individuals convicted of a felony or misdemeanor involving fraud or abuse in government programs or convicted of neglect or abuse of a patient while providing health care item or service. They are prohibited from operating programs like DMC and participating in state funded reimbursement programs. This bill strengthens the authority of agencies responsible for the contracted DMC outpatient facilities. A criminal background check will identify who is managing these clinics and if they have been convicted of felonies that exclude them from participation. The author further states that this bill supplements any fraud prevention measures taken by the Administration by providing more information on contracted individuals who bill the agency. Providing DHCS and county agencies that oversee these programs criminal background information contributes to transparency and accountability in DMC. 2)BACKGROUND . DMC 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: they are delivered by a specialized system of providers certified by the state rather than through participating physicians or health plans. DMC services include outpatient drug free services, which consist mostly of group counseling and some limited individual counseling for persons in crisis; narcotic treatment programs, which provide methadone replacement therapy; intensive outpatient services; and, residential services. There are about 800 active DMC providers in the state. Current regulations create requirements for oversight of DMC providers at both the state and county levels. DHCS is tasked SB 1339 Page 4 with administrative and fiscal oversight, monitoring, auditing, utilization review, and recovery of improper payments. Counties that elect to contract with DHCS to provide DMC services are required to maintain a system of fiscal disbursement and controls, monitor to ensure that billing is within established rates, and process claims for reimbursement. Most counties choose to contract with DHCS, however, 13 counties (Alpine, Amador, Calaveras, Colusa, Del Norte, Inyo, Modoc, Mono, Plumas, Sierra, Siskiyou, Trinity, and Tuolumne) do not participate in DMC. In addition, 15 providers statewide currently operate without a county contract, instead contracting directly with DHCS. a) Federal Regulations. In accordance with Federal Regulations published by the Centers for Medicare and Medicaid Services in the Federal Register (42 CFR Parts 405, 424, 447 et al. 72 Federal Register 5862 - 5971 [Feb. 2, 2011]), DHCS has implemented Medi-Cal screening level requirements as established in California Welfare & Institutions Code Section 14043.38. Beginning January 1, 2013, DHCS screens all applications based on a categorical risk level of "limited," "moderate," or "high". Provider types are designated within these risk categories and DHCS shall, at a minimum, utilize the federal regulations in determining an applicant's/provider's categorical risk. Provider types not designated to a specific risk category are screened at a categorical risk level subject to DHCS' discretion. Providers that fit within more than one risk level must be screened at the highest applicable level. Provider types designated as "limited" categorical risk are subject to license verification in accordance and database checks. Provider types designated as "moderate" categorical risk are subject to on-site inspections in addition to all screening measures applicable to "limited" risk provider types. Provider types designated as "high" categorical risk are subject to criminal background checks and fingerprinting in addition to all screening measures applicable to "limited" and "moderate" risk provider types. Provider types are designated as "high" categorical risk if any of the following conditions apply: SB 1339 Page 5 i) Payment suspension that is based on a credible allegation or fraud, waste or abuse; ii) Existing Medicaid overpayment based on fraud, waste or abuse; iii) Exclusion by the Office of Inspector General (OIG) or another state's Medicaid program within the previous 10 years; and, iv) A Moratorium was lifted within the previous six months prior to applying and the applicant/provider would have been prevented from enrolling due to the Moratorium. b) DMC Fraud. Beginning in July 2013, the Center for Investigative Reporting (CIR) published a series of reports on fraud in the DMC program in conjunction with a three-part series on CNN entitled 'Rehab Racket.' The reports alleged that DMC paid $94 million over the prior two fiscal years to 56 Southern California providers with histories of questionable billing practices. The reports alleged that a number of clinics in Southern California engaged in practices that included: i) Busing of teenagers without drug problems from group homes; ii) Fabricating patient treatment documents; iii) Paying clients for showing up to counseling sessions; iv) Billing for patients who were incarcerated or dead; v) Billing for group counseling for dozens of clients on a day when clinic staff told reporters that no group counseling was offered; and, vi) Billing for counseling sessions that did not occur. The reports suggested that the state's oversight and enforcement bodies were not working well in tandem: county audits of providers identified a number of serious deficiencies, but failed to terminate contracts or prevent the problems from continuing. c) DHCS Review. In July 2013, DHCS began reviewing DMC providers and ordering temporary suspensions due to credible allegations of fraud. As of January of 2014, DHCS had suspended 68 providers operating 177 facilities and referred the providers to the DOJ for criminal prosecution. After an extensive internal review, DHCS announced a number of steps it was taking to improve integrity in DMC: SB 1339 Page 6 i) Requiring all 816 active DMC providers to submit applications for recertification and decertifying providers that have not billed DMC in the last 12 months; ii) Requiring counties, through the state-county contract, to increase monitoring of DMC providers; iii) Continuing targeted investigations of DMC providers by DHCS auditors, nurse evaluators and peace officers; iv) Mining and analyzing of data to identify suspicious DMC providers for additional review, including onsite visits, fingerprinting, and background checks; and, v) Developing emergency regulations to clarify the requirements and responsibilities of providers, medical directors, and other provider personnel. d) Oversight hearing. In September 2013, the Assembly Health Committee and Assembly Accountability and Administrative Review Committee held a joint oversight hearing on fraud in the DMC program. Among the issues raised at the hearing was a need to update the standards for certification of DMC providers. Among the amendments to the standards recommended for consideration was the creation of standards for criminal background checks of DMC providers conducted through Live Scan and cross-checking the exclusions list maintained by the OIG. e) OIG exclusions program. The OIG is the U.S. Department of Health & Human Services' office charged with fighting waste, fraud, and abuse in Medicare, Medicaid, and other federally-funded programs. OIG has the authority to exclude individuals and entities from federally-funded health care programs and maintains a list of all currently excluded individuals and entities. OIG is required by law to exclude individuals convicted of: i) Medicare or Medicaid fraud and certain other offenses related to public health care programs; ii) patient abuse or neglect; iii) felony convictions for other health care-related fraud or other financial misconduct; and' iv) felony convictions for manufacture, distribution, prescription, or dispensing of controlled substances. OIG also has discretion to exclude individuals for a number of offenses, including misdemeanor health care fraud, non-health-care government fraud, engaging in illegal kickback arrangements, and various other crimes and misdeeds. The OIG exclusion list is publicly available on the OIG's Website. SB 1339 Page 7 f) Background Checks. In California, DOJ provides an automated service for criminal history background checks that may be required as a condition of employment, licensing, certification, foreign adoptions, or immigration clearances. According to DOJ, approximately 35,000 entities perform background checks through DOJ's Bureau of Criminal Information and Analysis. Individuals who are required to be fingerprinted must fill out a one-page form and have their fingerprints rolled by a certified Live Scan operator (which includes public providers, such as police departments, and private providers). Fees for state and federal background checks for general certification purposes are $32 and $17, respectively. In addition, Live Scan operators charge fingerprint rolling fees to cover their costs; these fees are typically in the $20 to $25 range, but some locations list rolling fees as high as $80. 3)SUPPORT . According to the California Welfare Fraud Investigators Association, there is a vital need for this criminal background process to be instituted, which would aide and assist counties and departments with the current needs and issues they are encountering. The County of Los Angeles states that SB 1339 would help fortify the DMC Program and its understanding of prospective contractors and would help to strengthen and/or improve the accountability of the wonders and key staff of DMC provider organizations. The Alameda County Sheriff's Office and the Howard Jarvis Taxpayers Association write that the requirements of SB 1339 are necessary to implement in order to protect against fraud and misuse of funds in California's drug and alcohol programs. 4)RELATED LEGISLATION . a) AB 1644 (Medina) requires DMC providers to be designated as a 'high' categorical risk and be subject to criminal background checks as a condition of DMC certification. AB 1644 is pending in the Assembly Appropriations Committee. b) AB 1967 (Pan) requires DHCS, when it commences or concludes an investigation of a DMC provider, to notify counties that contract with the provider. AB 1967 is in SB 1339 Page 8 the Senate Health Committee. 5)PREVIOUS LEGISLATION . a) SB 1529 (Alquist), Chapter 797, Statutes of 2012, revises 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. b) SB 857 (Speier), Chapter 601, Statutes of 2003, makes 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. 6)POLICY COMMENT . As discussed above, current law already requires, in accordance with federal regulations, for designating provider types as "high," "moderate," or "limited." The Committee may wish to amend this bill to fit within these already established requirements. 7)RECOMMENDED AMENDMENT . On page 2, strike lines 3 through 13, inclusive, and insert "(a) Drug Medi-Cal Treatment Program provider shall be categorized as "high" categorical risk pursuant to Section 14043.38 and shall be subject to background checks pursuant to the provisions of that section. (b) On and after January 1, 2018, the department may designate a Drug Medi-Cal Treatment Program provider as "limited" or "moderate" categorical risk pursuant to Section 14043.38 and federal regulations. To designate a DMC Treatment Program provider as "limited" or "moderate" the department shall execute a declaration, to be retained by the director and posted on the department's Internet Web site, that states the reason that a "high" categorical risk designation is no longer warranted. The department shall transmit a copy of this declaration to the Legislature." REGISTERED SUPPORT / OPPOSITION : Support SB 1339 Page 9 Alameda County Sheriff's Office California Welfare Fraud Investigators Association County of Los Angeles Howard Jarvis Taxpayers Association Opposition None on file. Analysis Prepared by : Paula Villescaz / HEALTH / (916) 319-2097