BILL NUMBER: AB 784 CHAPTERED 10/10/99 CHAPTER 993 FILED WITH SECRETARY OF STATE OCTOBER 10, 1999 APPROVED BY GOVERNOR OCTOBER 10, 1999 PASSED THE ASSEMBLY SEPTEMBER 9, 1999 PASSED THE SENATE SEPTEMBER 8, 1999 AMENDED IN SENATE SEPTEMBER 3, 1999 AMENDED IN SENATE AUGUST 16, 1999 AMENDED IN SENATE JUNE 24, 1999 AMENDED IN ASSEMBLY MAY 25, 1999 AMENDED IN ASSEMBLY APRIL 19, 1999 AMENDED IN ASSEMBLY APRIL 5, 1999 INTRODUCED BY Assembly Member Romero (Coauthors: Assembly Members Aroner, Davis, Firebaugh, Honda, Jackson, Knox, Longville, and Mazzoni) (Coauthor: Senator Speier) FEBRUARY 24, 1999 An act to amend Sections 14170.8 and 14171.6 of, and to add Section 14100.75 to, the Welfare and Institutions Code, relating to Medi-Cal. LEGISLATIVE COUNSEL'S DIGEST AB 784, Romero. Medi-Cal. Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Services, pursuant to which medical benefits are provided to public assistance recipients and certain other low-income persons. Existing law specifies that any Medi-Cal provider of durable medical equipment or incontinence supplies shall provide to the department a bond of not less than $25,000, but authorizes the provider to seek an exemption from that requirement after continuous operation of 3 years. This bill would extend those requirements to other providers under the Medi-Cal program, and would require the department to establish a mechanism to track participation rates to determine if the requirement is a deterrent to Medi-Cal program participation. Existing law provides that principal labelers and other primary suppliers of goods and services to incontinence supplies providers under the Medi-Cal program maintain accounting records to support the cost of goods and services provided to those providers, subject to audit or examination by the department. This bill would extend that requirement to primary Medi-Cal suppliers, as defined, of equipment and supplies to all providers under the Medi-Cal program. Existing law requires the Director of Health Services to establish administrative appeal processes to review grievances or complaints arising from the findings of an audit or examination for final settlements. This bill would revise those procedures to require that collection of overpayments subject to a notice of deficiency by the department shall not be deferred although the provider has submitted a request for an appeal process, if the department determines that fraud or willful misrepresentation was applied in the provision of the goods or services, until the completion of the appeal process except in certain cases of extreme financial hardship. Existing law requires that a provider of durable medical equipment or incontinence supplies under the Medi-Cal program shall be subject to certain penalties and interest on reimbursements received under the Medi-Cal program to which the provider is not entitled. This bill would extend those penalty and interest requirements to also apply to any provider of services, as defined. This bill would exempt certain primary care clinics from all the provisions of the bill. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 14100.75 is added to the Welfare and Institutions Code, to read: 14100.75. (a) (1) Any provider of goods or services shall provide, to the department, a bond, or other security satisfactory to the department, of an amount determined by the department, pursuant to regulations adopted by the department. (2) The department, in determining the amount of bond or security required by paragraph (1), shall base the determination on the level of estimated billings, and shall not be less than twenty-five thousand dollars ($25,000). (b) (1) After three years of continuous operation as a provider, a Medi-Cal provider may apply to the department for an exemption from the requirements of subdivision (a). (2) The department shall adopt regulations establishing conditions for the approval or denial of applications for exemption pursuant to paragraph (1). (c) The department shall establish a mechanism to track rates of participation among providers who are subject to the requirement of subdivision (a) to determine if the requirement is a deterrent to Medi-Cal program participation among provider applicants. (d) Subdivisions (a) and (b) do not apply to individuals who are licensed pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, to any clinic licensed pursuant to subdivision (a) of Section 1204 of the Health and Safety Code, to any health facility licensed pursuant to Section 1250 of the Health and Safety Code, or to any provider that is operated by a city, county, school district, county office of education, or state special school. SEC. 2. Section 14170.8 of the Welfare and Institutions Code is amended to read: 14170.8. (a) Notwithstanding any other provision of law, every primary supplier of pharmaceuticals or medical equipment and supplies shall maintain accounting records to demonstrate the manufacture, assembly, purchase, or acquisition and subsequent sale, of any pharmaceuticals or medical equipment and supplies to Medi-Cal providers. Accounting records shall include, but not be limited to, inventory records, general ledgers, financial statements, purchase and sales journals and invoices, prescription records, bills of lading, and delivery records. For purposes of this section the term "primary suppliers" shall mean any manufacturer, principal labeler, wholesaler, and any other primary supplier. (b) Accounting records maintained pursuant to subdivision (a) shall be subject to audit or examination by the department or the Controller during regular business hours. These accounting records shall be maintained for three years from the date of sale or the date of service. (c) This section shall not apply to any clinic licensed pursuant to subdivision (a) of Section 1204 of the Health and Safety Code or to any manufacturer of prescription drugs registered with the federal Food and Drug Administration in accordance with Section 510 of the Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 360). SEC. 3. Section 14171.6 of the Welfare and Institutions Code is amended to read: 14171.6. (a) (1) Any provider, as defined in paragraph (3), that obtains reimbursement under this chapter to which it is not entitled shall be subject to interest charges or penalties as specified in this section. (2) When it is established upon audit that the provider has not received reimbursement to which it is entitled, the department shall pay the provider interest assessed at the rate, and in the manner, specified in subdivision (h) of Section 14171. (3) For purposes of this section, "provider" means any provider of services, as defined in subdivision (a) of Section 51051 of Title 22 of the California Code of Regulations. (b) When it is established upon audit that the provider has claimed payments under this chapter to which it is not entitled, the provider shall pay, in addition to the amount improperly received, interest at the rate specified by subdivision (h) of Section 14171. (c) (1) When it is established upon audit that the provider claimed payments related to services or costs that the department had previously notified the provider in an audit report that the costs or services were not reimbursable, the provider shall pay, in addition to the amount improperly claimed, a penalty of 10 percent of the amount improperly claimed after receipt of the notice, plus the cost of the audit. (2) In addition to the penalty and costs specified by paragraph (1), interest shall be assessed at the rate specified in subdivision (h) of Section 14171. (3) Providers that wish to preserve appeal rights or to challenge the department's positions regarding appeal issues may claim the costs or services and not be reimbursed therefor if they are identified and presented separately on the cost report. (d) (1) When it is adjudicated that the provider fraudulently claimed and received payments under this chapter, the provider shall pay, in addition to that portion of the claim that was improperly claimed, a penalty of 300 percent of the amount improperly claimed, plus the cost of the audit. (2) In addition to the penalty and costs specified by paragraph (1), interest shall be assessed at the rate specified by subdivision (h) of Section 14171. (3) For purposes of this subdivision, a fraudulent claim is a claim upon which the provider has been convicted of fraud upon the Medi-Cal program. (e) Nothing in this section shall prevent the imposition of any other civil or criminal penalties to which the provider may be liable. (f) Any appeal to any action taken pursuant to subdivision (b), (c), or (d) is subject to the administrative appeals process provided by Section 14171. (g) As used in this section, "cost of the audit" includes actual hourly wages, travel, and incidental expenses at rates allowable by rules adopted by the State Board of Control and applicable overhead costs that are incurred by employees of the state in administering this chapter with respect to the performance of audits. (h) This section shall not apply to any clinic licensed pursuant to subdivision (a) of Section 1204 of the Health and Safety Code.