BILL NUMBER: AB 1600 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 23, 2001
INTRODUCED BY Assembly Member Keeley
(Coauthor: Assembly Member Richman)
FEBRUARY 23, 2001
An act to add Title 9.6 (commencing with Section 1299.20) to Part
3 of the Code of Civil Procedure, to amend Section 1367 of, and to
add Section 1367.001 to, the Health and Safety Code, and to add
Section 10178.4 to the Insurance Code, relating to arbitration.
LEGISLATIVE COUNSEL'S DIGEST
AB 1600, as amended, Keeley. Arbitration: health care provider
disputes.
Existing law provides, in general, for contract arbitration, and
establishes special provisions for the arbitration of certain issues.
This bill would establish special provisions for the arbitration
of health care provider disputes and would set forth the findings and
declarations of the Legislature in this regard.
Existing law, contained in the Knox-Keene Health Care Service Plan
Act of 1975, sets forth the process for the review of disputes with
a health care service plan by health care providers concerning health
care services provided to plan enrollees, as specified. A violation
of the provisions of that act is a misdemeanor.
This bill would revise various requirements for the operation of a
dispute resolution process to deal with provider disputes concerning
matters arising out of plan-provider contracts and to conform with
the bill's arbitration provisions. The bill would make certain
conduct by a health care service plan directed at providers unlawful.
Existing law provides for the regulation of disability insurers by
the Insurance Commissioner.
This bill would establish parallel dispute resolution provisions
to govern a dispute between providers and insurers issuing policies
of disability insurance, and would make health care provider disputes
with disability insurers subject to the bill's arbitration
provisions. This bill would make certain conduct by a disability
insurer directed at providers unlawful.
Because this bill would revise the requirements for the
establishment and operation of a dispute resolution procedure by a
health care service plan and would make certain actions by a plan
directed at providers unlawful, this bill would create a
state-mandated local program by creating new crimes and changing the
definitions of existing crimes.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Title 9.6 (commencing with Section 1299.20) is added to
Part 3 of the Code of Civil Procedure, to read:
TITLE 9.6. ARBITRATION OF HEALTH CARE PROVIDER DISPUTES
CHAPTER 1. LEGISLATIVE FINDINGS
1299.20. The findings and declarations of legislative intent
contained in this chapter govern the construction of this title.
1299.21. It is the policy of the State of California to ensure
that its citizens have access to health care that is both
cost-effective and of high quality.
CHAPTER 2. ARBITRATION
1299.40. Any dispute resolution process established by a health
care service plan pursuant to Section 1367 of the Health and Safety
Code or by an insurer pursuant to Section 10178.4 of the Insurance
Code shall provide that a provider may either file a civil action
pursuant to this code or, by written notification to the
plan, in the event the provider chooses not to file
such an action, that both parties may request that their
differences be submitted to an arbitration panel, whenever any of the
following events occur:
(a) The parties have been participating in the process for more
than 30 days.
(b) The parties are unable to agree to the appointment of a
mediator.
(c) If a mediator agreed to by the parties is unable to effect
settlement of a dispute between the parties within 30 days after his
or her appointment.
1299.41. Within three days after receipt of the written
notification, unless the parties otherwise agree to a single
arbitrator, each party shall designate a person to serve as its
member of an arbitration panel. Within five days thereafter, or
within additional periods to which they mutually agree, the two
members of the arbitration panel appointed by the parties shall
designate an impartial person to act as chairperson of the
arbitration panel.
1299.42. In the event that the parties are unable or unwilling to
agree upon a third person to serve as chairperson, the two members
of the arbitration panel shall jointly request from the American
Arbitration Association a list of seven impartial and experienced
persons who are familiar with matters concerning health care
contracting. The two panel members may, as an alternative, jointly
request a list of seven names from the California State Mediation and
Conciliation Service, or a list from either entity containing more
or less than seven names, so long as the number requested is an odd
number. If after five days of receipt of the list, the two panel
members cannot agree on which of the listed persons shall serve as
chairperson, they shall, within two days, alternately strike names
from the list, with the first panel member to strike names being
determined by lot. The last person whose name remains on the list
shall be chairperson.
1299.43. All parties to an arbitration shall have the right to
counsel and full and comprehensive discovery coextensive with Article
3 (commencing with Section 2016) of Chapter 3 of Title 3 of Part 4.
In addition, no health care service plan or disability insurer may
shorten the applicable statute of limitations provided for
arbitration under this code, and there shall be no limitations on the
amount or nature of damages that may be awarded in an arbitration
other than those that would otherwise be recoverable under a court of
law. In addition, the arbitration panel may order a party, the
party's attorney, or both, to pay reasonable expenses, including
attorney's fees, incurred by another party as a result of bad faith
actions or tactics that are frivolous or that are solely intended to
cause unnecessary delay.
1299.44. The arbitration panel shall, within 10 days after its
establishment or any additional periods to which the parties agree,
meet with the parties or their representatives, either jointly or
separately, make inquiries and investigations, hold hearings, and
take any other action that the arbitration panel deems appropriate.
1299.45. The arbitration panel shall direct that five days prior
to the commencement of its hearings, each of the parties shall submit
the last best offer of settlement as to each of the issues that are
in dispute. The arbitration panel, within 15 days after the
conclusion of the hearing, or any additional period as to which the
parties agree, shall separately decide on each of the disputed issues
submitted by selecting, without modification, the last best offer of
settlement that most nearly complies with the applicable factors
described in Section 1299.46.
1299.46. The factors to be considered by the arbitrator or
arbitration panel when considering each party's last best offer of
settlement shall include, but not be limited to:
(a) The stipulations of the parties.
(b) The interest and welfare of patients.
(c) The patients' access to care.
(d) The ability of providers to render quality health care
services.
(e) The cost of providing the services, taking into consideration
the increasing age of the population, new pharmaceuticals, the
increasing sophistication of medical technology, and the medical
demographics of the population of the plan's enrollees.
(f) The reasonableness of the reimbursement rates, particularly
when compared to utilization levels and costs of services to be
provided under the contract, adjusted for geographic region and the
benefit plan. If capitated payments are involved, the actuarial
soundness of the rates based on the appropriate reimbursement rates
set forth above should be compared.
(g) Any supplemental information as the arbitration panel may deem
necessary or proper to enable it to reach a determination.
(h) The ability of the provider to continue to provide health care
to patients and to avoid bankruptcy, closure, financial insolvency,
or contract termination.
1299.47. The arbitration panel shall mail or otherwise deliver a
copy of the decision to the parties. However, the decision of the
arbitration panel shall not be binding, for a period of five days
after service to the parties. During that five-day period, the
parties may meet privately, attempt to resolve their differences and,
by mutual agreement, amend or modify the decision of the arbitration
panel.
1299.48. At the conclusion of the five-day period, which may be
extended by mutual agreement of the parties, the arbitration panel's
decision, as may be amended or modified by the parties, shall be
binding on all parties.
1299.49. Each party to the arbitration shall pay his or her pro
rata share of the expenses and fees of the arbitrator, together with
other expenses of the arbitration incurred or approved by the
arbitrator, not including counsel fees or witness fees or other
expenses incurred by a party for his or her own benefit.
1299.50. Except as otherwise provided in this title, the conduct
of the arbitration shall be governed pursuant to Chapter 3
(commencing with Section 1282) and Chapter 4 (commencing with Section
1285) of Title 9, and any party may petition the court to confirm,
correct, modify, or vacate the arbitration award decision as set
forth therein. Any award shall be made retroactive to the date the
provider initiated the dispute resolution process with the plan.
1299.51. Notwithstanding Section 1285, the court, when
considering an arbitration award issued pursuant to arbitration under
contracts entered into pursuant to Section 1367 of the Health and
Safety Code or Section 10178.4 of the Insurance Code shall, in
addition to its powers pursuant to Section 1286, consider whether the
award is supported by substantial evidence in light of the factors
set forth in Section 1367.001 of the Health and Safety Code and
Section 10178.4 of the Insurance Code, and shall modify the award as
necessary to ensure that the award is supported by such evidence.
1299.52. Nothing in this chapter is intended to impair the
ability of a health care service plan or disability insurer to
terminate a contractual relationship consistent with the principles
enunciated by the California Supreme Court in Potvin v. Metropolitan
Life Insurance Co. (2000) 22 Cal.4th 1060.
SEC. 2. Section 1367 of the Health and Safety Code is amended to
read:
1367. Each health care service plan and, if applicable, each
specialized health care service plan shall meet the following
requirements:
(a) All facilities located in this state including, but not
limited to, clinics, hospitals, and skilled nursing facilities to be
utilized by the plan shall be licensed by the State Department of
Health Services, where licensure is required by law. Facilities not
located in this state shall conform to all licensing and other
requirements of the jurisdiction in which they are located.
(b) All personnel employed by or under contract to the plan shall
be licensed or certified by their respective board or agency, where
licensure or certification is required by law.
(c) All equipment required to be licensed or registered by law
shall be so licensed or registered and the operating personnel for
that equipment shall be licensed or certified as required by law.
(d) The plan shall furnish services in a manner providing
continuity of care and ready referral of patients to other providers
at times as may be appropriate consistent with good professional
practice.
(e) (1) All services shall be readily available at reasonable
times to all enrollees. To the extent feasible, the plan shall make
all services readily accessible to all enrollees.
(2) To the extent that telemedicine services are appropriately
provided through telemedicine, as defined in subdivision (a) of
Section 2290.5 of the Business and Professions Code, these services
shall be considered in determining compliance with Section 1300.67.2
of Title 10 of the California Code of Regulations.
(f) The plan shall employ and utilize allied health manpower for
the furnishing of services to the extent permitted by law and
consistent with good medical practice.
(g) The plan shall have the organizational and administrative
capacity to provide services to subscribers and enrollees. The plan
shall be able to demonstrate to the department that medical decisions
are rendered by qualified medical providers, unhindered by fiscal
and administrative management.
(h) (1) All contracts with subscribers and enrollees, including
group contracts, and all contracts with providers, and other persons
furnishing services, equipment, or facilities to or in connection
with the plan, shall be fair, reasonable, and consistent with the
objectives of this chapter. Any contractual provision that
requires providers to waive any provision set forth in this title, or
any other provision of law, or that allows the plan to unilaterally
amend the contract is void as contrary to public policy. All
plans shall establish a fast, fair, and cost-effective dispute
resolution mechanism under which providers, individually or jointly,
may submit disputes to the plan at any time if they contend that the
current or proposed renewal provider
contracts , on their face or as implemented,
violate this section or any other provision of law, compromise
patient care; or are otherwise unfair or unreasonable.
(2) Matters subject to the dispute resolution process include all
those matters identified by the provider as being in dispute and
which arise out of the plan-health care professional contract, such
as, but not limited to:
(i) Services covered under the contract.
(ii) The definition or application of medical necessity and other
conditions of coverage.
(iii) Utilization review criteria and procedures, including
matters relating to prior authorization, and patient referral
standards, including those applicable to out-of-network referrals.
(iv) Clinical practice guidelines, medical management policies,
and quality assurance programs or audits.
(v) Drug formularies and standards and procedures for prescribing
off-formulary drugs.
(vi) The confidentiality of medical information.
(vii)
(ii) Any matters that arise after a contract has been
executed, such as increased reimbursement for new technology and
pharmaceutical therapeutics, and new unanticipated uses of existing
technology.
(viii)
(iii) Whether the current or proposed reimbursement or the
methodology for determining the payment for health care services and
supplies is disclosed, reasonable, or even adequate to cover the cost
of care.
(ix)
(iv) Sudden costs of absorbing patients in the midst of, or
affected by delay of, care resulting from insolvencies of provider
organizations.
(3) The plan shall inform providers when contracting with the plan
of the procedures for processing and resolving disputes, including
the location and telephone number where information regarding
disputes may be submitted. All procedures shall also comply with
Title 9.6 (commencing with Section 1299.20) of Part 3 of the Code of
Civil Procedure.
(4) Each health care service plan shall ensure that a dispute
resolution mechanism is accessible to noncontracting providers
for the purpose of resolving billing and claims disputes .
Where providers jointly utilize the dispute resolution process
established by the plan, the providers shall designate one person or
entity to represent them. The provider may retain and utilize
counsel to represent them.
(5) On and after January 1, 2002, each health care service plan
shall annually submit a report to the department regarding its
dispute resolution mechanism. The report shall include information
on the number of providers who utilized the dispute resolution
mechanism and a summary of the disposition of those disputes.
(i) Each health care service plan contract shall provide to
subscribers and enrollees all of the basic health care services
included in subdivision (b) of Section 1345, except that the director
may, for good cause, by rule or order exempt a plan contract or any
class of plan contracts from that requirement. The director shall by
rule define the scope of each basic health care service which health
care service plans shall be required to provide as a minimum for
licensure under this chapter. Nothing in this chapter shall prohibit
a health care service plan from charging subscribers or enrollees a
copayment or a deductible for a basic health care service or from
setting forth, by contract, limitations on maximum coverage of basic
health care services, provided that the copayments, deductibles, or
limitations are reported to, and held unobjectionable by, the
director and set forth to the subscriber or enrollee pursuant to the
disclosure provisions of Section 1363.
(j) No health care service plan shall require registration under
the Controlled Substances Act of 1970 (21 U.S.C. Sec. 801 et seq.) as
a condition for participation by an optometrist certified to use
therapeutic pharmaceutical agents pursuant to Section 3041.3 of the
Business and Professions Code.
Nothing in this section shall be construed to permit the director
to establish the rates charged subscribers and enrollees for
contractual health care services.
The director's enforcement of Article 3.1 (commencing with Section
1357) shall not be deemed to establish the rates charged subscribers
and enrollees for contractual health care services.
SEC. 3. Section 1367.001 is added to the Health and Safety Code,
to read:
1367.001. It shall be unlawful for a health plan to do either of
the following:
(a) Impose or threaten to impose retaliation, such as contract
termination, on providers, discriminate or threaten to discriminate
against providers, or otherwise interfere with, restrain, or coerce
providers because of their exercise of their rights guaranteed by
Title 9.6 (commencing with Section 1299.20) of Part 3 of the Code of
Civil Procedure.
(b) Dominate or interfere with the ability of providers to jointly
utilize the dispute mechanisms established pursuant to Title 9.6
(commencing with Section 1299.20) of Part 3 of the Code of Civil
Procedure.
SEC. 4. Section 10178.4 is added to the Insurance Code, to read:
10178.4. (a) Every insurer issuing group or individual policies
of disability insurance that covers hospital, medical, or surgical
expenses shall establish a fast, fair, and cost-effective dispute
resolution mechanism under which providers, individually or jointly,
may submit disputes to the insurer at any time if they contend that
the current or proposed renewal provider
contracts , on their face or as implemented,
violate any provision of law, compromise patient care, or are
otherwise unfair or unreasonable. The term "provider" shall have the
same meaning as set forth in Section 10178.3. All contracts
with providers shall be fair, reasonable, and consistent with the
objectives of this section. Any contractual provision that requires
providers to waive any provision set forth in this section or any
other provision of law, or that allows the plan to unilaterally amend
the contract is void as contrary to public policy.
(b) Matters subject to the dispute resolution process include all
those matters identified by the provider as being in dispute and
which arise out of the insurer-health care professional contract,
such as, but not limited to:
(1) Services covered under the contract.
(2) The definition or application of medical necessity and other
conditions of coverage.
(3) Utilization review criteria and procedures, including matters
relating to prior authorization, and patient referral standards,
including those applicable to out-of-network referrals.
(4) Clinical practice guidelines, medical management policies, and
quality assurance programs or audits.
(5) Drug formularies and standards and procedures for prescribing
off-formulary drugs.
(6) The confidentiality of medical information.
(7) Any matters that arise after a contract has been executed,
such as increased reimbursement for new technology and pharmaceutical
therapeutics, and new unanticipated uses of existing technology.
(8) Whether the current or proposed reimbursement or the
methodology for determining the payment for health care services and
supplies is disclosed, reasonable, or even adequate to cover the cost
of care.
(9) Sudden costs of absorbing patients in the midst of, or
affected by delay of, care resulting from insolvencies of provider
organizations.
(c) The insurer shall inform providers when contracting with the
insurer of the procedures for processing and resolving disputes,
including the location and telephone number where information
regarding disputes may be submitted. All procedures shall also
comply with Title 9.6 (commencing with Section 1299.20) of Part 3 of
the Code of Civil Procedure.
(d) Each insurer shall ensure that a dispute resolution mechanism
is accessible to noncontracting providers for the purpose of
resolving billing and claims disputes . Where providers
jointly utilize the dispute resolution process established by the
plan, the providers shall designate one person or entity to represent
them. Providers may retain and utilize counsel to represent them.
(e) On and after January 1, 2003, each insurer shall annually
submit a report to the department regarding its dispute resolution
mechanism. The report shall include information on the number of
providers who utilized the dispute resolution mechanism and a summary
of the disposition of those disputes.
(f) It shall be unlawful for an insurer to do any of the
following:
(1) Impose or threaten to impose retaliation, such as contract
termination, on providers, discriminate or threaten to discriminate
against providers, or otherwise interfere with, restrain, or coerce
providers because of their exercise of their rights guaranteed by
Title 9.6 (commencing with Section 1299.20) of Part 3 of the Code of
Civil Procedure.
(2) Dominate or interfere with the ability of providers to jointly
utilize the dispute mechanisms established pursuant to Title 9.6
(commencing with Section 1299.20) of Part 3 of the Code of Civil
Procedure.
SEC. 5. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.