BILL NUMBER: AB 1600 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 20, 2001
AMENDED IN SENATE JULY 9, 2001
AMENDED IN SENATE JUNE 27, 2001
AMENDED IN SENATE JUNE 25, 2001
AMENDED IN ASSEMBLY JUNE 4, 2001
AMENDED IN ASSEMBLY MAY 24, 2001
AMENDED IN ASSEMBLY MAY 15, 2001
AMENDED IN ASSEMBLY APRIL 30, 2001
AMENDED IN ASSEMBLY APRIL 23, 2001
INTRODUCED BY Assembly Member Keeley
(Coauthor: Assembly Member Richman)
FEBRUARY 23, 2001
An act to add and repeal Section 1373.22
amend Section 1394 of the Health and Safety Code, relating to
health care service plans.
LEGISLATIVE COUNSEL'S DIGEST
AB 1600, as amended, Keeley. Health care service plans :
provider contracts .
Existing law, the Knox-Keene Health Care Service Plan Act of 1975,
provides for the regulation and licensure of health care service
plans by the Department of Managed Health Care and makes a willful
violation of the act's provisions a crime. The act, among
other matters, requires that a plan's contracts with providers be
fair, reasonable, and consistent with the act's objectives, which
include ensuring that high-quality health care coverage is provided
in the most efficient and cost-effective manner possible.
This bill would authorize health care providers on a class basis
and health care service plans to negotiate any contract term or
condition and upon an impasse, as defined, to submit the dispute to
facilitated negotiation and, if unsuccessful, to refer the matter to
advisory arbitration and would require the filing of the contract,
facilitated negotiation agreement, or advisory arbitration award with
the department. The bill would require the department to make
public all parts of the contract which are not considered proprietary
or confidential, and allow public comment. The bill would also
require the department to approve, modify, or reject the contract,
agreement, or award and to adopt regulations prior to July 1, 2002,
pertaining to these facilitated negotiation and advisory arbitration
processes. The bill would specify that its provisions become
inoperative on July 1, 2004, and are repealed on January 1, 2005,
unless a later enacted statute that is enacted before January 1,
2005, deletes or extends these dates.
Because this bill would specify requirements for the facilitated
negotiation and advisory arbitration processes, the violation of
which would be punishable as a misdemeanor offense, it would expand
the scope of an existing crime, thereby imposing a state-mandated
local program. Existing law provides that the civil,
criminal, and administrative remedies available to the Director of
the Department of Managed Health Care are not exclusive, and may be
sought and employed in any combination deemed advisable by the
director to enforce these provisions.
This bill would allow any interested person to obtain equitable
relief in any court of competent jurisdiction from any person or
entity licensed under these provisions with respect to violations or
threatened violations of these provisions, with certain exceptions.
The bill would provide for the court to invite the parties to resolve
their dispute through an independent external review process, as
specified. The bill would require the department, by September 1,
2002, to accredit at least 3 independent external review
organizations in this regard. The bill would provide that a waiver
of these provisions is contrary to public policy and is therefore
unenforceable and void. The bill would also declare that certain of
its provisions are declaratory of existing law. The bill would enact
other related provisions.
Because willful violation of these provisions by health care
service plans would be a crime, this bill would thereby impose a
state-mandated local program.
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. (a) The Legislature finds and declares the
SECTION 1. Section 1394 of the Health and Safety Code is amended
to read:
1394. (a) The civil, criminal, and administrative
remedies available to the director pursuant to this article are not
exclusive, and may be sought and employed in any combination deemed
advisable by the director to enforce the provisions of this chapter.
(b) (1) Any interested person may obtain equitable relief from any
licensee as to any violation or threatened violation of this chapter
in any court of competent jurisdiction. This remedy is not
exclusive, but is cumulative to other remedies or penalties available
under all other laws of this state and under federal law.
(2) Within five days after the deadline set for the respondent or
defendant to file its answer to an action brought pursuant to this
subdivision, the court may invite the parties to consider resolving
their dispute through an independent external review process. In
order to utilize that process, the following shall apply:
(A) Both parties agree to submit their dispute to the independent
external review process.
(B) The department shall not review the decision of the
independent external review organization.
(C) The costs of the independent external review shall be borne
equally by the parties. However, if the independent external review
organization apportions fault between the parties, the costs shall be
apportioned between the parties based on the percentage outlined by
the organization.
(D) The recommendation of the independent external review
organization shall be in writing and shall describe the reasons for
the recommendation.
(E) The independent external review organization shall complete
its review and submit its written decision to the parties no later
than 30 days from the time the dispute is submitted to it for
independent external review, unless a later specified time is agreed
to by the parties.
(3) The department, shall, by September 1, 2002, accredit at least
three independent external review organizations. The department
may, at its discretion grant and revoke accreditation, and shall
develop, apply and enforce accreditation standards that ensure the
independence of each organization and the qualifications and
independence of its reviewers. In order to receive accreditation for
the purposes of this subdivision, an organization shall meet all of
the following requirements:
(A) The organization shall be an organization that has as its
primary function the provision of mediation and arbitration services
and that receives a majority of its revenues from these services.
(B) The organization shall submit to the department the following
information upon initial application for accreditation and annually
thereafter upon any change to any of the following information:
(i) The names of all stockholders and owners of more than 5
percent of any stock or options of the organization, if a publicly
held organization.
(ii) The names of all holders of bonds or notes of the
organization in excess of one hundred thousand dollars ($100,000), if
any.
(iii) The names of all corporations and organizations that the
organization controls or is affiliated with, and the nature and
extent of any ownership or control, including the affiliated
organization's type of business.
(iv) The names and biographical sketches of all directors,
officers, executives, and reviewers of the organization, as well as a
statement regarding any relationships its directors, officers,
executives, and mediators may have with any health care service plan,
disability insurer, managed care organization, provider group, or
board or committee.
(v) A description of the system the organization uses to identify
and recruit reviewers, the number of reviewers credentialed and the
types of cases the reviewers are credentialed to handle.
(vi) A description of the areas of expertise available from
reviewers retained by the organization.
(vii) A description of how the organization ensures compliance
with the conflict-of-interest provisions of this subdivision.
(4) If the court invites the parties to consider an independent
external review process, the parties shall notify the court within 30
days if they have selected a mutually acceptable independent
external review organization and appropriate reviewers. If the
parties have not made their selection within 30 days, the action
shall proceed. The court shall not draw any implication, favorable
or otherwise, from the refusal by a party to accept the invitation by
the court to consider utilizing an independent external review
process.
(5) Nothing in this subdivision shall preclude the parties, by
mutual consent, from using the independent external review process at
any other time.
(6) (A) Notwithstanding any provision of law to the contrary, all
time limits with respect to an action shall be tolled while the
matter is pending in the independent external review process.
(B) Ninety days after the commencement of the review and every 90
days thereafter, the action shall be reactivated unless the parties
to the action do either of the following:
(i) Arrive at a settlement and implement it in accordance with the
provisions of current law.
(ii) Agree by written stipulation to extend the independent
external review process for another 90-day period.
(C) Section 703.5 and Chapter 2 (commencing with Section 1115) of
Division 9 of the Evidence Code apply to any review conducted
pursuant to the subdivision.
(7) If the contract between a licensee and provider expires during
the pendency of an action brought pursuant to this subdivision, the
court shall issue an order extending the contract for a 180-day
period, in order to provide continuing care to enrollees. The
current contract rates and terms shall stay in effect during the
180-day period, subject to appropriate adjustment by the court to
ensure enrollee access to health care. This period may be extended
by mutual agreement of the parties.
(8) It shall not be a defense in an action brought pursuant to
this subdivision that a provision of this chapter that is at issue
has been contractually waived. Provisions of contracts of health
care service plans or their contracting intermediaries that require
beneficiaries or providers to waive any provision of this chapter are
prohibited and unenforceable.
(9) It shall be unlawful for a licensee to terminate, retaliate
against, or otherwise penalize plan enrollees or providers for
exercising their rights under this subdivision.
(10) This subdivision does not apply to disputes that are subject
to Section 1368, 1368.01, 1368.02, 1368.03, 1368.04, 1368.1, 1370.4,
1374.30, 1374.31, 1374.32, 1374.33, 1374.34, 1374.35, or 1374.36.
(11) A health care service plan shall not seek indemnity, whether
contractual or equitable, from a provider, employer, or employer
group purchasing organization for any liability imposed pursuant to
this subdivision.
(12) Any waiver of this subdivision is contrary to public policy
and therefore shall be unenforceable and void.
(13) All provisions of this subdivision, other than those set
forth in paragraphs (3) to (7), inclusive, confirm, and are
declarative of, rather than constituting a change in, existing law.
SEC. 2. 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.
following:
(1) The principal priorities of the Legislature for health care
are the following:
(A) The citizens of this state have access to the highest quality
health care.
(B) Patients have the opportunity for continuing access to their
own health care providers.
(C) Health care costs be reasonable and affordable.
(D) Administrative costs in the health care service plan and
health care provider relationship be as low as possible in order to
keep health care costs affordable.
(E) Health care service plans and health care providers remain
financially solvent in order to provide the highest quality care and
to retain patients' continuing access to their own health care
providers.
(2) The current health care service plan and health care provider
relationship is not satisfactorily meeting the state's health care
priorities for the following reasons:
(A) There is evidence that some health care providers are choosing
not to practice in California because of this relationship, thereby
threatening the quality of, and access to, health care in this state.
(B) Some patients have not been able to have continuing access to
their own health care providers because health care service plans and
health care providers have been unable to reach agreement on
contract extensions.
(C) Administrative costs in the health care service plan and
health care provider relationship are still high, resulting in higher
health care costs for both health care service plans and health care
providers.
(D) A large number of providers have been economically failing,
threatening the quality of, and access to, health care in this state
and the continuity of care for patients.
(E) Too much of a health care provider's time is spent in the
administrative aspects of the relationship, determining what care may
be provided to patients and settling claims, thereby reducing the
amount of time that providers spend with patients, increasing the
cost of health care, reducing patient access to health care, and
impairing the quality of care available.
(F) The negotiating relationship between health care service plans
and health care providers is imbalanced.
(b) It is the intent of the Legislature to implement a solution to
achieve the state's health care priorities, given the unsatisfactory
relationship between health care service plans and health care
providers. This solution would allow competing health care providers
to renegotiate contracts with health care service plans, thereby
allowing an improved balance in the contracting relationship that
should result in improvements in the state's priorities because of
the interests of health care service plans and health care providers
to resolve issues that are consistent with the interests of the
state. This solution would displace unfair competitive practices and
have an actively supervised state program to ensure that health care
service plan contracts with health care providers are fair,
reasonable, and provide appropriate reimbursement, consistent with
the best interests of the patients and this act. The Legislature
intends that this solution is consistent with the state action
immunity doctrine, which establishes immunity from federal and state
antitrust laws for conduct taken or supervised by a state. This
solution does not authorize the health care providers to conduct a
group boycott or to strike. Only activity specifically authorized by
this bill shall receive immunity from antitrust liability.
SEC. 2. Section 1373.22 is added to the Health and Safety Code, to
read:
1373.22. (a) (1) Health care providers, on a class basis, and
health care service plans may agree to negotiate any contract term or
condition upon renewal of a contract or during the contract term, if
there is no provision for renegotiation. Any contract negotiated
pursuant to this section shall be subject to the confirmation process
set forth in subdivision (e). In the event a health care service
plan declines to participate in these voluntary negotiations, no
further action by the class that is reasonably related to the subject
of the requested negotiations shall be permitted.
(2) Prior to commencing any negotiations authorized by this
section, health care providers shall submit a statement to the
Department of Managed Health Care indicating who will represent the
providers in the negotiations, the type of licensure of the providers
participating in the negotiations, and the number of providers who
that person will represent in the negotiations. If the department
finds that the nature of the representation is not in the best
interest of enrollees or is otherwise inconsistent with the
Knox-Keene Health Care Service Plan Act of 1975, it shall indicate
the reasons for its findings and recommend changes to the
representation to protect the best interest of enrollees and to
conform with the provisions of the Knox-Keene Health Care Service
Plan Act of 1975.
(b) In the event the parties reach an impasse during the
negotiations, the parties, upon mutual agreement, may submit the
issues in dispute to facilitated negotiation. For the purposes of
this subdivision, an "impasse" means that the parties to a dispute
have reached a point in meeting and negotiating where their
differences in position are so substantial or prolonged that future
meetings would be futile.
(c) In the event facilitated negotiation is unsuccessful, the
matter may, upon mutual agreement by the parties, be referred to
advisory arbitration. No advisory arbitration conducted pursuant to
this section shall limit the rights and remedies otherwise available
to the parties under common or statutory law. In addition, the
arbitrator 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.
(d) The Department of Managed Health Care shall adopt regulations
by July 1, 2002, that ensure that the facilitated negotiation and
advisory arbitration processes described in this section are fair and
effective. These regulations shall include a provision requiring
that the facilitator and arbitrator be neutral and specify factors to
be considered by the facilitator or arbitrator when resolving the
issues that shall include, but not be limited to, the following:
(1) The stipulations of the parties.
(2) The interest and welfare of patients.
(3) The patient's access to care.
(4) The ability of health care providers to render quality health
care services.
(5) 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, including
risk adjustment for high concentrations of diseases with high
treatment costs such as diabetes, multiple sclerosis, human
immunodeficiency virus, and acquired immune deficiency syndrome.
(6) The reasonableness of the reimbursement rates.
(7) The impact on the costs of health care premiums to purchasers.
(e) Upon negotiation of a contract, the parties, or upon
successful facilitated negotiation, the facilitator, or if the
parties agree to advisory arbitration, the arbitrator, shall file a
copy of the contract, facilitated negotiation agreement, or advisory
arbitration award, a statement of reasons, and submitted evidence to
the department for review. The department shall make public all
parts of the contract which are not considered proprietary or
confidential, and allow public comment. The department, after making
an independent review of the evidence and considering public comment
and the factors set forth in subdivision (d), shall approve, modify,
or reject the contract, agreement, or award.
(f) For purposes of this section, the following definitions apply:
(1) "Health care providers" shall mean any health care
professional licensed pursuant to, or group, corporation, or
partnership of health care professionals lawfully organized under
Division 2 (commencing with Section 500) of the Business and
Professions Code or licensed pursuant to the Chiropractic or
Osteopathic Initiative Acts. Health care providers shall also mean
all primary care providers who agree to provide case management to
Medi-Cal beneficiaries pursuant to Section 14088 and following of the
Welfare and Institutions Code. Health care providers shall not
include entities primarily organized as pharmacies or pharmacy
corporations, and pharmacists licensed under Chapter 9 (commencing
with Section 4000) of Division 2 of the Business and Professions
Code.
(2) "Health care service plan" means any fully licensed health
care service plan or specialized health care service plan that is
licensed pursuant to this chapter.
(3) A representative may be a professional association, labor
union, or any other person or entity designated by the class.
(4) "Facilitated negotiation" means any negotiation between the
parties that utilizes a neutral, third party to resolve their
differences for a contract renewal that is advisory in nature and
subject to the approval, modification, or rejection of the Department
of Managed Health Care.
(5) "Advisory arbitration" means any arbitration process that the
parties utilize to resolve their differences for a contract renewal
that is advisory in nature and subject to the approval, modification,
or rejection of the Department of Managed Health Care.
(g) The Legislature does not intend for the dispute resolution
procedures described in this section to have any application or legal
effect other than as described in this section.
(h) On or after January 1, 2003, each health care service plan
shall annually submit a report to the department regarding contract
negotiations conducted pursuant to this section. The report shall
include the number of providers who utilize the contract negotiation
process and a summary of the disposition of those negotiations. The
report shall also include information on the number of providers who
sought to utilize the process, but did not because the health plan
did not agree to the process.
(i) This section shall not affect the scope of practice of health
care providers or the rights and responsibilities of health care
providers mandated by law.
(j) This section shall not affect the operation of Section 16770
of the Business and Professions Code insofar as health care providers
organized into a class pursuant to subdivision (b) shall not exclude
from the class another health care provider where the ground for the
exclusion is failure to possess the same license or certification as
is possessed by the members of the class.
(k) This section shall become inoperative on July 1, 2004, and, as
of January 1, 2005, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2005, deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 3. 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.