BILL ANALYSIS
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THIRD READING
Bill No: AB 1613
Author: Assembly Budget Committee
Amended: 10/6/10 in Senate
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
SUBJECT : Health Budget Trailer Bill
SOURCE : Author
DIGEST : Senate Floor Amendments of 10/6/10 delete the
prior version of the bill which expressed the intent of the
Legislature to enact statutory changes relating to the
Budget Act of 2010, and add the current content relating to
health.
This bill is now the Health Budget Trailer bill which
contains provisions necessary to implement the 2010-11
Budget.
ANALYSIS : This is the Omnibus Health Trailer Bill, which
contains necessary changes to enact modifications in the
Budget Bill for 2010-11. It makes the following key
changes:
Department of Health Care Services
1. Skilled Nursing Facility Quality Assurance and
Accountability . This bill reauthorizes the Quality
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Assurance Fee on nursing homes, established through AB
1629 (Frommer), Chapter 875, Statutes of 2004, and makes
the following changes which are General Fund neutral:
A. Rate Increases . Provides for a two-year rate
adjustment of up to 3.9 percent in 2010-11 and up to
2.4 percent in 2011-12 by extending the sunset of the
Quality Assurance Fee to July 30, 2012. Provides for
a larger revenue base in which to apply the Quality
Assurance Fee by trending forward the net revenue of
nursing facilities, including Medi-Cal, Medicare, and
private pay, using historical increases in net
revenue.
B. Continuing Care Retirement Communities . This bill
continues to exclude these facilities from paying any
Quality Assurance Fee. These entities operate under
a different type of license and serve few Medi-Cal
patients.
C. Multi-Level Residential Community (MLRC)
Facilities . As contained in the Governor's May
Revision, this bill extends the Quality Assurance Fee
to MLRC facilities for those beds that are licensed
and certified to provide nursing home level care.
This will affect approximately 76 facilities.
These facilities have received rate increases as a
result of
AB 1629, Statutes of 2004, but have not previously been
required to pay the Quality Assurance Fee. As such,
other nursing homes have been subsidizing the MLRC
rate increases. Specifically, the Department of
Health Care Services (DHCS) states that over 50
percent of the MLRCs are reimbursed by Medi-Cal and
in the aggregate have received approximately $46
million in rate increases since 2004 without paying
the fee.
This bill also expresses the Legislature's intent
that consistent with current law, a Multi-Level
Residential Facility that has been assessed a Quality
Assurance Fee shall pay the fee within 60 days of the
date rates are increased in accordance with Section
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1322.28 of the Health and Safety Code and paid to
these facilities.
D. Limits Medi-Cal Reimbursement for Legal Costs . As
proposed by the Administration, this bill limits
reimbursement of legal fees incurred by nursing
facilities engaged in the defense of legal actions
filed by governmental agencies or departments against
the facilities where any of the following apply: (1)
a decision has been rendered in favor of the
governmental agency or department; (2) the
determination of the governmental agency or
department otherwise stands; and (3) a settlement or
similar resolution has been reached, as specified.
E. Limits Medi-Cal Reimbursement for Liability
Insurance . This bill limits Medi-Cal reimbursement
for liability insurance to the 75th percentile
computed on a specified geographic peer group basis.
F. Labor-Driven Operating Allocation (LDOA) . This
bill eliminates the LDOA since quality assurance and
accountability measures will be phased-in.
G. Quality Assurance and Accountability Provisions .
This bill begins to phase-in a Quality Assurance and
Accountability Supplemental Payment System to provide
supplemental payments to nursing facilities that
improve the quality and accountability of care
rendered to residents and penalizing those facilities
that do not meet measurable standards. This bill
provides specific methodologies to be used in
calculating the supplemental payments to be made and
the penalties to be imposed.
The quality benchmarks established in this bill
include a 3.2 nursing hours-to-patient ratio;
immunizations; physical restraints; facility-acquired
pressure ulcers; direct care retention; and resident
and family satisfaction surveys.
Additional benchmarks will be added, including
federal health care reform measures identified by the
federal Centers for Medicare and Medicaid Services,
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the use of chemical restraints, and direct care staff
retention if not addressed in 2011-12.
This bill also establishes a stakeholder work
group to provide assistance to the Administration to
develop recommendations regarding the Quality
Assurance and Accountability Payment System.
H. 3.2 Nursing Hours-to-Patient Ratio . This bill
requires that nursing homes that do not meet this
existing ratio and are in non-compliance will be
assessed a penalty of $15,000 for noncompliance on
five percent to 49 percent of audited days, and
$30,000 for noncompliance on 49 percent or more of
audited days.
I. Establishes Special Funds for Quality Assurance
and Accountability System . This bill creates the
Skilled Nursing Facility Minimum Staffing Penalty
Account and requires the Department of Public Health
(DPH) to deposit penalty payments collected from
nursing facilities into the account. DPH is required
to transfer, on a monthly basis, moneys in the
account to the Skilled Nursing Facility Quality and
Accountability Fund.
It establishes the Skilled Nursing Facility
Quality and Accountability Fund and beginning in
2011-12; one percent of the rate increase will be
allocated to this Fund.
The Skilled Nursing Facility Quality and
Accountability Fund is continuously appropriated to
DHCS to provide supplemental payments to nursing
homes; provide for specified administrative support;
and provide $1.9 million for the Long-Term Care
Ombudsman Program activities.
If supplemental payments are not made by May 1,
2012, then funds accumulated in the Skilled Nursing
Facility Quality and Accountability Fund will be
allocated back into nursing home rates.
J. Long-Term Care Ombudsman . This bill expresses the
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Legislature's intent that the $1.9 million (Skilled
Nursing Facility Quality and Accountability Fund)
appropriation contained in the bill is in addition to
the $4.168 million proposed in the Governor's May
Revision for 2010-11. It also directs the DHCS to
seek approval from the federal Centers for Medicare
and Medicaid Services to obtain federal Medicaid
funds for this purpose.
2. Medi-Cal Program: Hospital Rate Freeze and Transition
to Diagnosis-Related Groups . This bill freezes Medi-Cal
reimbursement paid to Private Hospitals for one-year,
retroactive to January 1, 2010. It establishes a
process for implementation of a new rate setting
methodology which uses Diagnosis-Related Groups. This
is to save $169 million ($84.5 million General Fund) for
2010-11.
3. Medi-Cal Program: Physician Administered Drug Rate
Reduction . This bill authorizes DHCS to implement a new
Medi-Cal reimbursement rate for physician administered
drugs, to be the lower of (1) the Medi-Cal reimbursement
for pharmacy providers (i.e., Average Wholesale Price
minus 17 percent); or (2) the federal Medicare rate
(Average Sales Price plus six percent), unless federal
law requires a higher reimbursement level. This becomes
effective as of February 1, 2011, and is to save $12.8
million ($6.4 million General Fund).
4. Medi-Cal Program: Radiology Rate Reduction . This bill
reduces Medi-Cal reimbursement for radiology services to
80 percent of federal Medicare rates, effective October
1, 2010, to save $27.2 million ($13.6 million General
Fund).
5. Medi-Cal Program: Roger's Amendment Sunset Extension .
This bill extends the sunset for one year (to January
2012) on the State statute that implements the federal
"Roger's Amendment", enacted as part of the Federal
Deficit Reduction Act of 2005. It sets a limit on the
amount that a Medi-Cal Managed Care plan can reimburse a
non-contracted hospital that provides emergency services
to one of the plan's members. It requires hospitals to
accept as payment in full no more than the amounts that
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it could collect under the Fee-for-Service Medi-Cal
Program.
The DHCS estimates that annual savings are as much as
$19.7 million (total funds) from this action.
6. Medi-Cal Program: County Medi-Cal Eligibility
Administration . This bill establishes a process for
DHCS and county welfare departments to exchange
information and develop a methodology for the
administration of Medi-Cal eligibility processing. It
also suspends the cost-of-doing business for 2010-11 for
a savings of $21.6 million ($10.8 million General Fund).
7. Medi-Cal Program: Limit on Non-Legend Acetaminophen .
Under federal law, non-legend drugs ("over-the-counter")
are considered an optional benefit under Medicaid
(Medi-Cal). Medi-Cal has covered over-the-counter drugs
for many years as an inexpensive alternative to
prescription drugs.
This bill provides that non-legend acetaminophen (such
as Adult Tylenol) products selected by DHCS would no
longer be a covered benefit under Medi-Cal. There are
prescription substitutions available for the
acetaminophen-containing products and these would
continue to be a covered benefit in Medi-Cal. Dual
eligibles individuals (Medicare and Medi-Cal) could
obtain these products with a prescription through
Medicare Part D, as well. Children's liquid Tylenol
would not be affected by this change and will continue
to be a covered Medi-Cal benefit. Cough and cold
medications also continue as a Medi-Cal benefit as is
current practice. The Budget Bill assumes a savings of
$3.1 million (General Fund) from this change.
8. Medi-Cal Program: Payment of Medicare Part B Premiums.
Prior to September 2008, DHCS paid federal Medicare Part
B premiums for individuals who qualify for both Medi-Cal
and Medicare (dual eligibles) even when they had not met
their share-of-cost within the Medi-Cal Program.
To address a budget deficit, AB 1183 (Assembly Budget
Committee), Chapter 758, Statutes of 2008, eliminated
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Medicare Part B premium payments for elderly and
disabled enrollees having an unmet share-of-cost in
excess of $500.
This bill, as proposed by the Governor, eliminates DHCS
payment of Medicare Part B premiums for individuals who
do not meet their share-of-cost obligation for the
remainder of the program (i.e., unmet share-of-cost of
$500 or less). Approximately 951 average monthly
eligibles would be affected by this change. The Budget
Bill reflects a reduction of $1 million (General Fund)
from this action.
9. Medi-Cal Program: Annual Eligibility for Children . The
Budget Act of 2008 adopted semi-annual eligibility
reporting requirements for children in Medi-Cal
shortened from annual eligibility renewal requirements,
with a sunset of July 1, 2011. Annual eligibility was
restored in 2009 in response to maintenance-of-effort
requirements included in the federal American
Reinvestment and Recovery Act (ARRA), but set to sunset
at the time that federal ARRA was originally designated
to sunset (i.e., December 31, 2010). The federal
Patient Protection and Affordable Care Act (H.R. 3590)
of 2010 provides for similar maintenance-of-effort
requirements. Specifically, it requires States to
maintain Medicaid (Medi-Cal) eligibility standards,
methodologies, and procedures until a Health Insurance
Exchange is operational in the State.
This bill clarifies that annual eligibility for children
will remain in effect to meet the federal
maintenance-of-effort requirements. This conforms to
the Governor's May Revision.
10. Medi-Cal Program: Family Planning, Access, Care, and
Treatment (FPACT) Program . This program presently
operates under a federal waiver which is set to end as
of August 31, 2010. Recent federal law changes would
enable California to operate this program under a
Medi-Cal State Plan Amendment which would provide
savings of $5.0 million General Fund. This bill
provides for the FPACT Program to be operated under a
State Plan Amendment in lieu of a waiver.
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11. Medi-Cal Program: Managed Care Rates . DHCS
administratively implemented a risk-adjustment factor
for the 2009-10 rate year in the Two-Plan Counties and
the affected plans did not realizes the full impact of
this adjustment until December 2009. This
risk-adjustment factor warrants additional analysis
before it is further expanded.
This bill establishes that prior to October 1, 2011, the
Medi-Cal risk-adjusted countywide capitation rate being
used by DHCS shall comprise no more than 20 percent of
the total capitation rate paid to each Medi-Cal Managed
Care plan establishes that prior to
October 1, 2011, the Medi-Cal risk-adjusted countywide
capitation rate being used by the DHCS shall comprise no
more than 20 percent of the total capitation rate paid
to each Medi-Cal Managed Care plan.
12. Medi-Cal Program: Extension of AB 1422, Statutes of
2009 . The Medi-Cal provider gross premium tax,
authorized by AB 1422 (Bass), Chapter 157, Statutes of
2009, establishes a funding source for essential
preventative and primary health care services provided
through the Healthy Families program by adding Medi-Cal
Managed Care plans to the list of insurers subject to
California's gross premiums tax of 2.35 percent for the
period of January 1, 2009, through December 31, 2010.
This bill extends the sunset to June 30, 2011.
13. Medi-Cal Program: Geographic Managed Care Rate
Negotiations Reassigned to DHCS . This bill reassigns
the responsibility for negotiating Medi-Cal Geographic
Managed Care rates from the California Medical
Assistance Commission to DHCS.
14. Medi-Cal Program: Timely Filing Rule for Medi-Cal
Providers . Federal law requires that when a Medicaid
enrollee has third party health care coverage or
insurance, the State Medicaid agency shall be the payer
of last resort. When other coverage is identified, DHCS
and its vendors determine which claims Medi-Cal paid
that were eligible for reimbursement under that
coverage.
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Federal and State law authorizes DHCS to seek
reimbursement for claims up to three years after the
date of service. Upon notification of claims subject to
other coverage, providers should submit claims for
payment to the insurer. However, some insurers are
denying claims based on "timely filing" restrictions -
typically 30 to 180 days - delineated in each individual
contract with the provider. When an insurer denies a
claim as untimely, DHCS loses revenue due to its
inability to recoup Medi-Cal moneys from the provider.
This bill requires a three-year "look back" when
providers submit claims which were originally paid by
Medi-Cal. This statutory change is a cost avoidance
measure that retains $10 million (total funds) in
savings.
15. California Discount Prescription Drug Program . This
program, established by AB 2911 (Nunez), Chapter 619,
Statutes of 2006, has never been implemented due to
budget constraints. This bill delays implementation and
sunsets the program in 2015.
16. Medi-Cal Program: State Administrative Support for 1115
Medi-Cal Waiver . This bill authorizes the Department of
Managed Health Care (DMHC) to assess managed care plans
a total of $994,000 for deposit into the existing
Managed Care Fund to support positions authorized in the
Budget Bill for DMHC to administer specified components
of the 1115 Medi-Cal Waiver which will provide
California approximately $10 billion in federal funds
over a five-year period. This bill also requires DHCS
and DMHC to have an interagency agreement to coordinate
specified activities related to the mandatory enrollment
of seniors and persons with developmental disabilities
into Medi-Cal Managed Care.
17. Medi-Cal Program: Reporting on Waivers . This bill
requires DHCS to provide the fiscal and policy
committees of the Legislature with updates in March and
October of each year on all of California's Medi-Cal
Waivers.
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18. Medi-Cal Program: Oversight of California Medi-Cal
Management Information System (CA-MMIS) . DHCS is
procuring a new Fiscal Intermediary for Medi-Cal
referred to as the California Medi-Cal Management
Information System (CA-MMIS). In order to have
oversight of this system implementation, this bill
requires DHCS to submit quarterly reports to the
Legislature, Legislative Analyst's Office, Office of the
State Chief Information Officer (OCIO), and the Bureau
of State Audits. This bill also makes the project
subject to review by the OCIO, and requires the Bureau
of State Audits to review all project documents and
reports and make recommendations as necessary.'
19. Medi-Cal Program: Legislative Intent Language for
Hospital Quality Assurance Fee . This bill expresses the
Legislature's intent to utilize the Quality Assurance
Fee paid by specified hospitals to expand children's
health care services in future years, if and when the
Quality Assurance Fee is in effect in strong budget and
economic times.
20. DHCS: California Children's Services (CCS) Program .
This bill requires DHCS to seek foundation funding to
develop studies of the CCS Program to be provided to the
Legislature and stakeholders by May 2011. These studies
are to address (1) systems analysis of core business
processes and practices; (2) provider certification and
enrollment processes; (3) medical eligibility
processing; (4) oversight of quality of care; (5) best
practices for case management; and (6) use of advanced
information technology tools.
Department of Public Health
21. DPH: HIV Rapid Testing . This bill deletes the
requirement that HIV testing sites must receive funding
from the DPH in order to conduct rapid HIV tests.
Current law requires sites to receive State funding;
however, reductions to the Office of AIDS due to
Governor's vetoes in 2009 have affected approximately 40
counties and their ability to conduct rapid HIV tests as
they have lost all of their State funding. This change
will enable them to continue to provide rapid HIV
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testing. The Administration concurs with this change.
22. DPH: AIDS Drug Assistance Program in Use as Certified
Public Expenditure . This bill requires DHCS and DPH to
ensure the integrity of the AIDS Drug Assistance Program
(ADAP) in meeting its maintenance of effort requirements
to receive federal funds and to obtain all drug rebates,
in the event that State expenditures for the ADAP are
identified to be used as a certified public expenditure
for the purpose of obtaining federal financial
participation under the Medi-Cal Program for purposes of
the 1115 Medicaid Waiver.
23. DPH: Required Estimate Packages . This bill requires
DPH to include in the Governor's January and May
Revision budget submittals to the Legislature detailed
estimate packages for the following programs: (a)
Women, Infant and Children's Supplemental Food Program;
(2) Licensing and Certification Division; and (3) the
Every Woman Counts Program.
24. DPH: Every Woman Counts Program . This bill requires
DPH to provide the Legislature with quarterly reports
that include expenditure data available for this
program.
25. DPH: Vacancy Report . This bill requires DPH to provide
the fiscal committees of the Legislature and the
Legislative Analyst's Office with an annual vacancy
report by no later than January 20th of each year.
Managed Risk Medical Insurance Board (MRMIB)
26. Children's Health Insurance Program Reauthorization Act
(CHIPRA) of 2009 . As proposed by the Administration,
this bill provides MRMIB with emergency regulation
authority for purposes of implementing the federal
CHIPRA and related program activities through 2011-12,
in order to facilitate prompt completion of tasks and
avoid delays. The emergency regulation authority
applies specifically and only to CHIPRA activities.
Department of Developmental Services (DDS)
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27. DDS: Additional 1.25 Percent Reduction (total of 4.25
percent) . Existing law requires Regional Centers to
reduce Purchase of Services payments made to providers
by three percent from February 1, 2009 to June 30, 2011,
inclusive. Existing law also provides exemptions from
reduction for certain services, including Supported
Employment, the SSP (State Supplementary Payment)
supplement for independent living, and services with
usual and customary rates as established in regulation.
Other services may be exempt from this reduction if a
Regional Center demonstrates that a non-reduced payment
is necessary to protect the health and safety of a
consumer and DDS has granted approval.
As proposed in the Governor's May Revision, this bill
increases this reduction by 1.25 percent for a total of
4.25 percent, and continues the above existing law
exemptions. In addition, this bill permits a Regional
Center, with certain restrictions as specified, to
temporarily modify personnel requirements, functions,
qualifications, or staff training requirements of
providers.
The 4.25 percent reduction in the Purchase of Services
reimbursement saves $141 million ($70.4 million General
Fund) for 2010-11. It should be noted that Regional
Center Operations expenditures are also reduced by 4.25
percent for a savings of $22.4 million ($15.4 million
General Fund) as reflected in the Budget Bill.
28. DDS: Intermediate Care Facilities for Developmentally
Disabled (ICF-DD) Facility Billing to Obtain Additional
Federal Funds . The Budget Act of 2007 required DDS and
DHCS to obtain federal CMS approval to reconfigure
(bundle) the rate paid to ICF-DD facilities to include
Day Program and Transportation services expenditures
received by residents of these facilities for the
purpose of receiving federal fund support.
Federal CMS approval was recently obtained and
resolution of a billing mechanism for past-years has
just occurred. A net reduction of $53.5 million
(General Fund) is reflected in the Budget Bill for this
purpose.
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Due to this availability of federal funding, this bill
provides for the liquidation until June 30, 2011,
certain funds appropriated in the Budget Act of 2007,
and authorizes DDS to make specified supplemental
payments to ICF-DD providers for day treatment and
transportation services. This bill also makes related
conforming changes to ensure the integrity of the
Individual Program Plan process, to capture all federal
funds available, and to clarify the roles and
responsibilities of the billing process.
29. DDS: Lanterman Developmental Center . The
Administration has submitted a transition plan for
Lanterman Developmental Center to the Legislature
through the budget process. (The Administration
submitted the Agnews Developmental Center closure using
this same approach as contained in existing state
statute.) It is anticipated that closure of Lanterman
will take at least two or more years.
Through a public and collaborative process, the
Administration and Budget Committees have developed
statute language to include references to Lanterman
Developmental Center, as was done with Agnews
Developmental Center. This includes the following:
A. Requires the Secretary of Health and Human
Services to verify protocols as specified for the
health and human safety of individuals transitioning
from Lanterman.
B. Requires DHCS to provide appropriate reimbursement
to health plans participating in Medi-Cal and serving
consumers transitioned from Lanterman to ensure
health care coverage.
C. Provides for State staff to work in the community
as specified to ensure continuity of care for the
consumers. Specifically, for the Lanterman
Developmental Center, the use of department employees
is in effect for up to two years following the
transfer of the last resident of Lanterman, unless a
later enacted statute deletes or extends this
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provision.
D. Allows for DDS to operate an outpatient clinic
throughout the transition of Lanterman.
E. Provides for the expansion of Adult Residential
Facilities for Persons with Special Health Care Needs
so this residential model can specifically be used
for the orderly closure of Lanterman Developmental
Center.
30. DDS: Written Notice for Exemption or Exception . As a
result of reductions in the Budget Act of 2009 and the
Budget Bill of 2010-11, it was agreed that consumers
participating in the Regional Center system needed to be
informed of the Regional Center's exemption process for
the purchase of services.
This bill requires each Regional Center to notify
consumers receiving services at their Regional Center
regarding the purchase of services exemption process, as
specified.
Department of Mental Health
31. DMH: Office of Patients Rights Contract . This bill
extends the contract length for the Office of Patients
Rights from three years to five years in order to
increase efficiency and reduce costs for the State.
32. DMH: Mental Health Services Act (MHSA) Report on State
Administration . This bill requires DMH to include in
its Proposition 63 reports to the Legislature a detailed
accounting of the proposed MHSA funds for State
Administration.
33. DMH: State Hospitals . This bill allows for DMH to
contract with providers for the provision of emergency
health care services for patients residing at the State
Hospitals and specifies maximum reimbursement rates of
payment for these services, including those provided
under contract with the DMH and those that are not under
contract. The Budget Bill reflects savings of $2
million (General Fund) for this purpose.
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California Health and Human Services (CHHS) Agency
34. CHHS Agency: Health Information Exchange and Federal
Funds . The CHHS Agency received a four-year $38.7
million federal grant for California's Health
Information Exchange. The majority of these funds are
to be available in the first two years of the grant,
based on the State's performance in spending funds and
building health information exchange capacity.
Under California's plan, the CHHS Agency is the federal
grantee and retains responsibility for administering the
grant and all grant deliverables. The CHHS Agency is to
coordinate electronic health activities in the State and
work with the Legislature, State departments, and
stakeholders to support and recommend policy needs for
Health Information Technology in California.
Cal eConnect (CeC) is California's "governance entity"
which is a nonprofit responsible for meeting the
requirements the CHHS Agency sets in contract and
subsequent amendments. CeC was selected through a
Request for Information process. Generally, CeC will be
responsible for establishing ground rules by which
health information can be exchanged appropriately among
clinicians, hospitals, health plans, patients, and
government agencies.
SB 337 (Alquist), Chapter 180, Statutes of 2009,
established a framework in statute for the functions
outlined above.
This bill further clarifies the duties of the CHHS
Agency and the governance entity by modifying the
membership of the initial governing board. This bill
requires an implementation plan to be developed and
submitted to the Legislature by November 1, 2010, and
also specifies certain annual reporting requirements to
the Legislature regarding expenditures and plan
implementation status.
This bill provides that all deliverables, as defined in
the scope of work, shall upon delivery and acceptance by
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the CHHS Agency become the property of the State and may
be copyrighted by the State.
This bill requires the CHHS Agency to require the
State-designated entity to develop specified policies
and procedures to provide the public with transparency
of the actions of the entity.
This bill also specifies that the State governance
entity shall establish and begin providing health
information exchange services no later than January 1,
2012.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
CTW:mw 10/6/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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