BILL ANALYSIS �
AB 1644
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Date of Hearing: April 1, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 1644 (Medina) - As Amended: March 18, 2014
SUBJECT : Medi-Cal: Drug Medi-Cal Program providers.
SUMMARY : Requires a county or the Department of Health Care
Services (DHCS), before contracting with a Drug Medi-Cal
provider, to conduct a criminal background check of the owner
for crimes involving fraud.
EXISTING LAW :
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 Drug Medi-Cal program, which provides
substance use disorder services to Medi-Cal recipients.
3)Allows DHCS to enter into contracts with counties for the
provision of Drug Medi-Cal services. If a county declines to
contract with DHCS, requires DHCS to contract for services in
the county to ensure beneficiary access.
4)Requires each county to fund the nonfederal share for Drug
Medi-Cal services through realigned funds, as specified.
5)Require providers of Drug Medi-Cal 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
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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
Drug Medi-Cal program by July 1, 2014.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, a recent
report by the Center for Investigative Reporting (CIR) and CNN
alleged that within the past two years alone there has been
$94 million in fraud in the Drug Medi-Cal program. The author
asserts that taxpayer dollars should not be wasted, and
moreover that reports of fraud in public programs undermine
the integrity of those programs. The author argues that vital
services should not be jeopardized by bad actors. This bill
is intended to protect the Drug Medi-Cal program by revealing
whether clinic owners have been involved in fraudulent or
illegal activity prior to their opening a clinic.
2)BACKGROUND . Drug Medi-Cal services are reimbursed on a
fee-for-service basis at maximum 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. Drug Medi-Cal services include
outpatient drug-free services, which consist mostly of group
counseling and some limited individual counseling for people
in crisis; narcotic treatment programs, which provide
methadone replacement therapy; intensive outpatient services;
and residential services. There are about 800 active Drug
Medi-Cal providers in the state.
Current regulations create requirements for oversight of Drug
Medi-Cal providers at both the state and county levels. DHCS
is tasked with administrative and fiscal oversight,
monitoring, auditing, utilization review, and recovery of
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improper payments. Counties that elect to contract with DHCS
to provide Drug Medi-Cal 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 Drug Medi-Cal. In
addition, 15 providers statewide currently operate without a
county contract, instead contracting directly with DHCS.
a) Media reports of Drug Medi-Cal fraud. Beginning in July
2013, CIR published a series of reports on fraud in the
Drug Medi-Cal program in conjunction with a three-part
series on CNN entitled "Rehab Racket." The reports alleged
that Drug Medi-Cal 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.
b) DHCS response. In July 2013, DHCS began reviewing Drug
Medi-Cal providers and ordering temporary suspensions due
to credible allegations of fraud. As of January 2014, DHCS
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had suspended 68 providers operating 177 facilities and
referred the providers to the Department of Justice (DOJ)
for criminal prosecution. After an extensive internal
review, DHCS announced a number of steps it was taking to
improve integrity in Drug Medi-Cal:
i) Requiring all 816 active Drug Medi-Cal 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 Drug Medi-Cal
providers;
iii) Continuing targeted investigations of Drug Medi-Cal
providers by DHCS auditors, nurse evaluators, and peace
officers;
iv) Mining and analyzing of data to identify suspicious
Drug Medi-Cal 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.
c) 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 Drug Medi-Cal program. Among the
issues raised at the hearing was a need to update the
standards for certification of Drug Medi-Cal providers.
Among the amendments to the standards recommended for
consideration was the creation of standards for criminal
background checks of Drug Medi-Cal providers conducted
through Live Scan and cross-checking the exclusions list
maintained by the Office of Inspector General (OIG).
d) OIG exclusions program. 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
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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.
e) Fingerprint-based 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.
2)SUPPORT . In support, California Opioid Maintenance Providers
write that this bill's simple, reasonable requirements will
enhance program integrity in the Drug Medi-Cal system, thereby
improving public faith in the system and preventing fraud,
which can cost the state millions of dollars. The California
State Sheriffs' Association, also in support, writes that this
bill would provide common sense safeguards to ensure that Drug
Medi-Cal dollars are being used to serve patients while
protecting taxpayers.
3)OPPOSITION . Legal Services for Prisoners with Children, in
opposition, asserts that this bill would have the unintended
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negative consequence of increasing the already high level of
discrimination that formerly incarcerated people face after
their release. Legal Services writes that there is a great
potential for misuse of background checks, which are often
inaccurate and serve to bring racially discriminatory
sentencing practices from the prison system into other
institutions.
4)RELATED LEGISLATION .
a) AB 1967 (Pan) requires DHCS, when it commences or
concludes an investigation of a Drug Medi-Cal provider, to
notify counties that contract with the provider.
b) SB 1339 (Cannella) requires a county or DHCS, before
contracting with a Drug Medi-Cal provider, to obtain
criminal background checks for the owner and key staff. SB
1339 is pending in the Senate Health Committee.
c) SB 1045 (Beall) decreases, from four to two, the minimum
number of participants in a group counseling session
provided by certain Drug Medi-Cal providers and eliminates
the maximum of 10 participants. SB 1045 is pending in the
Senate Health Committee.
d) SB 570 (DeSaulnier) requires alcohol or other drug
counselors to submit criminal background checks for review
by DHCS. SB 570 is on the Assembly Inactive File.
5)PREVIOUS LEGISLATION .
a) AB 218 (Dickinson), Chapter 699, Statutes of 2013,
requires state and local agencies determine if a job
applicant meets minimum qualifications before obtaining and
considering an applicant's criminal conviction history on
an employment application.
b) SB 509 (DeSaulnier and Emmerson), Chapter 10, Statutes
of 2013, requires the California Health Benefit Exchange to
obtain fingerprint-based criminal background checks for
employees, contractors, volunteers, or vendors whose duties
include access to certain personal and confidential
information.
c) SB 1529 (Alquist), Chapter 797, Statutes of 2012,
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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.
d) 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 . Current law gives DHCS broad authority to
conduct background checks to verify Medi-Cal provider
application information and requires DHCS to perform criminal
background checks for high risk Medi-Cal providers. To create
consistency with current state law and federal regulations,
the Committee may wish to amend this bill to require
background checks as a condition of certification, rather than
contracting, in the Drug Medi-Cal program.
REGISTERED SUPPORT / OPPOSITION :
Support
California Opioid Maintenance Providers
California State Sheriffs' Association
Opposition
Legal Services for Prisoners with Children
Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097