BILL ANALYSIS �
SB 1339
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Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 1339 (Cannella) - As Amended: May 27, 2014
SENATE VOTE : 36-0
SUBJECT : Medi-Cal: Drug Medi-Cal Treatment Program providers.
SUMMARY : Requires the Department of Health Care Services (DHCS)
or a county to obtain a criminal background check for the owner
and medical director of a Drug Medi-Cal (DMC) provider prior to
entering into a contract. Specifically, this bill :
1)Requires a county or DHCS, before contracting with a certified
DMC provider, to require a certified DMC provider's owner and
medical director to undergo a criminal background check
administered by the Department of Justice (DOJ).
2)Requires DOJ to forward the fingerprint images and related
information received, as defined, to the Federal Bureau of
Investigation (FBI) and request a federal summary of criminal
information.
3)Requires DOJ to review the information returned from the FBI
and compile and disseminate a response to the county or DHCS,
as specified.
4)Requires either the county or DHCS which is contracting with a
DMC provider to request subsequent arrest notification service
from DOJ, as specified.
5)Requires DOJ to charge a fee sufficient to cover the cost of
processing the requests described, and requires payment of the
fee to be the responsibility to the DMC provider's owner or
medical director, as applicable.
6)Prohibits, except as provided by federal law, a DMC provider
from being excluded from contracting with a county or DHCS
based solely on the existence of a past criminal record of the
DMC provider's owner or medical director.
EXISTING LAW
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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 DMC program, which provides substance use
disorder services to Medi-Cal recipients.
3)Allows DHCS to enter into contracts with counties for the
provision of DMC services. If a county declines to contract
with DHCS, existing law requires DHCS to contract for services
in the county to ensure beneficiary access.
4)Requires each county to fund the nonfederal share for DMC
services through realignment funds, as specified.
5)Requires providers of DMC 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
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 DMC
program by July 1, 2014.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)One-time costs up to $140,000 for initial background checks by
DOJ (private funds) and minor costs ongoing. There are about
1,000 active DMC providers and the cost for a background check
is $65. After the initial round of background checks, ongoing
costs to perform background checks should be minor for new
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providers or new medical directors.
2)Likely administrative costs up to $75,000 in the first year to
coordinate background checks with DMC providers and DOJ by
DHCS (General Fund and federal funds).
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, weak,
ineffective oversight has facilitated a rehabilitation racket.
Individuals on the federal list of excluded providers work
for clinics, collecting money and committing fraud. This list
includes individuals convicted of a felony or misdemeanor
involving fraud or abuse in government programs or convicted
of neglect or abuse of a patient while providing health care
item or service. They are prohibited from operating programs
like DMC and participating in state funded reimbursement
programs. This bill strengthens the authority of agencies
responsible for the contracted DMC outpatient facilities. A
criminal background check will identify who is managing these
clinics and if they have been convicted of felonies that
exclude them from participation.
The author further states that this bill supplements any fraud
prevention measures taken by the Administration by providing
more information on contracted individuals who bill the
agency. Providing DHCS and county agencies that oversee these
programs criminal background information contributes to
transparency and accountability in DMC.
2)BACKGROUND . DMC services are reimbursed on a fee-for-service
basis at 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. DMC
services include outpatient drug free services, which consist
mostly of group counseling and some limited individual
counseling for persons in crisis; narcotic treatment programs,
which provide methadone replacement therapy; intensive
outpatient services; and, residential services. There are
about 800 active DMC providers in the state.
Current regulations create requirements for oversight of DMC
providers at both the state and county levels. DHCS is tasked
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with administrative and fiscal oversight, monitoring,
auditing, utilization review, and recovery of improper
payments. Counties that elect to contract with DHCS to
provide DMC 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 DMC. In addition, 15
providers statewide currently operate without a county
contract, instead contracting directly with DHCS.
a) Federal Regulations. In accordance with Federal
Regulations published by the Centers for Medicare and
Medicaid Services in the Federal Register (42 CFR Parts
405, 424, 447 et al. 72 Federal Register 5862 - 5971 [Feb.
2, 2011]), DHCS has implemented Medi-Cal screening level
requirements as established in California Welfare &
Institutions Code Section 14043.38.
Beginning January 1, 2013, DHCS screens all applications
based on a categorical risk level of "limited," "moderate,"
or "high". Provider types are designated within these risk
categories and DHCS shall, at a minimum, utilize the
federal regulations in determining an
applicant's/provider's categorical risk. Provider types not
designated to a specific risk category are screened at a
categorical risk level subject to DHCS' discretion.
Providers that fit within more than one risk level must be
screened at the highest applicable level.
Provider types designated as "limited" categorical risk are
subject to license verification in accordance and database
checks. Provider types designated as "moderate" categorical
risk are subject to on-site inspections in addition to all
screening measures applicable to "limited" risk provider
types. Provider types designated as "high" categorical risk
are subject to criminal background checks and
fingerprinting in addition to all screening measures
applicable to "limited" and "moderate" risk provider types.
Provider types are designated as "high" categorical risk if
any of the following conditions apply:
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i) Payment suspension that is based on a credible
allegation or fraud, waste or abuse;
ii) Existing Medicaid overpayment based on fraud, waste
or abuse;
iii) Exclusion by the Office of Inspector General (OIG)
or another state's Medicaid program within the previous
10 years; and,
iv) A Moratorium was lifted within the previous six
months prior to applying and the applicant/provider would
have been prevented from enrolling due to the Moratorium.
b) DMC Fraud. Beginning in July 2013, the Center for
Investigative Reporting (CIR) published a series of reports
on fraud in the DMC program in conjunction with a
three-part series on CNN entitled 'Rehab Racket.' The
reports alleged that DMC 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.
c) DHCS Review. In July 2013, DHCS began reviewing DMC
providers and ordering temporary suspensions due to
credible allegations of fraud. As of January of 2014, DHCS
had suspended 68 providers operating 177 facilities and
referred the providers to the DOJ for criminal prosecution.
After an extensive internal review, DHCS announced a
number of steps it was taking to improve integrity in DMC:
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i) Requiring all 816 active DMC 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 DMC providers;
iii) Continuing targeted investigations of DMC providers
by DHCS auditors, nurse evaluators and peace officers;
iv) Mining and analyzing of data to identify suspicious
DMC 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.
d) 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 DMC program. Among the issues
raised at the hearing was a need to update the standards
for certification of DMC providers. Among the amendments
to the standards recommended for consideration was the
creation of standards for criminal background checks of DMC
providers conducted through Live Scan and cross-checking
the exclusions list maintained by the OIG.
e) OIG exclusions program. The 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
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.
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f) 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.
3)SUPPORT . According to the California Welfare Fraud
Investigators Association, there is a vital need for this
criminal background process to be instituted, which would aide
and assist counties and departments with the current needs and
issues they are encountering.
The County of Los Angeles states that SB 1339 would help
fortify the DMC Program and its understanding of prospective
contractors and would help to strengthen and/or improve the
accountability of the wonders and key staff of DMC provider
organizations.
The Alameda County Sheriff's Office and the Howard Jarvis
Taxpayers Association write that the requirements of SB 1339
are necessary to implement in order to protect against fraud
and misuse of funds in California's drug and alcohol programs.
4)RELATED LEGISLATION .
a) AB 1644 (Medina) requires DMC providers to be designated
as a 'high' categorical risk and be subject to criminal
background checks as a condition of DMC certification. AB
1644 is pending in the Assembly Appropriations Committee.
b) AB 1967 (Pan) requires DHCS, when it commences or
concludes an investigation of a DMC provider, to notify
counties that contract with the provider. AB 1967 is in
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the Senate Health Committee.
5)PREVIOUS LEGISLATION .
a) SB 1529 (Alquist), Chapter 797, Statutes of 2012,
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.
b) 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 . As discussed above, current law already
requires, in accordance with federal regulations, for
designating provider types as "high," "moderate," or
"limited." The Committee may wish to amend this bill to fit
within these already established requirements.
7)RECOMMENDED AMENDMENT . On page 2, strike lines 3 through 13,
inclusive, and insert "(a) Drug Medi-Cal Treatment Program
provider shall be categorized as "high" categorical risk
pursuant to Section 14043.38 and shall be subject to
background checks pursuant to the provisions of that section.
(b) On and after January 1, 2018, the department may designate
a Drug Medi-Cal Treatment Program provider as "limited" or
"moderate" categorical risk pursuant to Section 14043.38 and
federal regulations. To designate a DMC Treatment Program
provider as "limited" or "moderate" the department shall
execute a declaration, to be retained by the director and
posted on the department's Internet Web site, that states the
reason that a "high" categorical risk designation is no longer
warranted. The department shall transmit a copy of this
declaration to the Legislature."
REGISTERED SUPPORT / OPPOSITION :
Support
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Alameda County Sheriff's Office
California Welfare Fraud Investigators Association
County of Los Angeles
Howard Jarvis Taxpayers Association
Opposition
None on file.
Analysis Prepared by : Paula Villescaz / HEALTH / (916)
319-2097