BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1339|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 1339
Author: Cannella (R), et al.
Amended: 8/12/14
Vote: 21
SENATE HEALTH COMMITTEE : 8-0, 4/24/14
AYES: Hernandez, Morrell, Beall, DeSaulnier, Evans, Monning,
Nielsen, Wolk
NO VOTE RECORDED: De Le�n
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/14
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SENATE FLOOR : 36-0, 5/28/14
AYES: Anderson, Beall, Berryhill, Block, Cannella, Corbett,
Correa, De Le�n, DeSaulnier, Evans, Fuller, Gaines, Galgiani,
Hancock, Hernandez, Hill, Hueso, Huff, Jackson, Lara, Leno,
Lieu, Liu, Mitchell, Monning, Morrell, Nielsen, Padilla,
Pavley, Roth, Steinberg, Torres, Vidak, Walters, Wolk, Wyland
NO VOTE RECORDED: Calderon, Knight, Wright, Yee
ASSEMBLY FLOOR : 78-0, 8/19/14 (Consent) - See last page for
vote
SUBJECT : Medi-Cal: Drug Medi-Cal Treatment Program providers
SOURCE : Author
DIGEST : This bill specifies that, for purposes of identifying
potential fraud, waste, or abuse in the Medi-Cal program,
CONTINUED
SB 1339
Page
2
criminal background checks are to be conducted on the officers
and executive director of the provider or applicant, if the
provider or applicant is a nonprofit Drug Medi-Cal provider or
applicant; and specifies fingerprint requirement for these
persons and any person with a 5% or greater ownership interest
in the provider or applicant.
Assembly Amendments delete provisions of the bill relating to a
County or the Department of Health Care Services (DHCS)
contracting with a certified Department of Managed Care (DMC)
provider (criminal history and related information) requirements
and add provisions related to provider risk categories, fees and
provider contracting and add coauthors.
ANALYSIS : Existing law:
1.Establishes the Medi-Cal program, which is administered by the
DHCS, under which qualified low-income individuals receive
health care services. The Medi-Cal program is, in part,
governed and funded by federal Medicaid program provisions.
2.Allows DHCS to enter into a DMC Treatment Program contracts
with each county for the provision of alcohol and drug use
services within the county service area.
3.Requires DHCS to contract for DMC services in a county as
necessary that does not enter into or terminates its DMC
contract with DHCS to ensure beneficiary access to alcohol and
drug use services. Requires contracts be made in accordance
with federal Medicaid and state Medi-Cal laws and in
accordance with the federal court order and any future action
in the case of Sobky v. Smoley (E.D.Cal 1994) 855 F.Supp.
1123.
4.Requires a DMC contract in order for DMC services to be
reimbursed to DMC-certified providers.
5.Permits counties to negotiate contracts only with providers
certified by DHCS to provide DMC services.
This bill:
1.Provides that, if DHCS designates a provider or applicant as a
"high" categorical risk, DHCS or its designee shall conduct a
CONTINUED
SB 1339
Page
3
criminal background check of (1) the provider or applicant,
and if the provider or applicant is a nonprofit Drug Medi-Cal
provider or applicant, the officers and executive director of
the provider or applicant, and (2) any person with a 5% or
greater direct or indirect ownership interest in the provider
or applicant.
2.Requires the persons specified above to submit a set of
fingerprints within 30 days of DHCS's request, in a manner
determined by DHCS.
Background
According to the author's office, a yearlong investigation by
CNN's Special Investigations Unit and the Center for
Investigative Reporting (CIR) uncovered a widespread "rehab
racket" within the DMC outpatient treatment program. There is an
obvious oversight in DMC that has allowed individuals to profit
from deceptive practices. California referred 16 clinics to the
Department of Justice in July 2013. Fraudulent facilities are
detrimental to the integrity of legitimate clinics that
undeniably help people on the path to substance abuse recovery.
The Joint Legislative Audit Committee approved an audit of the
DMC program in August 2013 (2013-119). The audit report has not
yet been released; however the initial analysis and
investigation support the reports of clinic operators
fabricating patient's claims, overcharging the state for
reimbursements, and employing individuals with disqualifying
criminal records. More concerning is the fact that clinics
continued to receive reimbursements.
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 with CHI contributes to
transparency and accountability in the DMC program.
DMC. According to DHCS, the DMC program provides substance use
disorder treatment services to Medi-Cal beneficiaries. Funding
for the program was realigned to the counties as part of the
2011 Public Safety Realignment, but the delivery system remained
unchanged. DHCS certifies and monitors DMC treatment providers
to ensure adherence to Title 9 and Title 22, California Code of
CONTINUED
SB 1339
Page
4
Regulations, which govern DMC treatment.
According to DHCS, as of January 1, 2014, responsibility for
initial and ongoing DMC certification was shifted to the
Medi-Cal Provider Enrollment Division (PED) from the Substance
Use Disorder Compliance Division, which used to be part of the
Department of Alcohol and Drug Programs prior to its elimination
and transfer to DHCS. PED is beginning to align DMC
certification with the Medi-Cal Fee-For-Service provider
enrollment process. Existing law prohibits DHCS from enrolling
any provider that has been convicted of any felony or
misdemeanor involving fraud or abuse in any government program,
as specified. DHCS has the authority to complete a background
check on applicants to verify the accuracy of information
provided to be enrolled in the Medi-Cal program, which may
include, but is not limited to, onsite inspections prior to
enrollment, review of business records, and data searches.
The Medi-Cal program imposes a variety of sanctions on providers
that fail to comply with requirements or fail to meet the
program's standards of participation. Sanctions range from
temporary suspension of submitting claims for reimbursement to
permanent suspension from participating in the program.
Allegations of fraud and DHCS response. According to DHCS, the
CNN/CIR report in July 2013 alleged that providers hired
individuals who were on the federal list of Medicaid excluded
providers and had been convicted of a felony or misdemeanor
involving fraud or abuse in a government program, or had been
convicted of neglect or abuse of a patient while providing a
health care service. Additionally, some DMC-certified facilities
were suspected of violating state and federal laws by providing
services not deemed medically necessary. Others were suspected
of fraudulently billing DMC for services that were never
rendered.
In July 2013, DHCS began a process to recertify all current
DMC-certified providers. According to DHCS, other steps have
been taken to ensure DMC program integrity since the transfer of
all DMC program oversight to DHCS from the Department of Alcohol
and Drug Programs in July 2013, which include a statewide sweep
of providers, taking actions against unscrupulous DMC program
medical directors, engaging county entities to assist in
monitoring efforts, and securing additional resources to fight
CONTINUED
SB 1339
Page
5
DMC fraud. In February 2014, DHCS stated that it had suspended
68 providers operating 214 facilities that had credible
allegations of fraud, and referred the providers to DOJ for
criminal prosecution. Approximately 440 providers total were
inactivated for not billing. Providers that have not billed for
12 months or more are automatically suspended. DHCS stated that
those who have been deactivated for not billing will be removed
from the deactivation list if DHCS receives a letter stating
that the DMC-certified program intends to bill in the future.
Other reforms DHCS has implemented include requiring all
DMC-certified provider medical directors to be enrolled in the
Medi-Cal program by PED; conducting monthly checks against the
Medicare Exclusion Database to identify exclusions and
reinstatements of existing DMC providers; amending the next
state-county contract to increase county monitoring of DMC
providers; and developing a regulatory revision package to
increase DMC program integrity.
CHI . According to the Attorney General's office, state and
local summary CHI is confidential and access is strictly
regulated by statute. DOJ provides an automated service for CHI
checks that may be required as a condition of such things as
employment, licensing, and certification. Digitally scanned
fingerprints and related information can be submitted
electronically to DOJ within a matter of minutes and allows CHI
to be processed usually within 72 hours, according to the
Attorney General's Web site. DOJ's record retention policy is
to maintain CHI until the subject reaches 100 years of age.
Although DHCS has the authority to conduct background checks on
applicants prior to enrollment, existing law currently only
requires CHI checks and fingerprints for providers that DHCS
designates as high risk, meaning providers for whom DHCS imposes
a payment suspension based on a credible allegation of fraud,
waste, or abuse; providers with an existing Medicaid overpayment
based on fraud, waste, or abuse; providers excluded by the
Office of Inspector General or another state's Medicaid program
within the previous 10 years; and providers/applicants for whom
a moratorium has been lifted within the previous six months
prior to applying for the Medicaid program and the
provider/applicant would have been prevented from enrolling due
to the moratorium. However, DHCS has determined that it
currently lacks the statutory authority to receive the results
CONTINUED
SB 1339
Page
6
of the CHI and will be pursuing trailer bill language this year
to be given the authority to receive the results of the CHI of
applicants and providers from DOJ.
Prior Legislation
SB 1529 (Alquist, Chapter 797, Statutes of 2012) revised
screening, enrollment, disenrollment, suspensions, and other
sanctions for fee-for service Medi-Cal providers and suppliers
to conform to the federal Affordable Care Act.
SB 857 (Speier, Chapter 601, Statutes of 2003) made changes to
the Medi-Cal program to address provider fraud, such as
establishing new Medi-Cal application requirements for new
providers, existing providers at new locations, and providers
applying for continued enrollment.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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
providers or new medical directors.
Likely administrative costs up to $75,000 in the first year to
coordinate background checks with DMC providers and DHCS
(General Fund and federal funds).
SUPPORT : (Verified 8/19/14)
Alameda County Sheriff's Office
California Welfare Fraud Investigators Association
Howard Jarvis Taxpayers Association
Los Angeles County Board of Supervisors
ARGUMENTS IN SUPPORT : Supporters of the bill cite the need
for a CHI process, which would assist counties and DHCS with
protecting against fraud and misuse of taxpayer dollars within
the DMC program.
CONTINUED
SB 1339
Page
7
ASSEMBLY FLOOR : 78-0, 8/19/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Holden,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A.
P�rez, V. Manuel P�rez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Gomez, Vacancy
JL:AL:nl 8/19/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED