Bill Text: CA SB171 | 2017-2018 | Regular Session | Amended

California Senate Bill 171 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Medi-Cal: Medi-Cal managed care plans.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2017-10-13 - Chaptered by Secretary of State. Chapter 768, Statutes of 2017. [SB171 Detail]

Download: California-2017-SB171-Amended.html

Amended IN Assembly July 05, 2017

Amended IN Senate May 02, 2017

Amended IN Senate April 19, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill

No. 171

Introduced by Senator Hernandez
(Coauthor: Assembly Member Wood)

January 23, 2017

An act to amend Section ~~10951~~ 1367.035 of the Health and Safety Code, and to amend Sections 10950 and 10951 of, to add Section 10959.5 to, and to add Article 6.3 (commencing with Section 14197) to Chapter 7 of Part 3 of Division 9 of, the Welfare and Institutions Code, relating to Medi-Cal, and making an appropriation therefor.

LEGISLATIVE COUNSEL'S DIGEST

SB 171, as amended, Hernandez. Medi-Cal: Medi-Cal managed care plans.

(1) Existing law establishes the Medi-Cal program, administered by the State Department of Health Care Services, under which health care services are provided to qualified, low-income persons. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Under existing law, one of the methods by which Medi-Cal services are provided is pursuant to contracts with various types of managed care plans. Existing federal regulations, published on May 6, 2016, revise regulations governing Medicaid managed care plans to, among other things, align, where feasible, those rules with those of other major sources of coverage, including coverage through qualified health plans offered through an American Health Benefit Exchange, such as the California Health Benefit Exchange, and promote quality of care and strengthen efforts to reform delivery systems that serve Medicaid and CHIP beneficiaries. These federal regulations, among other things, authorize an enrollee to request a state fair hearing only after receiving notice that the Medicaid managed care plan is upholding an adverse benefit determination, and requires the enrollee to request a state fair hearing no later than 120 calendar days from the date of the Medicaid managed care plans notice of resolution. These federal regulations require, with regards to a state fair hearing request filed by an enrollee entitled to an expedited resolution of an appeal by a managed care plan, an agency to take final administrative action as expeditiously as the enrollee’s health condition requires, but not later than 3 working days after the agency receives, from the managed care plan, the case file and information for any appeal of a denial or a service that, as indicated by the managed care plan meets the criteria for expedited resolution of an appeal, but was not resolved within the timeframe for expedited resolution, or was resolved within the timeframe for expedited resolution of an appeal, but the managed care plan reached a decision wholly or partially adverse to the enrollee.

Existing state law establishes hearing procedures for an applicant for or beneficiary of Medi-Cal who is dissatisfied with certain actions regarding health care services and medical assistance to request a hearing from the State Department of Social Services under specified circumstances, and requires a request for a hearing to be filed within 90 days after the order or action complained of.

This bill would implement various provisions in regard to those federal regulations, as amended May 6, 2016, governing Medicaid managed care plans. The bill would authorize a ~~person~~ person, after he or she has exhausted the Medi-Cal managed care plan’s appeals process, to request a hearing involving a Medi-Cal managed care plan within 120 calendar days after ~~the order or action complained of,~~ he or she has either received verbal or written notice from the Medi-Cal managed care plan that the adverse benefit determination, as defined, is upheld or the appeal or expedited appeal is denied, or the person is deemed to have exhausted the Medi-Cal managed care plans appeals process, as specified, and would exclude a request from the 120-calendar day filing time if there is good cause, as defined, for filing the request beyond the 120-calendar day period. The bill would require the State Department of Social Services to adopt any necessary rules and regulations to implement these changes, and, until July 1, 2018, would authorize the State Department of Social Services to adopt any necessary rules and regulations as emergency regulations.

The bill would require the State Department of Social Services, for a beneficiary of a Medi-Cal managed care plan who meets the criteria for an expedited resolution of an appeal, to take final administrative action as expeditiously as the individual’s health condition requires, but no later than 3 working days after the State Department of Social Services receives certain information from the Medi-Cal managed care plan consistent with the federal regulation described above. The bill would require a Medi-Cal managed care plan, upon notice from the State Department of Social Services that a beneficiary has requested a state fair hearing, to provide to the department a copy of the case file and any information for any appeal of a denial of a service within 3 business days of the Medi-Cal managed care plan’s receipt of the department’s notice of a request by a beneficiary for a state fair hearing.

(2) These federal regulations require a state that contracts with specified Medicaid managed care plans to develop and enforce network adequacy standards and requires each state to ensure that all services covered under the Medicaid state plan are available and accessible to enrollees of specified Medicaid managed care plans in a timely manner. These regulations also require specified Medicaid managed care plans to calculate and report a medical loss ratio (MLR) for the rating period that begins in 2017. If a state elects to mandate a minimum MLR for its Medicaid managed care plans, these regulations require that minimum MLR to be equal to or higher than 85% and authorizes the state to impose a remittance requirement consistent with the minimum standards established in these federal regulations for the failure to meet the minimum ratio standard imposed by the state.

The bill would require the State Department of Health Care Services, in consultation with the Department of Managed Health Care, to develop time and distance standards for specified provider types to ensure that covered and medically necessary ~~covered~~ services are accessible to enrollees of Medi-Cal managed care plans, as defined, to develop, for those Medi-Cal managed care plans that cover long-term services and supports (LTSS), time and distance standards for LTSS providers and network adequacy standards other than time and distance standards, and to develop timeliness standards to ensure that all covered and medically necessary services are available and accessible to enrollees of Medi-Cal managed care plans in a timely manner, as specified. The bill would require these standards to meet ~~or exceed~~ specified existing standards for timeliness of access to care established by the Department of Managed Health Care or those set forth in existing Medi-Cal managed care plan ~~contracts.~~ contracts, and would require the department, in developing these standards, to take into consideration requirements under a specified federal regulation. The bill would authorize the State Department of Health Care Services, upon the request of a Medi-Cal managed care plan, to allow alternative access standards, including the use of telecommunications technology, if the applying Medi-Cal managed care plan has exhausted all other reasonable options to obtain providers to meet either the time and distance or timely access standards. The bill would require, on ~~at least~~ an annual ~~basis,~~ basis and when requested by the State Department of Health Care Services, a Medi-Cal managed care plan, as defined, to demonstrate to the ~~department~~ State Department of Health Care Services and, for Medi-Cal managed care plans licensed under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act), the Department of Managed Health Care its compliance with the standards developed under this provision. The bill would also require a health care service plan licensed under the Knox-Keene Act that provides services to Medi-Cal beneficiaries to provide to the Department of Managed Health Care, in a manner specified by the department, data regarding the standards developed under this provision. Because a willful violation of the Knox-Keene Act by a health care service plan is a crime, this bill would impose a state-mandated local program.

The bill would require a Medi-Cal managed care plan, as defined, to comply with the MLR calculation and reporting requirements imposed under those federal regulations, and would require a Medi-Cal managed care plan to comply with a minimum 85% MLR and to provide a remittance to the state if the ratio does not meet the minimum ratio of 85% for that reporting year consistent with those federal regulations. The bill would generally provide that these MLR requirements do not apply to a health care service plan under a subcontract with a Medi-Cal managed care plan to provide covered health care services to Medi-Cal beneficiaries enrolled in the Medi-Cal managed care plan. The bill would require the department to post specified information on its Internet Web site, including any required remittances owed by a Medi-Cal managed care plan.

The bill would require the department to adopt regulations by July 1, 2019, and, commencing July 1, 2018, would require the department to provide a status report to the Legislature on a semiannual basis until regulations are adopted.

(3) These federal regulations require specified managed care plans to have a grievance and appeal system in place for enrollees, and requires managed care plans to resolve each grievance and appeal, and to provide timely and adequate notice, as expeditiously as the enrollee’s health condition requires, within certain state-established timeframes that may not exceed specified timeframes.
This bill would require a Medi-Cal managed care plan, as defined, to give a beneficiary timely and adequate notice of an adverse benefit determination, as defined, in writing consistent with those federal regulations. The bill would require a Medi-Cal managed care plan to establish and maintain an expedited review process for a beneficiary or the beneficiary’s provider to request an expedited resolution of an appeal based on specified circumstances, including when the beneficiary’s condition is such that the beneficiary faces an imminent and serious threat to his or her health, or the standard timeline would be detrimental to the beneficiary’s life or health or could jeopardize the beneficiary’s ability to regain maximum function. The bill would require a Medi-Cal managed care plan to resolve a standard appeal no more than 30 calendar days from the day the Medi-Cal managed care plan receives the appeal, and would require the Medi-Cal managed care plan to resolve an expedited appeal no longer than 72 hours after the Medi-Cal managed care plan receives the appeal.
(4) Existing federal regulations, published on March 30, 2016, revise regulations governing mental health parity requirements to address the application of certain mental health parity requirements under a specified federal law to certain Medicaid managed care plans, Medicaid benchmark and benchmark-equivalent plans, and the Children’s Health Insurance Program (CHIP).
This bill would require the State Department of Health Care Services to ensure that all covered mental health and substance use disorder benefits are provided in compliance with those revised federal regulations. The bill would require the department to implement, interpret, or make specific this provision by means of all-county letters, plan letters, or plan or provider bulletins, or similar instructions until regulations are adopted, and would require the department to adopt regulations by July 1, 2018. The bill would require, on an annual basis and when requested by the department, a Medi-Cal managed care plan, as defined, to demonstrate to the department its compliance with these mental health parity requirements, and would require the department to make an annual compliance report available on its Internet Web site.
~~(3)~~

(5) Existing law requires specified percentages of newly eligible beneficiaries, such as childless adults under 65 years of age, to be assigned to public hospital health systems in an eligible county, if applicable, until the county public hospital health system meets its enrollment target, as defined. Existing law also requires, subject to specified criteria, Medi-Cal managed care plans serving newly eligible beneficiaries to pay county public hospital health systems for providing and making available services to newly eligible beneficiaries of the Medi-Cal managed care plan in amounts that are no less than the cost of providing those services, and requires the capitation rates paid to Medi-Cal managed care plans for newly eligible beneficiaries to be determined based on its obligations to provide supplemental payments to those county public hospital health systems providing services to newly eligible beneficiaries. Existing law requires the department to pay Medi-Cal managed care plans specified rate range increases, and requires those Medi-Cal managed care plans to pay all of the rate range increases as additional payments to county public hospital health systems, as specified. Existing law authorizes a designated public hospital system or affiliated governmental entity to voluntarily provide intergovernmental transfers to provide support for the nonfederal share of risk-based payments to managed care health plans to enable those plans to compensate designated public hospital systems in an amount to preserve and strengthen the availability and quality of services provided by those hospitals.

These federal regulations generally prohibit states from directing managed care plans’ expenditures under a managed care contract. The federal regulations authorize states to direct managed care plans’ expenditures for provider payment through the managed care contracts in a manner based on the delivery of services, utilization, and the outcomes and quality of the delivered services.

This bill, commencing with the 2017–18 state fiscal year, would require the department to require each Medi-Cal managed care plan, as defined, to enhance contract services ~~payments~~ payments, as defined, to designated public hospital systems, as defined, by ~~a uniform percentage applied uniformly across~~ an amount determined under a prescribed uniform distribution methodology to be developed by the department, and would authorize these directed payments to separately account for inpatient and noninpatient hospital services and require these directed payments to be developed and applied separately for and uniformly within specified classes of designated public hospital ~~systems in accordance with a prescribed methodology.~~ systems. The bill would require a Medi-Cal managed care plan to annually provide to the department an accounting of the amount paid or payable to a designated public hospital system to demonstrate its compliance with the directed payment requirements. The bill would authorize the ~~department~~ department, after providing notice of its determination to the affected Medi-Cal managed care plan and allowing a reasonable period to cure the deficiencies, to reduce the default assignment into a Medi-Cal managed care plan by up to ~~25%,~~ 25% in the applicable county, as specified, if the Medi-Cal managed care plan is not in compliance with the directed payment requirements.

The bill, commencing with the 2017–18 state fiscal year, would require the department, in consultation with the designated public hospital systems and ~~each Medi-cal~~ applicable Medi-Cal managed care ~~plan,~~ plans, to establish a program under which a designated public hospital system may earn performance-based quality incentive payments from Medi-Cal managed care plans, as specified, and would require payments to be earned by each designated public hospital system based on its performance in achieving identified targets for quality of care. The bill would require the department to establish uniform performance measures and parameters for the designated public hospital systems to select the applicable measures, and would require these performance measures to advance at least one goal identified in the state’s Medicaid quality strategy.

The bill would authorize a designated public hospital system and their affiliated governmental entities, or other public entities, to voluntarily provide the nonfederal share of the portion of the capitation rates associated with the directed payments and for the quality incentive payments through an intergovernmental transfer. The bill would authorize the department to accept these elective funds and, in its discretion, to deposit the transfer in the Medi-Cal Inpatient Payment Adjustment Fund, a continuously appropriated fund, thereby making an appropriation.

The bill would prohibit the department or a Medi-Cal managed care plan from being required to make any payment ~~to a Medi-Cal managed care plan~~ pursuant to the provisions described in (3) for any state fiscal year in which these provisions are implemented, as specified.

The bill would authorize the department to implement, interpret, or make specific these provisions by means of all-county letters, plan letters, provider bulletins, or other similar instructions without taking regulatory action.

The bill would require these provisions to be implemented only to the extent that any necessary federal approvals are obtained and federal financial participation is available and is not otherwise jeopardized, and would require the department to seek any necessary federal approvals.

The bill would provide that these provisions shall cease to be operative on the first day of the state fiscal year beginning on or after the date the department determines, after consultation with the designated public hospital systems, that implementation of these provisions is no longer financially and programmatically supportive of the Medi-Cal program, as specified. The bill would require the department to post notice of the determination on its Internet Web site, and to provide written notice of the determination to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.
(6) 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: YES Fiscal Committee: YES Local Program: NOYES

The people of the State of California do enact as follows:

SECTION 1.

It is the intent of the Legislature to implement the revisions to federal regulations governing Medicaid managed care plans at Parts 431, 433, 438, 440, 457, and 495 of Title 42 of the Code of Federal Regulations, as amended May 6, 2016, as published in the Federal Register (81 Fed. Reg. 27498).

SEC. 2.

Section 1367.035 of the Health and Safety Code is amended to read:

1367.035.

(a) As part of the reports submitted to the department pursuant to subdivision (f) of Section 1367.03 and regulations adopted pursuant to that section, a health care service plan shall submit to the department, in a manner specified by the department, data regarding network adequacy, including, but not limited to, the following:

(1) Provider office location.

(2) Area of specialty.

(3) Hospitals where providers have admitting privileges, if any.

(4) Providers with open practices.

(5) The number of patients assigned to a primary care provider or, for providers who do not have assigned enrollees, information that demonstrates the capacity of primary care providers to be accessible and available to enrollees.

(6) Grievances regarding network adequacy and timely access that the health care service plan received during the preceding calendar year.

(b) A health care service plan that uses a network for its Medi-Cal managed care product line that is different from the network used for its other product lines shall submit the data required under subdivision (a) for its Medi-Cal managed care product line separately from the data submitted for its other product lines.

(c) A health care service plan that uses a network for its individual market product line that is different from the network used for its small group market product line shall submit the data required under subdivision (a) for its individual market product line separate from the data submitted for its small group market product line.

(d) The department shall review the data submitted pursuant to this section for compliance with this chapter.

(e) (1) In submitting data under this section, a health care service plan that provides services to Medi-Cal beneficiaries pursuant to Chapter 7 (commencing with Section 14000) or Chapter 8 (commencing with Section 14200) of Part 3 of Division 9 of the Welfare and Institutions Code shall provide the same data to the State Department of Health Care Services pursuant to Section 14456.3 of the Welfare and Institutions Code.

(2) A health care service plan that provides services to Medi-Cal beneficiaries also shall provide to the department, in a manner specified by the department, data regarding the standards set forth in Section 14197 of the Welfare and Institutions Code.

(f) In developing the format and requirements for reports, data, or other information provided by plans pursuant to subdivision (a), the department shall not create duplicate reporting requirements, but, instead, shall take into consideration all existing relevant reports, data, or other information provided by plans to the department. This subdivision does not limit the authority of the department to request additional information from the plan as deemed necessary to carry out and complete any enforcement action initiated under this chapter.

(g) If the department requests additional information or data to be reported pursuant to subdivision (a), which is different or in addition to the information required to be reported in paragraphs (1) to (6), inclusive, of subdivision (a), the department shall provide health care service plans notice of that change by November 1 of the year prior to the change.

(h) A health care service plan may include in the provider contract provisions requiring compliance with the reporting requirements of Section 1367.03 and this section.

SEC. 3.

Section 10950 of the Welfare and Institutions Code is amended to read:

10950.

(a) If any applicant for or recipient of public social services is dissatisfied with any action of the county department relating to his or her application for or receipt of public social services, if his or her application is not acted upon with reasonable promptness, or if any person who desires to apply for public social services is refused the opportunity to submit a signed application therefor, and is dissatisfied with that refusal, he or she shall, in person or through an authorized representative, without the necessity of filing a claim with the board of supervisors, upon filing a request with the State Department of Social Services or the State Department of Health Care Services, whichever department administers the public social service, be accorded an opportunity for a state hearing.

(b) (1) The requirements of Sections 100506.2 and 100506.4 of the Government Code apply to state hearings regarding eligibility for or enrollment in an insurance affordability program administered by the State Department of Health Care Services to the extent that those sections conflict with the state hearing requirements under this chapter.

(2) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department, without taking any further regulatory action, shall implement, interpret, or make specific this subdivision by means of all-county letters, plan letters, plan or provider bulletins, or similar instructions until the time regulations are adopted. The department shall adopt regulations by July 1, 2017, in accordance with the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. Notwithstanding Section 10231.5 of the Government Code, beginning July 1, 2015, the department shall provide a semiannual status report to the Legislature, in compliance with Section 9795 of the Government Code, until regulations have been adopted.

(3) This subdivision shall be implemented only to the extent it does not conflict with federal law.

(c) Priority in setting and deciding cases shall be given in those cases in which aid is not being provided pending the outcome of the hearing. This priority shall not be construed to permit or excuse the failure to render decisions within the time allowed under federal and state law.

(d) Notwithstanding any other provision of this code, there is no right to a state hearing when either (1) state or federal law requires automatic grant adjustments for classes of recipients unless the reason for an individual request is incorrect grant computation, or (2) the sole issue is a federal or state law requiring an automatic change in services or medical assistance which adversely affects some or all recipients.

(e) For the purposes of administering health care services and medical assistance, the Director of Health Care Services shall have those powers and duties conferred on the Director of Social Services by this chapter to conduct state hearings in order to secure approval of a state plan under applicable federal law.

(f) The Director of Health Care Services may contract with the State Department of Social Services for the provisions of state hearings in accordance with this chapter.

(g) As used in this chapter, ~~“recipient”~~ the following terms have the following meanings:

(1) “Adverse benefit determination” means, in the case of a Medi-Cal managed care plan, any of the following:
(A) The denial or limited authorization of a requested service, including determinations based on the type or level of service, requirements for medical necessity, appropriateness, setting, or effectiveness of a covered benefit.
(B) The reduction, suspension, or termination of a previously authorized service.
(C) The denial, in whole or in part, of payment for a service.
(D) The failure to provide services in a timely manner, as defined by the State Department of Health Care Services.
(E) The failure of a Medi-Cal managed care plan to act within the timeframes provided in Section 438.408(b)(1) of Title 42 of the Code of Federal Regulations regarding the standard resolution of grievances and appeals.
(F) For a resident of a rural area with only one Medi-Cal managed care plan, the denial of an enrollee's request to exercise his or her right under Section 438.52(b)(2)(i) of Title 42 of the Code of Federal Regulations to obtain services outside the network.
(G) The denial of an enrollee's request to dispute a financial liability, including cost sharing, copayments, premiums, deductibles, coinsurance, and other enrollee financial liabilities.
(2) “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries pursuant to any of the following:
(A) Article 2.7 (commencing with Section 14087.3) of Chapter 7 of Part 3, including dental managed care programs developed pursuant to Section 14087.46.
(B) Article 2.8 (commencing with Section 14087.5) of Chapter 7 of Part 3.
(C) Article 2.81 (commencing with Section 14087.96) of Chapter 7 of Part 3.
(D) Article 2.9 (commencing with Section 14088) of Chapter 7 of Part 3.
(E) Article 2.91 (commencing with Section 14089) of Chapter 7 of Part 3.
(F) Chapter 8 (commencing with Section 14200) of Part 3, including dental managed care plans.
(G) Chapter 8.9 (commencing with Section 14700) of Part 3.
(H) A county Drug Medi-Cal organized delivery system authorized under the California Medi-Cal 2020 Demonstration, Number 11-W-00193/9, as approved by the federal Centers for Medicare and Medicaid Services and described in the Special Terms and Conditions. For purposes of this subdivision, “Special Terms and Conditions” shall have the same meaning as set forth in subdivision (o) of Section 14184.10.

(3) “Recipient” means an applicant for or recipient of public social services except aid exclusively financed by county funds or aid under Article 1 (commencing with Section 12000) to Article 6 (commencing with Section 12250), inclusive, of Chapter 3 of Part 3, and under Article 8 (commencing with Section 12350) of Chapter 3 of Part 3, or those activities conducted under Chapter 6 (commencing with Section 18350) of Part 6, and shall include any individual who is an approved adoptive parent, as described in subdivision (C) of Section 8708 of the Family Code, and who alleges that he or she has been denied or has experienced delay in the placement of a child for adoption solely because he or she lives outside the jurisdiction of the department.

SEC. 2.SEC. 4.

Section 10951 of the Welfare and Institutions Code is amended to read:

10951.

(a) (1) A person is not entitled to a hearing pursuant to this chapter unless he or she files his or her request for the same within 90 days after the order or action complained of.

(2) Notwithstanding paragraph (1), a person shall be entitled to a hearing pursuant to this chapter if he or she files the request more than 90 days after the order or action complained of and there is good cause for filing the request beyond the 90-day period. The director may determine whether good cause exists. The department shall not grant a request for a hearing for good cause if the request is filed more than 180 days after the order or action complained of.

(b) (1) Notwithstanding subdivision (a), a person who is enrolled in a Medi-Cal managed care plan and who has received an adverse benefit determination from the Medi-Cal managed care plan shall, to the extent required by federal law or regulation, appeal the adverse benefit determination to the Medi-Cal managed care plan before requesting a state fair hearing pursuant to this chapter. After appealing to the Medi-Cal managed care plan, the enrollee may request a hearing pursuant to this chapter involving a Medi-Cal managed care plan within 120 calendar days after ~~the order or action complained of.~~ either of the following:

(A) Receiving verbal or written notice from the Medi-Cal managed care plan that the adverse benefit determination is upheld or the appeal or expedited appeal is denied.
(B) When the enrollee’s appeal is deemed exhausted because the Medi-Cal managed care plan failed to comply with state or federal requirements for notice and timeliness related to the disputed action or the appeal, including when a Medi-Cal managed care plan fails to respond to an appeal within 30 days as required pursuant to subdivision (b) of Section 14197.2 or asks the enrollee or his or her treating provider for more information to resolve the appeal solely for purposes of delaying a decision.

(2) Notwithstanding paragraph (1), a person shall be entitled to a hearing pursuant to this chapter if he or she files the request more than 120 calendar days after ~~the order or action complained of~~ receiving notice from the Medi-Cal managed care plan that the adverse benefit determination is upheld and there is good cause for filing the request beyond the 120-calendar day period. The director may determine whether good cause exists. The department shall not grant a request for a hearing for good cause if the request is filed more than 180 days after receipt of the notice from the Medi-Cal managed care plan that the adverse benefit determination is upheld.

(c) For purposes of this section, “good cause” means a substantial and compelling reason beyond the party’s control, considering the length of the delay, the diligence of the party making the request, and the potential prejudice to the other party. The inability of a person to understand an adequate and language-compliant notice, in and of itself, shall not constitute good cause. ~~The department shall not grant a request for a hearing for good cause if the request is filed more than 180 days after the order or action complained of.~~

(d) This section shall not preclude the application of the principles of equity jurisdiction as otherwise provided by law.

(e) Notwithstanding the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), the department shall implement this section through an all-county information notice. The department may also provide further instructions through training notes.

(f) Notwithstanding subdivision (e), the department shall implement the amendments made to this section by the act that added this subdivision by adopting any necessary rules and regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code). Until July 1, 2018, any rules and regulations necessary to implement the amendments made to this section by the act that added this subdivision may be adopted as emergency regulations in accordance with the Administrative Procedure Act. The adoption of emergency regulations pursuant to this subdivision shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare.

SEC. 5.

Section 10959.5 is added to the Welfare and Institutions Code, to read:

10959.5.
(a) Notwithstanding Sections 10952 and 10959, for a beneficiary of a Medi-Cal managed care plan who meets the criteria for an expedited resolution of an appeal as set forth in subdivision (c) of Section 14197.2, the department shall take final administrative action as expeditiously as the individual’s health condition requires, but no later than three working days after the department receives, from the Medi-Cal managed care plan, the case file and information for any appeal of a denial of a service that, as indicated by the Medi-Cal managed care plan, meets either of the following criteria:
(1) Meets the criteria for expedited resolution as set forth in Section 438.410 (a) of Title 42 of the Code of Federal Regulations, but was not resolved within the timeframe for expedited resolution.
(2) Was resolved within the timeframe for expedited resolution, but reached a decision wholly or partially adverse to the beneficiary.
(b) Upon notice from the department that a Medi-Cal managed care plan’s beneficiary has requested a state fair hearing, the Medi-Cal managed care plan shall provide to the department a copy of the following information within three business days of the Medi-Cal managed care plan’s receipt of the department’s notice of a request by a beneficiary for a state fair hearing:
(1) The case file.
(2) Any information for any appeal of a denial of a service that, as indicated by the Medi-Cal managed care plan, meets either of the criteria described in paragraph (1) or (2) of subdivision (a).

SEC. 3.SEC. 6.

Article 6.3 (commencing with Section 14197) is added to Chapter 7 of Part 3 of Division 9 of the Welfare and Institutions Code, to read:

Article 6.3. Medi-Cal Managed Care Plans

14197.

(a) It is the intent of the Legislature that the department implement the time and distance requirements set forth in Sections 438.68, 438.206, and 438.207 of Title 42 of the Code of Federal Regulations, to ensure that all Medi-Cal covered services are available and accessible to enrollees of Medi-Cal managed care plans in a timely manner, as those standards were enacted in May 2016.

(b) The department, in consultation with the Department of Managed Health Care, shall develop all of the following:

(1) Time and distance standards for the following provider types, as specified in Section 438.68(b)(1) of Title 42 of the Code of Federal Regulations, to ensure that covered and medically necessary ~~covered~~ services are accessible to enrollees of Medi-Cal managed care plans.

(A) Primary care, adult and pediatric.

(B) Obstetrics and gynecology.

(D) Specialist, adult and pediatric.

(E) Hospital.

(F) Pharmacy.

(G) Pediatric dental.

(H) Additional provider types when it promotes the objectives of the Medicaid program, as determined by the federal Centers for Medicare and Medicaid Services, for the provider type to be subject to time and distance access standards.

(2) For those Medi-Cal managed care plans that cover long-term services and supports (LTSS), both of the following:

(A) Time and distance standards for LTSS provider types in which an enrollee must travel to the provider to receive services.

(B) Network adequacy standards other than time and distance standards for LTSS provider types that travel to the enrollee to deliver services.

(3) Standards to ensure that all covered and medically necessary services are available and accessible to enrollees of Medi-Cal managed care plans in a timely manner.

(c) The standards developed by the department pursuant to this section shall, at a minimum, do ~~both~~ all of the following:

(1) Meet ~~or exceed~~ existing time and distance standards ~~developed pursuant to Section 1367.03 of the Health and Safety Code~~ set forth in Section 1300.51 of Title 28 of the California Code of Regulations and the standards set forth in Medi-Cal managed care contracts entered into with the department as of January 1, 2016. In the event of a conflict between the time and distance standards set forth in Section 1300.51 of Title 28 of the California Code of Regulations and the Medi-Cal managed care contracts entered into within the department as of January 1, 2016, the standard that requires a shorter travel time or less distance shall prevail.

(2) Meet ~~or exceed~~ the appointment time standards developed pursuant to Section 1367.03 of the Health and Safety ~~Code~~ Code, Section 1300.67.2.2 of Title 28 of the California Code of Regulations, and the standards set forth in contracts entered into between the department and Medi-Cal managed care plans.

(3) Take into consideration the requirements of subdivision (c) of Section 438.68 of Title 42 of the Code of Federal Regulations.

(d) In developing the time and distance standards, if the department elects a county standard for time and distance, the department shall categorize counties into at least five or more county categories, one of which is a rural county category.

(e) The department may have varying standards for the same provider type based on geographic areas, subject to the requirements of this section.

(f) (1) The department, upon request of a Medi-Cal managed care plan, may allow alternative access standards if the requesting Medi-Cal managed care plan has exhausted all other reasonable options to obtain providers to meet either time and distance or timely access standards, and, if the Medi-Cal managed care plan is licensed as a health care service plan under the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code), has obtained approval from the Department of Managed Health Care. The department shall post any approved alternative access standards on its Internet Web site.

(2) The department may allow for the use of telecommunications technology as a means of alternative access to care, including ~~telemedicine,~~ telehealth consistent with the requirements of Section 2290.5 of the Business and Professions Code, e-visits, or other evolving and innovative technological solutions that are used to provide care from a distance.

(g) The department may permit standards other than time and distance if the health care provider travels to the beneficiary or to a community-based setting to deliver services.

(h) (1) A Medi-Cal managed care plan shall, on ~~at least~~ an annual ~~basis,~~ basis and when requested by the department, demonstrate to the department its compliance with the time and distance and ~~timeliness~~ appointment wait time standards developed pursuant to this section. The report shall measure compliance separately for adult and pediatric services for primary care, behavioral health, and core specialist services. A Medi-Cal managed care plan licensed under the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code) shall also, on an annual basis, demonstrate to the Department of Managed Health Care its compliance with the time and distance and appointment wait time standards developed pursuant to this section.

(2) The department shall annually publish on its Internet Web site a report for each Medi-Cal managed care plan that specifies any areas where the Medi-Cal managed care plan was found to be out of compliance and the Medi-Cal managed care plan’s corrective action plan.
(i) The department shall consult with Medi-Cal managed care plans, including mental health plans, health care providers, consumers, providers and consumers of LTSS, and organizations representing Medi-Cal beneficiaries in the implementation of the requirements of this section.
~~(i)(1)~~

(j) For purposes of this section, “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries pursuant to any of the following:

~~(A)~~

(1) Article 2.7 (commencing with Section 14087.3), including dental managed care programs developed pursuant to Section ~~14087.46 .~~ 14087.46.

~~(B)~~

(2) Article 2.8 (commencing with Section 14087.5).

~~(C)~~

(3) Article 2.81 (commencing with Section 14087.96).

~~(D)~~

(4) Article 2.9 (commencing with Section 14088).

~~(E)~~

(5) Article 2.91 (commencing with Section 14089).

~~(F)~~

(6) Chapter 8 (commencing with Section 14200), including dental managed care plans.

~~(G)~~

(7) Chapter 8.9 (commencing with Section 14700).

~~(H)~~

(8) A county Drug Medi-Cal organized delivery system authorized under the California Medi-Cal 2020 Demonstration, Number 11-W-00193/9, as approved by the federal Centers for Medicare and Medicaid Services and described in the Special Terms and Conditions. For purposes of this subdivision, “Special Terms and Conditions” shall have the same meaning as set forth in subdivision (o) of Section 14184.10.

~~(j)~~

(k) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department, without taking any further regulatory action, shall implement, interpret, or make specific this section by means of all-county letters, plan letters, plan or provider bulletins, or similar instructions until the time regulations are adopted. The department shall adopt regulations by July 1, 2019, in accordance with the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. Commencing July 1, 2018, the department shall provide a status report to the Legislature on a semiannual basis, in compliance with Section 9795 of the Government Code, until regulations are adopted.

14197.1.
(a) The department shall ensure that all covered mental health and substance use disorder benefits are provided in compliance with Parts 438, 440, 456, and 457 of Title 42 of the Code of Federal Regulations, as amended March 30, 2016, as published in the Federal Register (81 Fed. Reg. 18390), and any subsequent amendment to those regulations, and any associated federal policy guidance issued by the federal Centers for Medicare and Medicaid Services.
(b) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department, without taking any further regulatory action, shall implement, interpret, or make specific this subdivision by means of all-county letters, plan letters, plan or provider bulletins, or similar instructions until the time regulations are adopted. In doing so, the director shall consult with managed care plans and consumer advocates. By July 1, 2018, the department shall adopt regulations in accordance with the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(c) A Medi-Cal managed care plan, on an annual basis and when requested by the department, shall demonstrate compliance with this section. The department shall make an annual compliance report available on its Internet Web site.
(d) For purposes of this section, “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries pursuant to any of the following:
(1) Article 2.7 (commencing with Section 14087.3), excluding dental managed care programs developed pursuant to Section 14087.46.
(2) Article 2.8 (commencing with Section 14087.5).
(3) Article 2.81 (commencing with Section 14087.96).
(4) Article 2.91 (commencing with Section 14089).
(5) Chapter 8 (commencing with Section 14200), excluding dental managed care plans.
(6) Chapter 8.9 (commencing with Section 14700).
(7) A county Drug Medi-Cal organized delivery system authorized under the California Medi-Cal 2020 Demonstration, Number 11-W-00193/9, as approved by the federal Centers for Medicare and Medicaid Services and described in the Special Terms and Conditions. For purposes of this subdivision, “Special Terms and Conditions” shall have the same meaning as set forth in subdivision (o) of Section 14184.10.

14197.1.14197.2.

(a) This section implements the state option in subdivision (j) of Section 438.8 of Title 42 of the Code of Federal Regulations.

(b) A Medi-Cal managed care plan shall comply with a minimum 85 percent medical loss ratio (MLR) consistent with Section 438.8 of Title 42 of the Code of Federal Regulations. The ratio shall be calculated and reported for each MLR reporting year by the Medi-Cal managed care plan consistent with Section 438.8 of Title 42 of the Code of Federal Regulations.

(c) A Medi-Cal managed care plan shall provide a remittance for an MLR reporting year if the ratio for that MLR reporting year does not meet the minimum MLR standard of 85 percent.

(d) Except as otherwise required under this section, the requirements under this section do not apply to a health care service plan under a subcontract with a Medi-Cal managed care plan to provide covered health care services to Medi-Cal beneficiaries enrolled in the Medi-Cal managed care plan.
(e) The department shall post on its Internet Web site all of the following information:
(1) The aggregate MLR of all Medi-Cal managed care plans.
(2) The MLR of each Medi-Cal managed care plan.
(3) Any required remittances owed by each Medi-Cal managed care plan.
~~(d)~~

(f) For purposes of this section, the following definitions apply:

(1) “Medical loss ratio (MLR) reporting year” shall have the same meaning as that term is defined in Section 438.8 of Title 42 of the Code of Federal Regulations.

(2) (A) “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries pursuant to any of the following:

(i) Article 2.7 (commencing with Section 14087.3).

(ii) Article 2.8 (commencing with Section 14087.5).

(iii) Article 2.81 (commencing with Section 14087.96).

~~(iv)Article 2.9 (commencing with Section 14088).~~
~~(v)~~

(iv) Article 2.91 (commencing with Section 14089).

~~(vi)~~

(v) Article 1 (commencing with Section 14200) of Chapter 8.

~~(vii)~~

(vi) Article 7 (commencing with Section 14490) of Chapter 8.

(B) ~~“Medi-Cal~~ For purposes of the remittance requirement described in subdivision (c), “Medi-Cal managed care plan” does not include dental managed care plans that contract with the department pursuant to this chapter or Chapter 8 (commencing with Section 14200).

~~(e)~~

(g) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department, without taking any further regulatory action, shall implement, interpret, or make specific this section by means of all-county letters, plan letters, plan or provider bulletins, or similar instructions until the time any regulations are adopted. The department shall adopt regulations by July 1, 2019, in accordance with the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. Commencing July 1, 2018, the department shall provide a status report to the Legislature on a semiannual basis, in compliance with Section 9795 of the Government Code, until regulations are adopted.

14197.3.
(a) A Medi-Cal managed care plan shall give a beneficiary timely and adequate notice of an adverse benefit determination in writing consistent with the requirements in Sections 438.404, 438.408, and 438.10 of Title 42 of the Code of Federal Regulations. For purposes of this subdivision, “adverse benefit determination” means either of the following:
(1) Any action described in Section 10950.
(2) Any health care service eligible for coverage and payment under a Medi-Cal managed care plan contract that has been denied, modified, or delayed by a decision of the Medi-Cal managed care plan, or by one of its contracting providers.
(b) Except as provided in subdivision (c), a Medi-Cal managed care plan shall resolve an appeal no more than 30 calendar days from the day the Medi-Cal managed care plan receives the appeal.
(c) A Medi-Cal managed care plan shall resolve an expedited appeal no longer than 72 hours after the Medi-Cal managed care plan receives the appeal. A Medi-Cal managed care plan shall establish and maintain an expedited review process for a beneficiary or the beneficiary’s provider to request an expedited resolution of an appeal based on either of the following circumstances:
(1) If the Medi-Cal managed care plan determines, for a request from the beneficiary, or the provider indicates, in making the request on the beneficiary’s behalf or supporting the beneficiary’s request, that taking the time for a standard resolution under the timeframe described in subdivision (b) could seriously jeopardize the beneficiary’s life, physical or mental health, or ability to attain, or regain, maximum function.
(2) When the beneficiary’s condition is such that the beneficiary faces an imminent and serious threat to his or her health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the timeframe described in subdivision (b) would be detrimental to the beneficiary’s life or health or could jeopardize the beneficiary’s ability to regain maximum function.
(d) For purposes of this section, “Medi-Cal managed care plan” means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries pursuant to any of the following:
(1) Article 2.7 (commencing with Section 14087.3), including dental managed care programs developed pursuant to Section 14087.46.
(2) Article 2.8 (commencing with Section 14087.5).
(3) Article 2.81 (commencing with Section 14087.96).
(4) Article 2.9 (commencing with Section 14088).
(5) Article 2.91 (commencing with Section 14089).
(6) Chapter 8 (commencing with Section 14200), including dental managed care plans.
(7) Chapter 8.9 (commencing with Section 14700).
(8) A county Drug Medi-Cal organized delivery system authorized under the California Medi-Cal 2020 Demonstration, Number 11-W-00193/9, as approved by the federal Centers for Medicare and Medicaid Services and described in the Special Terms and Conditions. For purposes of this subdivision, “Special Terms and Conditions” shall have the same meaning as set forth in subdivision (o) of Section 14184.10.

14197.2.14197.4.

(a) The Legislature finds and declares all of the following:

(1) Designated public ~~hospitals~~ hospital systems play an essential role in the Medi-Cal program, providing high-quality care to a disproportionate number of low-income Medi-Cal and uninsured populations in the state. Because Medi-Cal covers approximately one-third of the state’s population, the strength of these essential public health care systems is of critical importance to the health and welfare of the people of California.

(2) Designated public hospital systems provide comprehensive health care services to low-income patients and ~~life-saving~~ lifesaving trauma, burn, and disaster-response services for entire communities, and train the next generation of doctors and other health care professionals, such as nurses and paramedical professionals, who are critical to new team-based care models that achieve more efficient and patient-centered care.

(3) The Legislature intends to continue to provide levels of support for designated public hospital systems in light of their reliance on Medi-Cal funding to provide quality care to everyone, regardless of insurance status, ability to pay, or other circumstance, the significant proportion of Medi-Cal services provided under managed care by these public hospital systems, and new federal requirements related to Medicaid managed care.

(4) It is the intent of the Legislature that Medi-Cal managed care plans and designated public hospital systems that may enter into contracts to provide services for Medi-Cal beneficiaries shall in good faith negotiate for, and implement, contract rates, the provision and arrangement of services and member assignment that are sufficient to ensure continued participation by Medi-Cal managed care plans and designated public hospital systems and to maintain access to services for Medi-Cal managed care beneficiaries and other low-income patients.

(5) It is the intent of the Legislature that, in order to ensure both the financial viability of Medi-Cal managed care plans and support the participation of designated public hospital systems in Medi-Cal managed care, the department shall provide Medi-Cal managed care plans timely notice of and actuarially sound rates reflecting the enhanced contract services payments implemented to comply with the new federal requirements relating to Medicaid managed care.

(b) Commencing with the 2017–18 state fiscal year, and for each state fiscal year thereafter, and notwithstanding any other law, the department shall require each Medi-Cal managed care plan to enhance contract services payments to the designated public hospital systems ~~by a uniform percentage~~ by amounts determined under a uniform methodology that meets federal requirements and as described in this subdivision. The enhancements may be determined and applied as distributions from directed enhanced payment pools, as a uniform percentage increase, or other basis, and may incorporate acuity adjustments or other factors.

(1) ~~The applicable percentage for purposes of the directed payments shall be uniformly applied across all~~ The directed payments may separately account for inpatient hospital services and noninpatient hospital services and shall be developed and applied separately for and uniformly within each of the following classes of designated public hospital systems:

(A) Designated public hospital systems owned and operated by the University of California.

(B) Designated public hospital systems that hold a risk-based per member per month capitated contract with one or more Medi-Cal managed care plans that includes capitation for the provision of inpatient hospital services.
~~(B)~~

(C) Designated public hospital systems not identified in subparagraph (A) or (B) that include a designated public hospital with a level 1 or level 2 trauma designation.

~~(C)~~

(D) Designated public hospital systems not identified in subparagraph ~~(A) or (B).~~ (A), (B), or (C).

(2) To the extent permitted by federal law and to meet the objectives identified in subdivisions (a) and (d), the department shall develop and implement the directed payment program in consultation with designated public hospital systems or Medi-Cal managed care plans, or both, as follows:
~~(2)~~

(A) The department, in consultation with the designated public hospital systems, shall annually determine ~~the applicable uniform percentages for each class identified in paragraph (1)~~ on a prospective basis the aggregate amount of payments that will be directed to each class of designated public hospitals systems pursuant to this subdivision and the classification of each designated public hospital system. Once the department determines the classification for each designated public hospital system for a particular state fiscal year, that classification shall not be eligible to change until no sooner than the subsequent state fiscal year. To For state fiscal years following the 2017–18 state fiscal year, the aggregate amounts of payments to a class of designated public hospital systems shall include an increase for the rate of inflation to the aggregate amounts available during the prior state fiscal year, subject to any modifications to account for changes in the classification of designated public hospital systems, changes required by federal law, changes to account for the size of the payments made pursuant to subdivision (c), or other material changes.

(B) The department, in consultation with the designated public hospital systems, shall develop the methodologies for determining the required directed payments for each designated public hospital system.

(C) To the extent necessary to meet the objectives identified in subdivisions (a) and (d) or to comply with federal requirements, the department may, in consultation with the designated public hospital systems, adjust or modify ~~the applicable percentages or the classifications. The~~ the amounts of the aggregate directed payments for any class of designated public hospital systems, the method for determining the distribution of the directed payment amounts within any class of designated public hospital systems, and may modify, consolidate, or subdivide the classes of designated public hospital systems described in paragraph (1).

(D) After the aggregate amounts and the distribution methodology of directed payments for each designated public hospital system class have been established, the department shall consult with the designated public hospital systems and each affected Medi-Cal managed care plan with regard to the impact on the Medi-Cal managed care plan capitation ratesetting process and implementation of the directed payment ~~requirements once these payment levels have been established.~~ requirements, including applicable interim and final payment processes, to ensure that 100 percent of the aggregate amounts are paid to the applicable designated public hospital system.

(3) The required directed payment amounts shall be determined by multiplying the applicable percentage developed pursuant to paragraph (2) by the total amount of contract services payments. Performance-based incentive payments, amounts earned pursuant to the quality incentive program described in subdivision (c), and amounts paid pursuant to Sections 14301.4 and 14301.5 shall not be subject to the required directed payments. Nothing in this subdivision shall prevent a Medi-Cal managed care plan from making additional payments to a designated public hospital system in amounts exceeding the directed payment amounts required under this subdivision, or, at the sole option and request of a designated public hospital system, from working with the designated public hospital system to develop risk-sharing arrangements consistent with the intent and purposes of this subdivision. paid by the Medi-Cal managed care plans as adjustments to the total amounts of contract services payments otherwise paid to the designated public hospital systems in accordance with the department’s directions and methodologies established pursuant to this subdivision.

(4) The directed payments required under this subdivision shall be implemented and documented by each Medi-Cal managed care plan and designated public hospital system in accordance with all of the following parameters and any guidance issued by the department:

(A) A Medi-Cal managed care plan and the designated public hospital systems shall determine the manner, timing, and amount of payment for contract services, including through fee-for-service, capitation, or other permissible manner. The rates of payment for contract services agreed upon by the Medi-Cal managed care plan and the designated public hospital system shall be established and documented without regard to the directed payments and quality incentive payments required by this section.

(B)A Medi-Cal managed care plan and a designated public hospital system shall, for the directed payment amounts determined pursuant to paragraph (3), determine the manner of their distribution, including the frequency and amount of each distribution through arrangements that may include, but are not limited to, a per-claim enhancement, per-capitation enhancement, monthly or quarterly lump-sum enhancement, or other permissible arrangement.
~~(C)~~

(B) The required directed payment enhancements provided pursuant to this subdivision shall not supplant amounts that would otherwise be payable by a Medi-Cal managed care plan to a designated public hospital system for an applicable state fiscal ~~year.~~ year, and the Medi-Cal managed care plan shall not impose a fee or retention amount that would result in a direct or indirect reduction to the amounts required under this subdivision.

(D)A Medi-Cal managed care plan shall not terminate a contract with a designated public hospital system for the purpose of circumventing the directed payment obligations under this subdivision.
(C) A contract between a Medi-Cal managed care plan and a designated public hospital system shall not be terminated by either party for the specific purpose of circumventing or otherwise impacting the payment obligations implemented pursuant to this subdivision.
~~(E)~~

(D) In the event a Medi-Cal managed care plan subcontracts or ~~otherwise~~ delegates responsibility to a separate entity for either or both the arrangement or payment of services, the Medi-Cal managed care plan shall ~~ensure that~~ be responsible for paying the designated public hospital system ~~receives~~ the directed payment ~~enhancements~~ described in this subdivision with respect to the services it provides that are covered by that arrangement, regardless of whether the Medi-Cal managed care plan subcontracted or delegated responsibility for payment of the directed payment amounts to the subcontracted or delegated entity, and shall be liable for any unpaid amounts. A Medi-Cal managed care plan shall require reporting of amounts paid or payable pursuant to that subcontracted or delegated arrangements as necessary to calculate the amount of those directed payment enhancements. arrangement. The designated public hospital system and the applicable subcontractor or delegated entity shall together work with the Medi-Cal managed care plan to provide the information necessary to facilitate the Medi-Cal managed care plan’s compliance with the payments requirements under this subdivision.

(5) Each year, a Medi-Cal managed care plan shall provide to the department, at the times and in the form and manner specified by the department, an accounting of amounts paid or payable to the designated public hospital systems it contracts with, including both contract rates and the directed payments, to demonstrate compliance with this subdivision. To the extent the department ~~determines, in its sole discretion,~~ determines that a Medi-Cal managed care plan is not in compliance with the requirements of this subdivision, or is otherwise circumventing the purposes thereof, to the material detriment of an applicable designated public hospital ~~system , and, independent of any remedy available to the designated public hospital system, the department may~~ system, the department may, after providing notice of its determination to the affected Medi-Cal managed care plan and allowing a reasonable period for the Medi-Cal managed care plan to cure the specified deficiencies, reduce the default assignment into the Medi-Cal managed care plan with respect to all Medi-Cal managed care beneficiaries by up to 25 ~~percent,~~ percent in the applicable county, so long as the other Medi-Cal managed care plan or Medi-Cal managed care plans in the applicable county have the capacity to receive the additional default membership. ~~The department’s determination, whether to exercise discretion under this paragraph, shall not be subject to judicial review.~~ Nothing in this paragraph shall be construed to preclude or otherwise limit the right of any Medi-Cal managed care plan or designated public hospital system to pursue a breach of contract ~~action~~ action, or any other available remedy as appropriate, in connection with the requirements of this subdivision.

(6) Capitation rates paid by the department to a Medi-Cal managed care plan shall be actuarially sound and account for the Medi-Cal managed care plan’s obligation to pay the directed payments to designated public hospital systems in accordance with this subdivision. The department may require Medi-Cal managed care plans and the designated public hospital systems to submit information regarding contract rates and expected or actual utilization of services, at the times and in the form and manner specified by the department. To the extent consistent with federal law and actuarial standards of practice, the department shall utilize the most recently available ~~data,~~ data and reasonable projections, as determined by the department, when accounting for the directed payments required under this subdivision, and shall account for additional clinics, practices, or other health care providers added to a designated public hospital system. In implementing the requirements of this section, including the Medi-Cal managed care plan ratesetting process, the department may additionally account for material adjustments, as appropriate under federal law and actuarial standards, as described above, and as determined by the department, to contracts entered into between a Medi-Cal managed care plan or applicable subcontracted or delegated entity and a designated public hospital system.

(c) Commencing with the 2017–18 state fiscal year, and for each state fiscal year thereafter, the department, in consultation with the designated public hospital systems and ~~each~~ applicable Medi-Cal managed care ~~plan,~~ plans, shall establish a program under which a designated public hospital system may earn performance-based quality incentive payments from the Medi-Cal managed care plan they contract with in accordance with this subdivision.

(1) Payments shall be earned by each designated public hospital system based on its performance in achieving identified targets for quality of care.

(A) The department, in consultation with the designated public hospital systems and ~~each~~ applicable Medi-Cal managed care ~~plan,~~ plans, shall establish and provide a method for updating uniform performance measures for the performance-based quality incentive payment program and parameters for the designated public hospital systems to select the applicable measures. The performance measures shall advance at least one goal identified in the state’s Medicaid quality strategy. Measures shall not duplicate measures utilized in the PRIME program established pursuant to Section 14184.50.

(B) Each designated public hospital system shall submit reports to the department containing information required to evaluate its performance on all applicable performance measures, at the times and in the form and manner specified by the department. A Medi-Cal managed care plan shall assist a designated public hospital system in collecting information necessary for these reports.

(2) The department, in consultation with each designated public hospital system, shall determine a maximum amount that each class identified in paragraph (1) of subdivision (b) may earn in quality incentive payments for the state fiscal year.

(3) The department shall calculate the amount earned by each designated public hospital system based on its performance score established pursuant to paragraph (1).

(A) This amount shall be paid to the designated public hospital system by each of its contracted Medi-Cal managed care plans. If a designated public hospital system contracts with multiple Medi-Cal managed care plans, the department shall identify each Medi-Cal managed care plan’s proportionate amount of the designated public hospital system’s payment. The timing and amount of the distributions and any related reporting requirements for interim payments shall be established and agreed to by the designated public hospital system and each of the applicable Medi-Cal managed care plans.

~~(B)A Medi-Cal managed care plan shall not terminate a contract with a designated public hospital system for the purpose of circumventing the payment obligations under this subdivision.~~
(B) A contract between a Medi-Cal managed care plan and designated public hospital system shall not be terminated by either party for the specific purpose of circumventing or otherwise impacting the payment obligations implemented pursuant to this subdivision.

(C) Each Medi-Cal managed care plan shall be responsible for payment of the quality incentive payments described in this ~~subdivision.~~ subdivision, subject to funding by the department pursuant to paragraph (4).

(4)Nothing in this subdivision shall be construed to replace or otherwise prevent the continuation of prior quality incentive or pay-for-performance payment mechanisms or the establishment of new payment programs by any Medi-Cal managed care plan and their contracted designated public hospital systems.
~~(5)~~

(4) The department shall provide appropriate funding to each Medi-Cal managed care plan, to account for and to enable them to make the quality incentive payments described in this subdivision, through the incorporation into actuarially sound capitation rates or any other federally permissible method. The amounts designated by the department for the quality incentive payments made pursuant to this subdivision shall be reserved for the purposes of the performance-based quality incentive payment program.

(d) (1) In determining the ~~uniform percentages~~ amount of the required directed payments described in paragraph (2) of subdivision (b), and the aggregate size of the quality incentive payment program described in paragraph (2) of subdivision (c), the department shall consult with designated public hospital systems to establish levels for these payments that, in combination with one another, are projected to result in aggregate payments that will advance the quality and access objectives reflected in prior payment enhancement mechanisms for designated public hospital systems. To the extent necessary to meet these objectives or to comply with any federal requirements, the department may, in consultation with the designated public hospital systems, adjust or modify either or both the ~~applicable percentagesor~~ directed payments or quality incentive payment program. Once these payment levels are established, the department shall consult with the designated public hospital systems and the Medi-Cal managed care plans in the development of the Medi-Cal managed care rates needed for the directed payments and the structure of the quality incentive payment program.

(2) For the state fiscal year 2017–18, the department shall provide written notice of the directed payment and quality incentive payment amounts established pursuant to this section. For each annual determination thereafter, the department shall provide written notice at least 90 days in advance to each affected Medi-Cal managed care plan and designated public hospital system of the applicable Medi-Cal managed care plan’s directed payment amounts, the classification of designated public hospital systems, quality incentive payment amounts, and any other information deemed necessary for the Medi-Cal managed care plan to fulfill its payment obligations under subdivisions (b) and (c). If the modification of either or both directed payment amounts or quality incentive payment amounts is necessary after receipt of the written notification, the department shall notify the Medi-Cal managed care plan and designated public hospital system in writing of the revised amounts prior to implementation of the revised amounts.
(3) A Medi-Cal managed care plan’s obligation to pay the directed payments and quality incentive payments required under subdivisions (b) and (c) to a designated public hospital shall be contingent upon receipt of notice from the department that the department is in receipt of the necessary federal approvals pursuant to paragraph (1) of subdivision (g).

(e) The provisions of paragraphs ~~(3) and (4)~~ (3), (4), and (5) of subdivision (a), ~~and~~ paragraphs (3) and (4) of subdivisions (b) and ~~(c)~~ (c), and paragraph (3) of subdivision (d) shall be deemed incorporated into each contract between a designated public hospital system and a Medi-Cal managed care plan, and its subcontractor or designee, as applicable, and any claim for breach of those provisions may be brought by the designated public hospital system or the Medi-Cal managed care plan directly in a court of competent jurisdiction.

(f) (1) The nonfederal share of the portion of the capitation rates specifically associated with directed payments to designated public hospital systems required under subdivision (b) and for the quality incentive payments established pursuant to subdivision (c) may consist of voluntary intergovernmental transfers of funds provided by designated public hospitals and their affiliated governmental entities, or other public entities, pursuant to Section 14164. Upon providing any intergovernmental transfer of funds, each transferring entity shall certify that the transferred funds qualify for federal financial participation pursuant to applicable federal Medicaid laws, and in the form and manner specified by the department. Any intergovernmental transfer of funds made pursuant to this section shall be considered voluntary for purposes of all federal laws. Notwithstanding any other law, the department shall not assess the fee described in subdivision (d) of Section 14301.4 or any other similar fee.

(2) When applicable for voluntary intergovernmental ~~transfers,~~ transfers described in paragraph (1), the department, in consultation with the designated public hospital systems, shall develop and maintain a protocol to determine the available funding for the nonfederal share associated with payments for each ~~public entity’s intergovernmental transfer amount in an~~ applicable state fiscal year ~~for purposes of funding the nonfederal share associated with payments~~ pursuant to this section. The protocol developed and maintained pursuant to this paragraph shall account for any applicable contributions made by public entities to the nonfederal share of Medi-Cal managed care expenditures, including, but not limited to, contributions previously made by those specific public entities for the 2015–16 state fiscal year pursuant to Section 14182.15 or ~~14199.2.~~ 14199.2, but excluding any contributions made pursuant to Sections 14301.4 and 14301.5. Nothing in this section shall be construed to limit or otherwise alter any existing authority of the department to accept intergovernmental transfers for purposes of funding the nonfederal share of Medi-Cal managed care expenditures.

(g) (1) This section shall be implemented only to the extent that any necessary federal approvals are obtained and federal financial participation is available and is not otherwise jeopardized.

(2) For any state fiscal year in which this section is implemented, in whole or in part, and notwithstanding any other law, the department or a Medi-Cal managed care plan shall not be required to make any payment ~~to a Medi-Cal managed care plan~~ pursuant to Section 14182.15, 14199.2, or 14301.5. Nothing in this section shall be construed to preclude or otherwise impose limitations on payment amounts or arrangements that may be negotiated and agreed to between the relevant parties, including, but not limited to, the continuation of existing or the creation of new quality incentive or pay-for-performance programs in addition to the quality incentive payment program described in subdivision (c) and contract services payments that may be in excess of the directed payment amounts required under subdivision (b).

(h) (1) The department shall seek any necessary federal approvals for the directed payments and the quality incentive payments set forth in this section.

(2) The department shall consult with the designated public hospital systems with regard to the development ~~and implementation~~ of the directed payment levels and the size of the quality incentive payments established pursuant to this ~~section.~~ section, and shall consult with both the designated public hospital systems and Medi-Cal managed care plans with regards to the implementation of payments under this section.

(3) The director, after consultation with the designated public hospital ~~systems,~~ systems and Medi-Cal managed care plans, may modify the requirements set forth in this section to the extent necessary to meet federal requirements or to maximize available federal financial participation. In the event federal approval is only available with significant limitations or modifications, or in the event of changes to the federal Medicaid program that result in a loss of funding currently available to the designated public hospital systems, the department shall consult with the designated public hospitals and Medi-Cal managed care plans to consider alternative methodologies.

(i) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific this section by means of all-county letters, plan letters, provider bulletins, or other similar instructions, without taking regulatory action. The department shall make use of appropriate processes to ensure that affected designated public hospital systems and Medi-Cal managed care plans are timely informed of, and have access to, applicable guidance issued pursuant to this authority, and that this guidance remains publicly available until all payments made pursuant to this section are finalized.

(j) (1) This section shall cease to be operative on the first day of the state fiscal year beginning on or after the date the department determines, after consultation with the designated public hospital systems, that implementation of this section is no longer financially and programmatically supportive of the Medi-Cal program. This determination shall be based solely on both of the following factors:
(A) The projected amount of nonfederal share funds available is insufficient to support implementation of this section in the subject state fiscal year.
(B) The degree to which the payment arrangements will no longer materially advance the goals and objectives reflected in this section and in the department’s managed care quality strategy drafted and implemented pursuant to Section 438.340 of Title 42 of the Code of Federal Regulations in the subject state fiscal year.
(2) In making its determination, the department shall consider all reasonable options for mitigating the circumstances set forth in paragraph (1), including, but not limited to, options for curing projected funding shortfalls and options for program revisions and strategy updates to better coordinate payment requirements with the goals and objectives of this section and the managed care quality strategy.
(3) The department shall post notice of the determination on its Internet Web site, and shall provide written notice of the determination to the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislative Counsel.
(k) The department, in consultation with the designated public hospital systems and the Medi-Cal managed care plans, shall provide the Legislature with the evaluation plan required in Section 438.6(c)(2)(I)(D) of Title 42 of the Code of Federal Regulations to measure the degree to which the payments authorized under this section advance at least one of the goals and objectives of the department’s managed care quality strategy. The department, in consultation with the designated public hospital systems and the Medi-Cal managed care plans, shall report to the Legislature the results of this evaluation no earlier than January 1, 2021.
~~(j)~~

(l) For purposes of this section, the following definitions apply:

(1) “Contract services payments” means the amount paid or payable to a designated public hospital system, including amounts paid or payable under fee-for-service, ~~capitation,~~ capitation amounts prior to any adjustments for service payment withholds or deductions, or payments made on any other basis, under a network provider contract with a Medi-Cal managed care plan for medically necessary and covered services, drugs, supplies or other items provided to a an eligible Medi-Cal beneficiary enrolled in the Medi-Cal managed care ~~plan.~~ plan, excluding services provided to individuals who are dually eligible for both the Medicare and Medi-Cal programs. Contract services includes all covered services, drugs, supplies, or other items the designated public hospital system provides, or is responsible for providing, or arranging or paying for, pursuant to a network provider contract entered into with a Medi-Cal managed care plan. In the event a Medi-Cal managed care plan subcontracts or ~~otherwise~~ delegates responsibility to a separate entity for either or both the arrangement or payment of services, “contract services payments” also include amounts paid or payable for the services provided by, or otherwise the responsibility of, the designated public hospital system that are within the scope of services of the subcontracted or delegated arrangement so long as the designated public hospital system holds a network provider contract with the primary Medi-Cal managed care plan.

(2) “Designated public hospital” shall have the same meaning as set forth in subdivision (f) of Section 14184.10.

(3) “Designated public hospital system” means a designated public hospital and its affiliated government entity clinics, practices, and other health care providers, including the respective affiliated hospital authority and county government entities described in Chapter 5 (commencing with Section 101850) and Chapter 5.5 (commencing with Section 101852), of Part 4 of Division 101 of the Health and Safety Code.

(4) (A) “Medi-Cal managed care plan” means an applicable organization or entity that enters into a contract with the department pursuant to any of the following:

(i) Article 2.7 (commencing with Section 14087.3).

(ii) Article 2.8 (commencing with Section 14087.5).

(iii) Article 2.81 (commencing with Section 14087.96).

(iv) Article 2.91 (commencing with Section 14089).

(v) Chapter 8 (commencing with Section 14200).

(B) ~~“Medi-cal~~ “Medi-Cal managed care plan” does not include any of the following:

(i) A mental health plan contracting to provide mental health care for Medi-Cal beneficiaries pursuant to Chapter 8.9 (commencing with Section 14700).

(ii) A plan not covering inpatient services, such as primary care case management plans, operating pursuant to Section 14088.85.

(iii) A Program of All-Inclusive Care for the Elderly organization operating pursuant to Chapter 8.75 (commencing with Section 14591).

(5) “Network provider” shall have the same meaning as that term is defined in Section 438.2 of Title 42 of the Code of Federal Regulations, and does not include arrangements where a designated public hospital system provides or arranges for services under an agreement intended to cover a specific range of services for a single identified patient for a single inpatient admission, including any directly related followup care, outpatient visit or service, or other similar patient specific nonnetwork contractual arrangement, such as a letter of agreement or single case agreement, with a Medi-Cal managed care plan or subcontractor of a Medi-Cal managed care plan.

SEC. 7.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B 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 XIII B of the California Constitution.

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