36-2904

36-2904. Prepaid capitation coverage;
requirements; long-term care; dispute resolution; award of
contracts; notification; report

A. The administration may expend public funds appropriated for the purposes of this
article and shall execute prepaid capitated health services contracts, pursuant to
section 36-2906, with group disability insurers, hospital and medical service
corporations, health care services organizations and any other appropriate public or
private persons, including county-owned and operated facilities, for health and medical
services to be provided under contract with contractors. The administration may assign
liability for eligible persons and members through contractual agreements with
contractors. If there is an insufficient number of qualified bids for prepaid capitated
health services contracts for the provision of hospitalization and medical care within a
county, the director may:

1. Execute discount advance payment contracts, pursuant to section 36-2906 and
subject to section 36-2903.01, for hospital services.

2. Execute capped fee-for-service contracts for health and medical services, other
than hospital services. Any capped fee-for-service contract shall provide for
reimbursement at a level of not to exceed a capped fee-for-service schedule adopted by
the administration.

B. During any period in which services are needed and no contract exists, the
director may do either of the following:

1. Pay noncontracting providers for health and medical services, other than
hospital services, on a capped fee-for-service basis for members and persons who are
determined eligible. However, the state shall not pay any amount for services that
exceeds a maximum amount set forth in a capped fee-for-service schedule adopted by the
administration.

2. Pay a hospital subject to the reimbursement level limitation prescribed in
section 36-2903.01.

If health and medical services are provided in the absence of a contract, the director
shall continue to attempt to procure by the bid process as provided in section 36-2906
contracts for such services as specified in this subsection.

C. Payments to contractors shall be made monthly or quarterly and may be subject to
contract provisions requiring the retention of a specified percentage of the payment by
the director, a reserve fund or other contract provisions by which adjustments to the
payments are made based on utilization efficiency, including incentives for maintaining
quality care and minimizing unnecessary inpatient services. Reserve funds withheld from
contractors shall be distributed to contractors who meet performance standards
established by the director. Any reserve fund established pursuant to this subsection
shall be established as a separate account within the Arizona health care cost
containment system fund.

D. Except as prescribed in subsection E of this section, a member defined as
eligible pursuant to section 36-2901, paragraph 6, subdivision (a) may select, to the
extent practicable as determined by the administration, from among the available
contractors of hospitalization and medical care and may select a primary care physician
or primary care practitioner from among the primary care physicians and primary care
practitioners participating in the contract in which the member is enrolled. The
administration shall provide reimbursement only to entities that have a provider
agreement with the administration and that have agreed to the contractual requirements of
that agreement. Except as provided in sections 36-2908 and 36-2909, the system shall only
provide reimbursement for any health or medical services or costs of related services
provided by or under referral from the primary care physician or primary care
practitioner participating in the contract in which the member is enrolled. The director
shall establish requirements as to the minimum time period that a member is assigned to
specific contractors in the system.

E. For a member defined as eligible pursuant to section 36-2901, paragraph 6,
subdivision (a), item (v) the director shall enroll the member with an available
contractor located in the geographic area of the member's residence. The member may
select a primary care physician or primary care practitioner from among the primary care
physicians or primary care practitioners participating in the contract in which the
member is enrolled. The system shall only provide reimbursement for health or medical
services or costs of related services provided by or under referral from a primary care
physician or primary care practitioner participating in the contract in which the member
is enrolled. The director shall establish requirements as to the minimum time period that
a member is assigned to specific contractors in the system.

F. If a person who has been determined eligible but who has not yet enrolled in the
system receives emergency services, the director shall provide by rule for the enrollment
of the person on a priority basis. If a person requires system covered services on or
after the date the person is determined eligible for the system but before the date of
enrollment, the person is entitled to receive these services in accordance with rules
adopted by the director, and the administration shall pay for the services pursuant to
section 36-2903.01 or, as specified in contract, with the contractor pursuant to the
subcontracted rate or this section.

G. The administration shall not pay claims for system covered services that are
initially submitted more than six months after the date of the service for which payment
is claimed or after the date that eligibility is posted, whichever date is later, or that
are submitted as clean claims more than twelve months after the date of service for which
payment is claimed or after the date that eligibility is posted, whichever date is later,
except for claims submitted for reinsurance pursuant to section 36-2906, subsection C,
paragraph 6. The administration shall not pay claims for system covered services that are
submitted by contractors for reinsurance after the time period specified in the contract.
The director may adopt rules or require contractual provisions that prescribe
requirements and time limits for submittal of and payment for those claims.
Notwithstanding any other provision of this article, if a claim that gives rise to a
contractor's claim for reinsurance or deferred liability is the subject of an
administrative grievance or appeal proceeding or other legal action, the contractor shall
have at least sixty days after an ultimate decision is rendered to submit a claim for
reinsurance or deferred liability. Contractors that contract with the administration
pursuant to subsection A of this section shall not pay claims for system covered services
that are initially submitted more than six months after the date of the service for which
payment is claimed or after the date that eligibility is posted, whichever date is later,
or that are submitted as clean claims more than twelve months after the date of the
service for which payment is claimed or after the date that eligibility is posted,
whichever date is later. For the purposes of this subsection:

1. "Clean claims" means claims that may be processed without obtaining additional
information from the subcontracted provider of care, from a noncontracting provider or
from a third party but does not include claims under investigation for fraud or abuse or
claims under review for medical necessity.

2. "Date of service" for a hospital inpatient means the date of discharge of the
patient.

3. "Submitted" means the date the claim is received by the administration or the
prepaid capitated provider, whichever is applicable, as established by the date stamp on
the face of the document or other record of receipt.

H. In any county having a population of five hundred thousand or fewer persons, a
hospital that executes a subcontract other than a capitation contract with a contractor
for the provision of hospital and medical services pursuant to this article shall offer a
subcontract to any other contractor providing services to that portion of the county and
to any other person that plans to become a contractor in that portion of the county. If
such a hospital executes a subcontract other than a capitation contract with a contractor
for the provision of hospital and medical services pursuant to this article, the hospital
shall adopt uniform criteria to govern the reimbursement levels paid by all contractors
with whom the hospital executes such a subcontract. Reimbursement levels offered by
hospitals to contractors pursuant to this subsection may vary among contractors only as a
result of the number of bed days purchased by the contractors, the amount of financial
deposit required by the hospital, if any, or the schedule of performance discounts
offered by the hospital to the contractor for timely payment of claims.

I. This subsection applies to inpatient hospital admissions and to outpatient
hospital services on and after March 1, 1993. The director may negotiate at any time with
a hospital on behalf of a contractor for services provided pursuant to this article. If a
contractor negotiates with a hospital for services provided pursuant to this article, the
following procedures apply:

1. The director shall require any contractor to reimburse hospitals for services
provided under this article based on reimbursement levels that do not in the aggregate
exceed those established pursuant to section 36-2903.01 and under terms on which the
contractor and the hospital agree. However, a hospital and a contractor may agree on a
different payment methodology than the methodology prescribed by the director pursuant to
section 36-2903.01. The director by rule shall prescribe:

(a) The time limits for any negotiation between the contractor and the hospital.

(b) The ability of the director to review and approve or disapprove the
reimbursement levels and terms agreed on by the contractor and the hospital.

(c) That if a contractor and a hospital do not agree on reimbursement levels and
terms as required by this subsection, the reimbursement levels established pursuant to
section 36-2903.01 apply.

(d) That, except if submitted under an electronic claims submission system, a
hospital bill is considered received for purposes of subdivision (f) on initial receipt
of the legible, error-free claim form by the contractor if the claim includes the
following error-free documentation in legible form:

(i) An admission face sheet.

(ii) An itemized statement.

(iii) An admission history and physical.

(iv) A discharge summary or an interim summary if the claim is split.

(v) An emergency record, if admission was through the emergency room.

(vi) Operative reports, if applicable.

(vii) A labor and delivery room report, if applicable.

(e) That payment received by a hospital from a contractor is considered payment by
the contractor of the contractor's liability for the hospital bill. A hospital may
collect any unpaid portion of its bill from other third party payors or in situations
covered by title 33, chapter 7, article 3.

(f) That a contractor shall pay for services rendered on and after October 1, 1997
under any reimbursement level according to paragraph 1 of this subsection subject to the
following:

(i) If the hospital's bill is paid within thirty days of the date the bill was
received, the contractor shall pay ninety-nine per cent of the rate.

(ii) If the hospital's bill is paid after thirty days but within sixty days of the
date the bill was received, the contractor shall pay one hundred per cent of the rate.

(iii) If the hospital's bill is paid any time after sixty days of the date the bill
was received, the contractor shall pay one hundred per cent of the rate plus a fee of one
per cent per month for each month or portion of a month following the sixtieth day of
receipt of the bill until the date of payment.

2. In any county having a population of five hundred thousand or fewer persons, a
hospital that executes a subcontract other than a capitation contract with a provider for
the provision of hospital and medical services pursuant to this article shall offer a
subcontract to any other provider providing services to that portion of the county and to
any other person that plans to become a provider in that portion of the county. If a
hospital executes a subcontract other than a capitation contract with a provider for the
provision of hospital and medical services pursuant to this article, the hospital shall
adopt uniform criteria to govern the reimbursement levels paid by all providers with whom
the hospital executes a subcontract.

J. If there is an insufficient number of, or an inadequate member capacity in,
contracts awarded to contractors, the director, in order to deliver covered services to
members enrolled or expected to be enrolled in the system within a county, may negotiate
and award, without bid, a contract with a health care services organization holding a
certificate of authority pursuant to title 20, chapter 4, article 9. The director shall
require a health care services organization contracting under this subsection to comply
with section 36-2906.01. The term of the contract shall not extend beyond the next bid
and contract award process as provided in section 36-2906 and shall be no greater than
capitation rates paid to contractors in the same county or counties pursuant to section
36-2906. Contracts awarded pursuant to this subsection are exempt from the requirements
of title 41, chapter 23.

K. A contractor may require that a subcontracting or noncontracting provider shall
be paid for covered services, other than hospital services, according to the capped
fee-for-service schedule adopted by the director pursuant to subsection A, paragraph 2 of
this section or subsection B, paragraph 1 of this section or at lower rates as may be
negotiated by the contractor.

L. The director shall require any contractor to have a plan to notify members of
reproductive age either directly or through the parent or legal guardian, whichever is
most appropriate, of the specific covered family planning services available to them and
a plan to deliver those services to members who request them. The director shall ensure
that these plans include provisions for written notification, other than the member
handbook, and verbal notification during a member's visit with the member's primary care
physician or primary care practitioner.

M. The director shall adopt a plan to notify members of reproductive age who
receive care from a contractor who elects not to provide family planning services of the
specific covered family planning services available to them and to provide for the
delivery of those services to members who request them. Notification may be directly to
the member, or through the parent or legal guardian, whichever is most appropriate. The
director shall ensure that the plan includes provisions for written notification, other
than the member handbook, and verbal notification during a member's visit with the
member's primary care physician or primary care practitioner.

N. The director shall prepare a report that represents a statistically valid sample
and that indicates the number of children age two by contractor who received the
immunizations recommended by the national centers for disease control and prevention
while enrolled as members. The report shall indicate each type of immunization and the
number and percentage of enrolled children in the sample age two who received each type
of immunization. The report shall be done by contract year and shall be delivered to the
governor, the president of the senate and the speaker of the house of representatives no
later than April 1, 2004 and every second year thereafter.

O. If the administration implements an electronic claims submission system it may
adopt procedures pursuant to subsection I, paragraph 1 of this section requiring
documentation different than prescribed under subsection I, paragraph 1, subdivision (d)
of this section.