14300. The department shall publish a notice of intent to contract
at least 60 days prior to the effective date of any initial or
renewed contract. The notice shall appear in local newspapers
circulated in the service areas of the prepaid health plan. The
notice shall announce the department's intent to contract and any
person affected by the contract shall have the opportunity to request
that a public hearing be held. The request for public hearing shall
be accompanied by an explanation of the reason for the request and a
description of problems or questions regarding the plan's ability to
meet its contractual obligations. A hearing shall be held by the
department if the director determines that the request is reasonable
and warrants a full public hearing. A request shall be considered
reasonable if there is a question regarding the plan's ability to
meet its contractual obligations.
No contract shall be signed by the department until the department
determines that the plan has the ability to fully comply with its
contractual obligations.
14301. (a) The department shall determine, by actuarial methods,
prospective per capita rates of payment for services provided under
this chapter for Medi-Cal beneficiaries enrolled in a prepaid health
plan. The rates of payment shall be determined annually, shall be
effective no later than either the first day of July each year, or
another date chosen by the department, and shall not exceed the total
per capita amount (including cost of administration) which the
department estimates (with appropriate adjustments to provide
actuarial equivalence) would be payable for all services and
requirements covered under the prepaid health plan contract if all
such services and requirements were to be furnished to Medi-Cal
beneficiaries under the fee-for-service Medi-Cal program provided for
by Chapter 7 (commencing with Section 14000).
In the event that there is any delay in the payment of the new
annual rates determined pursuant to this subdivision, continued
payment to the prepaid health plan of the rate in effect at the time
the delay occurred shall be interim payment only, and shall be
subject to increase or decrease, as the case may be, to the level of
the new annual rates effective as of either the first day of July or
the date chosen by the department.
Notwithstanding the foregoing provision, in the event that a
contract amendment providing for the new annual rates has been
executed by the department and a prepaid health plan, but has not yet
received the approval of all required control agencies and
departments by the end of the first month following the effective
date of the new rate, payment of the new annual rates shall commence
no later than the first day of the second month following the
effective date of the new rate. Contract amendments providing for the
new annual rates shall provide that the prepaid health plan
contractor agrees that by accepting payment of the new annual rates
prior to final approval, such contractor stipulates to a confession
of judgment for any amounts received in excess of the final approved
rate. If the final approved rates differ from the rates set forth in
such amendments, any underpayment by the state shall be paid by the
department to the prepaid health plan within 30 days after final
approval of such rates. Any overpayment by the state shall be
recaptured by the state withholding the amount due from the prepaid
health plan's next capitation check. If the amount to be withheld
from subsequent capitation checks exceeds 25 percent of the
appropriate capitation payment for that month, amounts up to 25
percent shall be withheld from each successive monthly capitation
payment until such deficiencies are recovered by the state.
The contract shall provide the specific per capita rates, to be
determined by sound actuarial methods on the basis of age, sex, and
aid categories, which the state shall pay the prepaid health plan
each month for each beneficiary enrolled in the prepaid health plan,
a detailed description of the specific actuarial method or methods
and assumptions used in determining per capita rates, and a summary
of the data base, including costs and inflation assumptions and
utilization rates, which was used to determine per capita rates. In
addition, the director shall engage and rely upon the services of an
actuary or consulting actuary in determining prospective per capita
rates.
(b) Any prepaid health plan with an operating experience and scale
of operation deemed by the department to be insufficient to justify
the application of an actuarially determined per capita rate, shall
be reimbursed on a cost basis up to the fee-for-service maximum for
services provided until such time as the director determines that a
per capita method is reasonable, but not to exceed a period of one
year. For purposes of this section, costs shall be net of
intercompany profits in those circumstances where any of the
following persons have a substantial financial interest, as defined
by Section 14478, in any vendor to the prepaid health plan or any
vendor to a subcontractor of the plan:
(1) Any person also having a substantial financial interest in the
plan.
(2) Any director, officer, partner, trustee or employee of the
plan.
(3) Any member of the immediate family of any person designated in
paragraph (1) or (2).
(c) The obligations of a prepaid health plan shall be changed only
by contract or contract amendment. Any such change may be made
during a contract term or at the time of contract renewal, where
there is a change in obligations required by federal or state law or
regulation, or required by a change in the interpretation or
implementation of any such law or regulation. If any such change in
obligations occurs which affects the cost to a prepaid health plan of
performing under the terms of its contract, then the per capita
rates under the contract may be redetermined in the manner provided
by subdivision (a) to reflect such change. During such period of time
as is required to redetermine the per capita rates, payment to a
prepaid health plan of the per capita rates in effect at the time
such change occurred shall be considered interim payments and shall
be subject to increase or decrease, as the case may be, effective as
of the date on which such change is effective.
(d) The obligations of a prepaid health plan shall be changed only
by contract or contract amendment wherein payment for the changes,
whether payment results in an increase or decrease in the prior per
capita rates paid to a prepaid health plan, shall be determined in
accordance with this section and paid to affected prepaid health
plans.
(e) Nothing contained in this section shall be construed as
removing from a prepaid health plan the risk of beneficial or adverse
effects, including inflation, which normally result from contracting
to furnish health services.
(f) Per capita rates of payment for services provided to Medi-Cal
beneficiaries enrolled in prepaid health plans or Medi-Cal managed
care plans contracting in areas specified by the director for
expansion of the Medi-Cal managed care program under Section 14087.3
or contracting under Sections 14018.7, 14087.31, 14087.35, 14087.36,
14087.38, 14087.96, 14089, and 14089.05 shall be paid by the state
effective the date a beneficiary's enrollment takes effect. A primary
care provider or clinic contracting with a prepaid health plan or a
Medi-Cal managed care plan on a capitation basis and whose assignment
to or selection by a beneficiary has been confirmed by the plan
shall be paid capitation payments effective the date of the
beneficiary's enrollment. However, a primary care provider whose
assignment to or selection by a beneficiary was not confirmed by the
plan on the date of the beneficiary's enrollment, but is later
confirmed by the plan, shall be paid capitation payments effective no
later than 30 days after the beneficiary's enrollment. The prepaid
health plan or Medi-Cal managed care plan shall be financially
responsible for all Medi-Cal services covered under the contract with
the department for any newly enrolled beneficiary until that
beneficiary has a confirmed assignment to a primary care provider or
clinic. This subdivision shall not apply when a beneficiary requests
a change in primary care provider after initial selection or
assignment.
14301.1. (a) For rates established on or after August 1, 2007, the
department shall pay capitation rates to health plans participating
in the Medi-Cal managed care program using actuarial methods and may
establish health-plan- and county-specific rates. The department
shall utilize a county- and model-specific rate methodology to
develop Medi-Cal managed care capitation rates for contracts entered
into between the department and any entity pursuant to Article 2.7
(commencing with Section 14087.3), Article 2.8 (commencing with
Section 14087.5), and Article 2.91 (commencing with Section 14089) of
Chapter 7 that includes, but is not limited to, all of the
following:
(1) Health-plan-specific encounter and claims data.
(2) Supplemental utilization and cost data submitted by the health
plans.
(3) Fee-for-service data for the underlying county of operation or
other appropriate counties as deemed necessary by the department.
(4) Department of Managed Health Care financial statement data
specific to Medi-Cal operations.
(5) Other demographic factors, such as age, gender, or
diagnostic-based risk adjustments, as the department deems
appropriate.
(b) To the extent that the department is unable to obtain
sufficient actual plan data, it may substitute plan model, similar
plan, or county-specific fee-for-service data.
(c) The department shall develop rates that include administrative
costs, and may apply different administrative costs with respect to
separate aid code groups.
(d) The department shall develop rates that shall include, but are
not limited to, assumptions for underwriting, return on investment,
risk, contingencies, changes in policy, and a detailed review of
health plan financial statements to validate and reconcile costs for
use in developing rates.
(e) The department may develop rates that pay plans based on
performance incentives, including quality indicators, access to care,
and data submission.
(f) The department may develop and adopt condition-specific
payment rates for health conditions, including, but not limited to,
childbirth delivery.
(g) (1) Prior to finalizing Medi-Cal managed care capitation
rates, the department shall provide health plans with information on
how the rates were developed, including rate sheets for that specific
health plan, and provide the plans with the opportunity to provide
additional supplemental information.
(2) For contracts entered into between the department and any
entity pursuant to Article 2.8 (commencing with Section 14087.5) of
Chapter 7, the department, by June 30 of each year, or, if the budget
has not passed by that date, no later than five working days after
the budget is signed, shall provide preliminary rates for the
upcoming fiscal year.
(h) For the purposes of developing capitation rates through
implementation of this ratesetting methodology, Medi-Cal managed care
health plans shall provide the department with financial and
utilization data in a form and substance as deemed necessary by the
department to establish rates. This data shall be considered
proprietary and shall be exempt from disclosure as official
information pursuant to subdivision (k) of Section 6254 of the
Government Code as contained in the California Public Records Act
(Division 7 (commencing with Section 6250) of Title 1 of the
Government Code).
(i) The department shall report, upon request, to the fiscal and
policy committees of the respective houses of the Legislature
regarding implementation of this section.
(j) Prior to October 1, 2011, the risk-adjusted countywide
capitation rate shall comprise no more than 20 percent of the total
capitation rate paid to each Medi-Cal managed care plan.
14301.11. (a) The department shall use funds attributable to the
tax on Medi-Cal managed care plans imposed by Section 12201 of the
Revenue and Taxation Code for the purpose specified in paragraph (1)
of subdivision (b) of Section 12201 of the Revenue and Taxation Code.
(b) This section shall become inoperative on July 1, 2011, and, as
of January 1, 2012, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2012, deletes or
extends the dates on which it becomes inoperative and is repealed.
14302. Except as provided in Section 14490, the duration of initial
contracts entered into pursuant to this chapter shall be for a
maximum of one year and of renewed contracts for a maximum of five
years.
14302.1. Once it is determined that a contract shall be renewed
pursuant to the provisions of this chapter with a prepaid health
plan, by the state agency responsible for negotiating these
contracts, the agency shall, no later than 25 working days prior to
the expiration date of the existing contract or immediately, if that
date has passed, draft an extension of the existing contract for a
period not to exceed two calendar months. Such a contract extension
shall contain the same terms as the prior existing contract except
for the contract's expiration date. The contract extension shall be
for a period of time not to exceed two months from the termination
date of the original contract.
The state agency responsible for negotiating the contract shall
simultaneously submit to each federal and state agency required to
approve a contract extension, a draft of the contract for extension
no later than 20 working days prior to the expiration date of the
prior existing contract.
Each state agency to which an extension for contract has been
submitted shall approve or disapprove the extension no later than 10
working days after receipt of the contract.
In the course of any contract negotiations, the responsible state
agency shall encourage the participation of other involved state and
federal agencies in the negotiation process and shall cooperate with
those agencies and with the contractor, or proposed contractor, to
seek the resolution of any obstacles to contractual agreement.
No extension shall become effective until and unless federal
approval is received indicating that federal funds will be available
for services provided under the Medi-Cal program during the period of
the contract extension.
These contract extensions shall remain in force and effect until
such time as:
(1) The contract expires because the extension date has been
reached.
(2) The contract for renewal is entered into and is in force and
effect.
(3) The state agency responsible for negotiating the contract
determines not to contract or renew a contract with the provider and
notifies the provider in writing to that effect.
(4) The state agency responsible for negotiating the contract
terminates the contract in accordance with Section 14304.
When contract renewals are entered into, the effective date of the
contract shall be the termination date of the prior contract, not
the ending date of any contract extension. The state agency
responsible for negotiating the contract, once a new contract is
finalized, shall retroactively make adjustments in any amounts paid
under the contract extension to reflect the new terms and rates of
reimbursements as provided in the new contract.
It is the intent of the Legislature to provide for the payment of
services provided for under this chapter in a timely and efficient
manner. Nothing in this chapter shall be construed as to hinder,
prohibit, or interfere with the negotiating and contract process of
the responsible state agency and provider.
The provisions of this section shall apply only to those instances
in which both parties have reason to believe that their contract
renewal process will not be completed by the termination date of the
contract.
14303. No contract between the department and the prepaid health
plan shall be amended without the public notice and if necessary the
holding of a public hearing as required in Section 14300 if such
amendments make any of the following changes in the contract:
(a) Reduction in the scope or availability of services.
(b) Enlargement of the service area.
(c) Increase in the maximum enrollment permitted under the
contract.
(d) Any other change in the plan's organization, operation, or
delivery of services which the director determines will have a
substantial impact on the ability of enrollees to obtain health care
services.
14303.1. The department shall have authority to amend a prepaid
health plan contract in accordance with the terms of a merger of a
prepaid health plan with another organization or organizations other
than the plan's subsidiary corporation, its parent corporation, or
another subsidiary of its parent corporation, provided the surviving
organization meets the following conditions:
(a) The surviving organization assures the continued and
accessible delivery of health care services to enrollees.
(b) The plans concerned have satisfactorily demonstrated the
fiscal and administrative soundness of the newly proposed
organization.
(c) The enrollees of the plans concerned are informed of the
impending merger, any resulting changes in the service area or
delivery of health care services, and such other information required
by subdivision (a) of Section 14406 at least 30 days in advance of
the merger.
(d) The enrollees of the plans concerned are given the option of
disenrolling for any cause within 60 days following the effective
date of the merger.
(e) Public notice is given and if necessary a public hearing is
held as required by Section 14300.
(f) The organization meets such other requirements as deemed
necessary by the department in order to carry out the purpose of this
chapter.
14303.2. The department shall have authority to amend a prepaid
health plan contract in accordance with the terms of the
reorganization of a prepaid health plan or a merger of the plan with
its subsidiary corporation, its parent corporation, or another
subsidiary of its parent corporation, provided the following
conditions are met:
(a) The resulting or surviving organization assures the continued
and accessible delivery of health care services to enrollees.
(b) The plan has satisfactorily demonstrated the fiscal and
administrative soundness of the newly proposed organization.
(c) If the proposed reorganization or merger results in any change
of the plan's service area or delivery of health care services, or
if the director otherwise deems it to be appropriate, the following
additional conditions shall be met:
(1) Public notice is given and if necessary a public hearing is
held as required by Section 14300.
(2) The enrollees of the plan are informed of the impending
reorganization or merger, any resulting changes in the service area
or delivery of health care services, and such other information
required by subdivision (a) of Section 14406 at least 30 days in
advance of the reorganization or merger.
(3) The enrollees of the plan are given the option of disenrolling
for any cause within 60 days following the effective date of the
reorganization or merger.
(d) The plan meets such other requirements as deemed necessary by
the department in order to carry out the purpose of this chapter.
14303.3. The department shall renew a contract unless good cause is
shown for nonrenewal.
14304. (a) The director shall terminate a contract with a prepaid
health plan or a Medi-Cal managed health care plan if he or she finds
that the standards prescribed in this chapter, the regulations, or
the contract are not being complied with, that claims accrued or to
accrue have not or will not be recompensed, or for other good cause
shown. Good cause includes, but is not necessarily limited to, three
repeated and uncorrected findings of serious deficiencies that have
the potential to endanger patient care, as defined by the department
in accordance with this section, identified in the medical audits
conducted by the department. Except in the event that the director
determines there is an immediate threat to the health of Medi-Cal
beneficiaries enrolled in the plan, at the request of the plan, the
department shall hold a public hearing to commence 30 days after
notice of intent to terminate the contract has been received by the
plan. The department shall present evidence at the hearing showing
good cause for the termination. The department shall assign an
administrative law judge who shall provide a written recommendation
to the department on the termination of the contract within 30 days
after conclusion of the hearing. Reasonable notice of the hearing
shall be given to the plan, to Medi-Cal beneficiaries enrolled in the
plan, and others who may be directly interested, including any other
persons and organizations as the director may deem necessary. The
notice shall state the effective date of, and the reason for, the
termination.
(b) In lieu of contract termination specified in subdivision (a),
the director shall have the power and authority to take one or more
of the following sanctions against a contractor for noncompliance
with the findings by the director as specified in subdivision (a):
(1) Suspend enrollment and marketing activities.
(2) Require the contractor to suspend or terminate contractor
personnel or subcontractors.
(3) Impose civil penalties not to exceed ten thousand dollars
($10,000) per violation pursuant to regulations adopted by the
director. Unless imposed in error, penalties shall not be returned to
the plan.
(4) Make one or more of the temporary suspension orders set out in
subdivision (d).
(5) Take other appropriate action as determined necessary by the
department.
The director shall give reasonable notice of his or her intention
to apply any of the sanctions authorized by this subdivision to the
plan and others who may be directly interested, including any other
persons and organizations as the director may deem necessary. The
notice shall include the effective date, the duration of, and the
reason for each sanction proposed by the director.
(c) Notwithstanding subdivision (b), the director shall terminate
a contract with a prepaid health plan which the United States
Secretary of Health and Human Services has determined does not meet
the requirements for participation in the medicaid program contained
in Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title
42 of the United States Code.
(d) The department may make one or more of the following temporary
suspension orders as an immediate sanction: temporarily suspend
enrollment activities, temporarily suspend marketing activities,
require the contractor temporarily to suspend specified personnel of
the contractor, or require the contractor temporarily to suspend
participation by a specified subcontractor. The temporary suspension
orders must be effective no earlier than 20 days after the notice
specified in subdivision (b).
If the department issues a temporary suspension order as an
immediate sanction, it shall notify the contractor of the nature and
effective date of the temporary suspension and at the same time shall
serve the provider with an accusation. Upon receipt of a notice of
defense filed by the contractor, the department shall within 15 days
set the matter for hearing, which shall be held as soon as possible,
but not later than 30 days after receipt of the notice of hearing by
the contractor. The hearing may be continued at the request of the
contractor if a continuance is necessary to permit presentation of an
adequate defense. The temporary suspension order shall remain in
effect until the hearing is completed and the department has made a
final determination on the merits. However, the temporary suspension
order shall be deemed vacated if the director fails to make a final
determination on the merits within 60 days after the original hearing
has been completed.
(e) A contractor may request a hearing in connection with any
sanctions applied pursuant to subdivision (b), other than those
contained in a temporary suspension order, within 15 working days
after the notice of the effective date of the sanctions has been
given, by sending a letter so stating to the address specified in the
notice. The department shall stay implementation of the sanction
upon receipt of the request for a hearing. Implementation of the
sanction shall remain stayed until the effective date of the final
decision of the department.
(f) Except as otherwise provided in this section, all hearings to
review the imposition of sanctions, including temporary suspension
orders, shall be held pursuant to the procedures set forth in Section
100171 of the Health and Safety Code.
(g) The director may collect civil penalties by withholding the
amount from capitation owed to the plan.
14304.5. Each prepaid health plan shall provide directly or through
subcontractors, not less than the basic scope of health care
benefits as defined in Section 14256. The director shall establish
the scope and duration of such services and may require other
services listed in Section 14053 be provided on a risk or nonrisk
basis. The director shall encourage the prepaid health plan to
provide all of the services enumerated in Section 14053 on a prepaid
basis. When mutually agreeable to the prepaid health plan, the
department, and the hospital involved, and provided that the
confidentiality of the selected hospital contracting rates negotiated
pursuant to Chapter 7 (commencing with Section 14081) is maintained
by all parties, contracts entered into by the department pursuant to
this chapter may provide for alternative arrangements in any or all
of a prepaid health plan's Medi-Cal service area for the payment of
inpatient hospital services using Medi-Cal hospital inpatient rates.
Subject to prior approval by the director, any additional services
other than those listed in Section 14053 may be provided at
reasonable cost to Medi-Cal enrollees, provided the enrollees are
notified of services for which they will be charged and the amount of
the charge prior to rendering such services.
14305. The department may limit the scope of health care benefits
provided by a prepaid health plan under this chapter to exclude the
care of illness or injury which results from or is greatly aggravated
by, a catastrophic occurrence, including, but not limited to, an act
of war, declared or undeclared, and which occurs subsequent to
enrollment in the prepaid health plan.
14308. (a) Each prepaid health plan shall furnish to the director
such information and reports as required by Title XIX of the federal
Social Security Act.
(b) The director may require a prepaid health plan to provide the
director with information and reports which are furnished by the
prepaid health plan to the Director of the Department of Managed
Health Care pursuant to the provisions of Chapter 2.2 (commencing
with Section 1340), Division 2, of the Health and Safety Code, the
Knox-Keene Health Care Service Plan Act of 1975, or to the Insurance
Commissioner pursuant to the provisions of Chapter 11A (commencing
with Section 11491) of Part 2 of Division 2 of the Insurance Code, as
appropriate.
(c) The director may, by regulation, require plans to furnish
statistical information to the extent such information is necessary
for the department to establish rates of payment pursuant to Section
14301 and to provide reports pursuant to Section 14313. The
department shall, to the extent feasible, accept this information in
a form which is consistent with reports required to be provided
pursuant to the Knox-Keene Health Care Service Plan Act of 1975, or
to Chapter 11A (commencing with Section 11491) of Part 2 of Division
2 of the Insurance Code, as appropriate. In the case of a hospital
based plan which is a health maintenance organization qualified
pursuant to Title XIII of the federal Public Health Service Act, and
which has more than one million enrollees, of whom less than 10
percent are Medi-Cal enrollees, information required pursuant to this
subdivision shall consist of reports required to be made to the
Department of Health, Education and Welfare pursuant to Title XIII of
the federal Public Health Service Act.
14309. The department shall provide for a continuing study of the
quality of care and services resulting from the operation of this
chapter and for surveys and reports on prepaid health plans. With
respect to such plans contracted for under this chapter, the
department may contract with professional organizations for studies
and reports of the experience of such plans as to the standards of
care available to eligible persons, gross and net costs,
administrative costs, benefits, utilization of benefits, the portion
of actual personal expenditures of eligible persons for health care
which are being met by prepaid benefits, and the methods of
evaluating and improving the quality of, and controlling the costs
of, health care provided under such contracts. However, this section
shall not be construed to require any prepaid health plan to provide
accounting data or statistical data not required by regulations
adopted by the director.
14311. Prepaid health plans, the services they provide, and the
persons receiving these services shall not be subject to the
limitations on services set forth in Section 14133, 14133.1,
14133.25, or 14133.3 or subdivisions (c), (d), and (e) of Section
14120, or subdivision (c) of Section 14105. Notwithstanding this
section, the requirements set forth in Section 14301 for the
determination of prospective per capita rates of payment for services
provided under this chapter to Medi-Cal beneficiaries enrolled in a
prepaid health plan shall remain unchanged.
Nothing in this section or in Article 7 (commencing with Section
14490) shall relieve the director of his responsibility to provide
the benefits provided for in Section 14132. Where a contract between
the department and a prepaid health plan does not require the prepaid
health plan to provide a benefit to which a Medi-Cal recipient is
otherwise entitled, the recipient shall be entitled to receive such
benefit pursuant to Chapter 7 (commencing with Section 14000) of this
part.
14312. The director shall adopt all necessary rules and regulations
to carry out the provisions of this chapter. In adopting such rules
and regulations, the director shall be guided by the needs of
eligible persons as well as prevailing practices in the delivery of
health care on a prepaid basis. Except where otherwise required by
federal law or by this part, the rules and regulations shall be
consistent with the requirements of the Knox-Keene Health Care
Service Plan Act of 1975, or the provisions of Chapter 11A
(commencing with Section 11491) of Part 2 of Division 2 of the
Insurance Code, as appropriate.
14314. The director may recover a due and payable overpayment made
to a prepaid health plan by means of a repayment agreement executed
between such prepaid health plan and the director, and by any other
means available at law.
14315. When it has been determined that a prepaid health plan has
received an overpayment which is due and payable, the director may
recover such overpayment by offset against any amount currently due
to the prepaid health plan under the provisions of this chapter or
Chapter 7 (commencing with Section 14000) of this part.
14316. Notwithstanding any other provisions of law, contracts with
plans which are entered into, renewed, or amended pursuant to this
article may include one or more of the following:
(1) A provision to the effect that if the rate for a plan is less
than 90 percent of the estimated Medi-Cal fee-for-service cost, the
plan's rate shall be increased by one-half the difference between the
rate fixed and 90 percent of the estimated fee-for-service cost. The
rate shall not, however, be less than 85 percent of the estimated
fee-for-service costs.
(2) Guaranteed capitation payments for Medi-Cal beneficiaries, who
are entitled to benefits under Title IV of the Social Security Act,
for a period of six months or less, even if the eligibility for
benefits of such beneficiaries terminates prior to the end of the
guaranteed payment period. Each guaranteed payment period shall be
calculated beginning on the date a beneficiary's enrollment takes
effect.
(3) Benefits in addition to those listed under Section 14132, as
long as the provision of such additional services permits plans to
remain more cost effective than fee-for-service reimbursement.
14300. The department shall publish a notice of intent to contract
at least 60 days prior to the effective date of any initial or
renewed contract. The notice shall appear in local newspapers
circulated in the service areas of the prepaid health plan. The
notice shall announce the department's intent to contract and any
person affected by the contract shall have the opportunity to request
that a public hearing be held. The request for public hearing shall
be accompanied by an explanation of the reason for the request and a
description of problems or questions regarding the plan's ability to
meet its contractual obligations. A hearing shall be held by the
department if the director determines that the request is reasonable
and warrants a full public hearing. A request shall be considered
reasonable if there is a question regarding the plan's ability to
meet its contractual obligations.
No contract shall be signed by the department until the department
determines that the plan has the ability to fully comply with its
contractual obligations.
14301. (a) The department shall determine, by actuarial methods,
prospective per capita rates of payment for services provided under
this chapter for Medi-Cal beneficiaries enrolled in a prepaid health
plan. The rates of payment shall be determined annually, shall be
effective no later than either the first day of July each year, or
another date chosen by the department, and shall not exceed the total
per capita amount (including cost of administration) which the
department estimates (with appropriate adjustments to provide
actuarial equivalence) would be payable for all services and
requirements covered under the prepaid health plan contract if all
such services and requirements were to be furnished to Medi-Cal
beneficiaries under the fee-for-service Medi-Cal program provided for
by Chapter 7 (commencing with Section 14000).
In the event that there is any delay in the payment of the new
annual rates determined pursuant to this subdivision, continued
payment to the prepaid health plan of the rate in effect at the time
the delay occurred shall be interim payment only, and shall be
subject to increase or decrease, as the case may be, to the level of
the new annual rates effective as of either the first day of July or
the date chosen by the department.
Notwithstanding the foregoing provision, in the event that a
contract amendment providing for the new annual rates has been
executed by the department and a prepaid health plan, but has not yet
received the approval of all required control agencies and
departments by the end of the first month following the effective
date of the new rate, payment of the new annual rates shall commence
no later than the first day of the second month following the
effective date of the new rate. Contract amendments providing for the
new annual rates shall provide that the prepaid health plan
contractor agrees that by accepting payment of the new annual rates
prior to final approval, such contractor stipulates to a confession
of judgment for any amounts received in excess of the final approved
rate. If the final approved rates differ from the rates set forth in
such amendments, any underpayment by the state shall be paid by the
department to the prepaid health plan within 30 days after final
approval of such rates. Any overpayment by the state shall be
recaptured by the state withholding the amount due from the prepaid
health plan's next capitation check. If the amount to be withheld
from subsequent capitation checks exceeds 25 percent of the
appropriate capitation payment for that month, amounts up to 25
percent shall be withheld from each successive monthly capitation
payment until such deficiencies are recovered by the state.
The contract shall provide the specific per capita rates, to be
determined by sound actuarial methods on the basis of age, sex, and
aid categories, which the state shall pay the prepaid health plan
each month for each beneficiary enrolled in the prepaid health plan,
a detailed description of the specific actuarial method or methods
and assumptions used in determining per capita rates, and a summary
of the data base, including costs and inflation assumptions and
utilization rates, which was used to determine per capita rates. In
addition, the director shall engage and rely upon the services of an
actuary or consulting actuary in determining prospective per capita
rates.
(b) Any prepaid health plan with an operating experience and scale
of operation deemed by the department to be insufficient to justify
the application of an actuarially determined per capita rate, shall
be reimbursed on a cost basis up to the fee-for-service maximum for
services provided until such time as the director determines that a
per capita method is reasonable, but not to exceed a period of one
year. For purposes of this section, costs shall be net of
intercompany profits in those circumstances where any of the
following persons have a substantial financial interest, as defined
by Section 14478, in any vendor to the prepaid health plan or any
vendor to a subcontractor of the plan:
(1) Any person also having a substantial financial interest in the
plan.
(2) Any director, officer, partner, trustee or employee of the
plan.
(3) Any member of the immediate family of any person designated in
paragraph (1) or (2).
(c) The obligations of a prepaid health plan shall be changed only
by contract or contract amendment. Any such change may be made
during a contract term or at the time of contract renewal, where
there is a change in obligations required by federal or state law or
regulation, or required by a change in the interpretation or
implementation of any such law or regulation. If any such change in
obligations occurs which affects the cost to a prepaid health plan of
performing under the terms of its contract, then the per capita
rates under the contract may be redetermined in the manner provided
by subdivision (a) to reflect such change. During such period of time
as is required to redetermine the per capita rates, payment to a
prepaid health plan of the per capita rates in effect at the time
such change occurred shall be considered interim payments and shall
be subject to increase or decrease, as the case may be, effective as
of the date on which such change is effective.
(d) The obligations of a prepaid health plan shall be changed only
by contract or contract amendment wherein payment for the changes,
whether payment results in an increase or decrease in the prior per
capita rates paid to a prepaid health plan, shall be determined in
accordance with this section and paid to affected prepaid health
plans.
(e) Nothing contained in this section shall be construed as
removing from a prepaid health plan the risk of beneficial or adverse
effects, including inflation, which normally result from contracting
to furnish health services.
(f) Per capita rates of payment for services provided to Medi-Cal
beneficiaries enrolled in prepaid health plans or Medi-Cal managed
care plans contracting in areas specified by the director for
expansion of the Medi-Cal managed care program under Section 14087.3
or contracting under Sections 14018.7, 14087.31, 14087.35, 14087.36,
14087.38, 14087.96, 14089, and 14089.05 shall be paid by the state
effective the date a beneficiary's enrollment takes effect. A primary
care provider or clinic contracting with a prepaid health plan or a
Medi-Cal managed care plan on a capitation basis and whose assignment
to or selection by a beneficiary has been confirmed by the plan
shall be paid capitation payments effective the date of the
beneficiary's enrollment. However, a primary care provider whose
assignment to or selection by a beneficiary was not confirmed by the
plan on the date of the beneficiary's enrollment, but is later
confirmed by the plan, shall be paid capitation payments effective no
later than 30 days after the beneficiary's enrollment. The prepaid
health plan or Medi-Cal managed care plan shall be financially
responsible for all Medi-Cal services covered under the contract with
the department for any newly enrolled beneficiary until that
beneficiary has a confirmed assignment to a primary care provider or
clinic. This subdivision shall not apply when a beneficiary requests
a change in primary care provider after initial selection or
assignment.
14301.1. (a) For rates established on or after August 1, 2007, the
department shall pay capitation rates to health plans participating
in the Medi-Cal managed care program using actuarial methods and may
establish health-plan- and county-specific rates. The department
shall utilize a county- and model-specific rate methodology to
develop Medi-Cal managed care capitation rates for contracts entered
into between the department and any entity pursuant to Article 2.7
(commencing with Section 14087.3), Article 2.8 (commencing with
Section 14087.5), and Article 2.91 (commencing with Section 14089) of
Chapter 7 that includes, but is not limited to, all of the
following:
(1) Health-plan-specific encounter and claims data.
(2) Supplemental utilization and cost data submitted by the health
plans.
(3) Fee-for-service data for the underlying county of operation or
other appropriate counties as deemed necessary by the department.
(4) Department of Managed Health Care financial statement data
specific to Medi-Cal operations.
(5) Other demographic factors, such as age, gender, or
diagnostic-based risk adjustments, as the department deems
appropriate.
(b) To the extent that the department is unable to obtain
sufficient actual plan data, it may substitute plan model, similar
plan, or county-specific fee-for-service data.
(c) The department shall develop rates that include administrative
costs, and may apply different administrative costs with respect to
separate aid code groups.
(d) The department shall develop rates that shall include, but are
not limited to, assumptions for underwriting, return on investment,
risk, contingencies, changes in policy, and a detailed review of
health plan financial statements to validate and reconcile costs for
use in developing rates.
(e) The department may develop rates that pay plans based on
performance incentives, including quality indicators, access to care,
and data submission.
(f) The department may develop and adopt condition-specific
payment rates for health conditions, including, but not limited to,
childbirth delivery.
(g) (1) Prior to finalizing Medi-Cal managed care capitation
rates, the department shall provide health plans with information on
how the rates were developed, including rate sheets for that specific
health plan, and provide the plans with the opportunity to provide
additional supplemental information.
(2) For contracts entered into between the department and any
entity pursuant to Article 2.8 (commencing with Section 14087.5) of
Chapter 7, the department, by June 30 of each year, or, if the budget
has not passed by that date, no later than five working days after
the budget is signed, shall provide preliminary rates for the
upcoming fiscal year.
(h) For the purposes of developing capitation rates through
implementation of this ratesetting methodology, Medi-Cal managed care
health plans shall provide the department with financial and
utilization data in a form and substance as deemed necessary by the
department to establish rates. This data shall be considered
proprietary and shall be exempt from disclosure as official
information pursuant to subdivision (k) of Section 6254 of the
Government Code as contained in the California Public Records Act
(Division 7 (commencing with Section 6250) of Title 1 of the
Government Code).
(i) The department shall report, upon request, to the fiscal and
policy committees of the respective houses of the Legislature
regarding implementation of this section.
(j) Prior to October 1, 2011, the risk-adjusted countywide
capitation rate shall comprise no more than 20 percent of the total
capitation rate paid to each Medi-Cal managed care plan.
14301.11. (a) The department shall use funds attributable to the
tax on Medi-Cal managed care plans imposed by Section 12201 of the
Revenue and Taxation Code for the purpose specified in paragraph (1)
of subdivision (b) of Section 12201 of the Revenue and Taxation Code.
(b) This section shall become inoperative on July 1, 2011, and, as
of January 1, 2012, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2012, deletes or
extends the dates on which it becomes inoperative and is repealed.
14302. Except as provided in Section 14490, the duration of initial
contracts entered into pursuant to this chapter shall be for a
maximum of one year and of renewed contracts for a maximum of five
years.
14302.1. Once it is determined that a contract shall be renewed
pursuant to the provisions of this chapter with a prepaid health
plan, by the state agency responsible for negotiating these
contracts, the agency shall, no later than 25 working days prior to
the expiration date of the existing contract or immediately, if that
date has passed, draft an extension of the existing contract for a
period not to exceed two calendar months. Such a contract extension
shall contain the same terms as the prior existing contract except
for the contract's expiration date. The contract extension shall be
for a period of time not to exceed two months from the termination
date of the original contract.
The state agency responsible for negotiating the contract shall
simultaneously submit to each federal and state agency required to
approve a contract extension, a draft of the contract for extension
no later than 20 working days prior to the expiration date of the
prior existing contract.
Each state agency to which an extension for contract has been
submitted shall approve or disapprove the extension no later than 10
working days after receipt of the contract.
In the course of any contract negotiations, the responsible state
agency shall encourage the participation of other involved state and
federal agencies in the negotiation process and shall cooperate with
those agencies and with the contractor, or proposed contractor, to
seek the resolution of any obstacles to contractual agreement.
No extension shall become effective until and unless federal
approval is received indicating that federal funds will be available
for services provided under the Medi-Cal program during the period of
the contract extension.
These contract extensions shall remain in force and effect until
such time as:
(1) The contract expires because the extension date has been
reached.
(2) The contract for renewal is entered into and is in force and
effect.
(3) The state agency responsible for negotiating the contract
determines not to contract or renew a contract with the provider and
notifies the provider in writing to that effect.
(4) The state agency responsible for negotiating the contract
terminates the contract in accordance with Section 14304.
When contract renewals are entered into, the effective date of the
contract shall be the termination date of the prior contract, not
the ending date of any contract extension. The state agency
responsible for negotiating the contract, once a new contract is
finalized, shall retroactively make adjustments in any amounts paid
under the contract extension to reflect the new terms and rates of
reimbursements as provided in the new contract.
It is the intent of the Legislature to provide for the payment of
services provided for under this chapter in a timely and efficient
manner. Nothing in this chapter shall be construed as to hinder,
prohibit, or interfere with the negotiating and contract process of
the responsible state agency and provider.
The provisions of this section shall apply only to those instances
in which both parties have reason to believe that their contract
renewal process will not be completed by the termination date of the
contract.
14303. No contract between the department and the prepaid health
plan shall be amended without the public notice and if necessary the
holding of a public hearing as required in Section 14300 if such
amendments make any of the following changes in the contract:
(a) Reduction in the scope or availability of services.
(b) Enlargement of the service area.
(c) Increase in the maximum enrollment permitted under the
contract.
(d) Any other change in the plan's organization, operation, or
delivery of services which the director determines will have a
substantial impact on the ability of enrollees to obtain health care
services.
14303.1. The department shall have authority to amend a prepaid
health plan contract in accordance with the terms of a merger of a
prepaid health plan with another organization or organizations other
than the plan's subsidiary corporation, its parent corporation, or
another subsidiary of its parent corporation, provided the surviving
organization meets the following conditions:
(a) The surviving organization assures the continued and
accessible delivery of health care services to enrollees.
(b) The plans concerned have satisfactorily demonstrated the
fiscal and administrative soundness of the newly proposed
organization.
(c) The enrollees of the plans concerned are informed of the
impending merger, any resulting changes in the service area or
delivery of health care services, and such other information required
by subdivision (a) of Section 14406 at least 30 days in advance of
the merger.
(d) The enrollees of the plans concerned are given the option of
disenrolling for any cause within 60 days following the effective
date of the merger.
(e) Public notice is given and if necessary a public hearing is
held as required by Section 14300.
(f) The organization meets such other requirements as deemed
necessary by the department in order to carry out the purpose of this
chapter.
14303.2. The department shall have authority to amend a prepaid
health plan contract in accordance with the terms of the
reorganization of a prepaid health plan or a merger of the plan with
its subsidiary corporation, its parent corporation, or another
subsidiary of its parent corporation, provided the following
conditions are met:
(a) The resulting or surviving organization assures the continued
and accessible delivery of health care services to enrollees.
(b) The plan has satisfactorily demonstrated the fiscal and
administrative soundness of the newly proposed organization.
(c) If the proposed reorganization or merger results in any change
of the plan's service area or delivery of health care services, or
if the director otherwise deems it to be appropriate, the following
additional conditions shall be met:
(1) Public notice is given and if necessary a public hearing is
held as required by Section 14300.
(2) The enrollees of the plan are informed of the impending
reorganization or merger, any resulting changes in the service area
or delivery of health care services, and such other information
required by subdivision (a) of Section 14406 at least 30 days in
advance of the reorganization or merger.
(3) The enrollees of the plan are given the option of disenrolling
for any cause within 60 days following the effective date of the
reorganization or merger.
(d) The plan meets such other requirements as deemed necessary by
the department in order to carry out the purpose of this chapter.
14303.3. The department shall renew a contract unless good cause is
shown for nonrenewal.
14304. (a) The director shall terminate a contract with a prepaid
health plan or a Medi-Cal managed health care plan if he or she finds
that the standards prescribed in this chapter, the regulations, or
the contract are not being complied with, that claims accrued or to
accrue have not or will not be recompensed, or for other good cause
shown. Good cause includes, but is not necessarily limited to, three
repeated and uncorrected findings of serious deficiencies that have
the potential to endanger patient care, as defined by the department
in accordance with this section, identified in the medical audits
conducted by the department. Except in the event that the director
determines there is an immediate threat to the health of Medi-Cal
beneficiaries enrolled in the plan, at the request of the plan, the
department shall hold a public hearing to commence 30 days after
notice of intent to terminate the contract has been received by the
plan. The department shall present evidence at the hearing showing
good cause for the termination. The department shall assign an
administrative law judge who shall provide a written recommendation
to the department on the termination of the contract within 30 days
after conclusion of the hearing. Reasonable notice of the hearing
shall be given to the plan, to Medi-Cal beneficiaries enrolled in the
plan, and others who may be directly interested, including any other
persons and organizations as the director may deem necessary. The
notice shall state the effective date of, and the reason for, the
termination.
(b) In lieu of contract termination specified in subdivision (a),
the director shall have the power and authority to take one or more
of the following sanctions against a contractor for noncompliance
with the findings by the director as specified in subdivision (a):
(1) Suspend enrollment and marketing activities.
(2) Require the contractor to suspend or terminate contractor
personnel or subcontractors.
(3) Impose civil penalties not to exceed ten thousand dollars
($10,000) per violation pursuant to regulations adopted by the
director. Unless imposed in error, penalties shall not be returned to
the plan.
(4) Make one or more of the temporary suspension orders set out in
subdivision (d).
(5) Take other appropriate action as determined necessary by the
department.
The director shall give reasonable notice of his or her intention
to apply any of the sanctions authorized by this subdivision to the
plan and others who may be directly interested, including any other
persons and organizations as the director may deem necessary. The
notice shall include the effective date, the duration of, and the
reason for each sanction proposed by the director.
(c) Notwithstanding subdivision (b), the director shall terminate
a contract with a prepaid health plan which the United States
Secretary of Health and Human Services has determined does not meet
the requirements for participation in the medicaid program contained
in Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title
42 of the United States Code.
(d) The department may make one or more of the following temporary
suspension orders as an immediate sanction: temporarily suspend
enrollment activities, temporarily suspend marketing activities,
require the contractor temporarily to suspend specified personnel of
the contractor, or require the contractor temporarily to suspend
participation by a specified subcontractor. The temporary suspension
orders must be effective no earlier than 20 days after the notice
specified in subdivision (b).
If the department issues a temporary suspension order as an
immediate sanction, it shall notify the contractor of the nature and
effective date of the temporary suspension and at the same time shall
serve the provider with an accusation. Upon receipt of a notice of
defense filed by the contractor, the department shall within 15 days
set the matter for hearing, which shall be held as soon as possible,
but not later than 30 days after receipt of the notice of hearing by
the contractor. The hearing may be continued at the request of the
contractor if a continuance is necessary to permit presentation of an
adequate defense. The temporary suspension order shall remain in
effect until the hearing is completed and the department has made a
final determination on the merits. However, the temporary suspension
order shall be deemed vacated if the director fails to make a final
determination on the merits within 60 days after the original hearing
has been completed.
(e) A contractor may request a hearing in connection with any
sanctions applied pursuant to subdivision (b), other than those
contained in a temporary suspension order, within 15 working days
after the notice of the effective date of the sanctions has been
given, by sending a letter so stating to the address specified in the
notice. The department shall stay implementation of the sanction
upon receipt of the request for a hearing. Implementation of the
sanction shall remain stayed until the effective date of the final
decision of the department.
(f) Except as otherwise provided in this section, all hearings to
review the imposition of sanctions, including temporary suspension
orders, shall be held pursuant to the procedures set forth in Section
100171 of the Health and Safety Code.
(g) The director may collect civil penalties by withholding the
amount from capitation owed to the plan.
14304.5. Each prepaid health plan shall provide directly or through
subcontractors, not less than the basic scope of health care
benefits as defined in Section 14256. The director shall establish
the scope and duration of such services and may require other
services listed in Section 14053 be provided on a risk or nonrisk
basis. The director shall encourage the prepaid health plan to
provide all of the services enumerated in Section 14053 on a prepaid
basis. When mutually agreeable to the prepaid health plan, the
department, and the hospital involved, and provided that the
confidentiality of the selected hospital contracting rates negotiated
pursuant to Chapter 7 (commencing with Section 14081) is maintained
by all parties, contracts entered into by the department pursuant to
this chapter may provide for alternative arrangements in any or all
of a prepaid health plan's Medi-Cal service area for the payment of
inpatient hospital services using Medi-Cal hospital inpatient rates.
Subject to prior approval by the director, any additional services
other than those listed in Section 14053 may be provided at
reasonable cost to Medi-Cal enrollees, provided the enrollees are
notified of services for which they will be charged and the amount of
the charge prior to rendering such services.
14305. The department may limit the scope of health care benefits
provided by a prepaid health plan under this chapter to exclude the
care of illness or injury which results from or is greatly aggravated
by, a catastrophic occurrence, including, but not limited to, an act
of war, declared or undeclared, and which occurs subsequent to
enrollment in the prepaid health plan.
14308. (a) Each prepaid health plan shall furnish to the director
such information and reports as required by Title XIX of the federal
Social Security Act.
(b) The director may require a prepaid health plan to provide the
director with information and reports which are furnished by the
prepaid health plan to the Director of the Department of Managed
Health Care pursuant to the provisions of Chapter 2.2 (commencing
with Section 1340), Division 2, of the Health and Safety Code, the
Knox-Keene Health Care Service Plan Act of 1975, or to the Insurance
Commissioner pursuant to the provisions of Chapter 11A (commencing
with Section 11491) of Part 2 of Division 2 of the Insurance Code, as
appropriate.
(c) The director may, by regulation, require plans to furnish
statistical information to the extent such information is necessary
for the department to establish rates of payment pursuant to Section
14301 and to provide reports pursuant to Section 14313. The
department shall, to the extent feasible, accept this information in
a form which is consistent with reports required to be provided
pursuant to the Knox-Keene Health Care Service Plan Act of 1975, or
to Chapter 11A (commencing with Section 11491) of Part 2 of Division
2 of the Insurance Code, as appropriate. In the case of a hospital
based plan which is a health maintenance organization qualified
pursuant to Title XIII of the federal Public Health Service Act, and
which has more than one million enrollees, of whom less than 10
percent are Medi-Cal enrollees, information required pursuant to this
subdivision shall consist of reports required to be made to the
Department of Health, Education and Welfare pursuant to Title XIII of
the federal Public Health Service Act.
14309. The department shall provide for a continuing study of the
quality of care and services resulting from the operation of this
chapter and for surveys and reports on prepaid health plans. With
respect to such plans contracted for under this chapter, the
department may contract with professional organizations for studies
and reports of the experience of such plans as to the standards of
care available to eligible persons, gross and net costs,
administrative costs, benefits, utilization of benefits, the portion
of actual personal expenditures of eligible persons for health care
which are being met by prepaid benefits, and the methods of
evaluating and improving the quality of, and controlling the costs
of, health care provided under such contracts. However, this section
shall not be construed to require any prepaid health plan to provide
accounting data or statistical data not required by regulations
adopted by the director.
14311. Prepaid health plans, the services they provide, and the
persons receiving these services shall not be subject to the
limitations on services set forth in Section 14133, 14133.1,
14133.25, or 14133.3 or subdivisions (c), (d), and (e) of Section
14120, or subdivision (c) of Section 14105. Notwithstanding this
section, the requirements set forth in Section 14301 for the
determination of prospective per capita rates of payment for services
provided under this chapter to Medi-Cal beneficiaries enrolled in a
prepaid health plan shall remain unchanged.
Nothing in this section or in Article 7 (commencing with Section
14490) shall relieve the director of his responsibility to provide
the benefits provided for in Section 14132. Where a contract between
the department and a prepaid health plan does not require the prepaid
health plan to provide a benefit to which a Medi-Cal recipient is
otherwise entitled, the recipient shall be entitled to receive such
benefit pursuant to Chapter 7 (commencing with Section 14000) of this
part.
14312. The director shall adopt all necessary rules and regulations
to carry out the provisions of this chapter. In adopting such rules
and regulations, the director shall be guided by the needs of
eligible persons as well as prevailing practices in the delivery of
health care on a prepaid basis. Except where otherwise required by
federal law or by this part, the rules and regulations shall be
consistent with the requirements of the Knox-Keene Health Care
Service Plan Act of 1975, or the provisions of Chapter 11A
(commencing with Section 11491) of Part 2 of Division 2 of the
Insurance Code, as appropriate.
14314. The director may recover a due and payable overpayment made
to a prepaid health plan by means of a repayment agreement executed
between such prepaid health plan and the director, and by any other
means available at law.
14315. When it has been determined that a prepaid health plan has
received an overpayment which is due and payable, the director may
recover such overpayment by offset against any amount currently due
to the prepaid health plan under the provisions of this chapter or
Chapter 7 (commencing with Section 14000) of this part.
14316. Notwithstanding any other provisions of law, contracts with
plans which are entered into, renewed, or amended pursuant to this
article may include one or more of the following:
(1) A provision to the effect that if the rate for a plan is less
than 90 percent of the estimated Medi-Cal fee-for-service cost, the
plan's rate shall be increased by one-half the difference between the
rate fixed and 90 percent of the estimated fee-for-service cost. The
rate shall not, however, be less than 85 percent of the estimated
fee-for-service costs.
(2) Guaranteed capitation payments for Medi-Cal beneficiaries, who
are entitled to benefits under Title IV of the Social Security Act,
for a period of six months or less, even if the eligibility for
benefits of such beneficiaries terminates prior to the end of the
guaranteed payment period. Each guaranteed payment period shall be
calculated beginning on the date a beneficiary's enrollment takes
effect.
(3) Benefits in addition to those listed under Section 14132, as
long as the provision of such additional services permits plans to
remain more cost effective than fee-for-service reimbursement.
14300. The department shall publish a notice of intent to contract
at least 60 days prior to the effective date of any initial or
renewed contract. The notice shall appear in local newspapers
circulated in the service areas of the prepaid health plan. The
notice shall announce the department's intent to contract and any
person affected by the contract shall have the opportunity to request
that a public hearing be held. The request for public hearing shall
be accompanied by an explanation of the reason for the request and a
description of problems or questions regarding the plan's ability to
meet its contractual obligations. A hearing shall be held by the
department if the director determines that the request is reasonable
and warrants a full public hearing. A request shall be considered
reasonable if there is a question regarding the plan's ability to
meet its contractual obligations.
No contract shall be signed by the department until the department
determines that the plan has the ability to fully comply with its
contractual obligations.
14301. (a) The department shall determine, by actuarial methods,
prospective per capita rates of payment for services provided under
this chapter for Medi-Cal beneficiaries enrolled in a prepaid health
plan. The rates of payment shall be determined annually, shall be
effective no later than either the first day of July each year, or
another date chosen by the department, and shall not exceed the total
per capita amount (including cost of administration) which the
department estimates (with appropriate adjustments to provide
actuarial equivalence) would be payable for all services and
requirements covered under the prepaid health plan contract if all
such services and requirements were to be furnished to Medi-Cal
beneficiaries under the fee-for-service Medi-Cal program provided for
by Chapter 7 (commencing with Section 14000).
In the event that there is any delay in the payment of the new
annual rates determined pursuant to this subdivision, continued
payment to the prepaid health plan of the rate in effect at the time
the delay occurred shall be interim payment only, and shall be
subject to increase or decrease, as the case may be, to the level of
the new annual rates effective as of either the first day of July or
the date chosen by the department.
Notwithstanding the foregoing provision, in the event that a
contract amendment providing for the new annual rates has been
executed by the department and a prepaid health plan, but has not yet
received the approval of all required control agencies and
departments by the end of the first month following the effective
date of the new rate, payment of the new annual rates shall commence
no later than the first day of the second month following the
effective date of the new rate. Contract amendments providing for the
new annual rates shall provide that the prepaid health plan
contractor agrees that by accepting payment of the new annual rates
prior to final approval, such contractor stipulates to a confession
of judgment for any amounts received in excess of the final approved
rate. If the final approved rates differ from the rates set forth in
such amendments, any underpayment by the state shall be paid by the
department to the prepaid health plan within 30 days after final
approval of such rates. Any overpayment by the state shall be
recaptured by the state withholding the amount due from the prepaid
health plan's next capitation check. If the amount to be withheld
from subsequent capitation checks exceeds 25 percent of the
appropriate capitation payment for that month, amounts up to 25
percent shall be withheld from each successive monthly capitation
payment until such deficiencies are recovered by the state.
The contract shall provide the specific per capita rates, to be
determined by sound actuarial methods on the basis of age, sex, and
aid categories, which the state shall pay the prepaid health plan
each month for each beneficiary enrolled in the prepaid health plan,
a detailed description of the specific actuarial method or methods
and assumptions used in determining per capita rates, and a summary
of the data base, including costs and inflation assumptions and
utilization rates, which was used to determine per capita rates. In
addition, the director shall engage and rely upon the services of an
actuary or consulting actuary in determining prospective per capita
rates.
(b) Any prepaid health plan with an operating experience and scale
of operation deemed by the department to be insufficient to justify
the application of an actuarially determined per capita rate, shall
be reimbursed on a cost basis up to the fee-for-service maximum for
services provided until such time as the director determines that a
per capita method is reasonable, but not to exceed a period of one
year. For purposes of this section, costs shall be net of
intercompany profits in those circumstances where any of the
following persons have a substantial financial interest, as defined
by Section 14478, in any vendor to the prepaid health plan or any
vendor to a subcontractor of the plan:
(1) Any person also having a substantial financial interest in the
plan.
(2) Any director, officer, partner, trustee or employee of the
plan.
(3) Any member of the immediate family of any person designated in
paragraph (1) or (2).
(c) The obligations of a prepaid health plan shall be changed only
by contract or contract amendment. Any such change may be made
during a contract term or at the time of contract renewal, where
there is a change in obligations required by federal or state law or
regulation, or required by a change in the interpretation or
implementation of any such law or regulation. If any such change in
obligations occurs which affects the cost to a prepaid health plan of
performing under the terms of its contract, then the per capita
rates under the contract may be redetermined in the manner provided
by subdivision (a) to reflect such change. During such period of time
as is required to redetermine the per capita rates, payment to a
prepaid health plan of the per capita rates in effect at the time
such change occurred shall be considered interim payments and shall
be subject to increase or decrease, as the case may be, effective as
of the date on which such change is effective.
(d) The obligations of a prepaid health plan shall be changed only
by contract or contract amendment wherein payment for the changes,
whether payment results in an increase or decrease in the prior per
capita rates paid to a prepaid health plan, shall be determined in
accordance with this section and paid to affected prepaid health
plans.
(e) Nothing contained in this section shall be construed as
removing from a prepaid health plan the risk of beneficial or adverse
effects, including inflation, which normally result from contracting
to furnish health services.
(f) Per capita rates of payment for services provided to Medi-Cal
beneficiaries enrolled in prepaid health plans or Medi-Cal managed
care plans contracting in areas specified by the director for
expansion of the Medi-Cal managed care program under Section 14087.3
or contracting under Sections 14018.7, 14087.31, 14087.35, 14087.36,
14087.38, 14087.96, 14089, and 14089.05 shall be paid by the state
effective the date a beneficiary's enrollment takes effect. A primary
care provider or clinic contracting with a prepaid health plan or a
Medi-Cal managed care plan on a capitation basis and whose assignment
to or selection by a beneficiary has been confirmed by the plan
shall be paid capitation payments effective the date of the
beneficiary's enrollment. However, a primary care provider whose
assignment to or selection by a beneficiary was not confirmed by the
plan on the date of the beneficiary's enrollment, but is later
confirmed by the plan, shall be paid capitation payments effective no
later than 30 days after the beneficiary's enrollment. The prepaid
health plan or Medi-Cal managed care plan shall be financially
responsible for all Medi-Cal services covered under the contract with
the department for any newly enrolled beneficiary until that
beneficiary has a confirmed assignment to a primary care provider or
clinic. This subdivision shall not apply when a beneficiary requests
a change in primary care provider after initial selection or
assignment.
14301.1. (a) For rates established on or after August 1, 2007, the
department shall pay capitation rates to health plans participating
in the Medi-Cal managed care program using actuarial methods and may
establish health-plan- and county-specific rates. The department
shall utilize a county- and model-specific rate methodology to
develop Medi-Cal managed care capitation rates for contracts entered
into between the department and any entity pursuant to Article 2.7
(commencing with Section 14087.3), Article 2.8 (commencing with
Section 14087.5), and Article 2.91 (commencing with Section 14089) of
Chapter 7 that includes, but is not limited to, all of the
following:
(1) Health-plan-specific encounter and claims data.
(2) Supplemental utilization and cost data submitted by the health
plans.
(3) Fee-for-service data for the underlying county of operation or
other appropriate counties as deemed necessary by the department.
(4) Department of Managed Health Care financial statement data
specific to Medi-Cal operations.
(5) Other demographic factors, such as age, gender, or
diagnostic-based risk adjustments, as the department deems
appropriate.
(b) To the extent that the department is unable to obtain
sufficient actual plan data, it may substitute plan model, similar
plan, or county-specific fee-for-service data.
(c) The department shall develop rates that include administrative
costs, and may apply different administrative costs with respect to
separate aid code groups.
(d) The department shall develop rates that shall include, but are
not limited to, assumptions for underwriting, return on investment,
risk, contingencies, changes in policy, and a detailed review of
health plan financial statements to validate and reconcile costs for
use in developing rates.
(e) The department may develop rates that pay plans based on
performance incentives, including quality indicators, access to care,
and data submission.
(f) The department may develop and adopt condition-specific
payment rates for health conditions, including, but not limited to,
childbirth delivery.
(g) (1) Prior to finalizing Medi-Cal managed care capitation
rates, the department shall provide health plans with information on
how the rates were developed, including rate sheets for that specific
health plan, and provide the plans with the opportunity to provide
additional supplemental information.
(2) For contracts entered into between the department and any
entity pursuant to Article 2.8 (commencing with Section 14087.5) of
Chapter 7, the department, by June 30 of each year, or, if the budget
has not passed by that date, no later than five working days after
the budget is signed, shall provide preliminary rates for the
upcoming fiscal year.
(h) For the purposes of developing capitation rates through
implementation of this ratesetting methodology, Medi-Cal managed care
health plans shall provide the department with financial and
utilization data in a form and substance as deemed necessary by the
department to establish rates. This data shall be considered
proprietary and shall be exempt from disclosure as official
information pursuant to subdivision (k) of Section 6254 of the
Government Code as contained in the California Public Records Act
(Division 7 (commencing with Section 6250) of Title 1 of the
Government Code).
(i) The department shall report, upon request, to the fiscal and
policy committees of the respective houses of the Legislature
regarding implementation of this section.
(j) Prior to October 1, 2011, the risk-adjusted countywide
capitation rate shall comprise no more than 20 percent of the total
capitation rate paid to each Medi-Cal managed care plan.
14301.11. (a) The department shall use funds attributable to the
tax on Medi-Cal managed care plans imposed by Section 12201 of the
Revenue and Taxation Code for the purpose specified in paragraph (1)
of subdivision (b) of Section 12201 of the Revenue and Taxation Code.
(b) This section shall become inoperative on July 1, 2011, and, as
of January 1, 2012, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2012, deletes or
extends the dates on which it becomes inoperative and is repealed.
14302. Except as provided in Section 14490, the duration of initial
contracts entered into pursuant to this chapter shall be for a
maximum of one year and of renewed contracts for a maximum of five
years.
14302.1. Once it is determined that a contract shall be renewed
pursuant to the provisions of this chapter with a prepaid health
plan, by the state agency responsible for negotiating these
contracts, the agency shall, no later than 25 working days prior to
the expiration date of the existing contract or immediately, if that
date has passed, draft an extension of the existing contract for a
period not to exceed two calendar months. Such a contract extension
shall contain the same terms as the prior existing contract except
for the contract's expiration date. The contract extension shall be
for a period of time not to exceed two months from the termination
date of the original contract.
The state agency responsible for negotiating the contract shall
simultaneously submit to each federal and state agency required to
approve a contract extension, a draft of the contract for extension
no later than 20 working days prior to the expiration date of the
prior existing contract.
Each state agency to which an extension for contract has been
submitted shall approve or disapprove the extension no later than 10
working days after receipt of the contract.
In the course of any contract negotiations, the responsible state
agency shall encourage the participation of other involved state and
federal agencies in the negotiation process and shall cooperate with
those agencies and with the contractor, or proposed contractor, to
seek the resolution of any obstacles to contractual agreement.
No extension shall become effective until and unless federal
approval is received indicating that federal funds will be available
for services provided under the Medi-Cal program during the period of
the contract extension.
These contract extensions shall remain in force and effect until
such time as:
(1) The contract expires because the extension date has been
reached.
(2) The contract for renewal is entered into and is in force and
effect.
(3) The state agency responsible for negotiating the contract
determines not to contract or renew a contract with the provider and
notifies the provider in writing to that effect.
(4) The state agency responsible for negotiating the contract
terminates the contract in accordance with Section 14304.
When contract renewals are entered into, the effective date of the
contract shall be the termination date of the prior contract, not
the ending date of any contract extension. The state agency
responsible for negotiating the contract, once a new contract is
finalized, shall retroactively make adjustments in any amounts paid
under the contract extension to reflect the new terms and rates of
reimbursements as provided in the new contract.
It is the intent of the Legislature to provide for the payment of
services provided for under this chapter in a timely and efficient
manner. Nothing in this chapter shall be construed as to hinder,
prohibit, or interfere with the negotiating and contract process of
the responsible state agency and provider.
The provisions of this section shall apply only to those instances
in which both parties have reason to believe that their contract
renewal process will not be completed by the termination date of the
contract.
14303. No contract between the department and the prepaid health
plan shall be amended without the public notice and if necessary the
holding of a public hearing as required in Section 14300 if such
amendments make any of the following changes in the contract:
(a) Reduction in the scope or availability of services.
(b) Enlargement of the service area.
(c) Increase in the maximum enrollment permitted under the
contract.
(d) Any other change in the plan's organization, operation, or
delivery of services which the director determines will have a
substantial impact on the ability of enrollees to obtain health care
services.
14303.1. The department shall have authority to amend a prepaid
health plan contract in accordance with the terms of a merger of a
prepaid health plan with another organization or organizations other
than the plan's subsidiary corporation, its parent corporation, or
another subsidiary of its parent corporation, provided the surviving
organization meets the following conditions:
(a) The surviving organization assures the continued and
accessible delivery of health care services to enrollees.
(b) The plans concerned have satisfactorily demonstrated the
fiscal and administrative soundness of the newly proposed
organization.
(c) The enrollees of the plans concerned are informed of the
impending merger, any resulting changes in the service area or
delivery of health care services, and such other information required
by subdivision (a) of Section 14406 at least 30 days in advance of
the merger.
(d) The enrollees of the plans concerned are given the option of
disenrolling for any cause within 60 days following the effective
date of the merger.
(e) Public notice is given and if necessary a public hearing is
held as required by Section 14300.
(f) The organization meets such other requirements as deemed
necessary by the department in order to carry out the purpose of this
chapter.
14303.2. The department shall have authority to amend a prepaid
health plan contract in accordance with the terms of the
reorganization of a prepaid health plan or a merger of the plan with
its subsidiary corporation, its parent corporation, or another
subsidiary of its parent corporation, provided the following
conditions are met:
(a) The resulting or surviving organization assures the continued
and accessible delivery of health care services to enrollees.
(b) The plan has satisfactorily demonstrated the fiscal and
administrative soundness of the newly proposed organization.
(c) If the proposed reorganization or merger results in any change
of the plan's service area or delivery of health care services, or
if the director otherwise deems it to be appropriate, the following
additional conditions shall be met:
(1) Public notice is given and if necessary a public hearing is
held as required by Section 14300.
(2) The enrollees of the plan are informed of the impending
reorganization or merger, any resulting changes in the service area
or delivery of health care services, and such other information
required by subdivision (a) of Section 14406 at least 30 days in
advance of the reorganization or merger.
(3) The enrollees of the plan are given the option of disenrolling
for any cause within 60 days following the effective date of the
reorganization or merger.
(d) The plan meets such other requirements as deemed necessary by
the department in order to carry out the purpose of this chapter.
14303.3. The department shall renew a contract unless good cause is
shown for nonrenewal.
14304. (a) The director shall terminate a contract with a prepaid
health plan or a Medi-Cal managed health care plan if he or she finds
that the standards prescribed in this chapter, the regulations, or
the contract are not being complied with, that claims accrued or to
accrue have not or will not be recompensed, or for other good cause
shown. Good cause includes, but is not necessarily limited to, three
repeated and uncorrected findings of serious deficiencies that have
the potential to endanger patient care, as defined by the department
in accordance with this section, identified in the medical audits
conducted by the department. Except in the event that the director
determines there is an immediate threat to the health of Medi-Cal
beneficiaries enrolled in the plan, at the request of the plan, the
department shall hold a public hearing to commence 30 days after
notice of intent to terminate the contract has been received by the
plan. The department shall present evidence at the hearing showing
good cause for the termination. The department shall assign an
administrative law judge who shall provide a written recommendation
to the department on the termination of the contract within 30 days
after conclusion of the hearing. Reasonable notice of the hearing
shall be given to the plan, to Medi-Cal beneficiaries enrolled in the
plan, and others who may be directly interested, including any other
persons and organizations as the director may deem necessary. The
notice shall state the effective date of, and the reason for, the
termination.
(b) In lieu of contract termination specified in subdivision (a),
the director shall have the power and authority to take one or more
of the following sanctions against a contractor for noncompliance
with the findings by the director as specified in subdivision (a):
(1) Suspend enrollment and marketing activities.
(2) Require the contractor to suspend or terminate contractor
personnel or subcontractors.
(3) Impose civil penalties not to exceed ten thousand dollars
($10,000) per violation pursuant to regulations adopted by the
director. Unless imposed in error, penalties shall not be returned to
the plan.
(4) Make one or more of the temporary suspension orders set out in
subdivision (d).
(5) Take other appropriate action as determined necessary by the
department.
The director shall give reasonable notice of his or her intention
to apply any of the sanctions authorized by this subdivision to the
plan and others who may be directly interested, including any other
persons and organizations as the director may deem necessary. The
notice shall include the effective date, the duration of, and the
reason for each sanction proposed by the director.
(c) Notwithstanding subdivision (b), the director shall terminate
a contract with a prepaid health plan which the United States
Secretary of Health and Human Services has determined does not meet
the requirements for participation in the medicaid program contained
in Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title
42 of the United States Code.
(d) The department may make one or more of the following temporary
suspension orders as an immediate sanction: temporarily suspend
enrollment activities, temporarily suspend marketing activities,
require the contractor temporarily to suspend specified personnel of
the contractor, or require the contractor temporarily to suspend
participation by a specified subcontractor. The temporary suspension
orders must be effective no earlier than 20 days after the notice
specified in subdivision (b).
If the department issues a temporary suspension order as an
immediate sanction, it shall notify the contractor of the nature and
effective date of the temporary suspension and at the same time shall
serve the provider with an accusation. Upon receipt of a notice of
defense filed by the contractor, the department shall within 15 days
set the matter for hearing, which shall be held as soon as possible,
but not later than 30 days after receipt of the notice of hearing by
the contractor. The hearing may be continued at the request of the
contractor if a continuance is necessary to permit presentation of an
adequate defense. The temporary suspension order shall remain in
effect until the hearing is completed and the department has made a
final determination on the merits. However, the temporary suspension
order shall be deemed vacated if the director fails to make a final
determination on the merits within 60 days after the original hearing
has been completed.
(e) A contractor may request a hearing in connection with any
sanctions applied pursuant to subdivision (b), other than those
contained in a temporary suspension order, within 15 working days
after the notice of the effective date of the sanctions has been
given, by sending a letter so stating to the address specified in the
notice. The department shall stay implementation of the sanction
upon receipt of the request for a hearing. Implementation of the
sanction shall remain stayed until the effective date of the final
decision of the department.
(f) Except as otherwise provided in this section, all hearings to
review the imposition of sanctions, including temporary suspension
orders, shall be held pursuant to the procedures set forth in Section
100171 of the Health and Safety Code.
(g) The director may collect civil penalties by withholding the
amount from capitation owed to the plan.
14304.5. Each prepaid health plan shall provide directly or through
subcontractors, not less than the basic scope of health care
benefits as defined in Section 14256. The director shall establish
the scope and duration of such services and may require other
services listed in Section 14053 be provided on a risk or nonrisk
basis. The director shall encourage the prepaid health plan to
provide all of the services enumerated in Section 14053 on a prepaid
basis. When mutually agreeable to the prepaid health plan, the
department, and the hospital involved, and provided that the
confidentiality of the selected hospital contracting rates negotiated
pursuant to Chapter 7 (commencing with Section 14081) is maintained
by all parties, contracts entered into by the department pursuant to
this chapter may provide for alternative arrangements in any or all
of a prepaid health plan's Medi-Cal service area for the payment of
inpatient hospital services using Medi-Cal hospital inpatient rates.
Subject to prior approval by the director, any additional services
other than those listed in Section 14053 may be provided at
reasonable cost to Medi-Cal enrollees, provided the enrollees are
notified of services for which they will be charged and the amount of
the charge prior to rendering such services.
14305. The department may limit the scope of health care benefits
provided by a prepaid health plan under this chapter to exclude the
care of illness or injury which results from or is greatly aggravated
by, a catastrophic occurrence, including, but not limited to, an act
of war, declared or undeclared, and which occurs subsequent to
enrollment in the prepaid health plan.
14308. (a) Each prepaid health plan shall furnish to the director
such information and reports as required by Title XIX of the federal
Social Security Act.
(b) The director may require a prepaid health plan to provide the
director with information and reports which are furnished by the
prepaid health plan to the Director of the Department of Managed
Health Care pursuant to the provisions of Chapter 2.2 (commencing
with Section 1340), Division 2, of the Health and Safety Code, the
Knox-Keene Health Care Service Plan Act of 1975, or to the Insurance
Commissioner pursuant to the provisions of Chapter 11A (commencing
with Section 11491) of Part 2 of Division 2 of the Insurance Code, as
appropriate.
(c) The director may, by regulation, require plans to furnish
statistical information to the extent such information is necessary
for the department to establish rates of payment pursuant to Section
14301 and to provide reports pursuant to Section 14313. The
department shall, to the extent feasible, accept this information in
a form which is consistent with reports required to be provided
pursuant to the Knox-Keene Health Care Service Plan Act of 1975, or
to Chapter 11A (commencing with Section 11491) of Part 2 of Division
2 of the Insurance Code, as appropriate. In the case of a hospital
based plan which is a health maintenance organization qualified
pursuant to Title XIII of the federal Public Health Service Act, and
which has more than one million enrollees, of whom less than 10
percent are Medi-Cal enrollees, information required pursuant to this
subdivision shall consist of reports required to be made to the
Department of Health, Education and Welfare pursuant to Title XIII of
the federal Public Health Service Act.
14309. The department shall provide for a continuing study of the
quality of care and services resulting from the operation of this
chapter and for surveys and reports on prepaid health plans. With
respect to such plans contracted for under this chapter, the
department may contract with professional organizations for studies
and reports of the experience of such plans as to the standards of
care available to eligible persons, gross and net costs,
administrative costs, benefits, utilization of benefits, the portion
of actual personal expenditures of eligible persons for health care
which are being met by prepaid benefits, and the methods of
evaluating and improving the quality of, and controlling the costs
of, health care provided under such contracts. However, this section
shall not be construed to require any prepaid health plan to provide
accounting data or statistical data not required by regulations
adopted by the director.
14311. Prepaid health plans, the services they provide, and the
persons receiving these services shall not be subject to the
limitations on services set forth in Section 14133, 14133.1,
14133.25, or 14133.3 or subdivisions (c), (d), and (e) of Section
14120, or subdivision (c) of Section 14105. Notwithstanding this
section, the requirements set forth in Section 14301 for the
determination of prospective per capita rates of payment for services
provided under this chapter to Medi-Cal beneficiaries enrolled in a
prepaid health plan shall remain unchanged.
Nothing in this section or in Article 7 (commencing with Section
14490) shall relieve the director of his responsibility to provide
the benefits provided for in Section 14132. Where a contract between
the department and a prepaid health plan does not require the prepaid
health plan to provide a benefit to which a Medi-Cal recipient is
otherwise entitled, the recipient shall be entitled to receive such
benefit pursuant to Chapter 7 (commencing with Section 14000) of this
part.
14312. The director shall adopt all necessary rules and regulations
to carry out the provisions of this chapter. In adopting such rules
and regulations, the director shall be guided by the needs of
eligible persons as well as prevailing practices in the delivery of
health care on a prepaid basis. Except where otherwise required by
federal law or by this part, the rules and regulations shall be
consistent with the requirements of the Knox-Keene Health Care
Service Plan Act of 1975, or the provisions of Chapter 11A
(commencing with Section 11491) of Part 2 of Division 2 of the
Insurance Code, as appropriate.
14314. The director may recover a due and payable overpayment made
to a prepaid health plan by means of a repayment agreement executed
between such prepaid health plan and the director, and by any other
means available at law.
14315. When it has been determined that a prepaid health plan has
received an overpayment which is due and payable, the director may
recover such overpayment by offset against any amount currently due
to the prepaid health plan under the provisions of this chapter or
Chapter 7 (commencing with Section 14000) of this part.
14316. Notwithstanding any other provisions of law, contracts with
plans which are entered into, renewed, or amended pursuant to this
article may include one or more of the following:
(1) A provision to the effect that if the rate for a plan is less
than 90 percent of the estimated Medi-Cal fee-for-service cost, the
plan's rate shall be increased by one-half the difference between the
rate fixed and 90 percent of the estimated fee-for-service cost. The
rate shall not, however, be less than 85 percent of the estimated
fee-for-service costs.
(2) Guaranteed capitation payments for Medi-Cal beneficiaries, who
are entitled to benefits under Title IV of the Social Security Act,
for a period of six months or less, even if the eligibility for
benefits of such beneficiaries terminates prior to the end of the
guaranteed payment period. Each guaranteed payment period shall be
calculated beginning on the date a beneficiary's enrollment takes
effect.
(3) Benefits in addition to those listed under Section 14132, as
long as the provision of such additional services permits plans to
remain more cost effective than fee-for-service reimbursement.
