Bills

AB 2466: Medi-Cal managed care: network adequacy standards.

Session Year: 2023-2024
House: Assembly
Latest Version Date: 2024-04-18

Current Status:

Failed

(2024-05-16: In committee: Held under submission.)

Introduced

In Committee

First Chamber

In Committee

Second Chamber

Enacted

What does this bill do?

The bill tightens how the state judges and enforces Medi‑Cal managed care plans’ access and appointment rules by deeming a plan out of compliance when fewer than 85% of its network providers offer timely appointments or when the department finds evidence of access failures, and allows sanctions or contract termination. It also requires annual renewals of any approved alternative access standard with proof of recruitment efforts, expands reporting and EQRO data to show urgent/nonurgent and new/returning patient access, mandates direct testing (such as secret‑shopper checks) of appointment availability, and requires public annual updates on plans of correction.

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Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Existing law authorizes the Director of Health Care Services to terminate a contract or impose sanctions if the director finds that a Medi-Cal managed care plan fails to comply with contract requirements, state or federal law or regulations, or the state plan or approved waivers, or for other good cause.

Existing law establishes, until January 1, 2026, certain time and distance and appointment time standards for specified Medi-Cal managed care covered services, consistent with federal regulations relating to network adequacy standards, to ensure that those services are available and accessible to enrollees of Medi-Cal managed care plans in a timely manner, as specified.

Under this bill, a Medi-Cal managed care plan would be deemed to be not in compliance with the appointment time standards if either (1) fewer than 85% of the network providers had an appointment available within the standards or (2) the department receives information establishing that the plan was unable to deliver timely, available, or accessible health care services to enrollees, as specified. Under the bill, failure to comply with the appointment time standard may result in contract termination or the issuance of sanctions as described above.

Existing law requires a Medi-Cal managed care plan to submit a request for alternative access standards if the plan cannot meet the time or distance standards. Under existing law, a plan is not required to submit a previously approved request on an annual basis, unless the plan requires modifications to its request. Existing law requires the plan to submit this previously approved request at least every 3 years for review and approval when the plan is required to demonstrate compliance with time or distance standards.

This bill would instead require a plan that has a previously approved alternative access standard to submit a renewal request on an annual basis, explaining which efforts the plan has made in the previous 12 months to mitigate or eliminate circumstances that justify the use of an alternative access standard, as specified. The bill would require the department to consider the reasonableness and effectiveness of the mitigating efforts as part of the renewal decision.

Existing law requires a Medi-Cal managed care plan to demonstrate, annually and upon request by the department, how the plan arranged for the delivery of Medi-Cal covered services to Medi-Cal enrollees, with a report measuring compliance, as specified. Existing law requires the department to annually evaluate a plans compliance with the standards and to annually publish a report.

This bill would, effective for contract periods commencing on or after July 1, 2025, require the plans and departments reports to include certain information and require the departments evaluation to be performed using a direct testing method, as specified. Under the bill, failure to comply with these provisions may result in contract termination or the issuance of sanctions.

Existing law, as part of the federally required external quality review organization (EQRO) review of Medi-Cal managed care plans, requires the EQRO designated by the department to compile certain data, by plan and by county, for the purpose of informing the status of implementation of the above-described standards.

This bill would require that the data include, effective for contract periods commencing on or after July 1, 2025, the number of requests for alternative access standards, categorized by new and returning patients, and the number of allowable exceptions for the appointment time standards, categorized by urgent and nonurgent appointment types and by new and returning patients.

Under existing law, in lieu of contract termination, the director has the power and authority to require or impose a plan of correction and issue one or more of specified sanctions against a contractor for findings of noncompliance or good cause.

This bill would require the department to monitor any plan of correction imposed by the director, with progress reported publicly no less than annually for the duration of the plan of correction.

Existing law authorizes the director to impose monetary sanctions based on any of specified circumstances, including, among others, a contractors failure to comply with network adequacy standards, failure to submit timely and accurate network provider data, or failure to timely and accurately process grievances or appeals. data.

This bill would would, for purposes of the particular circumstance described above, set forth definitions for the terms of timely and accurate network provider data.

This bill would require the department to monitor any plan of correction imposed by the director, with progress reported publicly no less than annually for the duration of the plan of correction.

This bill would set forth definitions for the terms of timely and accurate network provider data.

Existing law establishes various state and local programs for the provision of mental health services within the jurisdiction of the State Department of Health Care Services, the State Department of Public Health, the California Behavioral Health Planning Council, the Department of Health Care Access and Information, and county public health or behavioral health departments, among other entities. Under existing law, those programs, services, and provisions include, among others, the Mental Health Services Act, the Lanterman-Petris-Short Act, the Children and Youth Behavioral Health Initiative, the Behavioral Health Continuum Infrastructure Program, the Licensed Mental Health Service Provider Education Program, and Medi-Cal specialty mental health services.This bill would state the intent of the Legislature to enact legislation relating to mental health.

Version:

The people of the State of California do enact as follows:SECTION 1.Section 14197 of the Welfare and Institutions Code is amended to read:14197.

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

(b)Commencing January 1, 2018, for covered benefits under its contract, as applicable, a Medi-Cal managed care plan shall maintain a network of providers that are located within the following time or distance standards for the following services:

(1)For primary care, both adult and pediatric, 10 miles or 30 minutes from the beneficiarys place of residence.

(2)For hospitals, 15 miles or 30 minutes from the beneficiarys place of residence.

(3)For dental services provided by a Medi-Cal managed care plan, 10 miles or 30 minutes from the beneficiarys place of residence.

(4)For obstetrics and gynecology primary care, 10 miles or 30 minutes from the beneficiarys place of residence.

(c)Commencing July 1, 2018, for the covered benefits under its contracts, as applicable, a Medi-Cal managed care plan shall maintain a network of providers that are located within the following time or distance standards for the following services:

(1)For specialists, as defined in subdivision (i), adult and pediatric, including obstetric and gynecology specialty care, as follows:

(A)Up to 15 miles or 30 minutes from the beneficiarys place of residence for the following counties: Alameda, Contra Costa, Los Angeles, Orange, Sacramento, San Diego, San Francisco, San Mateo, and Santa Clara.

(B)Up to 30 miles or 60 minutes from the beneficiarys place of residence for the following counties: Marin, Placer, Riverside, San Joaquin, Santa Cruz, Solano, Sonoma, Stanislaus, and Ventura.

(C)Up to 45 miles or 75 minutes from the beneficiarys place of residence for the following counties: Amador, Butte, El Dorado, Fresno, Kern, Kings, Lake, Madera, Merced, Monterey, Napa, Nevada, San Bernardino, San Luis Obispo, Santa Barbara, Sutter, Tulare, Yolo, and Yuba.

(D)Up to 60 miles or 90 minutes from the beneficiarys place of residence for the following counties: Alpine, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Imperial, Inyo, Lassen, Mariposa, Mendocino, Modoc, Mono, Plumas, San Benito, Shasta, Sierra, Siskiyou, Tehama, Trinity, and Tuolumne.

(2)For pharmacy services, 10 miles or 30 minutes from the beneficiarys place of residence.

(3)For outpatient mental health services, as follows:

(B)Up to 30 miles or 60 minutes from the beneficiarys place of residence for the following counties: Marin, Placer, Riverside, San Joaquin, Santa Cruz, Solano, Sonoma, Stanislaus, and Ventura.

(4)(A)For outpatient substance use disorder services other than opioid treatment programs, as follows:

(i)Up to 15 miles or 30 minutes from the beneficiarys place of residence for the following counties: Alameda, Contra Costa, Los Angeles, Orange, Sacramento, San Diego, San Francisco, San Mateo, and Santa Clara.

(ii)Up to 30 miles or 60 minutes from the beneficiarys place of residence for the following counties: Marin, Placer, Riverside, San Joaquin, Santa Cruz, Solano, Sonoma, Stanislaus, and Ventura.

(iii)Up to 60 miles or 90 minutes from the beneficiarys place of residence for the following counties: Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Madera, Mariposa, Mendocino, Merced, Modoc, Monterey, Mono, Napa, Nevada, Plumas, San Benito, San Bernardino, San Luis Obispo, Santa Barbara, Shasta, Sierra, Siskiyou, Sutter, Tehama, Trinity, Tulare, Tuolumne, Yolo, and Yuba.

(B)For opioid treatment programs, as follows:

(ii)Up to 30 miles or 60 minutes from the beneficiarys place of residence for the following counties: Marin, Placer, Riverside, San Joaquin, Santa Cruz, Solano, Sonoma, Stanislaus, and Ventura.

(iii)Up to 45 miles or 75 minutes from the beneficiarys place of residence for the following counties: Amador, Butte, El Dorado, Fresno, Kern, Kings, Lake, Madera, Merced, Monterey, Napa, Nevada, San Bernardino, San Luis Obispo, Santa Barbara, Sutter, Tulare, Yolo, and Yuba.

(iv)Up to 60 miles or 90 minutes from the beneficiarys place of residence for the following counties: Alpine, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Imperial, Inyo, Lassen, Mariposa, Mendocino, Modoc, Mono, Plumas, San Benito, Shasta, Sierra, Siskiyou, Tehama, Trinity, and Tuolumne.

(d)(1)(A)A Medi-Cal managed care plan shall comply with the appointment time standards developed pursuant to Section 1367.03 of the Health and Safety Code, Section 1300.67.2.2 of Title 28 of the California Code of Regulations, subject to any authorized exceptions in Section 1300.67.2.2 of Title 28 of the California Code of Regulations, and the standards set forth in contracts entered into between the department and Medi-Cal managed care plans.

(B)Commencing July 1, 2018, subparagraph (A) applies to Medi-Cal managed care plans that are not, as of January 1, 2018, subject to the appointment time standards described in subparagraph (A).

(C)A Medi-Cal managed care plan shall be deemed to be not in compliance with the appointment time standards described in subparagraphs (A) and (B) if either of the following circumstances exists:

(i)Fewer than 85 percent of the network providers, as calculated by the evaluation in subdivision (g), for a specific network had a nonurgent or urgent appointment available within the appointment time standards. Noncompliance shall be identified using the information reported to the department pursuant to subdivision (g).

(ii)The department receives information establishing that the Medi-Cal managed care plan was unable to deliver timely, available, or accessible health care services to enrollees. The department may consider any of the following factors in evaluating whether each instance identified is part of a pattern of noncompliance that is reasonably related:

(I)Each instance is a violation of the same standard described in subparagraph (A) or (B).

(II)Each instance involves the same network.

(III)Each instance involves the same provider group or subcontracted plan.

(IV)Each instance involves the same provider type.

(V)Each instance involves the same network provider.

(VI)Each instance occurs in the same region. For purposes of this subclause, region is a county in which a network provider practices and the counties next to or adjoining that county.

(VII)The number of enrollees in the Medi-Cal managed care plans network and the total number of instances identified as part of a pattern.

(VIII)Whether each instance occurred within the same 12-month period.

(IX)Whether each instance involves the same category of health care services.

(D)Failure to comply with this paragraph may result in contract termination or the issuance of sanctions pursuant to Section 14197.7.

(2)A Medi-Cal managed care plan shall comply with the following availability standards for skilled nursing facility services and intermediate care facility services, as follows:

(A)Within five business days of the request for the following counties: Alameda, Contra Costa, Los Angeles, Orange, Sacramento, San Diego, San Francisco, San Mateo, and Santa Clara.

(B)Within seven business days of the request for the following counties: Marin, Placer, Riverside, San Joaquin, Santa Cruz, Solano, Sonoma, Stanislaus, and Ventura.

(C)Within 14 calendar days of the request for the following counties: Amador, Butte, El Dorado, Fresno, Kern, Kings, Lake, Madera, Merced, Monterey, Napa, Nevada, San Bernardino, San Luis Obispo, Santa Barbara, Sutter, Tulare, Yolo, and Yuba.

(D)Within 14 calendar days of the request for the following counties: Alpine, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Imperial, Inyo, Lassen, Mariposa, Mendocino, Modoc, Mono, Plumas, San Benito, Shasta, Sierra, Siskiyou, Tehama, Trinity, and Tuolumne.

(3)A county Drug Medi-Cal organized delivery system shall provide an appointment within three business days to an opioid treatment program.

(4)A dental managed care plan shall provide an appointment within four weeks of a request for routine pediatric dental services and within 30 calendar days of a request for specialist pediatric dental services.

(e)The department may authorize a Medi-Cal managed care plan to use clinically appropriate video synchronous interaction, as defined in paragraph (5) of subdivision (a) of Section 2290.5 of the Business and Professions Code, as a means of demonstrating compliance with the time or distance standards established pursuant to this section, as defined by the department.

(f)(1)The department may develop policies for granting credit in the determination of compliance with time or distance standards established pursuant to this section when Medi-Cal managed care plans contract with specified providers to use clinically appropriate video synchronous interaction, as defined in paragraph (5) of subdivision (a) of Section 2290.5 of the Business and Professions Code.

(2)The department, upon request of a Medi-Cal managed care plan, may authorize alternative access standards for the time or distance standards established under this section if either of the following occur:

(A)The requesting Medi-Cal managed care plan has exhausted all other reasonable options to obtain providers to meet the applicable standard.

(B)The department determines that the requesting Medi-Cal managed care plan has demonstrated that its delivery structure is capable of delivering the appropriate level of care and access.

(3)(A)If a Medi-Cal managed care plan cannot meet the time or distance standards set forth in this section, the Medi-Cal managed care plan shall submit a request for alternative access standards to the department, in the form and manner specified by the department.

(B)An alternative access standard request may be submitted at the same time as the Medi-Cal managed care plan submits its annual demonstration of compliance with time or distance standards, if known at that time and at any time the Medi-Cal managed care plan is unable to meet time or distance standards.

(C)A Medi-Cal managed care plan that has a previously approved alternative access standard shall submit a renewal request to the department for review and approval on an annual basis. The request shall explain which efforts the Medi-Cal managed care plan has made in the previous 12 months to mitigate or eliminate circumstances that justify the use of an alternative access standard, including documentation of its efforts to recruit new providers into its network. The department shall consider the reasonableness and effectiveness of the mitigating efforts as part of the renewal decision.

(D)A Medi-Cal managed care plan shall close out any corrective action plan deficiencies in a timely manner to ensure beneficiary access is adequate and shall continually work to improve access in its provider network.

(4)A request for alternative access standards shall be approved or denied on a ZIP Code and provider type, including specialty type, basis by the department within 90 days of submission of the request. The Medi-Cal managed care plan shall also include a description of the reasons justifying the alternative access standards based on those facts and circumstances. Effective no sooner than contract periods commencing on or after July 1, 2020, the Medi-Cal managed care plan shall include a description on how the Medi-Cal managed care plan intends to arrange for beneficiaries to access covered services if the health care provider is located outside of the time or distance standards specified in subdivision (c). The department may stop the 90-day timeframe, on one or more occasions as necessary, in the event of an incomplete submission or to obtain additional information from the Medi-Cal managed care plan requesting the alternative access standards. Upon submission of sufficient additional information to the department, the 90-day timeframe shall resume at the same point in time it was previously stopped, except if there is less than 30 days remaining in which case the department shall approve or deny the request within 30 days of submission of sufficient additional information. If the department rejects the Medi-Cal managed care plans proposal, the department shall inform the Medi-Cal managed care plan of the departments reason for rejecting the proposal. The department shall post any approved alternative access standards on its internet website.

(5)As part of the departments evaluation of a request submitted by a Medi-Cal managed care plan to utilize an alternative access standard pursuant to this subdivision, the department shall evaluate and determine whether the resulting time or distance is reasonable to expect a beneficiary to travel to receive care.

(6)The department may authorize a Medi-Cal managed care plan to use clinically appropriate video synchronous interaction, as defined in paragraph (5) of subdivision (a) of Section 2290.5 of the Business and Professions Code, as part of an alternative access standard request.

(g)(1)Effective for contract periods commencing on or after July 1, 2018, a Medi-Cal managed care plan shall, on an annual basis and when requested by the department, demonstrate to the department the Medi-Cal managed care plans compliance with the time or distance and appointment time standards developed pursuant to this section. The report shall measure compliance separately for adult and pediatric services for primary care, behavioral health, and core specialist services.

(2)Effective for contract periods commencing on or after July 1, 2020, the Medi-Cal managed care plan shall demonstrate, on an annual basis, and when requested by the department, to the department how the Medi-Cal managed care plan arranged for the delivery of Medi-Cal covered services to Medi-Cal enrollees, such as through the use of either Medi-Cal covered transportation or clinically appropriate video synchronous interaction, as specified in paragraph (6) of subdivision (f), if the enrollees of a Medi-Cal managed care plan needed to obtain health care services from a health care provider or a facility located outside of the time or distance standards, as specified in subdivision (c).

The report shall measure compliance separately for adult and pediatric services for primary care, behavioral health, and core specialist services.

(3)Effective for contract periods commencing on or after July 1, 2018, the department shall evaluate on an annual basis a Medi-Cal managed care plans compliance with the time or distance and appointment time standards implemented pursuant to this section. This evaluation may include, but need not be limited to, annual and random surveys, investigation of complaints, grievances, or other indicia of noncompliance. Nothing in this subdivision shall be construed to limit the appeal rights of a Medi-Cal managed care plan under its contracts with the department.

(4)The department shall publish annually on its internet website a report that details the departments findings in evaluating a Medi-Cal managed care plans compliance under paragraph (2). At a minimum, the department shall specify in this report those Medi-Cal managed care plans, if any, that were subject to a corrective action plan due to noncompliance with the time or distance and appointment time standards implemented pursuant to this section during the applicable year and the basis for the departments finding of noncompliance. The report shall include a Medi-Cal managed care plans response to the corrective plan, if available.

(5)(A)Effective for contract periods commencing on or after July 1, 2025, all of the following shall apply:

(i)The report created by a Medi-Cal managed care plan as described in paragraph (2) shall measure all of the following:

(i)The report described in paragraph (1) shall measure both of the following:

(I)Compliance separately for new and returning patients.

(II)Compliance with a 48-hour urgent care standard for behavioral health appointments.

(III)Compliance with access standards for new and returning patients.

(ii)The evaluation by the department as described in paragraph (3) shall be performed using a direct testing method, which may include, but need not be limited to, a secret shopper method. The direct testing shall be used to evaluate compliance with the appointment time standards set forth in subdivision (d) for both new and followup appointments. To determine compliance with the urgent care standard, the evaluation shall measure the networks ability to provide urgent care within 48 hours pursuant to Section 1367.03 of the Health and Safety Code and Section 1300.67.2.2(c)(5)(A) of Title 28 of the California Code of Regulations. The evaluation shall also utilize a method for accounting for and reporting the number of providers who are unavailable or unreachable for purposes of the evaluation.

(iii)The departments annual report described in paragraph (4) shall report information on unavailable or unreachable providers and how each plan will utilize this information to regularly maintain or update its provider directories.

(B)Failure to comply with this paragraph may result in contract termination or the issuance of sanctions pursuant to Section 14197.7.

(h)The department shall consult with Medi-Cal managed care plans, including dental managed care plans, mental health plans, and Drug Medi-Cal Organized Delivery System programs, health care providers, consumers, providers and consumers of long-term services and supports, and organizations representing Medi-Cal beneficiaries in the implementation of the requirements of this section.

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

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

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

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

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

(D)Article 2.82 (commencing with Section 14087.98).

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

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

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

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

(I)A county Drug Medi-Cal organized delivery system authorized under the California Medi-Cal 2020 Demonstration pursuant to Article 5.5 (commencing with Section 14184) or a successor demonstration or waiver, as applicable.

(2)Specialist means any of the following:

(A)Cardiology/interventional cardiology.

(B)Nephrology.

(C)Dermatology.

(D)Neurology.

(E)Endocrinology.

(F)Ophthalmology.

(G)Ear, nose, and throat/otolaryngology.

(H)Orthopedic surgery.

(I)Gastroenterology.

(J)Physical medicine and rehabilitation.

(K)General surgery.

(L)Psychiatry.

(M)Hematology.

(N)Oncology.

(O)Pulmonology.

(P)HIV/AIDS specialists/infectious diseases.

(j)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department, without taking any further regulatory action, may implement, interpret, or make specific this section by means of all-county letters, plan letters, plan or provider bulletins, or similar instructions until the time regulations are adopted.

(k)The department shall seek any federal approvals it deems necessary to implement this section. This section shall be implemented only to the extent that any necessary federal approvals are obtained and federal financial participation is available and is not otherwise jeopardized.

(l)This section shall remain in effect only until January 1, 2026, and as of that date is repealed, unless a later enacted statute that is enacted before January 1, 2026, deletes or extends that date.

SEC. 2.Section 14197.05 of the Welfare and Institutions Code is amended to read:14197.05.

(a)As part of the federally required external quality review organization (EQRO) review of Medi-Cal managed care plans in the annual detailed technical report required by Section 438.364 of Title 42 of the Code of Federal Regulations, effective for contract periods commencing on or after July 1, 2018, the EQRO designated by the department shall compile the data described in subdivision (b), by plan and by county, for the purpose of informing the status of implementation of the requirements of Section 14197.

(b)(1)The information compiled by the EQRO shall include all of the following:

(A)Number of requests for alternative access standards in the plan service area for time and distance, categorized by provider types, including specialists, by adult and pediatric, and, effective for contract periods commencing on or after July 1, 2025, by new and returning patients.

(B)Number of allowable exceptions for the appointment time standard, if known, categorized by provider types, including specialists, by adult and pediatric, and, effective for contract periods commencing on or after July 1, 2025, by urgent and nonurgent appointment types and by new and returning patients.

(C)Distance and driving time between the nearest network provider and ZIP Code of the beneficiary furthest from that provider for requests for alternative access standards.

(D)Approximate number of beneficiaries impacted by alternative access standards or allowable exceptions.

(E)Percentage of providers in the plan service area, by provider and specialty type, that are under a contract with a Medi-Cal managed care plan.

(F)The number of requests for alternative access standards approved or denied by ZIP Code and provider and specialty type, and the reasons for the approval or denial of the request for alternative access standards. If an approval is authorized, the reasons for approval shall identify whether the approval was granted for either of the following reasons:

(i)A provider was not located in the requested ZIP Code.

(ii)The Medi-Cal managed care plan was unable to enter into a contract with a provider or providers in the requested ZIP Code.

(G)The process of ensuring out-of-network access.

(H)Descriptions of contracting efforts and explanation for why a contract was not executed.

(I)Timeframe for approval or denial of a request for alternative access standards by the department.

(J)Consumer complaints, if any.

(2)The information described in paragraph (1) shall be presented in a chart format to enable comparison among counties, provider types, and plans.

(c)The EQRO shall develop a methodology to assess information that will help inform the experience of individuals placed in a skilled nursing facility or intermediate care facility and the distance that they are placed from their place of residence. The EQRO shall report the results from the use of this methodology in the EQRO annual Medi-Cal managed care plan technical report.

(d)The department shall comply with the requirements of subsection (c) of Section 438.364 of Title 42 of the Code of Federal Regulations in making the information described in this section publicly available.

SEC. 3.Section 14197.7 of the Welfare and Institutions Code is amended to read:14197.7.(a)Notwithstanding any other law, if the director finds that any entity that contracts with the department for the delivery of health care services (contractor), including a Medi-Cal managed care plan or a prepaid health plan, fails to comply with contract requirements, state or federal law or regulations, or the state plan or approved waivers, or for other good cause, the director may terminate the contract or impose sanctions as set forth in this section. Good cause includes, but is not limited to, a finding of deficiency that results in improper denial or delay in the delivery of health care services, potential endangerment to patient care, disruption in the contractors provider network, failure to approve continuity of care, that claims accrued or to accrue have not or will not be recompensed, or a delay in required contractor reporting to the department.(b)The director may identify findings of noncompliance or good cause through any means, including, but not limited to, findings in audits, investigations, contract compliance reviews, quality improvement system monitoring, routine monitoring, facility site surveys, encounter and provider data submissions, grievances and appeals, network adequacy reviews, assessments of timely access requirements, reviews of utilization data, health plan rating systems, fair hearing decisions, complaints from beneficiaries and other stakeholders, whistleblowers, and contractor self-disclosures.(c)Except when the director determines that there is an immediate threat to the health of Medi-Cal beneficiaries receiving health care services from the contractor, at the request of the contractor, the department shall hold a public hearing to commence 30 days after notice of intent to terminate the contract has been received by the contractor. 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 contractor, Medi-Cal beneficiaries receiving services through the contractor, and other interested parties, 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.(d)(1)In lieu of contract termination, the director shall have the power and authority to require or impose a plan of correction and issue one or more of the following sanctions against a contractor for findings of noncompliance or good cause, including, but not limited to, those specified in subdivision (a):(A)Temporarily or permanently suspend enrollment and marketing activities.(B)Require the contractor to suspend or terminate contractor personnel or subcontractors.(C)Issue one or more of the temporary suspension orders set forth in subdivision (j).(D)Impose temporary management consistent with the requirements specified in Section 438.706 of Title 42 of the Code of Federal Regulations.(E)Suspend default enrollment of enrollees who do not select a contractor for the delivery of health care services.(F)Impose civil monetary sanctions consistent with the dollar amounts and violations specified in Section 438.704 of Title 42 of the Code of Federal Regulations, as follows:(i)A limit of twenty-five thousand dollars ($25,000) for each determination of the following:(I)The contractor fails to provide medically necessary services that the contractor is required to provide, under law or under its contract with the department, to an enrollee covered under the contract.(II)The contractor misrepresents or falsifies information to an enrollee, potential enrollee, or health care provider.(III)The contractor distributes directly, or indirectly through an agent or independent contractor, marketing materials that have not been approved by the state or that contain false or materially misleading information.(ii)A limit of one hundred thousand dollars ($100,000) for each determination of the following:(I)The contractor conducts any act of discrimination against an enrollee on the basis of their health status or need for health care services. This includes termination of enrollment or refusal to reenroll a beneficiary, except as permitted under the Medicaid program, or any practice that would reasonably be expected to discourage enrollment by beneficiaries whose medical condition or history indicates probable need for substantial future medical services.(II)The contractor misrepresents or falsifies information that it furnishes to the federal Centers for Medicare and Medicaid Services or to the department.(iii)A limit of fifteen thousand dollars ($15,000) for each beneficiary the director determines was not enrolled because of a discriminatory practice under clause (i) of subparagraph (B). This sanction is subject to the overall limit of one hundred thousand dollars ($100,000) under clause (ii).(2)Any plan of correction imposed by the director pursuant to paragraph (1) shall be monitored by the department and progress reported publicly no less than annually for the duration of the plan of correction.(e)(1)Notwithstanding the monetary sanctions imposed for the violations set forth in subparagraph (F) of paragraph (1) of subdivision (d), the director may impose monetary sanctions in accordance with this section based on any of the following:(A)The contractor violates any federal or state statute or regulation.(B)The contractor violates any provision of its contract with the department.(C)The contractor violates any provision of the state plan or approved waivers.(D)The contractor fails to meet quality metrics or benchmarks established by the department. Any changes to the minimum quality metrics or benchmarks made by the department that are effective on or after January 1, 2020, shall be established in advance of the applicable reporting or performance measurement period, unless required by the federal government.(E)The contractor fails to demonstrate that it has an adequate network to meet anticipated utilization in its service area.(F)The contractor fails to comply with network adequacy standards, including, but not limited to, time and distance, timely access, and provider-to-beneficiary ratio requirements pursuant to standards and formulae that are set forth in federal or state law, regulation, state plan or contract, and that are posted in advance to the departments internet website.(G)The contractor fails to comply with the requirements of a corrective action plan.(H)The contractor fails to submit timely and accurate network provider data.(I)The director identifies deficiencies in the contractors delivery of health care services.(J)The director identifies deficiencies in the contractors operations, including the timely payment of claims.(K)The contractor fails to comply with reporting requirements, including, but not limited to, those set forth in Section 53862 of Title 22 of the California Code of Regulations.(L)The contractor fails to timely and accurately process grievances or appeals.(2)For purposes of this subdivision, the following definitions apply:(A)Timely means no less than annually, unless otherwise specified by any other applicable law.(B)Accurate network provider data includes, but is not limited to, information made available to the plan through the evaluation described in paragraphs (3) and (5) of subdivision (g) of Section 14197 regarding unavailable or unreachable providers.(f)(1)Monetary sanctions imposed pursuant to subdivision (e) may be separately and independently assessed and may also be assessed for each day the contractor fails to correct an identified deficiency. For a deficiency that impacts beneficiaries, each beneficiary impacted constitutes a separate violation. Monetary sanctions shall be assessed in the following amounts:(A)Up to twenty-five thousand dollars ($25,000) for a first violation.(B)Up to fifty thousand dollars ($50,000) for a second violation.(C)Up to one hundred thousand dollars ($100,000) for each subsequent violation.(2)For monetary sanctions imposed on a contractor that is funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n), the department shall calculate a percentage of the funds attributable to the contractor to be offset per month pursuant to paragraphs (2) to (4), inclusive, of subdivision (n) until the amount offset equals the amount of the penalty imposed pursuant to paragraph (1).(g)When assessing sanctions pursuant to this section, the director shall determine the appropriate amount of the penalty for each violation based upon one or more of the following nonexclusive factors:(1)The nature, scope, and gravity of the violation, including the potential harm or impact on beneficiaries.(2)The good or bad faith of the contractor.(3)The contractors history of violations.(4)The willfulness of the violation.(5)The nature and extent to which the contractor cooperated with the departments investigation.(6)The nature and extent to which the contractor aggravated or mitigated any injury or damage caused by the violation.(7)The nature and extent to which the contractor has taken corrective action to ensure the violation will not recur.(8)The financial status of the contractor, including whether the sanction will affect the ability of the contractor to come into compliance.(9)The financial cost of the health care service that was denied, delayed, or modified.(10)Whether the violation is an isolated incident.(11)The amount of the penalty necessary to deter similar violations in the future.(12)Any other mitigating factors presented by the contractor.(h)Except in exigent circumstances in which there is an immediate risk to the health of beneficiaries, as determined by the department, the director shall give reasonable written notice to the contractor of the intention to impose any of the sanctions authorized by this section 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 for, the duration of, and the reason for each sanction proposed by the director. A contractor may request the department to meet and confer with the contractor to discuss information and evidence that may impact the directors final decision to impose sanctions authorized by this section. The director shall grant a request to meet and confer prior to issuance of a final sanction if the contractor submits the request in writing to the department no later than two business days after the contractors receipt of the directors notice of intention to impose sanctions.(i)Notwithstanding subdivision (d), the director shall terminate a contract with a contractor that 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 XIX (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code.(j)(1)The department may make one or more of the following temporary suspension orders as an immediate sanction:(A)Temporarily suspend enrollment activities.(B)Temporarily suspend marketing activities.(C)Require the contractor to temporarily suspend specified personnel of the contractor.(D)Require the contractor to temporarily suspend participation by a specified subcontractor.(2)The temporary suspension orders shall be effective no earlier than 20 days after the notice specified in subdivision (k).(k)Prior to issuing a temporary suspension order, or temporarily withholding funds pursuant to subdivision (o), the department shall provide the contractor with a written notice. The notice shall state the departments intent to impose a temporary suspension or temporary withhold, and specify the nature and effective date of the temporary suspension or temporary withhold. The contractor shall have 30 calendar days from the date of receipt of the notice to file a written appeal with the department. Upon receipt of a written appeal 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. The department shall stay imposition of a temporary withhold, pursuant to subdivision (o), until the hearing is completed and the department has made a final determination on the merits.(l)(1)Except as provided in paragraph (2), a contractor may request a hearing in connection with any sanctions applied pursuant to subdivision (d) or (e) 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 collection of monetary sanctions upon receipt of the request for a hearing. Collection of the sanction shall remain stayed until the effective date of the final decision of the department.(2)With respect to mental health plans, the due process and appeals process specified in paragraph (4) of subdivision (b) of Section 14718 shall be made available in connection with any contract termination actions, temporary suspension orders, temporary withholds of funds pursuant to subdivision (o), and sanctions applied pursuant to subdivision (d) or (e).(m)Except as otherwise provided in this section, all hearings to review the imposition of sanctions, including temporary suspension orders, the withholding or offsetting of funds pursuant to subdivision (n), or the temporary withholding of funds pursuant to subdivision (o), shall be held pursuant to the procedures set forth in Section 100171 of the Health and Safety Code.(n)(1)If the director imposes monetary sanctions pursuant to this section on a contractor, except for a contractor described in paragraphs (2) to (4), inclusive, the amount of the sanction may be collected by withholding the amount from capitation or other associated payments owed to the contractor.(2)If the director imposes monetary sanctions on a contractor that is funded from the Mental Health Subaccount, the Mental Health Equity Subaccount, the Vehicle License Collection Account of the Local Revenue Fund, or the Mental Health Account, the director may offset the monetary sanctions from the respective account. The offset is subject to paragraph (2) of subdivision (q).(3)If the director imposes monetary sanctions on a contractor that is funded from the Behavioral Health Subaccount of the Local Revenue Fund 2011, the director may offset the monetary sanctions from that account from the distribution attributable to the applicable contractor. The offset is subject to paragraph (2) of subdivision (q).(4)If the director imposes monetary sanctions on a contractor that is funded from any other mental health or substance use disorder realignment funds from which the Controller is authorized to make distributions to the contractor, the director may offset the monetary sanctions from these funds if the funds described in paragraphs (2) and (3) are insufficient for the purposes described in this subdivision, as appropriate. The offset is subject to paragraph (2) of subdivision (q).(o)(1)Whenever the department determines that a mental health plan or any entity that contracts with the department to provide Drug Medi-Cal services has violated state or federal law, a requirement of this chapter, Chapter 8 (commencing with Section 14200), Chapter 8.8 (commencing with Section 14600), or Chapter 8.9 (commencing with Section 14700), or any regulations, the state plan, or a term or condition of an approved waiver, or a provision of its contract with the department, the department may temporarily withhold payments of federal financial participation and payments from the accounts listed in paragraphs (2) to (4), inclusive, of subdivision (n). The department shall temporarily withhold amounts it deems necessary to ensure the mental health plan or the entity that contracts with the department to provide Drug Medi-Cal services promptly corrects the violation. The department shall release the temporarily withheld funds when it determines the mental health plan or the entity that contracts with the department to provide Drug Medi-Cal services has come into compliance.(2)A mental health plan, or any entity that contracts with the department to provide Drug Medi-Cal services, may appeal the imposition of a temporary withhold pursuant to this subdivision in accordance with the procedures described in subdivisions (k) and (m). Imposition of a temporary withhold shall be stayed until the effective date of the final decision of the department.(p)This section shall be read in conjunction with, and apply in addition to, any other applicable law that authorizes the department to impose sanctions or otherwise take remedial action upon contractors.(q)(1)Notwithstanding any other law, nonfederal moneys collected by the department pursuant to this section, except for moneys collected from a contractor funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n), shall be deposited into the General Fund for use, and upon appropriation by the Legislature, to address workforce issues in the Medi-Cal program and to improve access to care in the Medi-Cal program.(2)Monetary sanctions imposed via offset on a contractor that is funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n) shall be redeposited into the account from which the monetary sanctions were offset pursuant to paragraphs (2) to (4), inclusive, of subdivision (n). The department shall notify the Department of Finance of the percentage reduction for the affected county. The Department of Finance shall subsequently notify the Controller, and the Controller shall redistribute the monetary sanction amount to nonsanctioned counties based on each countys prorated share of the monthly base allocations from the realigned account. With respect to an individual contractor, the department shall not collect via offset more than 25 percent of the total amount of the funds distributed from the applicable account or accounts that are attributable to the contractor in a given month. If the department is not able to collect the full amount of monetary sanctions imposed on a contractor funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n) in a given month, the department shall continue to offset the amounts attributable to the contractor in subsequent months until the full amount of monetary sanctions has been collected.(r)(1)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific this section, in whole or in part, by means of plan or county letters, information notices, plan or provider bulletins, or other similar instructions, without taking any further regulatory action.(2)By July 1, 2025, the department shall adopt any regulations necessary to implement this section in accordance with the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.(s)This section shall be implemented only to the extent that any necessary federal approvals have been obtained and that federal financial participation is available.(t)For purposes of this section, contractor means any individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries pursuant to any of the following:(1)Article 2.7 (commencing with Section 14087.3), including dental managed care programs developed pursuant to Section 14087.46.(2)Article 2.8 (commencing with Section 14087.5).(3)Article 2.81 (commencing with Section 14087.96).(4)Article 2.82 (commencing with Section 14087.98).(5)Article 2.9 (commencing with Section 14088).(6)Article 2.91 (commencing with Section 14089).(7)Chapter 8 (commencing with Section 14200), including dental managed care plans.(8)Chapter 8.9 (commencing with Section 14700).(9)A county Drug Medi-Cal organized delivery system authorized under the California Medi-Cal 2020 Demonstration pursuant to Article 5.5 (commencing with Section 14184) or a successor demonstration or waiver, as applicable.SEC. 3.Section 14197.7 of the Welfare and Institutions Code, as added by Section 111 of Chapter 790 of the Statutes of 2023, is amended to read:14197.7.

(a)(1)Notwithstanding any other law, if the director finds that an entity that contracts with the department for the delivery of health care services (contractor), including a Medi-Cal managed care plan or a prepaid health plan, fails to comply with contract requirements, state or federal law or regulations, or the state plan or approved waivers, or for other good cause, the director may terminate the contract or impose sanctions as set forth in this section.

(2)Good cause includes, but is not limited to, a finding of deficiency that results in improper denial or delay in the delivery of health care services, potential endangerment to patient care, disruption in the contractors provider network, failure to approve continuity of care, that claims accrued or to accrue have not or will not be recompensed, or a delay in required contractor reporting to the department.

(b)The director may identify findings of noncompliance or good cause through any means, including, but not limited to, findings in audits, investigations, contract compliance reviews, quality improvement system monitoring, routine monitoring, facility site surveys, encounter and provider data submissions, grievances and appeals, network adequacy reviews, assessments of timely access requirements, reviews of utilization data, health plan rating systems, fair hearing decisions, complaints from beneficiaries and other stakeholders, whistleblowers, and contractor self-disclosures.

(c)(1)Except when the director determines there is an immediate threat to the health of Medi-Cal beneficiaries receiving health care services from the contractor, at the request of the contractor, the department shall hold a public hearing to commence 30 days after notice of intent to terminate the contract has been received by the contractor.

(2)The department shall present evidence at the hearing showing good cause for the termination.

(3)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.

(4)(A)Reasonable notice of the hearing shall be given to the contractor, Medi-Cal beneficiaries receiving services through the contractor, and other interested parties, including any other person and organization the director may deem necessary.

(B)The notice shall state the effective date of, and the reason for, the termination.

(d)(1)In lieu of contract termination, the director shall have the power and authority to require or impose a plan of correction and issue one or more of the following sanctions against a contractor for findings of noncompliance or good cause, including, but not limited to, those specified in subdivision (a):

(1)

(A)Temporarily or permanently suspend enrollment and marketing activities.

(2)

(B)Require the contractor to suspend or terminate contractor personnel or subcontractors.

(3)

(C)Issue one or more of the temporary suspension orders set forth in subdivision (j).

(4)

(D)Impose temporary management consistent with the requirements specified in Section 438.706 of Title 42 of the Code of Federal Regulations.

(5)

(E)Suspend default enrollment of enrollees who do not select a contractor for the delivery of health care services.

(6)

(F)Impose civil monetary sanctions consistent with the dollar amounts and violations specified in Section 438.704 of Title 42 of the Code of Federal Regulations, as follows:

(A)

(i)A limit of twenty-five thousand dollars ($25,000) for each determination of the following:

(i)

(I)The contractor fails to provide medically necessary services that the contractor is required to provide, under law or under its contract with the department, to an enrollee covered under the contract.

(ii)

(II)The contractor misrepresents or falsifies information to an enrollee, potential enrollee, or health care provider.

(iii)

(III)The contractor distributes directly, or indirectly through an agent or independent contractor, marketing materials that have not been approved by the state or that contain false or materially misleading information.

(B)

(ii)A limit of one hundred thousand dollars ($100,000) for each determination of the following:

(i)

(I)The contractor conducts an act of discrimination against an enrollee on the basis of their health status or need for health care services. This includes termination of enrollment or refusal to reenroll a beneficiary, except as permitted under the Medicaid program, or a practice that would reasonably be expected to discourage enrollment by beneficiaries whose medical condition or history indicates probable need for substantial future medical services.

(ii)

(II)The contractor misrepresents or falsifies information that it furnishes to the federal Centers for Medicare and Medicaid Services or to the department.

(C)

(iii)A limit of fifteen thousand dollars ($15,000) for each beneficiary the director determines was not enrolled because of a discriminatory practice under clause (i) of subparagraph (B). subclause (I) of clause (ii). This sanction is subject to the overall limit of one hundred thousand dollars ($100,000) under subparagraph (B). clause (ii).

(2)Any plan of correction imposed by the director pursuant to paragraph (1) shall be monitored by the department and progress reported publicly no less than annually for the duration of the plan of correction.

(e)Notwithstanding the monetary sanctions imposed for the violations set forth in paragraph (6) subparagraph (F) of paragraph (1) of subdivision (d), the director may impose monetary sanctions in accordance with this section based on any of the following:

(1)The contractor violates a federal or state statute or regulation.

(2)The contractor violates a provision of its contract with the department.

(3)The contractor violates a provision of the state plan or approved waivers.

(4)The contractor fails to meet quality metrics or benchmarks established by the department. Any changes to the minimum quality metrics or benchmarks made by the department that are effective on or after January 1, 2020, shall be established in advance of the applicable reporting or performance measurement period, unless required by the federal government.

(5)The contractor fails to demonstrate that it has an adequate network to meet anticipated utilization in its service area.

(6)The contractor fails to comply with network adequacy standards, including, but not limited to, time and distance, timely access, and provider-to-beneficiary ratio requirements pursuant to standards and formulae that are set forth in federal or state law, regulation, state plan, or contract and that are posted in advance to the departments internet website.

(7)The contractor fails to comply with the requirements of a corrective action plan.

(8)(A)The contractor fails to submit timely and accurate network provider data.

(B)For purposes of subparagraph (A), the following definitions apply:

(i)Timely means no less than annually, unless otherwise specified by any other applicable law.

(ii)Accurate network provider data includes, but is not limited to, information made available to the plan through the evaluation described in paragraphs (3) and (5) of subdivision (g) of Section 14197 regarding unavailable or unreachable providers.

(9)The director identifies deficiencies in the contractors delivery of health care services.

(10)The director identifies deficiencies in the contractors operations, including the timely payment of claims.

(11)The contractor fails to comply with reporting requirements, including, but not limited to, those set forth in Section 53862 of Title 22 of the California Code of Regulations.

(12)The contractor fails to timely and accurately process grievances or appeals.

(f)(1)Monetary sanctions imposed pursuant to subdivision (e) may be separately and independently assessed and may also be assessed for each day the contractor fails to correct an identified deficiency. For a deficiency that impacts beneficiaries, each beneficiary impacted constitutes a separate violation. Monetary sanctions shall be assessed in the following amounts:

(A)Up to twenty-five thousand dollars ($25,000) for a first violation.

(B)Up to fifty thousand dollars ($50,000) for a second violation.

(C)Up to one hundred thousand dollars ($100,000) for each subsequent violation.

(2)For monetary sanctions imposed on a contractor that is funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n), the department shall calculate a percentage of the funds attributable to the contractor to be offset per month pursuant to paragraphs (2) to (4), inclusive, of subdivision (n) until the amount offset equals the amount of the penalty imposed pursuant to paragraph (1).

(g)When assessing sanctions pursuant to this section, the director shall determine the appropriate amount of the penalty for each violation based upon one or more of the following nonexclusive factors:

(1)The nature, scope, and gravity of the violation, including the potential harm or impact on beneficiaries.

(2)The good or bad faith of the contractor.

(3)The contractors history of violations.

(4)The willfulness of the violation.

(5)The nature and extent to which the contractor cooperated with the departments investigation.

(6)The nature and extent to which the contractor aggravated or mitigated any injury or damage caused by the violation.

(7)The nature and extent to which the contractor has taken corrective action to ensure the violation will not recur.

(8)The financial status of the contractor, including whether the sanction will affect the ability of the contractor to come into compliance.

(9)The financial cost of the health care service that was denied, delayed, or modified.

(10)Whether the violation is an isolated incident.

(11)The amount of the penalty necessary to deter similar violations in the future.

(12)Other mitigating factors presented by the contractor.

(h)(1)Except in exigent circumstances in which there is an immediate risk to the health of beneficiaries, as determined by the department, the director shall give reasonable written notice to the contractor of the intention to impose any of the sanctions authorized by this section and others who may be directly interested, including any other persons and organizations the director may deem necessary.

(2)The notice shall include the effective date for, the duration of, and the reason for each sanction proposed by the director.

(3)A contractor may request the department to meet and confer with the contractor to discuss information and evidence that may impact the directors final decision to impose sanctions authorized by this section.

(4)The director shall grant a request to meet and confer prior to issuance of a final sanction if the contractor submits the request in writing to the department no later than two business days after the contractors receipt of the directors notice of intention to impose sanctions.

(i)Notwithstanding subdivision (d), the director shall terminate a contract with a contractor that 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 XIX (commencing with Section 1396) of Chapter 7 of Title 42 of the United States Code.

(j)(1)The department may make one or more of the following temporary suspension orders as an immediate sanction:

(A)Temporarily suspend enrollment activities.

(B)Temporarily suspend marketing activities.

(C)Require the contractor to temporarily suspend specified personnel of the contractor.

(D)Require the contractor to temporarily suspend participation by a specified subcontractor.

(2)The temporary suspension orders shall be effective no earlier than 20 days after the notice specified in subdivision (k).

(k)(1)Prior to issuing a temporary suspension order, or temporarily withholding funds pursuant to subdivision (o), the department shall provide the contractor with a written notice.

(2)The notice shall state the departments intent to impose a temporary suspension or temporary withhold and specify the nature and effective date of the temporary suspension or temporary withhold.

(3)The contractor shall have 30 calendar days from the date of receipt of the notice to file a written appeal with the department.

(4)Upon receipt of a written appeal 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.

(5)The hearing may be continued at the request of the contractor if a continuance is necessary to permit presentation of an adequate defense.

(6)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 of the close of the record for the matter.

(7)The department shall stay imposition of a temporary withhold, pursuant to subdivision (o), until the hearing is completed and the department has made a final determination on the merits within 60 days of the close of the record for the matter.

(l)(1)A contractor may request a hearing in connection with sanctions applied pursuant to subdivision (d) or (e) 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.

(2)The department shall stay collection of monetary sanctions upon receipt of the request for a hearing.

(3)Collection of the sanction shall remain stayed until the effective date of the final decision of the department.

(m)Except as otherwise provided in this section, all hearings to review the imposition of sanctions, including temporary suspension orders, the withholding or offsetting of funds pursuant to subdivision (n), or the temporary withholding of funds pursuant to subdivision (o) shall be held pursuant to the procedures set forth in Section 100171 of the Health and Safety Code.

(n)(1)If the director imposes monetary sanctions pursuant to this section on a contractor, except for a contractor described in paragraphs (2) to (5), inclusive, the amount of the sanction may be collected by withholding the amount from capitation or other associated payments owed to the contractor.

(2)If the director imposes monetary sanctions on a contractor that is funded from the Mental Health Subaccount, the Mental Health Equity Subaccount, the Vehicle License Collection Account of the Local Revenue Fund, or the Mental Health Account, the director may offset the monetary sanctions from the respective account. The offset is subject to paragraph (2) of subdivision (q).

(3)If the director imposes monetary sanctions on a contractor that is funded from the Behavioral Health Subaccount of the Local Revenue Fund 2011, the director may offset the monetary sanctions from that account from the distribution attributable to the applicable contractor. The offset is subject to paragraph (2) of subdivision (q).

(4)If the director imposes monetary sanctions on a contractor that is funded from another mental health or substance use disorder realignment fund from which the Controller is authorized to make distributions to the contractor, the director may offset the monetary sanctions from these funds if the funds described in paragraphs (2) and (3) are insufficient for the purposes described in this subdivision, as appropriate. The offset is subject to paragraph (2) of subdivision (q).

(5)(A)If the director imposes monetary sanctions pursuant to subdivision (e) of Section 5963.04, the director may offset the monetary sanctions from the Behavioral Health Services Fund from the distribution attributable to the applicable contractor.

(B)With respect to an individual contractor, the department shall not collect via offset more than 25 percent of the total amount of the funds distributed from the Behavioral Health Services Fund that are attributable to the contractor in a given month.

(C)If the department is not able to collect the full amount of monetary sanctions imposed on a contractor in a given month, the department shall continue to offset the amounts attributable to the contractor in subsequent months until the full amount of monetary sanctions has been collected. The offset is subject to paragraph (3) of subdivision (q).

(o)(1)(A)Whenever the department determines that a mental health plan or an entity that contracts with the department to provide Drug Medi-Cal services has violated state or federal law, a requirement of this chapter, Chapter 8 (commencing with Section 14200), Chapter 8.8 (commencing with Section 14600), or Chapter 8.9 (commencing with Section 14700), or any regulations, the state plan, a term or condition of an approved waiver, or a provision of its contract with the department, the department may temporarily withhold payments of federal financial participation and payments from the accounts listed in paragraphs (2) to (4), inclusive, of subdivision (n).

(B)The department shall temporarily withhold amounts it deems necessary to ensure the mental health plan or the entity that contracts with the department to provide Drug Medi-Cal services promptly corrects the violation.

(C)The department shall release the temporarily withheld funds when it determines the mental health plan or the entity that contracts with the department to provide Drug Medi-Cal services has come into compliance.

(2)(A)A mental health plan or an entity that contracts with the department to provide Drug Medi-Cal services may appeal the imposition of a temporary withhold pursuant to this subdivision in accordance with the procedures described in subdivisions (k) and (m).

(B)Imposition of a temporary withhold shall be stayed until the effective date of the final decision of the department.

(p)This section shall be read in conjunction with, and apply in addition to, any other applicable law that authorizes the department to impose sanctions or otherwise take remedial action upon contractors.

(q)(1)Notwithstanding any other law, nonfederal moneys collected by the department pursuant to this section, except for moneys collected from a contractor funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n), shall be deposited into the General Fund for use and, upon appropriation by the Legislature, to address workforce issues in the Medi-Cal program and improve access to care in the Medi-Cal program.

(2)(A)Monetary sanctions imposed via offset on a contractor that is funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n) shall be redeposited into the account from which the monetary sanctions were offset pursuant to paragraphs (2) to (4), inclusive, of subdivision (n).

(B)The department shall notify the Department of Finance of the percentage reduction for the affected county.

(C)The Department of Finance shall subsequently notify the Controller, and the Controller shall redistribute the monetary sanction amount to nonsanctioned counties based on each countys prorated share of the monthly base allocations from the realigned account.

(D)With respect to an individual contractor, the department shall not collect via offset more than 25 percent of the total amount of the funds distributed from the applicable account or accounts that are attributable to the contractor in a given month.

(E)If the department is not able to collect the full amount of monetary sanctions imposed on a contractor funded from one or more of the realigned accounts described in paragraphs (2) to (4), inclusive, of subdivision (n) in a given month, the department shall continue to offset the amounts attributable to the contractor in subsequent months until the full amount of monetary sanctions has been collected.

(3)Monetary sanctions imposed via offset on a contractor pursuant to subdivision (e) of Section 5963.04 shall be redeposited into the account from which the monetary sanctions were offset pursuant to paragraph (5) of subdivision (n).

(r)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, the department may implement, interpret, or make specific this section, in whole or in part, by means of plan or county letters, information notices, plan or provider bulletins, or other similar instructions without taking any further regulatory action.

(s)This section shall be implemented only to the extent that necessary federal approvals have been obtained and that federal financial participation is available.

(t)For purposes of this section, contractor means an individual, organization, or entity that enters into a contract with the department to provide services to enrolled Medi-Cal beneficiaries or other individuals receiving behavioral health services, as applicable, pursuant to any of the following:

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

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

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

(4)Article 2.82 (commencing with Section 14087.98).

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

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

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

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

(9)A county Drug Medi-Cal organized delivery system authorized under the California Medi-Cal 2020 Demonstration pursuant to Article 5.5 (commencing with Section 14184) or a successor demonstration or waiver, as applicable.

(10)Chapter 2 (commencing with Section 5650) of Part 2 of Division 5, solely for purposes of imposition of corrective action plans, monetary sanctions, or temporary withholds pursuant to subdivision (e) of Section 5963.04.

(11)Section 12534 of the Government Code.

(u)This section shall become operative on January 1, 2025, if amendments to the Mental Health Services Act are approved by the voters at the March 5, 2024, statewide primary election.