Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed by, and funded pursuant to, federal Medicaid program provisions. Existing law establishes the Administrative Claiming process under which the department is authorized to contract with local governmental agencies and local educational consortia for the purpose of obtaining federal matching funds to assist with the performance of administrative activities relating to the Medi-Cal program that are provided by a local governmental agency or local educational agency (LEA).

Existing law requires the department to engage in specified activities relating to the LEA Medi-Cal Billing Option, including amending the Medicaid state plan to ensure that schools are reimbursed for all eligible services, consulting with specified entities in formulating state plan amendments, examining methodologies for increasing school participation in the LEA Medi-Cal Billing Option, and conducting an audit of a Medi-Cal Billing Option claim consistent with prescribed requirements, such as generally accepted accounting principles. Existing law requires the department to issue and regularly maintain a program guide for the LEA Medi-Cal Billing Option program. Existing law requires the department to file an annual report with the Legislature that includes, among other things, a summary of department activities.

This bill would require the department, when conducting an audit of a Medi-Cal Billing Option claim, to complete the audit and notify the LEA of the findings within 18 months of the date that the Cost and Reimbursement Comparison Schedule (CRCS) is submitted. The bill would require the department to provide an interim settlement or final settlement within 12 months of the March 1 due date for the CRCS. The bill would require the department to update and distribute the program guide to all participating LEAs by July 1, 2024, as specified. The bill would require the departments summary of activities in the above-described report to also include training for LEAs and a summary of the number of audits conducted of Medi-Cal Billing Option claims, as specified. The bill would make other technical, nonsubstantive changes to these provisions.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed by, and funded pursuant to, federal Medicaid program provisions. Existing law establishes the Administrative Claiming process under which the department is authorized to contract with local governmental agencies and local educational consortia for the purpose of obtaining federal matching funds to assist with the performance of administrative activities relating to the Medi-Cal program that are provided by a local governmental agency or local educational agency (LEA).

Existing law requires the department to engage in specified activities relating to the LEA Medi-Cal Billing Option, including amending the Medicaid state plan to ensure that schools are reimbursed for all eligible services, consulting with specified entities in formulating state plan amendments, examining methodologies for increasing school participation in the LEA Medi-Cal Billing Option, and conducting an audit of a Medi-Cal Billing Option claim consistent with prescribed requirements, such as generally accepted accounting principles. Existing law requires the department to issue and regularly maintain a program guide for the LEA Medi-Cal Billing Option program. Existing law requires the department to file an annual report with the Legislature that includes, among other things, a summary of department activities.

This bill would require the department, when conducting an audit of a Medi-Cal Billing Option claim, to complete the audit and notify the LEA of the findings within 18 months of the date that the Cost and Reimbursement Comparison Schedule (CRCS) is submitted. The bill would require the department to provide an interim settlement or final settlement within 12 months of the March 1 due date for the CRCS. The bill would require the department to update and distribute the program guide to all participating LEAs by July 1, 2024, as specified. The bill would require the departments summary of activities in the above-described report to also include training for LEAs and a summary of the number of audits conducted of Medi-Cal Billing Option claims, as specified. The bill would make other technical, nonsubstantive changes to these provisions.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed by, and funded pursuant to, federal Medicaid program provisions. Existing law establishes the Administrative Claiming process under which the department is authorized to contract with local governmental agencies and local educational consortia for the purpose of obtaining federal matching funds to assist with the performance of administrative activities relating to the Medi-Cal program that are provided by a local governmental agency or local educational agency (LEA).

Existing law requires the department to engage in specified activities relating to the LEA Medi-Cal Billing Option, including amending the Medicaid state plan to ensure that schools are reimbursed for all eligible services, consulting with specified entities in formulating state plan amendments, examining methodologies for increasing school participation in the LEA Medi-Cal Billing Option, and conducting an audit of a Medi-Cal Billing Option claim consistent with prescribed requirements, such as generally accepted accounting principles. Existing law requires the department to issue and regularly maintain a program guide for the LEA Medi-Cal Billing Option program. Existing law requires the department to file an annual report with the Legislature that includes, among other things, a summary of department activities.

This bill would require the department to establish a revised audit process for Medi-Cal Billing Option claims submitted for dates of service on or after January 1, 2025, pursuant to specified requirements and limitations. The bill would require the department to report to the relevant policy committees and post on its internet website any changes made to the state plan pursuant to the requirement to revise the state plan. The bill would require the department to provide technical assistance to the LEA or to complete appeals by the LEA within 180 days if an audit requires a specified percentage of an LEAs total value of claims to be paid back. The bill would prohibit an auditor from determining that an LEA is required to pay back reimbursement for certain claims, except as specified. department, when conducting an audit of a Medi-Cal Billing Option claim, to complete the audit and notify the LEA of the findings within 18 months of the date that the Cost and Reimbursement Comparison Schedule (CRCS) is submitted. The bill would require the department to provide an interim settlement or final settlement within 12 months of the March 1 due date for the CRCS. The bill would require the department to update and distribute the program guide to all participating LEAs by July 1, 2024, as specified. The bill would require the departments summary of activities in the above-described report to also include training for LEAs and a summary of the number of audits conducted of Medi-Cal Billing Option claims, as specified. The bill would require the department to ensure, for those claims, that medical necessity for a beneficiary under 21 years of age has a specified meaning. The bill would make other technical, nonsubstantive changes to these provisions.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed by, and funded pursuant to, federal Medicaid program provisions. Existing law establishes the Administrative Claiming process under which the department is authorized to contract with local governmental agencies and local educational consortia for the purpose of obtaining federal matching funds to assist with the performance of administrative activities relating to the Medi-Cal program that are provided by a local governmental agency or local educational agency (LEA).

Existing law requires the department to engage in specified activities relating to the LEA Medi-Cal Billing Option, including amending the Medicaid state plan to ensure that schools are reimbursed for all eligible services, consulting with specified entities in formulating state plan amendments, examining methodologies for increasing school participation in the LEA Medi-Cal Billing Option, and conducting an audit of a Medi-Cal Billing Option claim consistent with prescribed requirements, such as generally accepted accounting principles. Existing law requires the department to file an annual report with the Legislature that includes, among other things, a summary of department activities.

This bill would require the department to revise the state plan to establish a revised audit process for Medi-Cal Billing Option claims submitted for dates of service on or after January 1, 2025, pursuant to specified requirements and limitations. The bill would require the department to report to the relevant policy committees and post on its internet website any changes made to the state plan pursuant to the requirement to revise the state plan. The bill would require the department to provide technical assistance to the LEA or to complete appeals by the LEA within 180 days if an audit requires a specified percentage of an LEAs total value of claims to be paid back. The bill would prohibit an auditor from determining that an LEA is required to pay back reimbursement for certain claims, except as specified. The bill would require the departments summary of activities in the above-described report to also include training for LEAs and a summary of the number of audits conducted of Medi-Cal Billing Option claims, as specified. The bill would require the department to ensure, for those claims, that medical necessity for a beneficiary under 21 years of age has a specified meaning. The bill would make other technical, nonsubstantive changes to these provisions.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed by, and funded pursuant to, federal Medicaid program provisions. Existing law establishes the Administrative Claiming process under which the department is authorized to contract with local governmental agencies and local educational consortia for the purpose of obtaining federal matching funds to assist with the performance of administrative activities relating to the Medi-Cal program that are provided by a local governmental agency or local educational agency (LEA).

Existing law requires the department to engage in specified activities relating to the LEA Medi-Cal Billing Option, including amending the Medicaid state plan to ensure that schools are reimbursed for all eligible services, consulting with specified entities in formulating state plan amendments, examining methodologies for increasing school participation in the LEA Medi-Cal Billing Option, and conducting an audit of a Medi-Cal Billing Option claim consistent with prescribed requirements, such as generally accepted accounting principles. Existing law requires the department to file an annual report with the Legislature that includes, among other things, a summary of department activities.

This bill would require the department to revise the state plan to establish a revised audit process for Medi-Cal Billing Option claims submitted for dates of service on or after January 1, 2025, pursuant to specified requirements and limitations. The bill would require the department to report to the relevant policy committees and post on its internet website any changes made to the state plan pursuant to the requirement to revise the state plan. The bill would require the department to provide technical assistance to the LEA or to complete appeals by the LEA within 180 days if an audit requires a specified percentage of an LEAs total value of claims to be paid back. The bill would prohibit an auditor from determining that an LEA is required to pay back reimbursement for certain claims, except as specified. The bill would require the departments summary of activities in the above-described report to also include training for LEAs and a summary of the number of audits conducted of Medi-Cal Billing Option claims, as specified. The bill would require the department to ensure, for those claims, that medical necessity for a beneficiary under 21 years of age has a specified meaning. The bill would make other technical, nonsubstantive changes to these provisions.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 483

Author:(Muratsuchi and Wood)

As Amended Ver:September 8, 2023

Majority vote

SUMMARY

Modifies and imposes new requirements related to timelines, reporting, technical assistance, stakeholder engagement, and guidance for the Local Education Agency Medi-Cal Billing Option Program (LEA BOP), a program that allows schools to claim reimbursement for a portion of the cost of delivering health services to Medi-Cal eligible students.

Senate Amendments

1. Require the LEA BOP program guide to include the following:
   1. A billing manual with an explanation of billing, auditing, costs reporting, time studies, and federal and state compliance rules.
   2. An explanation of the certified public expenditure processes used to report and reconcile program costs from interim reimbursement to final cost settlement, in plain language.
2. Require DHCS to distribute an updated program guide to all participating LEAs by July 1, 2024, that includes the requirements described in 1), above.
3. Change the time within which DHCS must complete and audit and notify an LEA of audit findings from 12 months to 18 months, and makes minor technical changes to other timelines.
4. Recast, clarify, and further specify the information included in the summary of audit findings.
5. Establish a due date of December 31 for an existing annual report on the LEA BOP program.
6. Require DHCS to provide semi-annual LEA BOP billing forums to provide guidance on appropriate billing practices.
7. Recast language to specify LEAs shall be reimbursed for all eligible services that meet federal requirements.
8. Remove the requirement to establish a revised audit process, as specified; timelines related to appeals of audit findings that require an LEA to pay back 50% or more of an LEA’s total value of claims; the definition of medical necessity applicable to claims; and the ability of the LEA to seek immediate relief in superior court if audits are not resolved within 300 days.
9. Change the allowable set-aside from the federal Medicaid LEA BOP payments allocable to LEAs for DHCS administrative costs from a limit of $1.5 million to a limit of 5% of the total federal Medicaid LEA BOP payments.

COMMENTS

1. LEA BOP. LEAs are school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California. The LEA BOP provides federal Medicaid matching funds to LEAs for health-related services provided by specified health practitioners to students enrolled in Medi-Cal.

Currently, 563 LEAs participate in LEA BOP and receive approximately $130 million in federal funding annually. The 563 participating LEAs account for over five million of the six million public school children in California. LEA covered services can include the following:

• 1. Health and mental health evaluations and health and mental health education;
  2. Medical transportation;
  3. Nursing services;
  4. Occupational therapy and physical therapy;
  5. Physician services;
  6. Mental health and counseling services;
  7. School health aide services;
  8. Speech pathology services;
  9. Audiology services; and,
  10. Targeted case management services for children.

DHCS's LEA advisory workgroup includes large, medium, and small school districts, county offices of education, professional organizations representing LEAs, DHCS, and the California Department of Education (CDE). DHCS indicates meetings are held every other month and provide a forum for LEAs to identify relevant issues and make recommendations to improve the LEA BOP.

1. LEA BOP Financing. LEAs pay for health-related outpatient services and are reimbursed for at least 50% of their allowable costs through Medicaid federal matching funds (FFP) using a certified public expenditure (CPE) methodology. Under the CPE methodology, LEAs provide the non-federal share of funds to draw down federal Medicaid matching funds. The state can claim FFP on behalf of a government entity like an LEA, provided the entity incurs an eligible expenditure and certifies the public funds were used to support the full cost of providing the service.

Under the LEA BOP, LEAs receive interim reimbursement through claims payments and then calculate their total cost of providing these services to Medi-Cal-enrolled students, submitted annually for the preceding fiscal year. Final payment settlements based on actual CPEs for a given year are considered completed when DHCS has audited a financial report submitted by the LEA, called the Cost and Reimbursement Comparison Schedule. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP.

DHCS' November 2022 Medi-Cal Estimate assumes the LEA BOP will draw down $440 million in federal funds in fiscal year 2022-23, a dramatic increase from the $122 million projected in the November 2021 Estimate. The November 2022 Estimate assumes additional significant growth; it estimates $615 million in federal funds will be drawn down in fiscal year 2023-24. A number of technical fiscal and program factors account for this growth, including one-time dollars projected to be claimed as a result of State Plan Amendment 15-021, which was approved in 2020 to expand LEA covered services, and allowed claiming for these expanded covered services and practitioners back to 2015.

1. Audit and Appeals. This bill is in response to disputes over DHCS audits of LEA BOP providers which results in DHCS recovering overpayments for services rendered, including for services for which reimbursement is finalized several years after the services were claimed, the existing appeals process and access to court following that process.

Existing law applicable to Medi-Cal requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by the DHCS in the manner and form prescribed by DHCS. Under California's Medicaid State Plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claim data available from the DHCS to determine the appropriate level of oversight.

If the interim Medi-Cal payments exceed the actual, certified costs of a LEA's Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered and/or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government in accordance with federal Medicaid regulation. If the cost report's actual certified costs of a LEA's Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.

1. Budget Change Proposal. In the Governor's 2023-24 Budget, DHCS requests a one-time appropriation of $7.45 million (Special Deposit Fund (SDF)) in fiscal year 2023-24 to reimburse LEAs for excess funds withheld by DHCS to administer the LEA BOP. According to DHCs, an administrative withhold is levied against LEA claim reimbursements to cover DHCS administrative costs to run the program without an impact to the SDF. These funds have accumulated in past years. DHCS states authority was given for the combined 2% withhold through the Budget Act of 2010 and in Welfare and Institutions Code 14115.8, and this proposal, consistent with that authority, would return the remainder of unused funds to the LEAs.
2. Studies and Informational Hearings. SB 75 (Budget and Fiscal Review Committee), Chapter 51, Statutes of 2019, required the CDE and DHCS to jointly convene one or more workgroups to provide input and recommendations on improving coordination and expansion of access to available federal funds through the LEA Medi-Cal Billing Option Program, and other Medi-Cal benefits and programs for children. The SB 75 Medi-Cal for Students Workgroup Recommendations, released in October 2021, identifies "burdensome audit processes" as one of the root causes contributing to challenges in the LEA BOP.

Between 2007 and 2015, most LEAs had to pay back a portion of the LEA BOP interim payment after reconciliation. LEAs reported financial hardships based on the timeline for repayment, as well as the interest paid on delayed repayment amounts. LEAs also reported that they do not receive an adequate level of technical assistance to help them avoid repeating past errors in future years as they go through the LEA BOP audit process.

The group made the following recommendations:

• 1. To facilitate the LEA BOP audit process, implement feedback loops between LEAs and the DHCS Audit & Investigations Division that foster collaborative learning and continuous improvement, and develop resources that support LEA audit preparation;
  2. Enhance auditor practices through auditor training informed by user experience, and gather regular feedback from LEAs about their LEA BOP audit experiences; and,
  3. Develop audit-related technical assistance processes to support LEAs before, during, and after the LEA BOP audit process.

The report notes the goal of these recommendations is to shift the culture of the LEA BOP audit process from a primary focus on audit completion toward a focus on providing support and technical assistance to the LEAs that are being audited.

A joint information hearing on this report and issue was held on October 14, 2021, by Assembly Education, Assembly Health, and Assembly Budget Subcommittees 1 & 2.

According to the Author

To address the demand for student physical and behavioral health care services, schools need significant support to build capacity. In aggregate, California schools bill far less, and draw down significantly less in reimbursements for Medicaid services than other states. For example, the author points out, California draws down $29 per Medi-Cal eligible child in federal funding, while Montana draws down over $500 per eligible child. This bill would expand access to school-based health and mental health services by encouraging more schools to participate in the LEA BOP program and to bill for more eligible services by reforming the process by which it audits claims from the LEA BOP program. The author concludes the ultimate goal is to increase funding available to support student health services.

Arguments in Support

This bill is cosponsored by a large number of educational stakeholders with interest in improving the LEA BOP and providing additional health services to students. It is supported by education groups. Supporters argue the current LEA BOP is administratively burdensome with punitive audit practices, that LEAs have experienced difficulty receiving clear and consistent guidance from the state, and/or have had to return significant funds disallowed through the audit process. Some LEAs have decided to cease participating in this program because of these problems. This has a direct impact on the ability of the LEA to provide health services to students. Supporters argue reforming the DHCS audit claims process for schools participating in LEA BOP will increase access to funding which, in turn, will expand access to health and mental health services for students.

Arguments in Opposition

The Department of Finance notes opposition to the July 13, 2023, version of this bill, expressing concerns that version of the bill imposes significant General Fund impacts not included in the 2023 Budget and that altering the process and focus of LEA BOP audits may conflict with federal requirements.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. DHCS estimates costs of $2,545,000 in 2024-25, $5,272,000 in 2025-26, and $5,218,000 in 2026-27 and ongoing thereafter (50 percent General Fund, 50 percent federal funds) for staffing resources for this bill.
2. The September 8, 2023 amendments likely reduce the staffing resources needed for this bill and change the allowable set-aside for DHCS administrative costs, which might also reduce the cost of the program.

VOTES:

ASM HEALTH: 14-0-1

YES: Wood, Waldron, Aguiar-Curry, Arambula, Boerner Horvath, Flora, Vince Fong, Maienschein, McCarty, Joe Patterson, Rodriguez, Santiago, Villapudua, Weber

ABS, ABST OR NV: Wendy Carrillo

ASM APPROPRIATIONS: 15-0-1

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega

ABS, ABST OR NV: Robert Rivas

ASSEMBLY FLOOR: 80-0-0

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones‑Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

SENATE FLOOR: 39-0-1

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Caballero

UPDATED

VERSION: September 8, 2023

CONSULTANT: Lisa Murawski / HEALTH / (916) 319-2097 FN: 0002315

 THIRD READING  

Bill No: AB 483

Author: Muratsuchi (D) and Wood (D), et al.

Amended: 9/8/23 in Senate

Vote: 21

SENATE HEALTH COMMITTEE: 11-0, 7/12/23

AYES: Eggman, Nguyen, Glazer, Gonzalez, Hurtado, Limón, Menjivar, Roth, Rubio, Wahab, Wiener

NO VOTE RECORDED: Grove

SENATE APPROPRIATIONS COMMITTEE: 7-0, 9/1/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

ASSEMBLY FLOOR: 80-0, 5/31/23 - See last page for vote

SUBJECT: Local educational agency: Medi-Cal billing option

SOURCE: State Superintendent of Public Instruction Tony Thurmond

California Association of School Psychologists

California County Superintendents

California School Boards Association

California School Nurses Organization

Los Angeles Unified School District

Santa Clara County Office of Education

DIGEST:

This bill requires the Department of Health Care Services (DHCS) to revise its audit timelines for the Local Education Agency (LEA) Medi-Cal Billing Option Program. This bill also requires DHCS to give LEAs additional technical assistance and submit additional information on its audits to the Legislature.

Senate Floor Amendments of 9/8/23:

1. Remove the requirement to establish a revised audit process, as specified; timelines related to appeals of audit findings that require an LEA to pay back 50% or more of an LEA’s total value of claims; the definition of medical necessity applicable to claims; and the ability of the LEA to seek immediate relief in superior court if audits are not resolved within 300 days.
2. Change the time within which DHCS must complete and audit and notify an LEA of audit findings from 12 months to 18 months, and make minor technical changes to other timelines. Further specify the information included in the summary of audit findings.
3. Require DHCS to distribute an updated program guide to all participating LEAs by July 1, 2024, that includes the following:
   1. A billing manual with an explanation of billing, auditing, costs reporting, time studies, and federal and state compliance rules.
   2. An explanation of the certified public expenditure processes used to report and reconcile program costs from interim reimbursement to final cost settlement, in plain language.
4. Establish a due date of December 31 for an existing annual report on the LEA Billing Option Program (LEA BOP).
5. Require DHCS to provide semi-annual LEA BOP billing forums to provide guidance on appropriate billing practices.
6. Specify that LEAs shall be reimbursed for all eligible services that meet federal requirements.
7. Change the allowable set-aside from the federal Medicaid LEA BOP payments allocable to LEAs for DHCS administrative costs from a limit of $1.5 million to a limit of 5% of the total federal Medicaid LEA BOP payments.

ANALYSIS:

Existing law:

1. Establishes the Medi-Cal program, administered by DHCS, under which qualified low-income individuals receive health care services. [WIC §14000, et seq.]
2. Makes children with family incomes up to 266% of the Federal Poverty Level (FPL) eligible for full-scope Medi-Cal, including providing full-scope Medi-Cal benefits to undocumented children through age 18. [WIC §14005.60, §14005.64, §14005.27, §14005.64, and §14007.8]
3. Establishes a schedule of benefits in the Medi-Cal program. Requires specified services provided by LEAs are covered Medi-Cal benefits, to the extent federal financial participation (FFP) is available, and subject to utilization controls and standards adopted by DHCS, and consistent with Medi-Cal requirements for physician prescription, order, and supervision. This is referred to as the LEA Billing Option Program (LEA BOP). [WIC §14132.06]
4. Requires DHCS to amend its Medicaid state plan with respect to the billing option for services by LEAs, to ensure that schools are reimbursed for all eligible services that they provide that are not precluded by federal requirements. [WIC §14115.8]
5. Requires DHCS to examine methodologies for increasing school participation in the Medi-Cal billing option for LEAs so that schools can meet the health care needs of their students. Requires DHCS, to the extent possible, to simplify claiming processes for LEA billing. [WIC §14115.8]
6. Requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by DHCS in the manner and form prescribed by DHCS, and requires DHCS to maintain adequate controls to ensure responsibility and accountability for the expenditure of federal and state funds. [WIC §14170]
7. Establishes an administrative appeal processes to review grievances or complaints arising from the findings of an audit or examination and for final settlements. [WIC §14171]

This bill:

1. Requires DHCS to complete an audit and notify a LEA of the audit findings within 18 months of the date that the Cost and Reimbursement Comparison Schedule (CRCS) is submitted. Permits an extension of this timeline of no more than three months upon a determination that the LEA has not provided sufficient documentation as requested by the auditor. Requires DHCS to provide interim or final settlement of a claim within 12 months. Where a final settlement is not issued within 12 months, requires DHCS to issue a final and perform final settlement on a claim within 18 months from the date the CRCS is submitted.
2. Requires DHCS to provide technical assistance to the LEA specific to the reasons the claims were disallowed and to assist with the preparation of a corrective action plan outlining the actions needed to avoid future disallowances for audits that disallow more than 25% of an LEA’s total value of claims in a given year.
3. Requires DHCS to consult with the LEA Ad Hoc workgroup consisting of the State Department of Education and LEAs prior to amending the state plan in order to implement this bill.
4. Requires DHCS to ensure that any LEA participating in the LEA BOP may participate virtually in any trainings or stakeholder meetings, including the LEA Ad Hoc Workgroup.
5. Adds additional elements to an existing required report to the Legislature on the LEA BOP and the LEA program guide as described in the amendments above.

Comments

1. Author’s statement. According to the author, the COVID-19 pandemic exacerbated the need for youth health and mental health services. In the first year of the pandemic, intentional self-harm among 13-18 year olds increased by 91%, overdoses increased by 95%, and diagnoses of depression increased by 84%. Schools need significant support to provide comprehensive health and mental health services for children and youth. According to DHCS, currently only 595 LEAs, or approximately one-half of LEAs, participate in the Medi-Cal LEA BOP. In aggregate, California schools draw down significantly less in reimbursements for Medicaid services than other states. For example, California spends $29 per Medi-Cal eligible child, while Montana generates over $500 per eligible child. The current Medi-Cal LEA BOP is administratively burdensome, due to extensive documentation requirements, and punitive audit practices. LEAs have experienced difficulty receiving clear and consistent guidance from the state and have had to return significant funds disallowed through the auditing process. Some LEAs have decided to cease participating in this program because of these problems. This bill requires DHCS to reform the audit process by requiring that audits are completed in a timely manner and include technical assistance to LEAs. This would expand access to school-based health services by encouraging more schools to participate in the LEA BOP program and to bill for more eligible services.
2. LEA BOP. The LEA BOP provides FFP through Medicaid reimbursement to LEAs (school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California) for health-related services provided by one of 21 qualified health practitioners specified in regulation to students who are enrolled in Medi-Cal. Any of the LEA entities are authorized to bill for services provided to any student, regardless of age, who is a Medi-Cal recipient. LEAs pay for health-related outpatient services and are reimbursed for 50% of their costs through Medicaid FFP. LEA services are delivered either through the LEAs (which employ practitioners who provide the services on site) or through local contracted practitioners. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP. LEA covered services can include the following:
3. Health and mental health evaluations and health and mental health education;
4. Medical transportation;
5. Nursing services;
6. Occupational therapy and physical therapy;
7. Physician services;
8. Mental health and counseling services;
9. School health aide services;
10. Speech pathology services;
11. Audiology services; and,
12. Targeted case management services for children regardless of whether the child has an individualized education plan or an individualized family service plan.

The LEA BOP is funded with a combination of local and federal funds. Claims are filed using the traditional Medi-Cal fee-for-service system through DHCS as the fiscal intermediary. LEAs pay 100% for the services and are reimbursed the maximum federal reimbursement for each individual service (50%); therefore, there is no state General Fund expense for this program. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP pursuant to federal regulations. Based on this certification, DHCS then claims FFP.

Under the LEA BOP, LEAs receive interim payments based on interim reimbursement rates, which are calculated using a Cost and Reimbursement Comparison Schedule (CRCS), which is submitted to DHCS annually for the preceding fiscal year. DHCS must reconcile the interim Medi-Cal reimbursements to LEAs with the costs to provide the Medi-Cal services. The CRCS is used to compare each LEA’s total actual costs for LEA services to interim Medi-Cal reimbursement for the preceding fiscal year.

The LEA BOP Ad Hoc Workgroup meets bi-monthly and is comprised of large, medium and small LEAs, community colleges, Local Governmental Agencies, Local Educational Consortia, DHCS, CDE, and professional associations with the purpose to enhance Medi-Cal services on school sites, increase access of care for students, and increase Medi-Cal reimbursement for LEAs. DHCS offers technical assistance to LEAs in need of support regarding the LEA BOP.

1. LEA BOP audits and appeals. This bill is in response to disputes over DHCS audits of LEA BOP providers, which results in DHCS recovering overpayments for services rendered, including for services billed several years after the services were claimed.

Existing Medi-Cal law requires that amounts paid for services provided to Medi-Cal beneficiaries be audited by DHCS in the manner and form prescribed by DHCS. Under California’s Medicaid State Plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claims data available from the DHCS to determine the appropriate level of oversight. If the interim Medi-Cal payments exceed the actual, certified costs of a LEA’s Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government. If the cost report’s actual certified costs of a LEA’s Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.

DHCS indicates it audits a sample of claims, through random claims reviews, payment error studies that suggest areas of vulnerability, and specific types of providers selected for review, suspicious claiming patterns, outside information from third parties, and complaints to the Medi-Cal fraud hotline. DHCS also indicates that of the audits it does, 60% are minimal audits, 30% are limited audits, and only 10% are field audits. DHCS indicates common audit findings are no physician prescription for treatments, medical necessity not established, unqualified personnel and/or supervision not documented, no service on date of service claims, lack of documentation, and nature of service not recorded. In 2015, for example, DHCS completed 518 field audits: 77% required repayment, though 76% of those required repayment of less than 25% of their interim payment. LEAs have 60 days to request an informal hearing to review grievances or complaints arising from the findings of an audit or examination. Should they not be satisfied with the results of the informal hearing, they can request a formal hearing within 30 days of receiving the informal appeal decision. In 2015, only seven issues were appealed – LEAs were not successful on any in either informal or formal appeals, though one issue was settled.

1. Children and Youth Behavioral Health Initiative. The 2021-2022 California State Budget included additional support for behavioral health services to children and youth. In addition to a number of grants and coordinating efforts, the initiative includes a new requirement that commercial health plans and insurers cover the provision of the behavioral health services identified in the fee-for-service reimbursement schedule published by DHCS when those services are delivered at school sites, regardless of the network status of the LEA, institution of higher education, or health care provider. Health plans and insurers are prohibited from charging co-pays, deductibles, or other cost-sharing for services received at school sites. This requirement is scheduled to take effect on January 1, 2024. The fee schedule is also to be used by Medi-Cal managed care plans. At this time, DHCS indicates that the fee schedule is not intended to be used for LEA BOP. It does, however, suggest that a more simplified payment mechanism is possible for the provision of behavioral health services in schools.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, DHCS estimates costs of $2,545,000 in 2024-25, $5,272,000 in 2025-26, and $5,218,000 in 2026-27 and ongoing thereafter (50 percent General Fund, 50 percent federal funds) for staffing resources for this bill.

Note that the September 8, 2023 amendments likely reduce the staffing resources needed for this bill and change the allowable set aside for DHCS administrative costs which might also reduce the cost of the program.

SUPPORT: (Verified 9/11/23)

State Superintendent of Public Instruction Tony Thurmond (co-source)

California Association of School Psychologists (co-source)

California County Superintendents (co-source)

California School Boards Association (co-source)

California School Nurses Organization (co-source)

Los Angeles Unified School District (co-source)

Santa Clara County Office of Education (co-source)

Alameda County Office of Education

Association of California School Administrators

California Association of School Business Officials

California Association of School Counselors

California Association of School Social Workers

California School Employees Association

California Teachers Association

Central Valley Education Coalition

Coalition for Adequate Funding for Special Education

Los Angeles Area Chamber of Commerce

Los Angeles County Office of Education

Riverside County Office of Education

Riverside County Superintendent of Schools

San Francisco Unified School District

Santa Clara County School Boards Association

Small School Districts’ Association

Steinberg Institute

OPPOSITION: (Verified 9/11/23)

Department of Finance

ARGUMENTS IN SUPPORT: Santa Clara County Office of Education, California County Superintendents, California Teachers Association, California School Nurses Organization, California Association of School Psychologists, California School Boards Association, and Los Angeles Unified School District, and other supporters submitted a coalition letter stating that the majority of the LEA BOP services are necessary and legally required by the Individuals with Disabilities Education Act to enable students to access their education. In recognition of well-established research indicating that students are 21 times more likely to receive health and mental health services provided on school campus, the federal government expanded LEA BOP’s scope in 2014 to allow schools to receive reimbursement for providing a wider range of services to more students, including those without disabilities. However, DHCS’s punitive administration of LEA BOP over the last decade has prevented California students from receiving critical health and mental health services. According to their own data, DHCS auditors currently require 75% of schools to pay back part of their LEA BOP reimbursement. This rate of paybacks is unparalleled in any other state operating a similar program. As the result of punitive audits, arbitrary and changing rules, and unreasonable documentation requirements, California schools receive only about $29 in Medi-Cal reimbursement per student while other states like Michigan and New Jersey receive approximately $250 per student. Were California to draw down Medi-Cal reimbursement rates more aligned with other large states, it would increase federal funding by approximately $1.3 billion annually. These dollars would ensure that special education programs are adequately funded and that school-based health centers, behavioral health services, and wellness programs have ongoing financial support.

ARGUMENTS IN OPPOSITION: The Department of Finance (DOF) is opposed to this bill because it results in significant General Fund impacts not included in the Fiscal Year 2023-24 Budget. Note that these concerns were submitted prior to the most recent amendments which likely reduce the cost.

ASSEMBLY FLOOR: 80-0, 5/31/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

Prepared by: Jen Flory / HEALTH / (916) 651-4111

9/11/23 12:50:01

**** END ****

 THIRD READING  

Bill No: AB 483

Author: Muratsuchi (D) and Wood (D), et al.

Amended: 7/13/23 in Senate

Vote: 21

SENATE HEALTH COMMITTEE: 11-0, 7/12/23

AYES: Eggman, Nguyen, Glazer, Gonzalez, Hurtado, Limón, Menjivar, Roth, Rubio, Wahab, Wiener

NO VOTE RECORDED: Grove

SENATE APPROPRIATIONS COMMITTEE: 7-0, 9/1/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

ASSEMBLY FLOOR: 80-0, 5/31/23 - See last page for vote

SUBJECT: Local educational agency: Medi-Cal billing option

SOURCE: Tony Thurmond, State Superintendent of Public Instruction

California Association of School Psychologists

California County Superintendents

California School Boards Association

California School Nurses Organization

Los Angeles Unified School District

Santa Clara County Office of Education

DIGEST:

This requires the Department of Health Care Services (DHCS) to revise its audit process for the Local Education Agency (LEA) Medi-Cal Billing Option Program to focus on fraud, waste, and abuse as the primary focus of recoupment. Revises timelines in the audit and appeals process and requires DHCS to give LEAs additional technical assistance and submit additional information on its audits to the Legislature.

ANALYSIS:

Existing law:

1. Establishes the Medi-Cal program, administered by DHCS, under which qualified low-income individuals receive health care services. [WIC §14000, et seq.]
2. Makes children with family incomes up to 266% of the Federal Poverty Level (FPL) eligible for full-scope Medi-Cal, including providing full-scope Medi-Cal benefits to undocumented children through age 18. [WIC §14005.60, §14005.64, §14005.27, §14005.64, and §14007.8]
3. Establishes a schedule of benefits in the Medi-Cal program. Requires specified services provided by LEAs are covered Medi-Cal benefits, to the extent federal financial participation (FFP) is available, and subject to utilization controls and standards adopted by DHCS, and consistent with Medi-Cal requirements for physician prescription, order, and supervision. This is referred to as the LEA Billing Option Program (LEA BOP). [WIC §14132.06]
4. Requires DHCS to amend its Medicaid state plan with respect to the billing option for services by LEAs, to ensure that schools are reimbursed for all eligible services that they provide that are not precluded by federal requirements. [WIC §14115.8]
5. Requires DHCS to examine methodologies for increasing school participation in the Medi-Cal billing option for LEAs so that schools can meet the health care needs of their students. Requires DHCS, to the extent possible, to simplify claiming processes for LEA billing. [WIC §14115.8]
6. Requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by DHCS in the manner and form prescribed by DHCS, and requires DHCS to maintain adequate controls to ensure responsibility and accountability for the expenditure of federal and state funds. [WIC §14170]
7. Establishes an administrative appeal processes to review grievances or complaints arising from the findings of an audit or examination and for final settlements. [WIC §14171]

This bill:

1. Requires DHCS to establish a revised audit process for LEA BOP claims submitted for dates of service on or after January 1, 2025. Requires DHCS’s audit plan to make fraud, waste, and abuse the primary focus of recoupment.
2. Requires DHCS to complete an audit and notify a LEA of the audit findings within 12 months of the date that the Cost and Reimbursement Comparison Schedule is submitted. Permits an extension of this timeline of no more than three months upon a determination that the LEA has not provided sufficient documentation as requested by the auditor. Requires DHCS to provide interim settlement of a claim within 12 months and perform final settlement on a claim, including completion of the appeals process, within three years from the date the Cost and Reimbursement Comparison Schedule is submitted. Permits the LEA to seek immediate relief in superior court in the event that an LEA’s audit appeal is not fully and finally resolved by DHCS within 300 days after the date a notice of appeal is filed.
3. Requires DHCS to provide technical assistance to the LEA specific to the reasons the claims were disallowed and to assist with the preparation of a corrective action plan outlining the actions needed to avoid future disallowances for audits that disallow more than 25% of an LEA’s total value of claims in a given year.
4. Requires informal and formal appeals to be completed within 180 days for appeals of audits disallowing 50% or more of an LEA’s total value of claims in a given year.
5. Prohibits the auditor from disallowing a claim for LEA BOP services unless the claim is out of compliance with the standards of the LEA BOP guide or the State Plan in effect at the time of submission. Requires the person reviewing the audit appeal to use the LEA BOP guide when reviewing an audit appeal, including the guidance contained in any website links in the LEA program guide, to determine whether the claim was appropriately disallowed.
6. Requires DHCS to revise its Medicaid state plan regarding the revised audit process only to the extent necessary to obtain federal approval upon consultation with the LEA Ad Hoc Workgroup, consisting of, but not limited to, representatives of the California Department of Education (CDE); urban, rural, large and small school districts; and, county offices of education, the local consortia, and LEAs. Requires DHCS to report to the relevant policy committees and post on its website any changes made to the state plan.
7. Requires DHCS to ensure that any LEA participating in the LEA BOP may participate virtually in any trainings or stakeholder meetings, including the LEA Ad Hoc Workgroup.
8. Adds additional elements to an existing required report to the Legislature on the LEA BOP to include a summary of DHCS trainings for LEAs and a summary of the number of audits conducted of Medi-Cal LEA BOP claims, the amount of funds disallowed per LEA broken down by those related to reimbursements for interim payments made in excess of actual costs, as well as those related to audit findings of noncompliance, and efforts made to provide technical assistance and develop corrective action plans.
9. Requires DHCS, for purposes of LEA BOP claims, to ensure that for a beneficiary under age 21, “medical necessity” has the same meaning as that term is defined in the medical necessity provision in existing state law that refers to the “correct and ameliorate” standard in federal Medicaid law.

Comments

1. Author’s statement. According to the author, the COVID-19 pandemic exacerbated the need for youth health and mental health services. In the first year of the pandemic, intentional self-harm among 13-18 year olds increased by 91%, overdoses increased by 95%, and diagnoses of depression increased by 84%. Schools need significant support to provide comprehensive health and mental health services for children and youth. According to DHCS, currently only 595 LEAs, or approximately one-half of LEAs, participate in the Medi-Cal LEA BOP. In aggregate, California schools draw down significantly less in reimbursements for Medicaid services than other states. For example, California spends $29 per Medi-Cal eligible child, while Montana generates over $500 per eligible child. The current Medi-Cal LEA BOP is administratively burdensome, due to extensive documentation requirements, and punitive audit practices. LEAs have experienced difficulty receiving clear and consistent guidance from the state and have had to return significant funds disallowed through the auditing process. Some LEAs have decided to cease participating in this program because of these problems. This bill would require DHCS to reform the audit process by requiring that audits are completed in a timely manner and include technical assistance to LEAs. This would expand access to school-based health services by encouraging more schools to participate in the LEA BOP program and to bill for more eligible services.
2. LEA BOP. The LEA BOP provides FFP through Medicaid reimbursement to LEAs (school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California) for health-related services provided by one of 21 qualified health practitioners specified in regulation to students who are enrolled in Medi-Cal. Any of the LEA entities are authorized to bill for services provided to any student, regardless of age, who is a Medi-Cal recipient. LEAs pay for health-related outpatient services and are reimbursed for 50% of their costs through Medicaid FFP. LEA services are delivered either through the LEAs (which employ practitioners who provide the services on site) or through local contracted practitioners. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP. LEA covered services can include the following:
3. Health and mental health evaluations and health and mental health education;
4. Medical transportation;
5. Nursing services;
6. Occupational therapy and physical therapy;
7. Physician services;
8. Mental health and counseling services;
9. School health aide services;
10. Speech pathology services;
11. Audiology services; and,
12. Targeted case management services for children regardless of whether the child has an individualized education plan or an individualized family service plan.

The LEA BOP is funded with a combination of local and federal funds. Claims are filed using the traditional Medi-Cal fee-for-service system through DHCS as the fiscal intermediary. LEAs pay 100% for the services and are reimbursed the maximum federal reimbursement for each individual service (50%); therefore, there is no state General Fund expense for this program. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP pursuant to federal regulations. Based on this certification, DHCS then claims FFP.

Under the LEA BOP, LEAs receive interim payments based on interim reimbursement rates, which are calculated using a Cost and Reimbursement Comparison Schedule (CRCS), which is submitted to DHCS annually for the preceding fiscal year. DHCS must reconcile the interim Medi-Cal reimbursements to LEAs with the costs to provide the Medi-Cal services. The CRCS is used to compare each LEA’s total actual costs for LEA services to interim Medi-Cal reimbursement for the preceding fiscal year.

The LEA BOP Ad Hoc Workgroup meets bi-monthly and is comprised of large, medium and small LEAs, community colleges, Local Governmental Agencies, Local Educational Consortia, DHCS, CDE, and professional associations with the purpose to enhance Medi-Cal services on school sites, increase access of care for students, and increase Medi-Cal reimbursement for LEAs. DHCS offers technical assistance to LEAs in need of support regarding the LEA BOP.

1. LEA BOP audits and appeals. This bill is in response to disputes over DHCS audits of LEA BOP providers, which results in DHCS recovering overpayments for services rendered, including for services billed several years after the services were claimed.

Existing Medi-Cal law requires that amounts paid for services provided to Medi-Cal beneficiaries be audited by DHCS in the manner and form prescribed by DHCS. Under California’s Medicaid State Plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claims data available from the DHCS to determine the appropriate level of oversight. If the interim Medi-Cal payments exceed the actual, certified costs of a LEA’s Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government. If the cost report’s actual certified costs of a LEA’s Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.

DHCS indicates it audits a sample of claims, through random claims reviews, payment error studies that suggest areas of vulnerability, and specific types of providers selected for review, suspicious claiming patterns, outside information from third parties, and complaints to the Medi-Cal fraud hotline. DHCS also indicates that of the audits it does, 60% are minimal audits, 30% are limited audits, and only 10% are field audits. DHCS indicates common audit findings are no physician prescription for treatments, medical necessity not established, unqualified personnel and/or supervision not documented, no service on date of service claims, lack of documentation, and nature of service not recorded. In 2015, for example, DHCS completed 518 field audits: 77% required repayment, though 76% of those required repayment of less than 25% of their interim payment. LEAs have 60 days to request an informal hearing to review grievances or complaints arising from the findings of an audit or examination. Should they not be satisfied with the results of the informal hearing, they can request a formal hearing within 30 days of receiving the informal appeal decision. In 2015, only seven issues were appealed – LEAs were not successful on any in either informal or formal appeals, though one issue was settled.

This bill has several provisions aiming to reform the DHCS audit process. It requires DHCS audits to focus recoupment efforts on fraud, waste, and abuse and to complete an audit and notify an LEA of the audit findings within 12 months of the date that the CRCS is submitted. The 12 months can only be extended if needed to obtain additional documentation from the LEA, and then only by three months. DHCS must provide interim settlement of a claim within 12 months and perform final settlement on a claim, including completion of the appeals process, within three years from the date the CRCS is submitted. To further incentivize prompt resolution of appeals, in the event an audit appeal is not resolved within 300 days from the filing of the appeal, the LEA would be able to go to superior court just as if the appeal were decided against them. This bill also requires auditors to adhere strictly to the LEA BOP program guide and state plan language in determining what should be repaid and requires DHCS to provide additional technical assistance to LEAs, particularly where recouping amounts in excess of 25% of a LEA’s total value of claims. Finally, this bill also requires additional reporting to the Legislature regarding the number of audits conducted and the amounts required to be repaid, broken down by whether the amount was for noncompliance or due to an excess of the LEA’s actual costs.

1. Children and Youth Behavioral Health Initiative. The 2021-2022 California State Budget included additional support for behavioral health services to children and youth. In addition to a number of grants and coordinating efforts, the initiative includes a new requirement that commercial health plans and insurers cover the provision of the behavioral health services identified in the fee-for-service reimbursement schedule published by DHCS when those services are delivered at school sites, regardless of the network status of the LEA, institution of higher education, or health care provider. Health plans and insurers are prohibited from charging co-pays, deductibles, or other cost-sharing for services received at school sites. This requirement is scheduled to take effect on January 1, 2024. The fee schedule is also to be used by Medi-Cal managed care plans. At this time, DHCS indicates that the fee schedule is not intended to be used for LEA BOP. It does, however, suggest that a more simplified payment mechanism is possible for the provision of behavioral health services in schools.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, DHCS estimates costs of $2,545,000 in 2024-25, $5,272,000 in 2025-26, and $5,218,000 in 2026-27 and ongoing thereafter (50 percent General Fund, 50 percent federal funds) for staffing resources for this bill.

SUPPORT: (Verified 9/1/23)

Tony Thurmond, State Superintendent of Public Instruction

(co-source)

California Association of School Psychologists (co-source)

California County Superintendents Educational Services Association (co-source)

California School Boards Association (co-source)

California School Nurses Organization (co-source)

Los Angeles Unified School District (co-source)
Santa Clara County Office of Education (co-source)

Alameda County Office of Education
Association of California School Administrators

California Association of School Business Officials
California Association of School Counselors

California Association of School Social Workers

California School Employees Association

California Teachers Association

Central Valley Education Coalition
Coalition for Adequate Funding for Special Education
Los Angeles Area Chamber of Commerce
Los Angeles County Office of Education
Riverside County Office of Education

Riverside County Superintendent of Schools

San Francisco Unified School District

Santa Clara County School Boards Association

Small School Districts’ Association
Steinberg Institute

OPPOSITION: (Verified 9/1/23)

Department of Finance

ARGUMENTS IN SUPPORT: Santa Clara County Office of Education, California County Superintendents Educational Services Association, California Teachers Association, California School Nurses Organization, California Association of School Psychologists, California School Boards Association, and Los Angeles Unified School District, and other supporters submitted a coalition letter stating that the majority of the LEA BOP services are necessary and legally required by the Individuals with Disabilities Education Act to enable students to access their education. In recognition of well-established research indicating that students are 21 times more likely to receive health and mental health services provided on school campus, the federal government expanded LEA BOP’s scope in 2014 to allow schools to receive reimbursement for providing a wider range of services to more students, including those without disabilities. However, DHCS’s punitive administration of LEA BOP over the last decade has prevented California students from receiving critical health and mental health services. According to their own data, DHCS auditors currently require 75% of schools to pay back part of their LEA BOP reimbursement. This rate of paybacks is unparalleled in any other state operating a similar program. As the result of punitive audits, arbitrary and changing rules, and unreasonable documentation requirements, California schools receive only about $29 in Medi-Cal reimbursement per student while other states like Michigan and New Jersey receive approximately $250 per student. Were California to draw down Medi-Cal reimbursement rates more aligned with other large states, it would increase federal funding by approximately $1.3 billion annually. These dollars would ensure that special education programs are adequately funded and that school-based health centers, behavioral health services, and wellness programs have ongoing financial support.

ARGUMENTS IN OPPOSITION: The Department of Finance (DOF) is opposed to this bill because it results in significant General Fund impacts not included in the Fiscal Year 2023-24 Budget. The LEA BOP program provides LEAs with the federal financial participation available for providing eligible Medi-Cal services to Medi-Cal enrolled students. DHCS may claim federal funds on behalf of a government entity like an LEA, provided the entity incurs an eligible expenditure and certifies the public funds were used to support the full cost of providing the service. DOF notes concerns that altering the process and focus of LEA BOP audits may conflict with federal requirements for the program. DHCS is already required to submit annual reports to the Legislature on LEA BOP audits; this bill requires DHCS to submit additional information on those reports.

ASSEMBLY FLOOR: 80-0, 5/31/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

Prepared by: Jen Flory / HEALTH / (916) 651-4111

9/2/23 14:58:44

**** END ****

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 483 (Muratsuchi) - Local educational agency: Medi-Cal billing option

Bill Summary:

AB 483 would require the Department of Health Care Services (DHCS) to revise its audit process for the Local Education Agency (LEA) Medi-Cal Billing Option Program (BOP).

Fiscal Impact:

The DHCS estimates costs of $2,545,000 in 2024-25, $5,272,000 in 2025-26, and $5,218,000 in 2026-27 and ongoing thereafter (50 percent General Fund, 50 percent federal funds) for staffing resources.

Background:

The LEA BOP provides federal funding through Medicaid reimbursements to LEAs (school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California) for health-related services provided by one of 21 qualified health practitioners specified in regulation to students who are enrolled in Medi-Cal. Any of the LEA entities is authorized to bill for services provided to any student, regardless of age, who is a Medi-Cal recipient. LEA services are delivered either through the LEAs (which employ practitioners who provide the services on site) or through local contracted practitioners.

The LEA BOP is funded with a combination of local and federal funds. Claims are filed using the traditional Medi-Cal fee-for-service system through DHCS as the fiscal intermediary. LEAs pay 100 percent for the services and are reimbursed the maximum federal reimbursement for each individual service (50 percent); therefore, there is no state General Fund expense for this program. LEAs must annually certify that the public funds expended for LEA services provided are eligible for federal funding pursuant to federal regulations. Based on this certification, DHCS then claims for federal funding.

Existing Medi-Cal law requires that amounts paid for services provided to Medi-Cal beneficiaries be audited by DHCS in the manner and form prescribed by DHCS. Under California’s Medicaid state plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The state plan requires the audit plan to include a risk assessment of the LEAs using paid claims data available from the DHCS to determine the appropriate level of oversight. If the interim Medi-Cal payments exceed the actual, certified costs of a LEA’s Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government. If the cost report’s actual certified costs of a LEA’s Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.

Proposed Law:

Specific provisions of the bill would:

• Require DHCS to establish a revised audit process for LEA BOP claims, as specified.
• Require DHCS to revise its Medicaid state plan regarding the revised audit process only to the extent necessary to obtain federal approval; and require DHCS to report to the relevant policy committees and post on its website any changes made to the state plan.
• Require DHCS to ensure that any LEA participating in the LEA BOP may participate virtually in any trainings or stakeholder meetings.
• Add additional elements to an existing required report to the Legislature on the LEA BOP, as specified.

Related Legislation:

AB 2034 (O’Donnell, 2022) was similar to this bill. AB 2034 was not heard in the Senate Education Committee.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Dr. Susan Talamantes Eggman, Chair

BILL NO: AB 483

SUBJECT: Local educational agency: Medi-Cal billing option

SUMMARY:

Requires the Department of Health Care Services (DHCS) to revise its audit process for the Local Education Agency (LEA) Medi-Cal Billing Option Program to focus on fraud, waste, and abuse as the primary focus of recoupment. Revises timelines in the audit and appeals process and requires DHCS to give LEAs additional technical assistance and submit additional information on its audits to the Legislature.

Existing law:

1. Establishes the Medi-Cal program, administered by DHCS, under which qualified low-income individuals receive health care services. [WIC §14000, et seq.]
2. Makes children with family incomes up to 266% of the Federal Poverty Level (FPL) eligible for full-scope Medi-Cal, including providing full-scope Medi-Cal benefits to undocumented children through age 18. [WIC §14005.60, §14005.64, §14005.27, §14005.64, and §14007.8]
3. Establishes a schedule of benefits in the Medi-Cal program. Requires specified services provided by LEAs are covered Medi-Cal benefits, to the extent federal financial participation (FFP) is available, and subject to utilization controls and standards adopted by DHCS, and consistent with Medi-Cal requirements for physician prescription, order, and supervision. This is referred to as the LEA Billing Option Program (LEA BOP). [WIC §14132.06]
4. Requires DHCS to amend its Medicaid state plan with respect to the billing option for services by LEAs, to ensure that schools are reimbursed for all eligible services that they provide that are not precluded by federal requirements. [WIC §14115.8]
5. Requires DHCS to examine methodologies for increasing school participation in the Medi-Cal billing option for LEAs so that schools can meet the health care needs of their students. Requires DHCS, to the extent possible, to simplify claiming processes for LEA billing. [WIC §14115.8]
6. Requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by DHCS in the manner and form prescribed by DHCS, and requires DHCS to maintain adequate controls to ensure responsibility and accountability for the expenditure of federal and state funds. [WIC §14170]
7. Establishes an administrative appeal processes to review grievances or complaints arising from the findings of an audit or examination and for final settlements. [WIC §14171]

This bill:

1. Requires DHCS to establish a revised audit process for LEA BOP claims submitted for dates of service on or after January 1, 2024. Requires DHCS’s audit plan to make fraud, waste, and abuse the primary focus of recoupment.
2. Requires DHCS to complete an audit and notify a LEA of the audit findings within 12 months of the date that the Cost and Reimbursement Comparison Schedule is submitted. Permits an extension of this timeline of no more than three months upon a determination that the LEA has not provided sufficient documentation as requested by the auditor. Requires DHCS to provide interim settlement of a claim within 12 months and perform final settlement on a claim, including completion of the appeals process, within three years from the date the Cost and Reimbursement Comparison Schedule is submitted. Permits the LEA to seek immediate relief in superior court in the event that an LEA’s audit appeal is not fully and finally resolved by DHCS within 300 days after the date a notice of appeal is filed.
3. Requires DHCS to provide technical assistance to the LEA specific to the reasons the claims were disallowed and to assist with the preparation of a corrective action plan outlining the actions needed to avoid future disallowances for audits that disallow more than 25% of an LEA’s total value of claims in a given year.
4. Requires informal and formal appeals to be completed within 180 days for appeals of audits disallowing 50% or more of an LEA’s total value of claims in a given year.
5. Prohibits the auditor from disallowing a claim for LEA BOP services unless the claim is out of compliance with the standards of the LEA BOP guide or the State Plan in effect at the time of submission. Requires the person reviewing the audit appeal to use the LEA BOP guide when reviewing an audit appeal, including the guidance contained in any website links in the LEA program guide, to determine whether the claim was appropriately disallowed.
6. Requires DHCS to revise its Medicaid state plan regarding the revised audit process only to the extent necessary to obtain federal approval upon consultation with the LEA Ad Hoc Workgroup, consisting of, but not limited to, representatives of the California Department of Education (CDE); urban, rural, large and small school districts; and, county offices of education, the local consortia, and LEAs. Requires DHCS to report to the relevant policy committees and post on its website any changes made to the state plan.
7. Requires DHCS to ensure that any LEA participating in the LEA BOP may participate virtually in any trainings or stakeholder meetings, including the LEA Ad Hoc Workgroup.
8. Adds additional elements to an existing required report to the Legislature on the LEA BOP to include a summary of DHCS trainings for LEAs and a summary of the number of audits conducted of Medi-Cal LEA BOP claims, the amount of funds disallowed per LEA broken down by those related to reimbursements for interim payments made in excess of actual costs, as well as those related to audit findings of noncompliance, and efforts made to provide technical assistance and develop corrective action plans.
9. Requires DHCS, for purposes of LEA BOP claims, to ensure that for a beneficiary under age 21, “medical necessity” has the same meaning as that term is defined in the medical necessity provision in existing state law that refers to the “correct and ameliorate” standard in federal Medicaid law.

FISCAL EFFECT:

According to the Assembly Appropriations Committee, the amount of costs to DHCS are unknown, but potentially in the hundreds of thousands of dollars, to revise the audit process and complete audits and final settlements within the timelines required by this bill (50% General Fund, 50% federal funds). There are also possible cost pressures to trial courts if DHCS does not resolve audit appeals within 300 days and LEAs seek relief in court.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, the COVID-19 pandemic exacerbated the need for youth health and mental health services. In the first year of the pandemic, intentional self-harm among 13-18 year olds increased by 91%, overdoses increased by 95%, and diagnoses of depression increased by 84%. Schools need significant support to provide comprehensive health and mental health services for children and youth. According to DHCS, currently only 595 LEAs, or approximately one-half of LEAs, participate in the Medi-Cal LEA BOP. In aggregate, California schools draw down significantly less in reimbursements for Medicaid services than other states. For example, California spends $29 per Medi-Cal eligible child, while Montana generates over $500 per eligible child. The current Medi-Cal LEA BOP is administratively burdensome, due to extensive documentation requirements, and punitive audit practices. LEAs have experienced difficulty receiving clear and consistent guidance from the state and have had to return significant funds disallowed through the auditing process. Some LEAs have decided to cease participating in this program because of these problems. This bill would require DHCS to reform the audit process by requiring that audits are completed in a timely manner and include technical assistance to LEAs. This would expand access to school-based health services by encouraging more schools to participate in the LEA BOP program and to bill for more eligible services.
2. LEA BOP. The LEA BOP provides FFP through Medicaid reimbursement to LEAs (school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California) for health-related services provided by one of 21 qualified health practitioners specified in regulation to students who are enrolled in Medi-Cal. Any of the LEA entities is authorized to bill for services provided to any student, regardless of age, who is a Medi-Cal recipient. LEAs pay for health-related outpatient services and are reimbursed for 50% of their costs through Medicaid FFP. LEA services are delivered either through the LEAs (which employ practitioners who provide the services on site) or through local contracted practitioners. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP. LEA covered services can include the following:
   
3. Health and mental health evaluations and health and mental health education;
4. Medical transportation;
5. Nursing services;
6. Occupational therapy and physical therapy;
7. Physician services;
8. Mental health and counseling services;
9. School health aide services;
10. Speech pathology services;
11. Audiology services; and,
12. Targeted case management services for children regardless of whether the child has an individualized education plan or an individualized family service plan.

The LEA BOP is funded with a combination of local and federal funds. Claims are filed using the traditional Medi-Cal fee-for-service system through DHCS as the fiscal intermediary. LEAs pay 100% for the services and are reimbursed the maximum federal reimbursement for each individual service (50%); therefore, there is no state General Fund expense for this program. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP pursuant to federal regulations. Based on this certification, DHCS then claims FFP.

Under the LEA BOP, LEAs receive interim payments based on interim reimbursement rates, which are calculated using a Cost and Reimbursement Comparison Schedule (CRCS), which is submitted to DHCS annually for the preceding fiscal year. DHCS must reconcile the interim Medi-Cal reimbursements to LEAs with the costs to provide the Medi-Cal services. The CRCS is used to compare each LEA’s total actual costs for LEA services to interim Medi-Cal reimbursement for the preceding fiscal year.

The LEA BOP Ad Hoc Workgroup meets bi-monthly and is comprised of large, medium and small LEAs, community colleges, Local Governmental Agencies, Local Educational Consortia, DHCS, CDE, and professional associations with the purpose to enhance Medi-Cal services on school sites, increase access of care for students, and increase Medi-Cal reimbursement for LEAs. DHCS offers technical assistance to LEAs in need of support regarding the LEA BOP.

1. LEA BOP audits and appeals. This bill is in response to disputes over DHCS audits of LEA BOP providers, which results in DHCS recovering overpayments for services rendered, including for services billed several years after the services were claimed.

Existing Medi-Cal law requires that amounts paid for services provided to Medi-Cal beneficiaries be audited by DHCS in the manner and form prescribed by DHCS. Under California’s Medicaid State Plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claims data available from the DHCS to determine the appropriate level of oversight. If the interim Medi-Cal payments exceed the actual, certified costs of a LEA’s Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government. If the cost report’s actual certified costs of a LEA’s Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.

DHCS indicates it audits a sample of claims, through random claims reviews, payment error studies that suggest areas of vulnerability, and specific types of providers selected for review, suspicious claiming patterns, outside information from third parties, and complaints to the Medi-Cal fraud hotline. DHCS also indicates that of the audits it does, 60% are minimal audits, 30% are limited audits, and only 10% are field audits. DHCS indicates common audit findings are no physician prescription for treatments, medical necessity not established, unqualified personnel and/or supervision not documented, no service on date of service claims, lack of documentation, and nature of service not recorded. In 2015, for example, DHCS completed 518 field audits: 77% required repayment, though 76% of those required repayment of less than 25% of their interim payment. LEAs have 60 days to request an informal hearing to review grievances or complaints arising from the findings of an audit or examination. Should they not be satisfied with the results of the informal hearing, which must be conducted within 90 days and completed within 180 days, they can request a formal hearing within 30 days of receiving the informal appeal decision. The formal appeal must be decided within 300 days of the filing of the initial Statement of Disputed issues that was filed to initiate the informal appeal. In 2015, only seven issues were appealed – LEAs were not successful on any in either informal or formal appeals, though one issue was settled.

This bill has several provisions aiming to reform the DHCS audit process. It requires DHCS audits to focus recoupment efforts on fraud, waste, and abuse and to complete an audit and notify an LEA of the audit findings within 12 months of the date that the Cost and Reimbursement Comparison Schedule is submitted. The 12 months can only be extended if needed to obtain additional documentation from the LEA, and then only by three months. DHCS must provide interim settlement of a claim within 12 months and perform final settlement on a claim, including completion of the appeals process, within three years from the date the Cost and Reimbursement Comparison Schedule is submitted. To further incentivize prompt resolution of appeals, in the event an audit appeal is not resolved within 300 days from the filing of the appeal, the LEA would be able to go to superior court just as if the appeal were decided against them. This bill also requires auditors to adhere strictly to the LEA BOP program guide and state plan language in determining what should be repaid and requires DHCS to provide additional technical assistance to LEAs, particularly where recouping amounts in excess of 25% of a LEA’s total value of claims. Finally, this bill also requires additional reporting to the Legislature regarding the number of audits conducted and the amounts required to be repaid, broken down by whether the amount was for noncompliance or due to an excess of the LEA’s actual costs.

It should be noted that in another context DHCS recently revised its audit protocols and reasons for recoupment, limiting recoupment to findings of fraud, waste, and abuse with regards to specialty mental health services provided by county mental health plans, effective July 1, 2022. This was part of a greater effort to simplify behavioral health documentation standards for specialty mental health services to remove outdated requirements and align standards across physical and behavioral health as part of the CalAIM initiative. While those audit protocols do not apply here, this bill would require a similar limitation.

1. Children and Youth Behavioral Health Initiative. The 2021-2022 California State Budget included additional support for behavioral health services to children and youth. In addition to a number of grants and coordinating efforts, the initiative includes a new requirement that commercial health plans and insurers cover the provision of the behavioral health services identified in the fee-for-service reimbursement schedule published by DHCS when those services are delivered at school sites, regardless of the network status of the LEA, institution of higher education, or health care provider. Health plans and insurers are prohibited from charging co-pays, deductibles, or other cost-sharing for services received at school sites. This requirement is scheduled to take effect on January 1, 2024. The fee schedule is also to be used by Medi-Cal managed care plans. At this time, DHCS indicates that the fee schedule is not intended to be used for LEA BOP. It does, however, suggest that a more simplified payment mechanism is possible for the provision of behavioral health services in schools.
2. Prior legislation. SB 229 (Dahle of 2021) would have required DHCS, in consultation with CDE, to provide up to $500 million in grants annually to LEAs and private schools, to provide mental health services for pupils affected by school closures and distance learning requirements resulting from the COVID-19 pandemic. SB 229 was held in the Senate Appropriations Committee.

SB 508 (Stern of 2021) would have required specified health care service plans, health insurers, and MCMC plans to enter into a MOU with all LEAs where 15% or more of the pupils of that LEA are insured by the plan or insurer; authorizes the LEA to bill for mental health and SUD services provided if the plan or insurer fails to enter into a MOU with the LEA; approves telehealth as an approved modality for provision of specified services by an LEA; and authorizes a school district to require parents provide information on a pupil’s health care coverage. SB 508 was not heard in the Senate Health Committee.

AB 2034 (O’Donnell of 2021) was nearly identical to this bill. AB 2034 passed the Senate Health Committee but was not heard in the Senate Education Committee.

AB 130 (Committee on Budget, Chapter 44, Statutes of 2021) included the School Health Demonstration Project administered by CDE and DHCS to expand comprehensive health and mental health services to public school pupils by providing training and support services to selected LEAs to secure ongoing Medi-Cal funding for those services.

AB 133 (Committee on Budget, Chapter 143, Statutes of 2021) included the Children and Youth Behavioral Health Initiative which requires, starting January 1, 2024, a health care service plan contract or insurance policy that is required to provide coverage for medically necessary treatment of mental health and substance use disorders (SUDs) to cover the provision of specified services when delivered at school sites, regardless of the network status of the LEA or health care provider. It requires the plan or insurer to reimburse the entity that provided the services at the Medi-Cal rate and requires the services to be provided without prior authorization or cost sharing. AB 133 also requires DHCS to set a fee structure for behavioral health services provided at school sites for MCMC plans and requires DHCS to set up an incentive program for qualifying MCMC plans providing behavioral health services at school sites.

AB 586 (O’Donnell of 2021) would have established the School Health Demonstration Project to expand comprehensive health and mental health services to students by providing intensive assistance and support to selected LEAs to build the capacity for long-term sustainability through leveraging multiple funding streams and partnering with county MHPs, Managed Care Organizations, and community-based providers. The contents of AB 586 were included in the budget trailer bill AB 130.

AB 3192 (O’Donnell, Chapter 658, Statutes of 2018) requires DHCS, in consultation with the LEA Ad Hoc Workgroup and CDE, to prepare and complete a fiscal and compliance audit guide of the LEA BOP, for distribution by June 30, 2019, and subject to approval by the LEA Ad Hoc Workgroup.

1. Support. Co-sponsors Santa Clara County Office of Education, California County Superintendents Educational Services Association, California Teachers Association, California School Nurses Organization, California Association of School Psychologists, California School Boards Association, and Los Angeles Unified School District, and other supporters submitted a coalition letter stating that the majority of the LEA BOP services are necessary and legally required by the Individuals with Disabilities Education Act to enable students to access their education. In recognition of well-established research indicating that students are 21 times more likely to receive health and mental health services provided on school campus, the federal government expanded LEA BOP’s scope in 2014 to allow schools to receive reimbursement for providing a wider range of services to more students, including those without disabilities. However, DHCS’s punitive administration of LEA BOP over the last decade has prevented California students from receiving critical health and mental health services. According to their own data, DHCS auditors currently require 75% of schools to pay back part of their LEA BOP reimbursement. This rate of paybacks is unprecedented, unparalleled in any other state operating a similar program, and has remained constant since audits began in 2009. As the result of punitive audits, arbitrary and changing rules, and unreasonable documentation requirements, California schools receive only about $29 in Medi-Cal reimbursement per student while other states like Michigan and New Jersey receive approximately $250 per student. Were California to draw down Medi-Cal reimbursement rates more aligned with other large states, it would increase federal funding by approximately $1.3 billion annually. These dollars would ensure that special education programs are adequately funded and that school-based health centers, behavioral health services, and wellness programs have ongoing financial support.
2. Amendments. Subsection (b)(2) should be amended to avoid redundancy with (b)(3) and make clearer DHCS’s obligation: Subject to the limitation of paragraph (3), the The department shall revise the state plan to establish a revised audit process for Medi-Cal Billing Option claims submitted for dates of service on or after January 1, 2025.

SUPPORT AND OPPOSITION:

Support: California Association of School Psychologists (co-sponsor)

California County Superintendents Educational Services Association (co-sponsor)

California School Boards Association (co-sponsor)

California School Nurses Organization (co-sponsor)

California Teachers Association (co-sponsor)

Los Angeles Unified School District (co-sponsor)
Santa Clara County Office of Education (co-sponsor)

Alameda County Office of Education
Association of California School Administrators

California Association of School Business Officials
California Association of School Counselors

California Association of School Social Workers

California School Employees Association

Central Valley Education Coalition
Coalition for Adequate Funding for Special Education
Los Angeles Area Chamber of Commerce
Los Angeles County Office of Education

Los Angeles Unified School District
Riverside County Office of Education

San Francisco Unified School District

Santa Clara County School Boards Association

Small School Districts’ Association
Steinberg Institute

Tony Thurmond, State Superintendent of Public Instruction, California Department of Education

Oppose: None received.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Dr. Susan Talamantes Eggman, Chair

BILL NO: AB 483

SUBJECT: Local educational agency: Medi-Cal billing option

SUMMARY:

Requires the Department of Health Care Services (DHCS) to revise its audit process for the Local Education Agency (LEA) Medi-Cal Billing Option Program to focus on fraud, waste, and abuse as the primary focus of recoupment. Revises timelines in the audit and appeals process and requires DHCS to give LEAs additional technical assistance and submit additional information on its audits to the Legislature.

Existing law:

1. Establishes the Medi-Cal program, administered by DHCS, under which qualified low-income individuals receive health care services. [WIC §14000, et seq.]
2. Makes children with family incomes up to 266% of the Federal Poverty Level (FPL) eligible for full-scope Medi-Cal, including providing full-scope Medi-Cal benefits to undocumented children through age 18. [WIC §14005.60, §14005.64, §14005.27, §14005.64, and §14007.8]
3. Establishes a schedule of benefits in the Medi-Cal program. Requires specified services provided by LEAs are covered Medi-Cal benefits, to the extent federal financial participation (FFP) is available, and subject to utilization controls and standards adopted by DHCS, and consistent with Medi-Cal requirements for physician prescription, order, and supervision. This is referred to as the LEA Billing Option Program (LEA BOP). [WIC §14132.06]
4. Requires DHCS to amend its Medicaid state plan with respect to the billing option for services by LEAs, to ensure that schools are reimbursed for all eligible services that they provide that are not precluded by federal requirements. [WIC §14115.8]
5. Requires DHCS to examine methodologies for increasing school participation in the Medi-Cal billing option for LEAs so that schools can meet the health care needs of their students. Requires DHCS, to the extent possible, to simplify claiming processes for LEA billing. [WIC §14115.8]
6. Requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by DHCS in the manner and form prescribed by DHCS, and requires DHCS to maintain adequate controls to ensure responsibility and accountability for the expenditure of federal and state funds. [WIC §14170]
7. Establishes an administrative appeal processes to review grievances or complaints arising from the findings of an audit or examination and for final settlements. [WIC §14171]

This bill:

1. Requires DHCS to establish a revised audit process for LEA BOP claims submitted for dates of service on or after January 1, 2024. Requires DHCS’s audit plan to make fraud, waste, and abuse the primary focus of recoupment.
2. Requires DHCS to complete an audit and notify a LEA of the audit findings within 12 months of the date that the Cost and Reimbursement Comparison Schedule is submitted. Permits an extension of this timeline of no more than three months upon a determination that the LEA has not provided sufficient documentation as requested by the auditor. Requires DHCS to provide interim settlement of a claim within 12 months and perform final settlement on a claim, including completion of the appeals process, within three years from the date the Cost and Reimbursement Comparison Schedule is submitted. Permits the LEA to seek immediate relief in superior court in the event that an LEA’s audit appeal is not fully and finally resolved by DHCS within 300 days after the date a notice of appeal is filed.
3. Requires DHCS to provide technical assistance to the LEA specific to the reasons the claims were disallowed and to assist with the preparation of a corrective action plan outlining the actions needed to avoid future disallowances for audits that disallow more than 25% of an LEA’s total value of claims in a given year.
4. Requires informal and formal appeals to be completed within 180 days for appeals of audits disallowing 50% or more of an LEA’s total value of claims in a given year.
5. Prohibits the auditor from disallowing a claim for LEA BOP services unless the claim is out of compliance with the standards of the LEA BOP guide or the State Plan in effect at the time of submission. Requires the person reviewing the audit appeal to use the LEA BOP guide when reviewing an audit appeal, including the guidance contained in any website links in the LEA program guide, to determine whether the claim was appropriately disallowed.
6. Requires DHCS to revise its Medicaid state plan regarding the revised audit process only to the extent necessary to obtain federal approval upon consultation with the LEA Ad Hoc Workgroup, consisting of, but not limited to, representatives of the California Department of Education (CDE); urban, rural, large and small school districts; and, county offices of education, the local consortia, and LEAs. Requires DHCS to report to the relevant policy committees and post on its website any changes made to the state plan.
7. Requires DHCS to ensure that any LEA participating in the LEA BOP may participate virtually in any trainings or stakeholder meetings, including the LEA Ad Hoc Workgroup.
8. Adds additional elements to an existing required report to the Legislature on the LEA BOP to include a summary of DHCS trainings for LEAs and a summary of the number of audits conducted of Medi-Cal LEA BOP claims, the amount of funds disallowed per LEA broken down by those related to reimbursements for interim payments made in excess of actual costs, as well as those related to audit findings of noncompliance, and efforts made to provide technical assistance and develop corrective action plans.
9. Requires DHCS, for purposes of LEA BOP claims, to ensure that for a beneficiary under age 21, “medical necessity” has the same meaning as that term is defined in the medical necessity provision in existing state law that refers to the “correct and ameliorate” standard in federal Medicaid law.

FISCAL EFFECT:

According to the Assembly Appropriations Committee, the amount of costs to DHCS are unknown, but potentially in the hundreds of thousands of dollars, to revise the audit process and complete audits and final settlements within the timelines required by this bill (50% General Fund, 50% federal funds). There are also possible cost pressures to trial courts if DHCS does not resolve audit appeals within 300 days and LEAs seek relief in court.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, the COVID-19 pandemic exacerbated the need for youth health and mental health services. In the first year of the pandemic, intentional self-harm among 13-18 year olds increased by 91%, overdoses increased by 95%, and diagnoses of depression increased by 84%. Schools need significant support to provide comprehensive health and mental health services for children and youth. According to DHCS, currently only 595 LEAs, or approximately one-half of LEAs, participate in the Medi-Cal LEA BOP. In aggregate, California schools draw down significantly less in reimbursements for Medicaid services than other states. For example, California spends $29 per Medi-Cal eligible child, while Montana generates over $500 per eligible child. The current Medi-Cal LEA BOP is administratively burdensome, due to extensive documentation requirements, and punitive audit practices. LEAs have experienced difficulty receiving clear and consistent guidance from the state and have had to return significant funds disallowed through the auditing process. Some LEAs have decided to cease participating in this program because of these problems. This bill would require DHCS to reform the audit process by requiring that audits are completed in a timely manner and include technical assistance to LEAs. This would expand access to school-based health services by encouraging more schools to participate in the LEA BOP program and to bill for more eligible services.
2. LEA BOP. The LEA BOP provides FFP through Medicaid reimbursement to LEAs (school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California) for health-related services provided by one of 21 qualified health practitioners specified in regulation to students who are enrolled in Medi-Cal. Any of the LEA entities is authorized to bill for services provided to any student, regardless of age, who is a Medi-Cal recipient. LEAs pay for health-related outpatient services and are reimbursed for 50% of their costs through Medicaid FFP. LEA services are delivered either through the LEAs (which employ practitioners who provide the services on site) or through local contracted practitioners. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP. LEA covered services can include the following:
   
3. Health and mental health evaluations and health and mental health education;
4. Medical transportation;
5. Nursing services;
6. Occupational therapy and physical therapy;
7. Physician services;
8. Mental health and counseling services;
9. School health aide services;
10. Speech pathology services;
11. Audiology services; and,
12. Targeted case management services for children regardless of whether the child has an individualized education plan or an individualized family service plan.

The LEA BOP is funded with a combination of local and federal funds. Claims are filed using the traditional Medi-Cal fee-for-service system through DHCS as the fiscal intermediary. LEAs pay 100% for the services and are reimbursed the maximum federal reimbursement for each individual service (50%); therefore, there is no state General Fund expense for this program. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP pursuant to federal regulations. Based on this certification, DHCS then claims FFP.

Under the LEA BOP, LEAs receive interim payments based on interim reimbursement rates, which are calculated using a Cost and Reimbursement Comparison Schedule (CRCS), which is submitted to DHCS annually for the preceding fiscal year. DHCS must reconcile the interim Medi-Cal reimbursements to LEAs with the costs to provide the Medi-Cal services. The CRCS is used to compare each LEA’s total actual costs for LEA services to interim Medi-Cal reimbursement for the preceding fiscal year.

The LEA BOP Ad Hoc Workgroup meets bi-monthly and is comprised of large, medium and small LEAs, community colleges, Local Governmental Agencies, Local Educational Consortia, DHCS, CDE, and professional associations with the purpose to enhance Medi-Cal services on school sites, increase access of care for students, and increase Medi-Cal reimbursement for LEAs. DHCS offers technical assistance to LEAs in need of support regarding the LEA BOP.

1. LEA BOP audits and appeals. This bill is in response to disputes over DHCS audits of LEA BOP providers, which results in DHCS recovering overpayments for services rendered, including for services billed several years after the services were claimed.

Existing Medi-Cal law requires that amounts paid for services provided to Medi-Cal beneficiaries be audited by DHCS in the manner and form prescribed by DHCS. Under California’s Medicaid State Plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claims data available from the DHCS to determine the appropriate level of oversight. If the interim Medi-Cal payments exceed the actual, certified costs of a LEA’s Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government. If the cost report’s actual certified costs of a LEA’s Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.

DHCS indicates it audits a sample of claims, through random claims reviews, payment error studies that suggest areas of vulnerability, and specific types of providers selected for review, suspicious claiming patterns, outside information from third parties, and complaints to the Medi-Cal fraud hotline. DHCS also indicates that of the audits it does, 60% are minimal audits, 30% are limited audits, and only 10% are field audits. DHCS indicates common audit findings are no physician prescription for treatments, medical necessity not established, unqualified personnel and/or supervision not documented, no service on date of service claims, lack of documentation, and nature of service not recorded. In 2015, for example, DHCS completed 518 field audits: 77% required repayment, though 76% of those required repayment of less than 25% of their interim payment. LEAs have 60 days to request an informal hearing to review grievances or complaints arising from the findings of an audit or examination. Should they not be satisfied with the results of the informal hearing, which must be conducted within 90 days and completed within 180 days, they can request a formal hearing within 30 days of receiving the informal appeal decision. The formal appeal must be decided within 300 days of the filing of the initial Statement of Disputed issues that was filed to initiate the informal appeal. In 2015, only seven issues were appealed – LEAs were not successful on any in either informal or formal appeals, though one issue was settled.

This bill has several provisions aiming to reform the DHCS audit process. It requires DHCS audits to focus recoupment efforts on fraud, waste, and abuse and to complete an audit and notify an LEA of the audit findings within 12 months of the date that the Cost and Reimbursement Comparison Schedule is submitted. The 12 months can only be extended if needed to obtain additional documentation from the LEA, and then only by three months. DHCS must provide interim settlement of a claim within 12 months and perform final settlement on a claim, including completion of the appeals process, within three years from the date the Cost and Reimbursement Comparison Schedule is submitted. To further incentivize prompt resolution of appeals, in the event an audit appeal is not resolved within 300 days from the filing of the appeal, the LEA would be able to go to superior court just as if the appeal were decided against them. This bill also requires auditors to adhere strictly to the LEA BOP program guide and state plan language in determining what should be repaid and requires DHCS to provide additional technical assistance to LEAs, particularly where recouping amounts in excess of 25% of a LEA’s total value of claims. Finally, this bill also requires additional reporting to the Legislature regarding the number of audits conducted and the amounts required to be repaid, broken down by whether the amount was for noncompliance or due to an excess of the LEA’s actual costs.

It should be noted that in another context DHCS recently revised its audit protocols and reasons for recoupment, limiting recoupment to findings of fraud, waste, and abuse with regards to specialty mental health services provided by county mental health plans, effective July 1, 2022. This was part of a greater effort to simplify behavioral health documentation standards for specialty mental health services to remove outdated requirements and align standards across physical and behavioral health as part of the CalAIM initiative. While those audit protocols do not apply here, this bill would require a similar limitation.

1. Children and Youth Behavioral Health Initiative. The 2021-2022 California State Budget included additional support for behavioral health services to children and youth. In addition to a number of grants and coordinating efforts, the initiative includes a new requirement that commercial health plans and insurers cover the provision of the behavioral health services identified in the fee-for-service reimbursement schedule published by DHCS when those services are delivered at school sites, regardless of the network status of the LEA, institution of higher education, or health care provider. Health plans and insurers are prohibited from charging co-pays, deductibles, or other cost-sharing for services received at school sites. This requirement is scheduled to take effect on January 1, 2024. The fee schedule is also to be used by Medi-Cal managed care plans. At this time, DHCS indicates that the fee schedule is not intended to be used for LEA BOP. It does, however, suggest that a more simplified payment mechanism is possible for the provision of behavioral health services in schools.
2. Prior legislation. SB 229 (Dahle of 2021) would have required DHCS, in consultation with CDE, to provide up to $500 million in grants annually to LEAs and private schools, to provide mental health services for pupils affected by school closures and distance learning requirements resulting from the COVID-19 pandemic. SB 229 was held in the Senate Appropriations Committee.

SB 508 (Stern of 2021) would have required specified health care service plans, health insurers, and MCMC plans to enter into a MOU with all LEAs where 15% or more of the pupils of that LEA are insured by the plan or insurer; authorizes the LEA to bill for mental health and SUD services provided if the plan or insurer fails to enter into a MOU with the LEA; approves telehealth as an approved modality for provision of specified services by an LEA; and authorizes a school district to require parents provide information on a pupil’s health care coverage. SB 508 was not heard in the Senate Health Committee.

AB 2034 (O’Donnell of 2021) was nearly identical to this bill. AB 2034 passed the Senate Health Committee but was not heard in the Senate Education Committee.

AB 130 (Committee on Budget, Chapter 44, Statutes of 2021) included the School Health Demonstration Project administered by CDE and DHCS to expand comprehensive health and mental health services to public school pupils by providing training and support services to selected LEAs to secure ongoing Medi-Cal funding for those services.

AB 133 (Committee on Budget, Chapter 143, Statutes of 2021) included the Children and Youth Behavioral Health Initiative which requires, starting January 1, 2024, a health care service plan contract or insurance policy that is required to provide coverage for medically necessary treatment of mental health and substance use disorders (SUDs) to cover the provision of specified services when delivered at school sites, regardless of the network status of the LEA or health care provider. It requires the plan or insurer to reimburse the entity that provided the services at the Medi-Cal rate and requires the services to be provided without prior authorization or cost sharing. AB 133 also requires DHCS to set a fee structure for behavioral health services provided at school sites for MCMC plans and requires DHCS to set up an incentive program for qualifying MCMC plans providing behavioral health services at school sites.

AB 586 (O’Donnell of 2021) would have established the School Health Demonstration Project to expand comprehensive health and mental health services to students by providing intensive assistance and support to selected LEAs to build the capacity for long-term sustainability through leveraging multiple funding streams and partnering with county MHPs, Managed Care Organizations, and community-based providers. The contents of AB 586 were included in the budget trailer bill AB 130.

AB 3192 (O’Donnell, Chapter 658, Statutes of 2018) requires DHCS, in consultation with the LEA Ad Hoc Workgroup and CDE, to prepare and complete a fiscal and compliance audit guide of the LEA BOP, for distribution by June 30, 2019, and subject to approval by the LEA Ad Hoc Workgroup.

1. Support. Co-sponsors Santa Clara County Office of Education, California County Superintendents Educational Services Association, California Teachers Association, California School Nurses Organization, California Association of School Psychologists, California School Boards Association, and Los Angeles Unified School District, and other supporters submitted a coalition letter stating that the majority of the LEA BOP services are necessary and legally required by the Individuals with Disabilities Education Act to enable students to access their education. In recognition of well-established research indicating that students are 21 times more likely to receive health and mental health services provided on school campus, the federal government expanded LEA BOP’s scope in 2014 to allow schools to receive reimbursement for providing a wider range of services to more students, including those without disabilities. However, DHCS’s punitive administration of LEA BOP over the last decade has prevented California students from receiving critical health and mental health services. According to their own data, DHCS auditors currently require 75% of schools to pay back part of their LEA BOP reimbursement. This rate of paybacks is unprecedented, unparalleled in any other state operating a similar program, and has remained constant since audits began in 2009. As the result of punitive audits, arbitrary and changing rules, and unreasonable documentation requirements, California schools receive only about $29 in Medi-Cal reimbursement per student while other states like Michigan and New Jersey receive approximately $250 per student. Were California to draw down Medi-Cal reimbursement rates more aligned with other large states, it would increase federal funding by approximately $1.3 billion annually. These dollars would ensure that special education programs are adequately funded and that school-based health centers, behavioral health services, and wellness programs have ongoing financial support.
2. Amendments. Subsection (b)(2) should be amended to avoid redundancy with (b)(3) and make clearer DHCS’s obligation: Subject to the limitation of paragraph (3), the The department shall revise the state plan to establish a revised audit process for Medi-Cal Billing Option claims submitted for dates of service on or after January 1, 2025.

SUPPORT AND OPPOSITION:

Support: California Association of School Psychologists (co-sponsor)

California County Superintendents Educational Services Association (co-sponsor)

California School Boards Association (co-sponsor)

California School Nurses Organization (co-sponsor)

California Teachers Association (co-sponsor)

Los Angeles Unified School District (co-sponsor)
Santa Clara County Office of Education (co-sponsor)

Alameda County Office of Education
Association of California School Administrators

California Association of School Business Officials
California Association of School Counselors

California Association of School Social Workers

California School Employees Association

Central Valley Education Coalition
Coalition for Adequate Funding for Special Education
Los Angeles Area Chamber of Commerce
Los Angeles County Office of Education

Los Angeles Unified School District
Riverside County Office of Education

San Francisco Unified School District

Santa Clara County School Boards Association

Small School Districts’ Association
Steinberg Institute

Tony Thurmond, State Superintendent of Public Instruction, California Department of Education

Oppose: None received.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 483

Author:(Muratsuchi and Wood)

As Introduced Ver:February 7, 2023

Majority vote

SUMMARY

Requires the Department of Health Care Services (DHCS) to establish a revised audit process for claims submitted through the Local Education Agency Medi-Cal Billing Option Program (LEA BOP), a program that allows schools to claim reimbursement for a portion of the cost of delivering health services to Medi-Cal eligible students, and establishes related requirements for stakeholder engagement and reporting.

Major Provisions

COMMENTS

1. LEA BOP. LEAs are school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California. The LEA BOP provides federal Medicaid matching funds to LEAs for health-related services provided by specified health practitioners to students enrolled in Medi-Cal.

Currently, 563 LEAs participate in LEA BOP and receive approximately $130 million in federal funding annually. The 563 participating LEAs account for over five million of the six million public school children in California. LEA covered services can include the following:

• 1. Health and mental health evaluations and health and mental health education;
  2. Medical transportation;
  3. Nursing services;
  4. Occupational therapy and physical therapy;
  5. Physician services;
  6. Mental health and counseling services;
  7. School health aide services;
  8. Speech pathology services;
  9. Audiology services; and,
  10. Targeted case management services for children.

DHCS's LEA advisory workgroup includes large, medium, and small school districts, county offices of education, professional organizations representing LEAs, DHCS, and the California Department of Education (CDE). DHCS indicates meetings are held every other month and provide a forum for LEAs to identify relevant issues and make recommendations to improve the LEA BOP.

1. LEA BOP Financing. LEAs pay for health-related outpatient services and are reimbursed for at least 50% of their allowable costs through Medicaid federal matching funds (FFP) using a certified public expenditure (CPE) methodology. Under the CPE methodology, LEAs provide the non-federal share of funds to draw down federal Medicaid matching funds. The state can claim FFP on behalf of a government entity like an LEA, provided the entity incurs an eligible expenditure and certifies the public funds were used to support the full cost of providing the service.

Under the LEA BOP, LEAs receive interim reimbursement through claims payments and then calculate their total cost of providing these services to Medi-Cal-enrolled students, submitted annually for the preceding fiscal year. Final payment settlements based on actual CPEs for a given year are considered completed when DHCS has audited a financial report submitted by the LEA, called the Cost and Reimbursement Comparison Schedule. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP.

DHCS' November 2022 Medi-Cal Estimate assumes the LEA BOP will draw down $440 million in federal funds in fiscal year 2022-23, a dramatic increase from the $122 million projected in the November 2021 Estimate. The November 2022 Estimate assumes additional significant growth; it estimates $615 million in federal funds will be drawn down in fiscal year 2023-24. A number of technical fiscal and program factors account for this growth, including one-time dollars projected to be claimed as a result of State Plan Amendment 15-021, which was approved in 2020 to expand LEA covered services, and allowed claiming for these expanded covered services and practitioners back to 2015.

1. Audit and Appeals. This bill is in response to disputes over DHCS audits of LEA BOP providers which results in DHCS recovering overpayments for services rendered, including for services for which reimbursement is finalized several years after the services were claimed, the existing appeals process and access to court following that process.

Existing law applicable to Medi-Cal requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by the DHCS in the manner and form prescribed by DHCS. Under California's Medicaid State Plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claim data available from the DHCS to determine the appropriate level of oversight.

If the interim Medi-Cal payments exceed the actual, certified costs of a LEA's Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered and/or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government in accordance with federal Medicaid regulation. If the cost report's actual certified costs of a LEA's Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.

1. Budget Change Proposal. In the Governor's 2023-24 Budget, DHCS requests a one-time appropriation of $7.45 million (Special Deposit Fund (SDF)) in fiscal year 2023-24 to reimburse LEAs for excess funds withheld by DHCS to administer the LEA BOP. According to DHCs, an administrative withhold is levied against LEA claim reimbursements to cover DHCS administrative costs to run the program without an impact to the SDF. These funds have accumulated in past years. DHCS states authority was given for the combined 2% withhold through the Budget Act of 2010 and in Welfare and Institutions Code 14115.8, and this proposal, consistent with that authority, would return the remainder of unused funds to the LEAs.
2. Studies and Informational Hearings. SB 75 (Committee on Budget and Fiscal Review), Chapter 51, Statutes of 2019, required the CDE and DHCS to jointly convene one or more workgroups to provide input and recommendations on improving coordination and expansion of access to available federal funds through the LEA Medi-Cal Billing Option Program, and other Medi-Cal benefits and programs for children. The SB 75 Medi-Cal for Students Workgroup Recommendations, released in October 2021, identifies "burdensome audit processes" as one of the root causes contributing to challenges in the LEA BOP.

Between 2007 and 2015, most LEAs had to pay back a portion of the LEA BOP interim payment after reconciliation. LEAs reported financial hardships based on the timeline for repayment, as well as the interest paid on delayed repayment amounts. LEAs also reported that they do not receive an adequate level of technical assistance to help them avoid repeating past errors in future years as they go through the LEA BOP audit process.

The group made the following recommendations:

• 1. To facilitate the LEA BOP audit process, implement feedback loops between LEAs and the DHCS Audit & Investigations Division that foster collaborative learning and continuous improvement, and develop resources that support LEA audit preparation;
  2. Enhance auditor practices through auditor training informed by user experience, and gather regular feedback from LEAs about their LEA BOP audit experiences; and,
  3. Develop audit-related technical assistance processes to support LEAs before, during, and after the LEA BOP audit process.

The report notes the goal of these recommendations is to shift the culture of the LEA BOP audit process from a primary focus on audit completion toward a focus on providing support and technical assistance to the LEAs that are being audited.

A joint information hearing on this report and issue was held on October 14, 2021, by Assembly Education, Assembly Health, and Assembly Budget Subcommittees 1 & 2.

According to the Author

To address the demand for student physical and behavioral health care services, schools need significant support to build capacity. In aggregate, California schools bill far less, and draw down significantly less in reimbursements for Medicaid services than other states. For example, the author points out, California draws down $29 per Medi-Cal eligible child in federal funding, while Montana draws down over $500 per eligible child. This bill would expand access to school-based health and mental health services by encouraging more schools to participate in the LEA BOP program and to bill for more eligible services by reforming the process by which it audits claims from the LEA BOP program. The author concludes the ultimate goal is to increase funding available to support student health services.

Arguments in Support

This bill is cosponsored by a large number of educational stakeholders with interest in improving the LEA BOP and providing additional health services to students. It is supported by education groups. Supporters argue the current LEA BOP is administratively burdensome with punitive audit practices, that LEAs have experienced difficulty receiving clear and consistent guidance from the state, and/or have had to return significant funds disallowed through the audit process. Some LEAs have decided to cease participating in this program because of these problems. This has a direct impact on the ability of the LEA to provide health services to students. Supporters argue reforming the DHCS audit claims process for schools participating in LEA BOP will increase access to funding which, in turn, will expand access to health and mental health services for students.

Arguments in Opposition

There is no known opposition.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. The amount of costs to DHCS is unknown, but potentially in the hundreds of thousands of dollars, to revise the audit process and complete audits and final settlements within the timelines required by this bill (50% General Fund, 50% federal funds).
2. Possible cost pressure to trial courts if DHCS does not resolve audit appeals within 300 days and LEAs seek relief in court.

VOTES

ASM HEALTH: 14-0-1

YES: Wood, Waldron, Aguiar-Curry, Arambula, Boerner Horvath, Flora, Vince Fong, Maienschein, McCarty, Joe Patterson, Rodriguez, Santiago, Villapudua, Weber

ABS, ABST OR NV: Wendy Carrillo

ASM APPROPRIATIONS: 15-0-1

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega

ABS, ABST OR NV: Robert Rivas

UPDATED

VERSION: February 7, 2023

CONSULTANT: Lisa Murawski / HEALTH / (916) 319-2097 FN: 0000702

Date of Hearing: April 19, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 483

Author:(Muratsuchi) – As Introduced Ver:February 7, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the Department of Health Care Services (DHCS) to establish a revised audit process for claims submitted through the Local Education Agency Medi-Cal Billing Option Program (LEA BOP), a program that allows schools to claim reimbursement for a portion of the cost of delivering health services to Medi-Cal eligible students.

Specifically, this bill:

1. Requires DHCS to revise the audit process for LEA BOP claims submitted for services on or after January 1, 2025.
2. Requires the revised audit plan to make fraud, waste, and abuse the primary focus of recoupment.
3. Requires DHCS to complete an audit and notify an LEA of the audit findings within 12 months of the date the Cost and Reimbursement Comparison Schedule (CRCS) is submitted.
4. Allows an LEA, in the event an audit appeal is not fully and finally resolved by DHCS within 300 days after the date a notice of appeal is filed, to seek immediate relief in superior court in the same manner as if the DHCS appeal process had been concluded.
   
5. Requires DHCS to perform final settlement on a claim, including completion of the appeals process, within three years from the date the CRCS is submitted.
6. Requires DHCS, if an audit results in a LEA being required to pay back more than 25% of a LEA’s total value of claims in a given year, to provide technical assistance to the LEA that is specific to the reasons that claims were disallowed, and to assist with the preparation of a corrective action plan (CAP) that outlines the actions needed to avoid future disallowances.
   
7. Requires, for appeals of audits disallowing 50% or more of a LEA’s total value of claims in a given year, those appeals to be completed within 180 days.
8. Prohibits a DHCS auditor from determining that an LEA must pay back reimbursements for any claim that meets the requirements of specified regulations that define "Local Educational Agency Services," unless the claim is out of compliance with the standards of the LEA program guide that was in place at the time the claim was filed.
   
9. Requires DHCS to annually submit to the Legislature and post on its internet website a report with specified elements.

FISCAL EFFECT:

The amount of costs to DHCS is unknown, but potentially in the hundreds of thousands of dollars, to revise the audit process and complete audits and final settlements within the timelines required by this bill (50% General Fund (GF), 50% federal funds (FF)).

Possible cost pressure to trial courts if DHCS does not resolve audit appeals within 300 days and LEAs seek relief in court.

COMMENTS:

1. Purpose. According to the author:

[S]chools need significant support to build the capacity necessary to provide comprehensive health and mental health services for children and youth. According to DHCS, currently only 595 [LEAs] or approximately one-half of LEAs in California participate in the [LEA BOP]. In aggregate, California schools bill far less, and draw down significantly less in reimbursements for Medicaid services than other states. For example, California spends $29 per Medi-Cal eligible child, while Montana generates over $500 per eligible child.

The current Medi-Cal LEA BOP is administratively burdensome, due to extensive documentation requirements, and has adopted punitive audit practices. LEAs have experienced difficulty receiving clear and consistent guidance from the state and/or have had to return significant funds disallowed through the auditing process. Some LEAs have decided to cease participating in this program because of these problems. This has a direct impact on the ability of the LEA to provide health services to students… [This] bill would require DHCS to reform the process by which it audits claims from the LEA BOP program by requiring that audits are completed in a timely manner and include technical assistance to LEAs.

1. Audits and Appeals. This bill is a response to disputes over DHCS audits of LEA BOP providers, which result in DHCS recovering overpayments for services rendered, sometimes several years after the services were claimed; the existing appeals process; and access to court following that process.
   
   California’s Medicaid State Plan requires DHCS, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claim data available from DHCS to determine the appropriate level of oversight.
   
   If the interim Medi-Cal payments exceed the actual, certified costs of an LEA’s Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered, or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government in accordance with federal Medicaid regulation.
2. LEA BOP Services. LEAs are school districts, county offices of education, charter schools, state special schools, community colleges, the California State University and the University of California. LEA services are delivered to students in Medi-Cal either through the LEAs, which employ practitioners who provide the services on site, or through local contracted practitioners. LEAs can be reimbursed for a wide variety of services, including health and mental health education and evaluations, medical transportation, occupational and physical therapy, physician services, speech pathology, and targeted case management.
3. LEA BOP Financing. Any LEA is authorized to bill for services provided to any student who is a Medi-Cal recipient. The LEA BOP provides at least 50% federal financial participation (FFP) of an LEA’s allowable costs through Medicaid reimbursement to LEAs for health services provided by specified health practitioners using a certified public expenditure (CPE) methodology. Under CPE methodology, LEAs provide the non-federal share of funds to draw down federal Medicaid matching funds. The state can claim FFP on behalf of a government entity like an LEA, provided the entity incurs an eligible expenditure and certifies the public funds were used to support the full cost of providing the service.
   
   Under the LEA BOP, LEAs receive interim reimbursement through claims payments and then calculate their total cost of providing these services to Medi-Cal-enrolled students, and submit the claims annually for the preceding fiscal year. Final payment settlements based on actual CPEs for a given year are considered completed when DHCS has audited a financial report submitted by the LEA. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP.
   
   DHCS’ November 2022 Medi-Cal Estimate assumes the LEA BOP will draw down $440 million in federal funds in fiscal year (FY) 2022-23, a dramatic increase from the $122 million projected in the November 2021 estimate. The Medi-Cal Estimate assumes additional significant growth in the LEA draw down: $615 million in federal funds in FY fiscal year 2023-24. A number of technical fiscal and program factors account for this growth, including one-time dollars projected to be claimed as a result of State Plan Amendment 15-021, which was approved in 2020 to expand LEA covered services, and allowed claiming for these expanded covered services and practitioners back to 2015.
4. Education Budget Trailer Bill. AB 130 (Committee on Budget), Chapter 44, Statutes of 2021, made multiple significant changes related to school-based health services. Major provisions included:
   1. Require the Department of Education to establish an Office of School-Based Health Programs for the purpose of helping LEAs with health-related programs, including LEA BOP.
   2. Establish the School Health Demonstration Project in the Office as a pilot project to provide LEAs with training and technical assistance on requirements for health care provider participation in Medi-Cal to enable participation in the LEA BOP, among other programs.
5. Prior Legislation. AB 2034 (O’Donnell), of the 2021-22 Legislative Session was nearly identical to this bill. AB 2034 passed the Senate Committee on Health and was referred to, but was not heard in, the Senate Committee on Education.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: March 21, 2023

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 483

Author:(Muratsuchi) – As Introduced Ver:February 7, 2023

SUBJECT: Local educational agency: Medi-Cal billing option.

SUMMARY: Requires the Department of Health Care Services (DHCS) to establish a revised audit process for claims submitted through the Local Education Agency Medi-Cal Billing Option Program (LEA BOP), a program that allows schools to claim reimbursement for a portion of the cost of delivering health services to Medi-Cal eligible students. Specifically, this bill:

1. Requires DHCS to establish a revised audit process for claims submitted with dates of service on or after January 1, 2025.
2. Requires the revised audit plan to make fraud, waste, and abuse the primary focus of recoupment.
3. Requires DHCS to complete an audit and notify a LEA of the audit findings within 12 months of the date that the Cost and Reimbursement Comparison Schedule (CRCS) is submitted.
4. Permits a LEA, in the event that a LEA’s audit appeal is not fully and finally resolved by DHCS within 300 days after the date a notice of appeal is filed, to elect to seek immediate relief in superior court in the same manner as if the DHCS appeal process had been concluded.
5. Requires DHCS to perform final settlement on a claim, including completion of the appeals process within three years from the date the CRCS is submitted.
6. Requires DHCS, if an audit results in a LEA being required to pay back more than 25% of a LEA’s total value of claims in a given year, to provide technical assistance to the LEA that is specific to the reasons that claims were disallowed, and to assist with the preparation of a corrective action plan (CAP) that outlines the actions needed to avoid future disallowances.
7. Requires, for appeals of audits disallowing 50% or more of a LEA’s total value of claims in a given year, those appeals to be completed within 180 days.
8. Prohibits an auditor’s determination from determining that a LEA must pay back reimbursements for any claim that meets the requirements of specified regulations that define "Local Educational Agency Services," unless the claim is out of compliance with the standards of the LEA program guide that was in place at the time the claim was filed, recognizing that schools are required to be reimbursed for all eligible services that they provide that are not precluded by federal requirements.
9. Requires DHCS to report to the relevant policy committees of the Legislature and post on its internet website any changes made to the state plan.
10. Requires DHCS, in formulating amendments to the State Plan required by existing law LEA BOP provisions, to regularly consult with the LEA Ad Hoc workgroup, as defined to include entities listed in statute with which DHCS is currently required to consult.
11. Requires DHCS to revise the State Plan only to the extent necessary to obtain federal approval and upon consultation with the LEA Ad Hoc workgroup.
12. Requires DHCS to ensure that any LEA participating in the LEA BOP is able to participate virtually in any trainings or stakeholder meetings, including those meetings conducted by the LEA Ad Hoc workgroup.
13. Requires DHCS to report a summary of the number of audits conducted, the amount of funds that each LEA was required to pay back, as specified, and efforts made to provide technical assistance and develop corrective action plans.
14. Requires DHCS, for purposes of LEA BOP claims, to ensure that for a beneficiary under 21 years of age, “medical necessity” has the same meaning as that term is defined in the medical necessity provision in existing state law that refers to the “correct and ameliorate” standard in federal Medicaid law.

EXISTING LAW:

1. Establishes the Medi-Cal program, administered by DHCS, under which eligible low-income individuals receive health care services. [Welfare and Institutions Code (WIC) §14000, et seq.]
   
2. Makes children with family incomes up to 266% of the Federal Poverty Level eligible for full-scope Medi-Cal, including providing full-scope Medi-Cal benefits to undocumented children through age 18. [WIC §14005, et seq.]
   
3. Establishes a schedule of benefits in the Medi-Cal program. Requires specified services provided by LEAs as covered Medi-Cal benefits, to the extent federal financial participation (FFP) is available, and subject to utilization controls and standards adopted by DHCS, and consistent with Medi-Cal requirements for physician prescription, order, and supervision. This is referred to as the LEA BOP. [WIC §14132; §14132.06]
4. Requires DHCS to amend its Medicaid State Plan with respect to the billing option for services by LEAs, to ensure that schools are reimbursed for all eligible services that they provide that are not precluded by federal requirements. [WIC §14115.8]
5. Requires DHCS to examine methodologies for increasing school participation in the Medi-Cal billing option for LEAs so that schools can meet the health care needs of their students. Requires DHCS, to the extent possible, to simplify claiming processes for LEA billing. [WIC §14115.8]
6. Requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by DHCS in the manner and form prescribed by DHCS, and requires DHCS to maintain adequate controls to ensure responsibility and accountability for the expenditure of federal and state funds. [WIC §14170]
7. Establishes an administrative appeal processes to review grievances or complaints arising from the findings of an audit or examination and for final settlements. [WIC §14171]

FISCAL EFFECT: Unknown. This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. This bill is sponsored by a coalition of educational stakeholders to make the LEA BOP program more “user-friendly” to LEAs, in order to maximize the number of LEAs participating, the federal dollars that can be drawn down by those entities, and the number of students who can benefit from additional services. According to the author, to address the demand for student physical and behavioral health care services, schools need significant support to build capacity. In aggregate, California schools bill far less, and draw down significantly less in reimbursements for Medicaid services than other states. For example, the author points out, California draws down $29 per Medi-Cal eligible child in federal funding, while Montana draws down over $500 per eligible child. This bill would expand access to school-based health and mental health services by encouraging more schools to participate in the LEA BOP program and to bill for more eligible services by reforming the process by which it audits claims from the LEA BOP program. The author concludes the ultimate goal is to increase funding available to support student health services.
2. BACKGROUND.
   1. LEA BOP. LEAs are school districts, county offices of education, charter schools, a state special school, community colleges, California State University, and University of California. The LEA BOP provides federal Medicaid matching funds to LEAs for health-related services provided by specified health practitioners to students enrolled in Medi-Cal.

Currently, 563 LEAs participate in LEA BOP and receive approximately $130 million in federal funding annually. The 563 participating LEAs account for over five million of the six million public school children in California. LEA covered services can include the following:

• • 1. Health and mental health evaluations and health and mental health education;
    2. Medical transportation;
    3. Nursing services;
    4. Occupational therapy and physical therapy;
    5. Physician services;
    6. Mental health and counseling services;
    7. School health aide services;
    8. Speech pathology services;
    9. Audiology services; and,
    10. Targeted case management services for children.

DHCS’s LEA advisory workgroup includes large, medium, and small school districts, county offices of education, professional organizations representing LEAs, DHCS, and the California Department of Education (CDE). DHCS indicates meetings are held every other month and provide a forum for LEAs to identify relevant issues and make recommendations to improve the LEA BOP.

• 1. LEA BOP Financing. LEAs pay for health-related outpatient services and are reimbursed for at least 50% of their allowable costs through Medicaid federal matching funds (FFP) using a certified public expenditure (CPE) methodology. Under the CPE methodology, LEAs provide the non-federal share of funds to draw down federal Medicaid matching funds. The state can claim FFP on behalf of a government entity like an LEA, provided the entity incurs an eligible expenditure and certifies the public funds were used to support the full cost of providing the service.
     
     Under the LEA BOP, LEAs receive interim reimbursement through claims payments and then calculate their total cost of providing these services to Medi-Cal-enrolled students, submitted annually for the preceding fiscal year. Final payment settlements based on actual CPEs for a given year are considered completed when DHCS has audited a financial report submitted by the LEA, called the Cost and Reimbursement Comparison Schedule. LEAs must annually certify that the public funds expended for LEA services provided are eligible for FFP.

DHCS’ November 2022 Medi-Cal Estimate assumes the LEA BOP will draw down $440 million in federal funds in fiscal year 2022-23, a dramatic increase from the $122 million projected in the November 2021 Estimate. The November 2022 Estimate assumes additional significant growth; it estimates $615 million in federal funds will be drawn down in fiscal year 2023-24. A number of technical fiscal and program factors account for this growth, including one-time dollars projected to be claimed as a result of State Plan Amendment 15-021, which was approved in 2020 to expand LEA covered services, and allowed claiming for these expanded covered services and practitioners back to 2015.

• 1. Audit and Appeals. This bill is in response to disputes over DHCS audits of LEA BOP providers which results in DHCS recovering overpayments for services rendered, including for services for which reimbursement is finalized several years after the services were claimed, the existing appeals process and access to court following that process.
     
     Existing law applicable to Medi-Cal requires amounts paid for services provided to Medi-Cal beneficiaries to be audited by the DHCS in the manner and form prescribed by DHCS. Under California’s Medicaid State Plan, DHCS is required, as part of its financial oversight responsibilities, to complete the audit and cost settlement process for each LEA on an annual basis. The State Plan requires the audit plan to include a risk assessment of the LEAs using paid claim data available from the DHCS to determine the appropriate level of oversight.
     
     If the interim Medi-Cal payments exceed the actual, certified costs of a LEA’s Medi-Cal services, DHCS will either offset future claims from the affected LEA until the amount of the overpayment is recovered and/or recoup any overpayments and return the federal share of the Medi-Cal payment to the federal government in accordance with federal Medicaid regulation. If the cost report’s actual certified costs of a LEA’s Medi-Cal services exceed interim Medi-Cal payments, DHCS will pay this difference to the LEA.
  2. Budget Change Proposal. In the Governor’s 2023-24 Budget, DHCS requests a one-time appropriation of $7,450,000 (Special Deposit Fund (SDF)) in fiscal year 2023-24 to reimburse LEAs for excess funds withheld by DHCS to administer the LEA BOP. According to DHCs, an administrative withhold is levied against LEA claim reimbursements to cover DHCS administrative costs to run the program without an impact to the SDF. These funds have accumulated in past years. DHCS states authority was given for the combined 2% withhold through the Budget Act of 2010 and in WIC 14115.8, and this proposal, consistent with that authority, would return the remainder of unused funds to the LEAs.
  3. Studies and Informational Hearings. SB 75 (Committee on Budget and Fiscal Review), Chapter 51, Statutes of 2019, required the CDE and DHCS to jointly convene one or more workgroups to provide input and recommendations on improving coordination and expansion of access to available federal funds through the LEA Medi-Cal Billing Option Program, and other Medi-Cal benefits and programs for children. The SB 75 Medi-Cal for Students Workgroup Recommendations, released in October 2021, identifies “burdensome audit processes” as one of the root causes contributing to challenges in the LEA BOP.
     
     Between 2007 and 2015, most LEAs had to pay back a portion of the LEA BOP interim payment after reconciliation. LEAs reported financial hardships based on the timeline for repayment, as well as the interest paid on delayed repayment amounts. LEAs also reported that they do not receive an adequate level of technical assistance to help them avoid repeating past errors in future years as they go through the LEA BOP audit process.
     
     The group made the following recommendations:
     1. To facilitate the LEA BOP audit process, implement feedback loops between LEAs and the DHCS Audit & Investigations Division that foster collaborative learning and continuous improvement, and develop resources that support LEA audit preparation;
     2. Enhance auditor practices through auditor training informed by user experience, and gather regular feedback from LEAs about their LEA BOP audit experiences; and,
     3. Develop audit-related technical assistance processes to support LEAs before, during, and after the LEA BOP audit process.

The report notes the goal of these recommendations is to shift the culture of the LEA BOP audit process from a primary focus on audit completion toward a focus on providing support and technical assistance to the LEAs that are being audited.

A joint information hearing on this report and issue was held on October 14, 2021, by Assembly Education, Assembly Health, and Assembly Budget Subcommittees 1 & 2.

1. SUPPORT. This bill is cosponsored by a large number of educational stakeholders with interest in improving the LEA BOP and providing additional health services to students. It is supported by education groups. Supporters argue the current LEA BOP is administratively burdensome with punitive audit practices, that LEAs have experienced difficulty receiving clear and consistent guidance from the state, and/or have had to return significant funds disallowed through the audit process. Some LEAs have decided to cease participating in this program because of these problems. This has a direct impact on the ability of the LEA to provide health services to students. Supporters argue reforming the DHCS audit claims process for schools participating in LEA BOP will increase access to funding which, in turn, will expand access to health and mental health services for students.
2. PREVIOUS LEGISLATION. AB 2034 (O’Donnell) of 2021 was similar to this bill. AB 2034 passed the Senate Committee on Health but was never heard in the Senate Committee on Education.

REGISTERED SUPPORT / OPPOSITION:

Support

California County Superintendents Educational Services Association (cosponsor)

California Association of School Psychologists (cosponsor)

California School Boards Association (cosponsor)

California School Nurses Association (cosponsor)

California Teachers Association (cosponsor)

Los Angeles Unified School District (cosponsor)

Santa Clara County Office of Education (cosponsor)

Association of California School Administrators

California Association of School Counselors

Coalition for Adequate Funding for Special Education

Los Angeles Area Chamber of Commerce

Los Angeles County Office of Education

Office of the Riverside County Superintendent of Schools

Riverside County Office of Education

Santa Clara County School Boards Association

Steinberg Institute

Opposition

None on file.

Analysis Prepared by: Lisa Murawski / HEALTH / (916) 319-2097