SB 1268: Medi-Cal managed care plans: contracts with safety net providers.
- Session Year: 2023-2024
- House: Senate
- Latest Version Date: 2024-04-15
Current Status:
Failed
(2024-04-24: April 24 set for first hearing canceled at the request of author.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
What does this bill do?
The bill requires Medi‑Cal managed care plans to offer and keep network contracts with safety‑net providers—hospitals and clinics that serve many Medi‑Cal, charity, or underinsured patients—within the plans' service areas if the provider agrees to the same terms the plan requires of similar providers. A plan may end a contract if the provider refuses those terms, loses its license, or the department finds the provider threatens a patient's health, and the rule applies only if necessary federal approvals and funding are available.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Under existing law, one of the methods by which Medi-Cal services are provided is pursuant to contracts between the department and various types of managed care plans and between those plans and providers of those services.
In the case of a contract between a Medi-Cal managed care plan and a safety net provider, as defined, that furnishes Medi-Cal services, the bill would, to the extent not in conflict with federal law, prohibit the plan and the provider from terminating the contract during the contract period without first declaring the cause of termination. The bill would prohibit the declared cause of termination from being a material fact or condition that existed at the time that the contract was entered into by those parties, and of which both parties had knowledge at that time.This bill would require a Medi-Cal managed care plan to offer a network provider contract to, and maintain a network provider contract with, each safety net provider, as defined, operating within the plans contracted geographic service areas if the safety net provider agrees to provide its applicable scope of services in accordance with the same terms and conditions that the Medi-Cal managed care plan requires of other similar providers.
The bill would set forth exceptions to that requirement in the case of a safety net provider no longer being willing to accept those terms and conditions, its license being revoked or suspended, or the department determining that the health or welfare of a Medi-Cal enrollee is threatened by the provider. The bill would require the plan to follow certain notification procedures if it terminates the network provider contract.
The bill would condition implementation of these provisions on receipt of any necessary federal approvals and the availability of federal financial participation.
Existing law establishes the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. The Medi-Cal program is, in part, governed and funded by federal Medicaid program provisions. Under existing law, one of the methods by which Medi-Cal services are provided is pursuant to contracts between the department and various types of managed care plans and between those plans and providers of those services.
In the case of a contract between a Medi-Cal managed care plan and a safety net provider, as defined, that furnishes Medi-Cal services, the bill would, to the extent not in conflict with federal law, prohibit the plan and the provider from terminating the contract during the contract period without first declaring the cause of termination. The bill would prohibit the declared cause of termination from being a material fact or condition that existed at the time that the contract was entered into by those parties, and of which both parties had knowledge at that time.
Existing law establishes the Medi-Cal program, administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. Existing law authorizes the establishment of a health authority in specified counties for the delivery of medical care and services in that county. Existing law makes the health authority subject to specified provisions, including certain notification and reporting requirements, commencing on the date that the health authority first receives Medi-Cal capitated payments for the provision of health care services to Medi-Cal beneficiaries and until the time that the health authority is in compliance with all the requirements regarding tangible net equity applicable to a health care service plan licensed under the Knox-Keene Health Care Service Plan Act of 1975.This bill would make technical, nonsubstantive changes to the above-described provision.Existing law establishes the Medi-Cal program, administered by the State Department of Health Care Services and under which qualified low-income individuals receive health care services. Existing law authorizes the establishment of a health authority in specified counties for the delivery of medical care and services in that county. Existing law makes the health authority subject to specified provisions, including certain notification and reporting requirements, commencing on the date that the health authority first receives Medi-Cal capitated payments for the provision of health care services to Medi-Cal beneficiaries and until the time that the health authority is in compliance with all the requirements regarding tangible net equity applicable to a health care service plan licensed under the Knox-Keene Health Care Service Plan Act of 1975.
This bill would make technical, nonsubstantive changes to the above-described provision.
(a)Except as provided in subdivision (b), and notwithstanding any other law to the contrary, a Medi-Cal managed care plan shall offer a network provider contract to, and maintain a network provider contract with, each safety net provider operating within the plans contracted geographic service areas if the safety net provider agrees to provide its applicable scope of services in accordance with the same terms and conditions that the Medi-Cal managed care plan requires of other similar providers.
(b)(1)If a safety net provider is no longer willing to accept a network provider contract on the same terms and conditions required of other similar providers, and the Medi-Cal managed care plan elects to terminate the network provider contract as a result, the Medi-Cal managed care plan shall notify the department of its intent to terminate that network provider contract with the applicable safety net provider at least 60 calendar days prior to the effective date of the intended contract termination.
(2)If the license of the safety net provider is revoked or suspended, or if the department determines that the health or welfare of a Medi-Cal enrollee is threatened by the provider, the Medi-Cal managed care plan may terminate the network provider contract with the applicable safety net provider immediately and without prior approval from the department, but the plan shall notify the department and the provider of the termination concurrently.
(c)This section shall be implemented only to the extent that any necessary federal approvals are obtained and federal financial participation is available and not otherwise jeopardized.
(d)For purposes of this section, the following definitions apply:
(1)Medi-Cal managed care plan has the same meaning as set forth in subdivision (j) of Section 14184.101.
(2)Network provider has the same meaning as set forth in Section 438.2 of Title 42 of the Code of Federal Regulations.
(3)Safety net provider means any provider of comprehensive primary care services or acute inpatient hospital services that serves a significant number of Medi-Cal beneficiaries, patients receiving charity, or patients who are medically underinsured, in relation to the total number of patients served by the provider. For purposes of a safety net provider of acute inpatient hospital services, this term includes, but is not limited to, a Medicaid Disproportionate Share Hospital-eligible hospital as described in Section 14105.98 and the Medi-Cal State Plan.
SECTION 1.Section 14197.8 is added to the Welfare and Institutions Code, to read:14197.8.(a)In the case of a contract between a Medi-Cal managed care plan of any type and a safety net provider, as defined in subdivision (e), that furnishes health care services covered under the Medi-Cal program, the plan and the provider shall not terminate the contract during the contract period without first declaring the cause of termination.(b)The declared cause of termination described in subdivision (a) shall not be a material fact or condition that existed at the time that the contract was entered into by the plan and the provider, and of which both the plan and the provider had knowledge at the time of entering that contract.(c)This section shall not be construed as modifying or otherwise affecting Section 14197.7.(d)This section shall be implemented only to the extent not in conflict with federal law.(e)For purposes of this section, safety net provider has the same meaning as set forth in Section 53810 of Title 22 of the California Code of Regulations, or its successor, and in which the provider has agreed to provide services under the same terms and conditions that the Medi-Cal managed care plan requires of any other similar provider to be included in the health care delivery system under a contract with the Medi-Cal managed care plan.(a)In the case of a contract between a Medi-Cal managed care plan of any type and a safety net provider, as defined in subdivision (e), that furnishes health care services covered under the Medi-Cal program, the plan and the provider shall not terminate the contract during the contract period without first declaring the cause of termination.
(b)The declared cause of termination described in subdivision (a) shall not be a material fact or condition that existed at the time that the contract was entered into by the plan and the provider, and of which both the plan and the provider had knowledge at the time of entering that contract.
(c)This section shall not be construed as modifying or otherwise affecting Section 14197.7.
(d)This section shall be implemented only to the extent not in conflict with federal law.
(e)For purposes of this section, safety net provider has the same meaning as set forth in Section 53810 of Title 22 of the California Code of Regulations, or its successor, and in which the provider has agreed to provide services under the same terms and conditions that the Medi-Cal managed care plan requires of any other similar provider to be included in the health care delivery system under a contract with the Medi-Cal managed care plan.
SECTION 1.Section 14087.37 of the Welfare and Institutions Code is amended to read:14087.37.Commencing on the date that a health authority established pursuant to Section 14087.35 or 14087.36 first receives Medi-Cal capitated payments for the provision of health care services to Medi-Cal beneficiaries and until the time that the health authority is in compliance with all the requirements regarding tangible net equity applicable to a health care service plan licensed under the Knox-Keene Health Care Service Plan Act of 1975, the following provisions shall apply:(a)The health authority may select and design its automated management information system, but the department, in cooperation with the health authority, prior to making capitated payments shall test the system to ensure that the system is capable of producing detailed, accurate, and timely financial information on the financial condition of the health authority and any other information generally required by the department in its contracts with health care service plans.(b)In addition to the reports required by the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975, and the rules of the Director of the Department of Managed Health Care promulgated thereunder, the health authority shall provide on a monthly basis to the department, the Department of Managed Health Care, and the members of the health authority, a copy of the automated report described in subdivision (a) and a projection of assets and liabilities, including those that have been incurred but not reported, with an explanation of material increases or decreases in current or projected assets or liabilities. The explanation of increases and decreases in assets or liabilities shall be provided, upon request, to a hospital, independent physicians practice association, or community clinic, that has contracted with the health authority to provide health care services.(c)In addition to the reporting and notification obligations the health authority has under the Knox-Keene Health Care Service Plan Act of 1975, the chief executive officer or director of the health authority shall immediately notify the department, the Department of Managed Health Care, and the members of the health authority in writing of any fact or facts that, in the chief executive officers or directors reasonable and prudent judgment, is likely to result in the health authority being unable to meet its financial obligations to health care providers or to other parties. Written notice shall describe the fact or facts, the anticipated fiscal consequences, and the actions that will be taken to address the anticipated consequences.(d)The Department of Managed Health Care shall not waive or vary, nor shall the department request the Department of Managed Health Care to waive or vary, the tangible net equity requirements for a health authority under the Knox-Keene Health Care Service Plan Act of 1975 after three years from the date of commencement of capitated payments to the health authority. Until the time the health authority is in compliance with all of the tangible net equity requirements under the Knox-Keene Health Care Service Plan Act of 1975, and the rules of the Director of the Department of Managed Health Care promulgated thereunder, the health authority shall develop a stop-loss program appropriate to the risks of the health authority. The program shall be satisfactory to both the department and the Department of Managed Health Care.(e)In the event that the health authority votes to file a petition of bankruptcy, or the board of supervisors notifies the department of its intent to terminate the health authority, the department shall immediately convert the health authoritys Medi-Cal beneficiaries to either of the following:(1)To other managed care contractors when available, provided those contractors are able to demonstrate that they can absorb the increased enrollment without detriment to the provision of health care services to their existing enrollees.(2)To the extent that other managed care contractors are unavailable or the department determines that the action is otherwise in the best interest of any particular beneficiary, to a fee-for-service reimbursement system pending the availability of managed care contractors, provided those contractors are able to demonstrate that they can absorb the increased enrollment without detriment to the provision of health care services to their existing enrollees, or if the department determines that providing care to any particular beneficiary pursuant to a fee-for-service reimbursement system is no longer necessary to protect the continuity of care or other interests of the beneficiary. Beneficiary eligibility for Medi-Cal shall not be affected by this action. Beneficiaries who have been or who are scheduled to be converted to a fee-for-service reimbursement system or managed care contractor may make a choice to be enrolled in another managed care system, if one is available, in full compliance with the federal freedom-of-choice requirements.(f)The health authority shall submit to a review of financial records when the department determines, based on data reported by the health authority or otherwise, that the health authority will not be able to meet its financial obligations to health care providers contracting with the health authority. Where the review of financial records determines that the health authority will not be able to meet its financial obligations to contracting health care providers for the provision of health care services, the director shall immediately terminate the contract between the health authority and the state, and immediately convert the health authority Medi-Cal beneficiaries in accordance with subdivision (e) in order to ensure uninterrupted provision of health care services to the beneficiaries and to minimize financial disruption to providers. The action of the director shall be the final administrative determination. Beneficiary eligibility for Medi-Cal shall not be affected by this action. Beneficiaries who have been or who are scheduled to be converted under subdivision (e) may make a choice to be enrolled in another managed care plan, if one is available, in full compliance with federal freedom-of-choice requirements.(g)It is the intent of the Legislature that the department shall implement Medi-Cal capitated enrollments in a manner that ensures that appropriate levels of health care services will be provided to Medi-Cal beneficiaries and that appropriate levels of administrative services will be furnished to health care providers. The contract between the department and the health authority shall authorize and permit the department to administer the number of covered Medi-Cal enrollments in such a manner that the health authoritys provider network and administrative structure are able to provide appropriate and timely services to beneficiaries and to participating providers.(h)In the event a health authority is terminated, files for bankruptcy, or otherwise no longer functions for the purpose for which it was established, the county shall, with respect to compensation for provision of health care services to beneficiaries, occupy no greater or lesser status than any other health care provider in the disbursement of assets of the health authority.(i)This subdivision shall not be construed to impair or diminish the authority of the Director of the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975, nor shall anything in the section be construed to reduce or otherwise limit the obligation of a health authority licensed as a health care service plan to comply with the requirements of the Knox-Keene Health Care Service Plan Act of 1975, and the rules of the Director of the Department of Managed Health Care promulgated thereunder.Commencing on the date that a health authority established pursuant to Section 14087.35 or 14087.36 first receives Medi-Cal capitated payments for the provision of health care services to Medi-Cal beneficiaries and until the time that the health authority is in compliance with all the requirements regarding tangible net equity applicable to a health care service plan licensed under the Knox-Keene Health Care Service Plan Act of 1975, the following provisions shall apply:
(a)The health authority may select and design its automated management information system, but the department, in cooperation with the health authority, prior to making capitated payments shall test the system to ensure that the system is capable of producing detailed, accurate, and timely financial information on the financial condition of the health authority and any other information generally required by the department in its contracts with health care service plans.
(b)In addition to the reports required by the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975, and the rules of the Director of the Department of Managed Health Care promulgated thereunder, the health authority shall provide on a monthly basis to the department, the Department of Managed Health Care, and the members of the health authority, a copy of the automated report described in subdivision (a) and a projection of assets and liabilities, including those that have been incurred but not reported, with an explanation of material increases or decreases in current or projected assets or liabilities. The explanation of increases and decreases in assets or liabilities shall be provided, upon request, to a hospital, independent physicians practice association, or community clinic, that has contracted with the health authority to provide health care services.
(c)In addition to the reporting and notification obligations the health authority has under the Knox-Keene Health Care Service Plan Act of 1975, the chief executive officer or director of the health authority shall immediately notify the department, the Department of Managed Health Care, and the members of the health authority in writing of any fact or facts that, in the chief executive officers or directors reasonable and prudent judgment, is likely to result in the health authority being unable to meet its financial obligations to health care providers or to other parties. Written notice shall describe the fact or facts, the anticipated fiscal consequences, and the actions that will be taken to address the anticipated consequences.
(d)The Department of Managed Health Care shall not waive or vary, nor shall the department request the Department of Managed Health Care to waive or vary, the tangible net equity requirements for a health authority under the Knox-Keene Health Care Service Plan Act of 1975 after three years from the date of commencement of capitated payments to the health authority. Until the time the health authority is in compliance with all of the tangible net equity requirements under the Knox-Keene Health Care Service Plan Act of 1975, and the rules of the Director of the Department of Managed Health Care promulgated thereunder, the health authority shall develop a stop-loss program appropriate to the risks of the health authority. The program shall be satisfactory to both the department and the Department of Managed Health Care.
(e)In the event that the health authority votes to file a petition of bankruptcy, or the board of supervisors notifies the department of its intent to terminate the health authority, the department shall immediately convert the health authoritys Medi-Cal beneficiaries to either of the following:
(1)To other managed care contractors when available, provided those contractors are able to demonstrate that they can absorb the increased enrollment without detriment to the provision of health care services to their existing enrollees.
(2)To the extent that other managed care contractors are unavailable or the department determines that the action is otherwise in the best interest of any particular beneficiary, to a fee-for-service reimbursement system pending the availability of managed care contractors, provided those contractors are able to demonstrate that they can absorb the increased enrollment without detriment to the provision of health care services to their existing enrollees, or if the department determines that providing care to any particular beneficiary pursuant to a fee-for-service reimbursement system is no longer necessary to protect the continuity of care or other interests of the beneficiary. Beneficiary eligibility for Medi-Cal shall not be affected by this action. Beneficiaries who have been or who are scheduled to be converted to a fee-for-service reimbursement system or managed care contractor may make a choice to be enrolled in another managed care system, if one is available, in full compliance with the federal freedom-of-choice requirements.
(f)The health authority shall submit to a review of financial records when the department determines, based on data reported by the health authority or otherwise, that the health authority will not be able to meet its financial obligations to health care providers contracting with the health authority. Where the review of financial records determines that the health authority will not be able to meet its financial obligations to contracting health care providers for the provision of health care services, the director shall immediately terminate the contract between the health authority and the state, and immediately convert the health authority Medi-Cal beneficiaries in accordance with subdivision (e) in order to ensure uninterrupted provision of health care services to the beneficiaries and to minimize financial disruption to providers. The action of the director shall be the final administrative determination. Beneficiary eligibility for Medi-Cal shall not be affected by this action. Beneficiaries who have been or who are scheduled to be converted under subdivision (e) may make a choice to be enrolled in another managed care plan, if one is available, in full compliance with federal freedom-of-choice requirements.
(g)It is the intent of the Legislature that the department shall implement Medi-Cal capitated enrollments in a manner that ensures that appropriate levels of health care services will be provided to Medi-Cal beneficiaries and that appropriate levels of administrative services will be furnished to health care providers. The contract between the department and the health authority shall authorize and permit the department to administer the number of covered Medi-Cal enrollments in such a manner that the health authoritys provider network and administrative structure are able to provide appropriate and timely services to beneficiaries and to participating providers.
(h)In the event a health authority is terminated, files for bankruptcy, or otherwise no longer functions for the purpose for which it was established, the county shall, with respect to compensation for provision of health care services to beneficiaries, occupy no greater or lesser status than any other health care provider in the disbursement of assets of the health authority.
(i)Nothing in this This subdivision shall not be construed to impair or diminish the authority of the Director of the Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act of 1975, nor shall anything in the section be construed to reduce or otherwise limit the obligation of a health authority licensed as a health care service plan to comply with the requirements of the Knox-Keene Health Care Service Plan Act of 1975, and the rules of the Director of the Department of Managed Health Care promulgated thereunder.
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Date
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Status
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|---|---|
| Apr 24, 2024 | April 24 set for first hearing canceled at the request of author. |
| Apr 15, 2024 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on HEALTH. |
| Apr 5, 2024 | Set for hearing April 24. |
| Apr 3, 2024 | Re-referred to Com. on HEALTH. |
| Mar 20, 2024 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on RLS. |
| Feb 29, 2024 | Referred to Com. on RLS. |
| Feb 16, 2024 | From printer. May be acted upon on or after March 17. |
| Feb 15, 2024 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
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Date
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|---|---|---|
| California Association Of Health Plans | ** Against | |
| California Hospital Association | ** Support | |
| California Medical Association | ** Against | |
| Caloptima Health | ** Against | |
| Local Health Plans Of California | ** Against |
SENATE COMMITTEE ON HEALTH
Senator Richard Roth, Chair
BILL NO: SB 1268
AUTHOR: | Nguyen | ||
VERSION: | April 15, 2024 | ||
HEARING DATE: | April 24, 2024 | ||
CONSULTANT: | Jen Flory | ||
SUBJECT: Medi-Cal managed care plans: contracts with safety net providers
SUMMARY:
Requires a Medi-Cal managed care plan (MCMC plan) to offer a network provider contract to, and maintain a network provider contract with, each safety net provider, as defined, operating within the MCMC plan’s contracted geographic service areas, if the safety net provider agrees to provide its applicable scope of services in accordance with the same terms and conditions that the MCMC plan requires of other similar providers. Includes requirements for terminating the provider contract.
Existing law:
- Establishes the Medi-Cal program, which is administered by the Department of Health Care Services (DHCS), and under which qualified low-income individuals receive health care services. [WIC §14000, et seq.]
- Authorizes the DHCS Director to contract, on a bid or nonbid basis, with any qualified individual, organization, or entity to provide services to, arrange for, or case manage the care of Medi-Cal beneficiaries and establishes managed care models that DHCS contracts with in each county. [WIC §14087.3, 14089, 14087.98, 14087.967, 14087.5]
- Defines a MCMC plan as any individual, organization, or entity that enters into a comprehensive risk contract with the department to provide covered full-scope health care services to enrolled Medi-Cal beneficiaries. [WIC §14184.101]
- Defines a network provider as any provider or entity that has a network provider agreement with a MCMC plan, the MCMC plan’s subcontractor, or MCMC plan’s downstream subcontractor, and receives Medi-Cal funding directly or indirectly to order, refer, or render covered services under this contract. A network provider is not a subcontractor or downstream subcontractor by virtue of the network provider agreement. [42 CFR 438.2]
- Defines a “disproportionate share eligible hospital” as a hospital that is included on the state’s disproportionate share list and is eligible for disproportionate share hospital payment adjustments. [WIC §14105.98]
This bill:
- Requires a MCMC plan to offer a network provider contract to, and maintain a network provider contract with, each safety net provider operating within the MCMC plan’s contracted geographic service areas if the safety net provider agrees to provide its applicable scope of services in accordance with the same terms and conditions that the MCMC plan requires of other similar providers.
- Permits the MCMC plan to elect to terminate the network provider contract if a safety net provider is no longer willing to accept a network provider contract on the same terms and conditions required of other similar providers and the MCMC plan notifies DHCS of its intent to terminate that network provider contract with the applicable safety net provider at least 60 calendar days prior to the effective date of the intended contract termination.
- Permits the MCMC plan to terminate the network provider contract with the applicable safety net provider immediately and without prior approval from DHCS if the license of the safety net provider is revoked or suspended, or if DHCS determines that the health or welfare of a Medi-Cal enrollee is threatened by the provider. Requires the MCMC plan to notify DHCS and the provider of the termination concurrently.
- Defines “safety net provider” as any provider of comprehensive primary care services or acute inpatient hospital services that serves a significant number of Medi-Cal beneficiaries, patients receiving charity, or patients who are medically underinsured, in relation to the total number of patients served by the provider. Includes, but is not limited to, a Medicaid Disproportionate Share Hospital-eligible hospital as described in existing law and the Medi-Cal State Plan.
- Conditions implementation of this bill on the receipt of any necessary federal approvals and that federal financial participation is not otherwise jeopardized.
FISCAL EFFECT:
This bill has not yet been analyzed by a fiscal committee.
COMMENTS:
- Author’s statement. According to the author, she has recently learned of an incident involving CalOptima and Prime Healthcare, which has negatively impacted and will continue to impact thousands of constituents in Senate District 36 who are served by Medi-Cal. Current law states that a plan must provide a 60-day notice without much evidence or reasoning for a termination of contract and, unfortunately, that will leave many people in a lurch and endanger their health or recovery if treatment or care is delayed.
- DHCS Medi-Cal managed care contract requirements with safety net providers. Approximately 15.2 million Medi-Cal beneficiaries in all 58 counties receive their health care through a MCMC plan. Medi-Cal providers who wish to provide services to managed care enrollees must participate in the managed care plan’s provider network. DHCS recently renewed its MCMC plan contracts effective January 1, 2024. The new 2024 contract provisions with regards to contract requirements with safety net providers are nearly identical to previous contract requirements. The DHCS contract requires that a MCMC plan must offer a network provider agreement to any safety-net provider that agrees to provide its scope of services in accord with the same terms and conditions that the MCMC plan requires of other similar providers. A “safety-net provider” is defined as any provider of comprehensive primary care or acute hospital inpatient services that provides services to a significant number of Medi-Cal recipients, patients who receive charity, and/or patients who are medically underinsured, in relation to the total number of patients served by the provider. When terminating a contract with a safety-net provider, the MCMC plan must notify DHCS of intent to terminate at least 60 calendar days prior to the effective date of termination unless the provider’s license has been revoked or suspended or where the health and welfare of a Medi-Cal recipient is threatened, in which event termination will be effective immediately.
- CalOptima’s recent cancellation of contracts with four Prime hospitals in Orange County. On February 5, 2024, CalOptima Health, the MCMC plan serving Orange County as a county-organized health system, terminated without cause its Medi-Cal contracts with Garden Grove Hospital and Medical Center, Huntington Beach Hospital, La Palma Intercommunity Hospital, and West Anaheim Medical Center, all owned by Prime Healthcare. As permitted by the current MCMC plan contract with DHCS, all CalOptima provider contracts include a without cause termination provision allowing either party to terminate with or without cause with 90 days’ written notice to the other party. CalOptima followed the requirements of the MCMC plan contracts regarding notification to DHCS, demonstration of an adequate provider network, and notification to affected beneficiaries. In the required transition plan submitted to DHCS, CalOptima stated that of the 26,290 visits to the four terminated hospitals in the year prior, 25,926 (98.6%) were emergency department visits or admissions. CalOptima members would continue to have access to these emergency departments as required by federal law. The transition plan also shows that none of CalOptima’s medical groups had a contract with the Prime facilities, which likely explains why the services provided are so skewed to emergency services.
- Prior legislation. AB 1642 (Wood, Chapter 465, Statutes of 2019) requires, among other things, an MCMC plan to provide to DHCS additional information in its request for alternative access standards to the time and distance standards. Requires DHCS to evaluate, as part of its review and approval of an alternative access standard, if the resulting time and distance is reasonable to expect a beneficiary to travel to receive care.
SB 171 (Hernandez, Chapter 768, Statutes of 2017) requires, among other things, DHCS to require MCMC plans to increase contract services payments to designated public hospitals by a uniform percentage, and to establish a program under which designated public hospitals may earn performance-based quality incentive payments from plans.
AB 205 (Wood, Chapter 738, Statutes of 2017) requires, among other things, MCMC plans to maintain a network of providers within specified time and distance standards, with differing requirements by provider type and county.
- Support. The California Hospital Association writes in support stating that this bill would clarify and strengthen requirements on MCMC plans to maintain network contracts with safety net providers who serve a significant number of Medi-Cal or indigent patients. Current Medi-Cal policy requires a plan to merely offer a network contract to a safety net provider, but allows MCMC plans to terminate the contract at will, without any regard to whether the provider remains willing to accept the network terms imposed by the plan. They state that this network volatility that results from the overly permissive termination policy places patients at unnecessary risk of worsening health conditions and they are left to endure prolonged delays and bureaucratic challenges in securing the care to which they are entitled.
- Opposition. CalOptima writes in opposition that this bill fundamentally undermines the purpose and structure of the “managed care” system, which recognizes that some providers deliver higher quality and more cost-effective care. They state that the removal of all reasons for a MCMC plan to initiate a contract termination would prohibit MCMC plans from assessing a provider’s quality of care, access and availability, accreditation statuses, non-compliance with regulatory requirements, existence of settlement or corporate integrity agreements, and engagement in fraud, waste, and abuse, including the submission of false claims. CalOptima also points out that the definition of safety-net provider is ambiguous and the bill would likely lead to litigation. The Local Health Plans of California oppose for similar reasons, stating that this bill will interfere with a plans’ capability to provide consequential oversight and accountability. They state this bill is not in the best interest of Medi-Cal members and does not allow plans to ensure good stewardship of public funds.
The California Medical Association writes in opposition stating that the bill leaves little room to negotiate on any contract details and, in fact, encourages health plans to place sub-standard terms, conditions and rates into their contracts with physicians. They state that the bill would make it impossible for physicians to terminate a contract with a health plan. The language in the bill states that the physician may only terminate a contract with a health plan if the health plan also elects to terminate the contract, forcing physicians to remain in-network until the health plan agrees.
- Policy comments.
- While this bill’s language follows the current MCMC plan boilerplate contract with DHCS regarding requirements to offer a network provider agreement to a safety net provider and requirements regarding terminations of the network provider agreement, there are key differences that make the network provider agreement requirements in this bill one-sided. This bill requires MCMC plans to maintain provider agreements with all safety-net providers in their service area unless the provider is no longer willing to accept the same terms and conditions offered to similar providers or if the provider has their license suspended or revoked. This is a significant change from the existing at-will contracting provisions that exist in many network provider agreements and essentially requires MCMC plans to contract with any willing party that meets the safety net provider definition, unless that provider’s license is in jeopardy.
- Federal requirements require the state to develop a strategy for accessing and improving the quality of health care services furnished by MCMC plans which includes, among other things, an adequate network, evidence-based clinical practice guidelines, measurable goals for continuous quality improvement accounting for the health status of all populations within the state, quality metrics, performance improvement projects, plans to decrease health disparities, arrangements for external independent reviews, and the appropriate use of sanctions. In 2022, DHCS finalized a quality strategy in accordance with the federal Managed Care Final Rule, incorporating and building upon the CalAIM initiative. The strategy outlines specific strategies to reduce health disparities and set clinical outcome metrics. Limiting MCMC plans’ ability to terminate contracts could undermine their efforts to meet these required standards, should a safety net provider not provide care in a manner that would help the plan meet the goals of the quality strategy.
SUPPORT AND OPPOSITION:
Support: California Hospital Association
Oppose: California Association of Health Plans
California Medical Association
CalOptima Health
Local Health Plans of California
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Bill Author
Bill Co-Author(s):