2005 California Welfare and Institutions Code Sections 14100-14124.10 Article 3. Administration

WELFARE AND INSTITUTIONS CODE
SECTION 14100-14124.10

14100.  The administration of this chapter shall be carried out by
the same agents as are authorized by the several boards of
supervisors to administer the public assistance programs.
14100.1.  For purposes of administering this chapter and Chapter 8
(commencing with Section 14200) of this part, the director shall have
those powers and duties necessary to conform to requirements for
securing approval of a state plan under the provisions of the
applicable federal law, and the department shall be the single state
agency for purposes of Title XIX of the federal Social Security Act.
14100.2.  (a) All types of information, whether written or oral,
concerning a person, made or kept by any public officer or agency in
connection with the administration of any provision of this chapter,
Chapter 8 (commencing with Section 14200), or Chapter 8.7 (commencing
with Section 14520) and for which a grant-in-aid is received by this
state from the United States government pursuant to Title XIX of the
Social Security Act shall be confidential, and shall not be open to
examination other than for purposes directly connected with the
administration of the Medi-Cal program.  However, in the context of a
petition for the appointment of a conservator for a person with
respect to whom this information is made or kept, and in the context
of a criminal prosecution for a violation of Section 368 of Penal
Code with respect to such a person, all of the following shall apply:
   A public officer or employee of any such agency may answer
truthfully, at any proceeding related to the petition or prosecution,
when asked if he or she is aware of information that he or she
believes is related to the legal mental capacity of that aid
recipient or the need for a conservatorship for that aid recipient.
If the officer or employee states that he or she is aware of this
information, the court may order the officer or employee to testify
about his or her observations and to disclose any relevant agency
records if the court has an other independent reason to believe that
the officer or employee has information that would facilitate the
resolution of the matter.
   (b) Except as provided in this section and to the extent permitted
by federal law or regulation all information about applicants and
recipients as provided for in subdivision (a) to be safeguarded
includes, but is not limited to, names and addresses, medical
services provided, social and economic conditions or circumstances,
agency evaluation of personal information, and medical data,
including diagnosis and past history of disease or disability.
   (c) Purposes directly connected with the administration of the
Medi-Cal program, Chapter 8 (commencing with Section 14200), or
Chapter 8.7 (commencing with Section 14520) encompass those
administrative activities and responsibilities in which the State
Department of Health Services and its agents are required to engage
to insure effective program operations.  These activities include,
but are not limited to:  establishing eligibility and methods of
reimbursement; determining the amount of medical assistance;
providing services for recipients; conducting or assisting an
investigation, prosecution, or civil or criminal proceeding related
to the administration of the Medi-Cal program; and conducting or
assisting a legislative investigation or audit related to the
administration of the Medi-Cal program.
   (d) Any officer, agent, or employee of the State Department of
Health Services or of any public agency shall provide the Joint
Legislative Audit Committee and the State Auditor with any and all
the information described in subdivision (b) within a reasonable
period of time as determined by the committee in consultation with
the State Department of Health Services, after receipt of a request
from the committee approved by a majority of the members of the
committee.  The Joint Legislative Audit Committee and the State
Auditor may use that information only for the purpose of
investigating or auditing the administration of the Medi-Cal program,
Chapter 8 (commencing with Section 14200), or Chapter 8.7
(commencing with Section 14520), and shall not use that information
for commercial or political purposes.  In any case where disclosure
of information is authorized by this section, the Joint Legislative
Audit Committee or the State Auditor shall not disclose the identity
of any applicant or recipient, except in the case of a criminal or
civil proceeding conducted in connection with the administration of
the Medi-Cal program.
   (e) The access to information provided in subdivision (d) shall be
permitted only to the extent and under the conditions provided by
federal law and regulations governing the release of such
information.
   (f) The State Department of Health Services may make rules and
regulations governing the custody, use and preservation of all
records, papers, files, and communications pertaining to the
administration of the laws relating to the Medi-Cal program, Chapter
8 (commencing with Section 14200), or Chapter 8.7 (commencing with
Section 14520).  The rules and regulations shall be binding on all
departments, officials, and employees of the state, or of any
political subdivision of the state and may provide for giving
information to or exchanging information with agencies, public or
political subdivisions of the state, and may provide for giving
information to or exchanging information with agencies, public or
private, which are engaged in planning, providing or securing such
services for or in behalf of recipients or applicants; and for making
case records available for research purposes, provided, that that
research will not result in the disclosure of the identity of
applicants for or recipients of those services.
   (g) Upon request, the department shall release to the negotiator
established pursuant to Article 2.6 (commencing with Section 14081)
all computer tapes and any modifications thereto, including paid
claims, connected with the administration of the Medi-Cal program
which are in the possession or under the control of the department,
including tapes prepared prior to the effective date of this section.
   To ensure compliance with federal law and regulations, the
department shall make the minimum necessary modifications to its
computer tapes prior to releasing the tapes to the negotiator in
order to assure the confidentiality of the identity of all applicants
for, or recipients of, those services.  The department shall not
make any modifications to paid claims tapes that affect information
regarding beneficiaries' aid categories or counties of origin.
   (h) Any person who knowingly releases or possesses confidential
information concerning persons who have applied for or who have been
granted any form of Medi-Cal benefits or benefits under Chapter 8
(commencing with Section 14200) or Chapter 8.7 (commencing with
Section 14520) for which state or federal funds are made available in
violation of this section is guilty of a misdemeanor.
14100.5.  The department shall prepare and submit Medi-Cal program
assumptions and estimates to the Department of Finance.  The purpose
of the assumptions and estimates shall be to clearly identify changes
within the Medi-Cal program which have policy or fiscal
implications, and to produce reliable forecasts of Medi-Cal
expenditures.
   Medi-Cal program assumptions and estimates shall be organized by
and correspond to Budget Act or Budget Bill item numbers, separately
identifying expenditures for all of the following:      (a) Purchase
of medical care and services.      (b) Rate increases.      (c)
County administration.      (d) Fiscal intermediary services.
Estimates and assumptions shall indicate state and federal, as well
as total, funds expended.
   The department shall submit, by September 10 and March 1 of each
year, to the Department of Finance for its approval, all assumptions
underlying all Medi-Cal program estimates.  The Department of Finance
shall approve or modify, in writing, the assumptions underlying all
estimates within 15 working days of their receipt.  If the Department
of Finance does not so approve or modify the assumptions by that
date, the assumptions, as presented by the department, shall be
deemed to be approved by the Department of Finance as of that date.
   The department shall submit an estimate of Medi-Cal program
expenditures to the Department of Finance by November 1 of each year,
and April 20 of each year.  All approved estimates and supporting
data provided by the department or developed independently by the
Department of Finance, shall be made available to the legislative
fiscal committees following approval by the Department of Finance.
However, departmental estimates with supporting data shall be
forwarded to the legislative fiscal committees on or about January 10
and May 15 of each year in the event this information has not been
released earlier.
   Each Medi-Cal assumption shall contain a clear narrative
description of the statutory, regulatory, or policy change, or other
change, that has occurred or will occur which affects Medi-Cal
program expenditures or which is of policy importance.  Each
assumption shall include a cost estimate which contains relevant
workload, caseload, unit cost and other data or information needed to
support the estimate.
   The assumptions related to purchase of medical care and services
shall include a section with a nontechnical description of the major
variables used to produce a base projection.  This section shall
further contain an estimate of the fiscal impact of the use of these
variables.  The estimates related to purchase of medical care and
services shall include current and budget year base projections of
eligibles, users, expenditures and cost per user by quarter with
sufficient past actual data to permit evaluation of the projections.
The projections shall be prepared by service category and aid
category.  The Department of Finance shall identify a high, mid, and
low range of Medi-Cal service expenditures, which shall be
accompanied by assumptions, when the estimates are released to the
Legislature.
   The assumptions or estimates related to fiscal intermediary
services shall contain a narrative description of how the forecasts
are prepared.  Sufficient historical workload by claim type and
expenditure data shall accompany the forecasts to permit evaluation.
Change orders to the fiscal intermediary contract shall be fully
described and costs estimated.  In addition, important modifications
to the Medi-Cal claims processing system not associated with change
orders shall be described and, if appropriate, costs or savings,
estimated.
   Assumptions or estimates related to Medi-Cal county administration
costs shall contain a narrative description of how the forecast was
prepared. Current and budget year estimates by county shall be
prepared.  The estimates shall compare past actual and projected
workload and expenditures in a format which will permit evaluation of
forecasts.  Changes in expenditure estimates for individual counties
resulting from allocation of funds or other factors shall be
identified in subsequent estimates.  Unallocated funds and funds for
special projects or special problems shall be separately identified.
The department shall compare budgeted and actual expenditures by
county as soon as the information from county quarterly costs reports
becomes available.
   The estimates shall compare budgeted to implemented rate increases
for the current year.  The comparisons shall be by provider category
and shall compare budgeted to implemented increases in terms of
percentage increases, date of implementation, and revised estimated
cost.
14100.6.  The department, in cooperation with the Controller, shall
establish a method of providing to the Controller, periodically,
updated information regarding changes in the roster of Medi-Cal
providers.
14100.7.  (a) Any Medi-Cal provider of incontinence supplies or
medical supplies, or both, shall provide, to the department, a bond,
or other security satisfactory to the department, of not less than
twenty-five thousand dollars ($25,000), pursuant to regulations
adopted by the department.
   (b) (1) After three years of continuous operation as a provider of
incontinence supplies or medical supplies, or both, a Medi-Cal
provider may apply to the department for an exemption from the
requirements of subdivision (a).
   (2) The department shall adopt regulations establishing conditions
for the approval or denial of applications for exemption pursuant to
paragraph (1).
   (c) For purposes of this section, "incontinence supplies" and
"medical supplies" mean items prescribed by a licensed practitioner
to meet medical needs of the patient, and which are eligible for
reimbursement pursuant to this chapter.
   (d) Subdivisions (a), (b), and (c) do not apply to individuals who
are licensed pursuant to Division 2 (commencing with Section 500) of
the Business and Professions Code.
14100.75.  (a) (1) Each provider and each applicant, as defined in
Section 14043.1, when applying for enrollment and continued
enrollment, shall provide, to the department, a bond, or other
security satisfactory to the department, of an amount determined by
the department, pursuant to regulations adopted by the department.
   (2) The department, in determining the amount of bond or security
required by paragraph (1), shall base the determination on the level
of estimated billings, and shall not be less than twenty-five
thousand dollars ($25,000).
   (3) This subdivision shall become operative only if the director
executes a declaration, that shall be retained by the director,
stating that the surety bonds described in this paragraph are
commercially offered throughout the state and by more than one
vendor.
   (b) (1) After three years of continuous operation as a provider, a
Medi-Cal provider may apply to the department for an exemption from
the requirements of subdivision (a).
   (2) The department shall adopt regulations establishing conditions
for the approval or denial of applications for exemption pursuant to
paragraph (1).
   (c) The department shall establish a mechanism to track rates of
participation among providers who are subject to the requirement of
subdivision (a) to determine if the requirement is a deterrent to
Medi-Cal program participation among provider applicants.
   (d) Subdivisions (a) and (b) shall not apply to natural persons
licensed or certified pursuant to Division 2 (commencing with Section
500) of the Business and Professions Code, the Osteopathic
Initiative Act, or the Chiropractic Initiative Act, or to any clinic
licensed pursuant to subdivision (a) of Section 1204 of the Health
and Safety Code, or exempt from licensure under subdivision (c) of
Section 1206 of the Health and Safety Code, to any health facility
licensed under Chapter 2 (commencing with Section 1250) of Division 2
of the Health and Safety Code, or to any provider that is operated
by a city, county, school district, county office of education, or
state special school, or any professional corporation practicing
pursuant to the Moscone-Knox Professional Corporation Act provided
for pursuant to Part 4 (commencing with Section 13400) of Division 3
of Title 1 of the Corporations Code.
   (e) Nothing in this section shall relieve an applicant or provider
of durable medical equipment or home health agency services from
complying with subdivisions (a) and (b) of Sections 14100.8 and
14100.9, as applicable.
14100.8.  (a) For purposes of this section, "provider of home health
agency services" means a home health agency that is licensed by the
department under Section 1726 of the Health and Safety Code that
meets the requirements for the medicaid program under Subpart A
(commencing with Sec.  441.10) of Part 441 of Title 42 of the Code of
Federal Regulations, as amended, that meets the requirements for the
Medicare program under Part 484 (commencing with Sec. 481.1) and
Part 489 (commencing with Sec. 489.1) of Title 42 of the Code of
Federal Regulations, as amended, and that is enrolled as a provider
in the Medi-Cal program.  In the event of inconsistent requirements
between the medicaid and Medicare programs, medicaid requirements
shall take precedence.
   (b) Within 90 days after the effective date of a final federal
regulation requiring that a provider of home health agency services
must acquire a surety bond in order to participate in the medicaid or
Medicare program, each provider of home health agency services shall
obtain, and thereafter maintain, a surety bond meeting the
requirements of the final federal regulation, as amended, as a
condition of participation in the Medi-Cal program.
   (c) Any entity that has applied to become a provider of home
health agency services less than 90 days prior to the date that the
final federal regulation described in subdivision (b) becomes
effective shall submit a surety bond within 90 days of the effective
date of the regulation.
   (d) Failure of a provider of home health agency services to obtain
and maintain a surety bond as required in this section shall result
in denial or recoupment of Medi-Cal reimbursement for services
provided during the period for which a surety bond should have been
in effect.
   (e) Failure of a provider of home health agency services to obtain
and maintain a surety bond as required in this section shall result
in automatic termination of the provider's participation in the
Medi-Cal program.
14100.9.  (a) For purposes of this section, "provider of durable
medical equipment" means any person or entity that furnishes medical
equipment and medical supplies, meets state and local laws applicable
to the furnishing of medical equipment and medical supplies, and
that is enrolled as a provider in the Medi-Cal program.
   (b) Within 90 days after the effective date of a final federal
regulation requiring that a provider of durable medical equipment
must acquire a surety bond in order to participate in the medicaid or
Medicare program, each provider of durable medical equipment shall
obtain, and thereafter maintain, a surety bond meeting the
requirements of the final federal regulation, as amended, as a
condition of participation in the Medi-Cal program.
   (c) Any person or entity that has applied to become a provider of
durable medical equipment less than 90 days prior to the date that
the final federal regulation described in subdivision (b) becomes
effective shall submit a surety bond within 90 days of the effective
date of the regulation.
   (d) Failure of a provider of durable medical equipment to obtain
and maintain a surety bond as required in this section shall result
in denial or recoupment of Medi-Cal reimbursement for services
provided during the period for which a surety bond should have been
in effect.
   (e) Failure of a provider of durable medical equipment to obtain
and maintain a surety bond as required in this section shall result
in automatic termination of the provider's participation in the
Medi-Cal program.
   (f) Subdivisions (a), (b), (c), (d), and (e) do not apply to
individuals who are licensed pursuant to Division 2 (commencing with
Section 500) of the Business and Professions Code.
14100.95.  (a) The department shall enter into demonstration
contracts with manufacturers of medical supplies for four items of
its own selection of medical supplies existing on the pharmacy claims
processing system, for the purpose of establishing rebates or other
cost-saving mechanisms and demonstrating cost savings in the purchase
of these medical supplies.  The department shall maintain a list of
the supplies for which contracts have been executed.
   (b) Nothing in this section shall prevent a small retail business
from continuing to supply medical supplies for use by Medi-Cal
beneficiaries.
   (c) In establishing these demonstration contracts, the department
shall preserve reasonable access to these supplies by beneficiaries.
   (d) The department shall report the outcomes of these
demonstration contracts to the Legislature no later than January 1,
2007.
14101.  The director may contract with other state agencies for
services in connection with the administration of this chapter,
Chapter 8 (commencing with Section 14200), Chapter 8.5 (commencing
with Section 14500), and Chapter 8.7 (commencing with Section 14520)
of this part.
14101.1.  The department shall enter into an agreement with the
Secretary of Health, Education and Welfare under which such secretary
will determine eligibility for Medi-Cal in the case of aged, blind
or disabled persons under this state's medical assistance plan
approved under Title XIX of the Social Security Act.  The state shall
pay the Secretary of Health, Education and Welfare an amount equal
to one-half of the cost of carrying out the agreement, but in
computing such cost with respect to individuals eligible for benefits
under Title XVI of the Social Security Act, such payment shall
include only those costs which are additional to the costs incurred
in carrying out such title.
14101.5.  The department and the State Department of Social Services
shall provide to the other any information necessary for the
performance of such department's duties under this chapter.
14101.7.  The Workers' Compensation Appeals Board and the department
shall exchange information and cooperate to assure that health
services provided by Medi-Cal which are reimbursable by Workers'
Compensation are identified, and that Workers' Compensation
reimburses the department for those services.
14103.2.  Whenever the director determines that the services or
products of a provider cost the program in excess of reasonable value
received, the provider shall thereafter be disqualified from
participation in the program.  The disqualification shall not become
effective until an opportunity for a public hearing has been granted.
   The department shall conduct a continuing review of reimbursements
to all hospitals participating in the program in order to determine
if any reimbursements are in excess of reasonable value received.
14103.4.  The director, with the advice of the Medicaid Advisory
Committee required by federal law or regulation, shall determine
which of the health care and related remedial or preventive services
are elective.  The director and the committee shall consult with
representatives of providers of such services before making a
determination.
14103.5.  (a) A noncontract hospital that is in a closed health
facility planning area is not eligible to receive reimbursement for
services provided to a Medi-Cal beneficiary, unless the noncontract
hospital provides necessary emergency services to a Medi-Cal
beneficiary who is in a life threatening or emergency situation, but
cannot be sufficiently stabilized in order to facilitate transport to
a contracting hospital.
   (b) A noncontract hospital in a closed health facility planning
area that provides necessary emergency services to a Medi-Cal
beneficiary who is in a life threatening or emergency situation, but
cannot be sufficiently stabilized in order to facilitate transport to
a contracting hospital, may only be reimbursed for those necessary
emergency services when it obtains an approved treatment
authorization request.
   (c) Any treatment authorization request submitted for any service
classified as a necessary emergency service, which would have been
subject to prior authorization had it not been so classified, shall
be supported by the attending physician's statement that does all of
the following:
   (1) Describes in detail the nature of the emergency or life
threatening situation, including relevant clinical information about
the patient's condition.
   (2) States why the patient could not be sufficiently stabilized
for transport to a contracting hospital and why the necessary
emergency services rendered were considered to be immediately
required.  A mere statement that an emergency existed is not
sufficient.  The treatment authorization request shall be
comprehensive enough to support a finding that an emergency or a life
threatening situation existed.
   (3) Contains the signature of the attending physician who had
direct knowledge of the emergency described in the statement.
   (d) For the purposes of this section, "necessary emergency
services" are limited to those health services medically necessary
for alleviation of severe pain or immediate diagnosis and treatment
of unforeseen medical conditions which, if not immediately diagnosed
and treated, could lead to significant disability or death.
   (e) For the purposes of this section, a "noncontract hospital"
means a hospital that has not contracted with the department pursuant
to Article 2.6 (commencing with Section 14081) for the provision of
inpatient services to Medi-Cal beneficiaries.
   (f) Nothing in this section shall be construed as limiting
reimbursement for medically necessary care following stabilization,
in the event that a contract hospital does not accept transfer of the
patient or pending the transfer to a contract hospital.
14103.6.  The director, or a carrier acting under regulations
adopted by the director, may require that any individual provider
shall receive prior authorization before providing services when the
director or carrier determines that the provider has been rendering
unnecessary services.
   At any time the director determines that it is necessary to
postpone elective services pursuant to Section 14120, he or she shall
require prior authorization for those services determined to be
generally elective under the provisions of Section 14103.4, except a
service which costs less than one hundred dollars ($100) or a lower
amount determined by the director.  This lower amount may be applied
generally or for specific services.  The director may terminate the
requirement for prior authorization when he or she determines that it
is no longer necessary to postpone elective services.
   Prior authorization for services provided by persons licensed
under the provisions of Chapter 4 (commencing with Section 1600) and
Chapter 7 (commencing with Section 3000) of Division 2 of the
Business and Professions Code shall be determined by consultants
licensed under Chapter 4 or Chapter 7 respectively.  Prior
authorization for all other elective services shall be determined by
consultants licensed under the provisions of Chapter 5 (commencing
with Section 2000) of Division 2 of the Business and Professions
Code, provided, however, that prior authorization for pharmaceutical
services may be determined by persons licensed under the provisions
of Chapter 9 (commencing with Section 4000) of Division 2 of the
Business and Professions Code, and prior authorization for services
provided in an inpatient setting may be reviewed and approved, but
not denied, by a person licensed under the provisions of Chapter 6
(commencing with Section 2700) of Division 2 of the Business and
Professions Code, working under the supervision of a consultant
licensed under the provisions of Chapter 5 (commencing with Section
2000) of Division 2 of the Business and Professions Code.
   In no event shall prior authorization be required when there is a
bona fide emergency requiring immediate treatment.
   In carrying out this section, notwithstanding Section 19130 of the
Government Code, the department may contract, either directly or
through the fiscal intermediary, for staff to accomplish the
treatment authorization request reviews and medical case management,
including appeals.  The fiscal intermediary contract, including any
contract amendment, system change pursuant to a change order, and
project or systems development notice shall be exempt from Part 2
(commencing with Section 10100) of Division 2 of the Public Contract
Code, Chapter 7 (commencing with Section 11700) of Part 1 of Division
3 of Title 2 of the Government Code, and any policies, procedures,
or regulations authorized by those laws.
14103.6.  The director, or a carrier acting under regulations
adopted by the director, may require that any individual provider
shall receive prior authorization before providing services when the
director or carrier determines that the provider has been rendering
unnecessary services.
   At any time the director determines that it is necessary to
postpone elective services pursuant to Section 14120, he or she shall
require prior authorization for those services determined to be
generally elective under the provisions of Section 14103.4, except a
service which costs less than one hundred dollars ($100) or a lower
amount determined by the director.  This lower amount may be applied
generally or for specific services.  The director may terminate the
requirement for prior authorization when he or she determines that it
is no longer necessary to postpone elective services.
   Prior authorization for services provided by persons licensed
under the provisions of Chapter 4 (commencing with Section 1600) and
Chapter 7 (commencing with Section 3000) of Division 2 of the
Business and Professions Code shall be determined by consultants
licensed under Chapter 4 or Chapter 7 respectively.  Prior
authorization for all other elective services shall be determined by
consultants licensed under the provisions of Chapter 5 (commencing
with Section 2000) of Division 2 of the Business and Professions
Code, provided, however, that prior authorization for pharmaceutical
services may be determined by persons licensed under the provisions
of Chapter 9 (commencing with Section 4000) of Division 2 of the
Business and Professions Code, and prior authorization for services
provided in an inpatient setting may be reviewed and approved, but
not denied, by a person licensed under the provisions of Chapter 6
(commencing with Section 2700) of Division 2 of the Business and
Professions Code, working under the supervision of a consultant
licensed under the provisions of Chapter 5 (commencing with Section
2000) of Division 2 of the Business and Professions Code.
   The consultants shall render decisions on prior authorization
requests in a timely manner.  A timely manner shall be deemed to be
an average of five working days after the prior authorization request
is received by the department.  A decision shall be an approval,
denial, modification, or request for additional information.  A
supplemental authorization request submitted with additional
information requested by a consultant shall be processed in a timely
manner as if it were an original authorization request.  If no
decision on a prior authorization request is rendered by the
consultant within 30 days of receipt by the department, the request
shall be deemed to be approved.  Final decisions of the department on
all requests for prior authorization shall be reviewable under the
department's provider appeal and fair hearing procedures.  If the
request is denied, the department shall send notice to the provider
and beneficiary of the right to appeal the decision.
   In no event shall prior authorization be required when there is a
bona fide emergency requiring immediate treatment.
   In carrying out this section, notwithstanding Section 19130 of the
Government Code, the department may contract, either directly or
through the fiscal intermediary, for staff to accomplish the
treatment authorization request reviews and medical case management,
including appeals.  The fiscal intermediary contract, including any
contract amendment, system change pursuant to a change order, and
project or systems development notice shall be exempt from Part 2
(commencing with Section 10100) of Division 2 of the Public Contract
Code, Chapter 7 (commencing with Section 11700) of Part 1 of Division
3 of Title 2 of the Government Code, and any policies, procedures,
or regulations authorized by those laws.
14103.7.  The department shall develop procedure codes for durable
medical equipment and orthotic and prosthetic equipment and services,
to enable the fiscal intermediary to efficiently and expeditiously
process claims for the equipment or services.
   For the purposes of this section, durable medical equipment,
orthotics,  and prosthetics shall include such equipment and
accessories as the director may provide by regulation, as authorized
by this chapter.
14103.75.  Prior authorization may be required by the director for
services or items prescribed or ordered by a practitioner who has
been determined by the director to have been prescribing or ordering
medically unnecessary or excessive services or items for Medi-Cal
beneficiaries.  When this requirement has been imposed upon a
practitioner, the department shall give written notice to the
practitioner, and shall also give written notice identifying the
practitioner to all Medi-Cal providers who may be requested by that
practitioner to furnish ordered or prescribed services or items.
Payment may not be denied for services or items provided pursuant to
an order or prescription issued by these practitioners prior to
written notification by the department that these services or items
must  have prior authorization.  After this notice has been received,
it shall be the duty of the practitioner to seek prior authorization
for all ordered or prescribed services or items within the scope of
the director's requirement.  Where a practitioner fails to obtain
prior authorization for a service or item within the scope of the
director's requirement and the service or item is provided or
dispensed to a beneficiary by another provider, the prescribing
practitioner shall be financially responsible for payment.  The
department shall not deny payment to the provider for the prescribing
practitioner's failure to obtain prior authorization, but shall
reimburse the provider as otherwise provided by law and recover the
payment from the prescribing practitioner.
14103.8.  (a) Medi-Cal services for beneficiaries who are eligible
for services under the California Children's Services Act (Article 5
(commencing with Section 123800) of Chapter 3 of Part 2 of Division
106 of the Health and Safety Code) as well as the Medi-Cal program
shall be subject to prior authorization by the director.
   (b) Claims for payment of prior authorized services shall be
reviewed by postpayment audit conducted by the department, and shall
not be subject to prepayment review under the California Children's
Services Act prior to submission to the Medi-Cal fiscal intermediary.
   (c) The California Children's Services program may require all
applicants who are potentially eligible for cash grant public
assistance to apply for Medi-Cal eligibility prior to becoming
eligible for funded services.
14104.  (a) The department may, to the extent feasible, and to the
extent permitted or required by applicable provisions of federal law,
enter into agreements with organizations of licensed professional
persons known as Professional Standards Review Organizations, as the
same are defined in, and authorized by, federal law, for the review
of inpatient and other health services provided to beneficiaries in
accordance with the provisions of this part, to determine whether
such services may be approved for payment.
   (b) Where such agreements are entered, the department may also
enter into agreements for review of services provided to
beneficiaries whose health care is funded solely from state or local
sources without federal participation under Title XIX of the Social
Security Act.
   (c) Agreements entered into under this section shall be awarded on
a nonbid basis.
14104.3.  (a) The department may, to the extent feasible, enter into
nonexclusive contracts providing arrangements under which funds
available for health care under this chapter shall be administered
and disbursed to providers of health care or to their designated
agents in consideration for services rendered and supplies furnished
by them in accordance with the provisions of the applicable contract
and any schedule of charges or formula for determining payments
established pursuant to the contract.  The contract shall provide
that the contractor:
   (1) Will take any action as may be necessary to assure that
payment for services to hospitals and other facilities and
professional services shall be based on standards determined by the
director.  The formula for the payments shall be determined in
accordance with regulations establishing the methods to be used and
the items to be included.
   (2) Will take any action which may be necessary to assure that
charges by providers will be reasonable and not higher than the
charge for a comparable service and under comparable circumstances
made to other payors.
   (3) Bills for service under this chapter shall be reviewed and
rejected or processed for payment within an average of 18 days from
receipt of evidence establishing validity of the bill for payment in
the office of the contractor.  Ninety percent of all bills submitted
to the contractor and under the contractor's control, as set forth in
the request for proposal, shall be processed and paid in 30 days and
99 percent of all claims submitted to the contractor and under the
contractor's control, as set forth in the request for proposal, shall
be processed and paid in 90 days.  If it is determined by the
contractor that additional evidence of validity is required, the
evidence shall be requested within 18 days from the date the bill is
received by the contractor.  In any event, notice shall be given
within 30 days from the date the bill is received concerning the
status of the bill submitted if the bill is held for peer review by
the contractor beyond 18 days.  In no event, shall the number of
bills not processed for payment within 30 days of receipt exceed 9
percent of the total bills inventory.
   (b) Contracts awarded under this section shall be awarded on a bid
basis, and before entering into any contract, the director shall
publish notice soliciting bids.
   (c) Contracts awarded under this section may provide all of the
following:
   (1) Payments to the contractor may be on a capitation or
prepayment basis, or on a combination of both methods of payment.
   (2) Providers may assume all or part of the risk of utilization of
services, or costs of services, or both, and that providers who
agree to assume that risk may be separately classified for purposes
of applicable rates of payment or administrative requirements.
   (3) Any other provisions which have previously been incorporated
into pilot programs established pursuant to Chapter 8 (commencing
with Section 14200) and determined by the director to be desirable
and feasible.
14104.5.  Notwithstanding any other provision of law, the director
shall by regulation adopt such procedures as are necessary for the
review of a grievance or complaint concerning the processing or
payment of money alleged by a provider of services to be payable by
reason of any of the provisions of this chapter.  After complying
with these procedures, if the provider is not satisfied with the
director's decision on his or her claim, he or she may not later than
one year after receiving notice of the decision, seek appropriate
judicial remedies.  This section shall be the exclusive remedy
available to the provider of services for moneys alleged to be
payable by reason of this chapter.
   This section shall not apply to those grievances or complaints
arising from the findings of an audit or examination made by or on
behalf of the director pursuant to Sections 10722 and 14170.  Article
5.3 (commencing with Section 14170) shall govern the grievances or
complaints.
14104.6.  No Medi-Cal fiscal intermediary contract shall be
approved, renewed or continued if a state employee is employed in a
management, consultant or technical position by the contractor or a
subcontractor to the contractor within one year after the state
employee terminated state employment.
   For purposes of this section, "state employee" means any
appointive or civil service employee of the Governor's office, the
Health and Welfare Agency, the State Department of Health Services,
the Controller's office, the Attorney General, or the Legislature
who, within two years prior to leaving state employment, had
responsibilities related to development, negotiation, contract
management, supervision, technical assistance or audit of a Medi-Cal
fiscal intermediary.
   The requirements of this section shall not apply to any state
employee who terminated state employment prior to the operative date
of this section.
14104.7.  The Director of the Department of Health Services shall
negotiate a modification of the contract with Computer Sciences
Corporation for the provision of fiscal intermediary services for the
Medi-Cal program in effect on the effective date of this section to
establish providers of durable medical equipment, prosthetic and
orthotic devices, and emergency and nonemergency medical
transportation as a distinct and separate provider classification for
claim processing purposes.  The director shall determine which
providers qualify as providers for the purposes of this section.  The
contract shall be further amended to provide that claims of this
type shall be processed for payment within an average of 25 days from
the date of receipt.  If the contractor fails to process such claims
within the 25-day standard, the department shall assess maximum
liquidated damages against the contractor, per day, until the
performance standard is met.
14104.8.  (a) The Secretary of the Health and Welfare Agency shall
be responsible for oversight of the contract for fiscal intermediary
services awarded by the State Department of Health Services to
Computer Sciences Corporation.  The director of the department shall
confer with the secretary of the agency regarding the progress made
in implementing the contract.
   (b) Within four months of enactment of this section, the State
Director of Health Services shall contract for an 18-month period
with a qualified systems engineering firm that has the ability to
work at the software level to acquire the system produced by Computer
Sciences Corporation for the purposes of monitoring the contract
awarded by the department to Computer Sciences Corporation and
ascertaining if the system meets contract requirements.
   (c) The systems engineering firm shall monitor compliance with all
provisions contained within the above-mentioned contract between the
department and Computer Sciences Corporation.
   (d) The contract shall:
   (1) Require the firm to conduct an evaluation of Computer Sciences
Corporation contract compliance, including design or operational
deficiencies, and, within four months of the award of the monitoring
contract, to report on this evaluation to the Secretary of the Health
and Welfare Agency and the State Director of Health Services, who
shall forward this report to the Legislature.
   (2) Include provisions to permit the firm to develop specific
remedies for design and operation deficiencies in the state owned
Medi-Cal fiscal intermediary system.
   (3) Require the firm to develop, install and operate the type of
monitoring and control system required by the contract.
   (4) Require production by the firm within one year of a detailed
work plan and budget for managing the contract with Computer Sciences
Corporation, including job descriptions, staffing levels and
organizational controls in order to continue operation of the
monitoring and control system at a high level of efficiency and
expertise.
   (5) Preclude the firm from bidding (or from being a major
subcontractor to a prime bidder) on any subsequent contract for
fiscal intermediary services for a period of five years from the date
of the contract.
   (e) If all requested documentation records and deliverables
required in the contract between the department and Computer Sciences
Corporation are not made available, as specified in that contract,
to the designated systems engineering firm, the Secretary of the
Health and Welfare Agency, the State Department of Health Services or
the Joint Legislative Audit Committee, whichever has so requested,
all applicable penalties and fines available under the contract shall
be evoked by the State Department of Health Services.
   (f) Subject to the approval of the Secretary of Health and
Welfare, the State Director of Health Services shall have the
authority to enter into a subsequent fiscal intermediary monitoring
contract to be in effect upon the expiration of the one-year contract
called for in subdivision (b) and to be based upon findings and
recommendations produced under subdivision (d).
14104.9.  Any Medi-Cal contract for fiscal intermediary services
entered into on or after January 1, 1992, shall permit the submission
of all paper claims for hospital services using billing forms that
are as similar as possible to the UB-82, also known as the HCFA-1450.
  These billing forms shall be designed to be both optically scanned
and automatically microfilmed.
14105.  (a) The director shall prescribe the policies to be followed
in the administration of this chapter, may limit the rates of
payment for health care services, and shall adopt any rules and
regulations as are necessary for carrying out, but are not
inconsistent with, the provisions thereof.
   The policies and regulations shall include rates for payment for
services not rendered under a contract pursuant to Chapter 8
(commencing with Section 14200).  In order to implement expeditiously
the budgeting decisions of the Legislature, the director shall, to
the extent permitted by federal law, adopt regulations setting rates
that reflect these budgeting decisions within one month after the
enactment of the Budget Act and of any other appropriation that
changes the level of funding for Medi-Cal services.  The proposed
regulations shall be submitted to the Department of Finance no later
than five days prior to the date of adoption.  With the written
approval of the Department of Finance, the director shall adopt the
regulations as emergency regulations in accordance with the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340), Part 1, Division 3, Title 2 of the Government Code).  For
purposes of that act, the adoption of these regulations shall be
deemed an emergency and necessary for the immediate preservation of
the public peace, health, and safety or general welfare.
   (b) (1) Insofar as practical, consistent with the efficient and
economical administration of this part, the department shall afford
recipients of public assistance a choice of managed care arrangements
under which they shall receive health care benefits and a choice of
primary care providers under each managed care arrangement.
   (2) Notwithstanding any other provision of law, Medi-Cal
beneficiaries shall be entitled to affirmatively select, or to be
assigned by default to, any primary care provider as defined in
paragraph (1) of subdivision (b) of Section 14088.
   (3) Notwithstanding any other provision of law, when a Medi-Cal
beneficiary is assigned, from any source, to a primary care
physician, as defined in Section 14254, and that primary care
physician is an employee of a primary care provider, as defined in
paragraph (1) of subdivision (b) of Section 14088, the assignment
shall constitute an assignment to the primary care provider.
   (c) If, in the judgment of the director, the actions taken by the
director under subdivision (c) of Section 14120 will not be
sufficient to operate the Medi-Cal program within the limits of
appropriated funds, he or she may limit the scope and kinds of health
care services, except for minimum coverage as defined in Section
14056, available to persons who are not eligible under Section
14005.1.  When and if necessary, that action shall be taken by the
director in ways consistent with the requirements of the federal
Social Security Act.
   (d) The director shall adopt regulations implementing regulatory
changes required to initially implement, and annually update, the
United States Health Care Financing Administration's common procedure
coding system as emergency regulations in accordance with Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.  For the purposes of the Administrative
Procedure Act, the adoption of the regulations shall be deemed to be
an emergency and necessary for the immediate preservation of the
public peace, health and safety, or general welfare.  These
regulations shall become effective immediately upon filing with the
Secretary of State.
   (e) Notwithstanding any other provision of law, prospective
reimbursement for any services provided to a Medi-Cal beneficiary in
a nursing facility that is a distinct part of an acute care hospital
shall not exceed the audited costs of the facility providing the
services.
   (f) Notwithstanding any other provision of law, reimbursement for
anesthesiology, surgical services, and the professional component of
radiology procedures except for comprehensive perinatal and
obstetrical services shall be reduced by 9.5 percent of the amount of
reimbursement provided for any of those services prior to the
operative date of this subdivision.  The director may exclude
emergency surgical services performed in the emergency department of
a general acute care hospital.  To be excluded, emergency surgical
services must be performed by an emergency room physician or a
physician on the emergency department's on-call list.
   (g) (1) It is the intent of the Legislature in enacting this
subdivision to enable the department to obtain Medicare cost reports
for the purpose of evaluating its Medi-Cal reimbursement rate
methodology for nursing facilities.
   (2) Skilled nursing facilities licensed pursuant to Chapter 2
(commencing with Section 1250) of Division 2 of the Health and Safety
Code shall submit copies of all Medicare cost reports to the
department by October 1, 1995, for reporting periods that ended
between July 1, 1993, and June 30, 1995.
   On or after July 1, 1995, those facilities shall submit the copies
to the department on the date that the Medicare cost reports are
submitted to the Medicare fiscal intermediary.
   (3) Hospitals providing skilled nursing care licensed pursuant to
Chapter 2 (commencing with Section 1250) of Division 2 of the Health
and Safety Code shall submit a copy of all Medicare cost reports for
reporting periods ended:
   (A) January 1, 1993, through June 30, 1995, to the department by
October 1, 1995.
   (B) On or after July 1, 1995, to the department when the Medicare
cost reports are submitted to the Medicare fiscal intermediary.
14105.05.  (a) Notwithstanding Section 14105, and any other
provision of law, the director may, without taking regulatory action
pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code, take one or both of the
following actions:
   (1) Establish the reimbursement rates necessitated by the
establishment of updated coding systems required for compliance by
the federal Health Insurance Portability and Accountability Act
(HIPAA).
   (2) Adopt and annually update the federal Healthcare Common
Procedure Coding System codes (formerly known as the United States
Healthcare Common Procedure Coding System HCPCS) or any other coding
system required for compliance with this chapter, federal medicaid
requirements, or the federal Health Insurance Portability and
Accountability Act (HIPAA).
   (b) The director may take the actions described in subdivision (a)
by means of publication in the California Regulatory Notice
Register, the Medi-Cal Provider Manual, or similar publications.
   (c) The publication of reimbursement rates or coding systems
pursuant to subdivision (a) shall include an effective date for the
published rates or coding systems.
   (d) Nothing in this section shall be construed to affect the
department's compliance with federal medicaid law or regulations
relating to the adoption of Medi-Cal reimbursement rates.
14105.06.  (a) Notwithstanding Section 14105 and any other provision
of law, the Medi-Cal reimbursement rates in effect on August 1,
2003, shall remain in effect through July 31, 2005, for the following
providers:
   (1) Freestanding nursing facilities licensed as either of the
following:
   (A) An intermediate care facility pursuant to subdivision (d) of
Section 1250 of the Health and Safety Code.
   (B) An intermediate care facility for the developmentally disabled
pursuant to subdivision (e), (g), or (h) of Section 1250 of the
Health and Safety Code.
   (2) A skilled nursing facility that is a distinct part of a
general acute care hospital. For purposes of this paragraph,
"distinct part" shall have the same meaning as defined in Section
72041 of Title 22 of the California Code of Regulations.
   (3) A subacute care program, as described in Section 14132.25 or
subacute care unit, as described in Sections 51215.5 and 51215.8 of
Title 22 of the California Code of Regulations.
   (4) An adult day health care center.
   (b) (1) The director may adopt regulations as are necessary to
implement subdivision (a). These regulations shall be adopted as
emergency regulations in accordance with the rulemaking provisions of
the Administrative Procedure Act, Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code. For purposes of this section, the adoption of regulations shall
be deemed an emergency and necessary for the immediate preservation
of the public peace, health, and safety or general welfare.
   (2) As an alternative to paragraph (1), and Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, the director may implement this article by
means of a provider bulletin, or similar instructions, without taking
regulatory action.
   (c) The director shall implement subdivision (a) in a manner that
is consistent with federal medicaid law and regulations. The director
shall seek any necessary federal approvals for the implementation of
this section. This section shall be implemented only to the extent
that federal approval is obtained.
   (d) The provisions of subdivision (a) shall apply to a skilled
nursing facility, as defined in subdivision (c) of Section 1250 of
the Health and Safety Code, only until the first day of the month
following federal approval to implement both the skilled nursing
quality assurance fee imposed by Article 7.6 (commencing with Section
1324.20) of Chapter 2 of Division 2 of the Health and Safety Code
and the rate methodology developed pursuant to Article 3.8
(commencing with Section 14126) of Chapter 7 of Part 3 of Division 9.
14105.1.  (a) Notwithstanding any other provision of law, to the
extent permitted by federal law, reimbursement to hospitals for
inpatient services rendered to Medi-Cal program beneficiaries between
July 1, 1981 and June 30, 1982, shall be adjusted to provide that
the average payment per discharge upon final settlement shall not
exceed a rate of increase of 6 percent over the average payment per
discharge at final settlement for services rendered during the period
of July 1, 1980 to June 30, 1981.
   (b) Interim payment rates to hospitals shall be adjusted on
October 1, 1981, or as shortly thereafter as reasonably possible and
consistent with federal law, to accomplish a rate of payment increase
to hospitals for inpatient services for the period of July 1, 1981
to June 30, 1982, which is consistent with the provisions of this
section.
   (c) It is the intent of the Legislature that the reimbursement
principles employed by the department in final settlement pursuant to
this section will be the methods in effect prior to October 1, 1981,
for any services rendered prior to that time, and for services
rendered between October 1, 1981, and June 30, 1982, that
reimbursement principles be in accordance with the alternative
methods adopted for use subsequent to October 1, 1981.
   (d) Nothing in this section shall be construed to limit
adjustments to hospital reimbursement based upon volume or case mix
changes.
14105.11.  (a) The department may negotiate settlements with acute
care hospitals with psychiatric units that unintentionally violate
Medi-Cal cost reimbursement policies or procedures governing the
operation of acute psychiatric hospitals and that had, prior to the
violations, been changed by the department.
   (b) In any case to which this section applies, the department may
waive all or part of the overpayments made under this chapter that
would otherwise be reimbursable to the department by an acute care
hospital.
   (c) This section shall only apply to hospitals in counties of the
20th and 42nd classes.
14105.115.  (a) The department may negotiate or renegotiate
settlements with any acute care hospital in San Diego County that has
a distinct part pediatric convalescent facility and that has
violated any Medi-Cal reimbursement policy or procedure governing the
operation of acute care hospitals.
   (b) In any settlement negotiated or renegotiated pursuant to this
section, the department may waive all or part of any overpayment made
under this chapter to any acute care hospital described in
subdivision (a) that would otherwise be reimbursable to the
department by that acute care hospital.
14105.12.  (a) The department shall specify circumstances under
which requests shall be granted for authorization for services
provided by a health facility licensed under subdivisions (c) and (d)
of Section 1250 of the Health and Safety Code for periods of up to
two years.  This subdivision shall be implemented not later than July
1, 1994.  The department shall consult with nursing facility
providers and appropriate health care professionals in the
development of the criteria and process for granting two-year
authorizations pursuant to this subdivision.
   (b) (1) As of July 1, 1997, the department shall specify
circumstances under which requests shall be granted for authorization
for services provided by a health facility licensed under
subdivisions (e), (g), and (h) of Section 1250 of the Health and
Safety Code for periods up to two years.  The department shall
consult with facility providers cited in this subdivision and
appropriate health care professionals in the development of the
criteria and process for granting two-year authorizations pursuant to
this subdivision.
   (2) The department shall not implement paragraph (1) unless and
until federal approval of a change in existing utilization control
methods as provided in this section is obtained.
14105.13.  (a) Private duty nursing agencies shall be a provider of
skilled nursing services provided on a shift basis covered under the
early and periodic screening, diagnosis, and treatment supplemental
and home- and community-based waiver programs, subject to federal
approval and availability of federal financial participation.  In
addition to satisfying any other requirements as a condition to
participating in the Medi-Cal program under this chapter, a private
duty nursing agency licensed under Chapter 8.3 (commencing with
Section 1743) of Division 2 of the Health and Safety Code shall
satisfy all of the following requirements:
   (1) The agency shall be in compliance with the requirements of
Chapter 8.3 (commencing with Section 1743) of Division 2 of the
Health and Safety Code, and any regulations adopted under that
chapter.
   (2) The agency shall provide services as specified in Section
1743.2 of the Health and Safety Code.
   (3) The agency shall provide skilled nursing services on a shift
basis in a patient's home or other community-based site appropriate
for patient care.
   (b) The department shall request federal approval of an amendment
to the existing nursing facility waiver and model nursing facility
waiver in order to include private duty nursing agencies as a
provider of skilled nursing services on a shift basis.
   (c) The department shall review all other federally approved
existing waivers that include home health care as a covered service
and request federal approval for adding private duty nursing agencies
as a provider of skilled nursing services provided on a shift basis,
including home- and community-based waivers under Section 1915(c) of
the federal Social Security Act (42 U.S.C. Sec. 1396n(c)).
14105.15.  (a) (1) In determining rates of reimbursement for
inpatient hospital services the department shall use the
reimbursement policy existing on June 29, 1982.  The director shall
have authority to modify this reimbursement policy.  The director
shall implement a new reimbursement policy of peer grouping of
hospitals through the promulgation of emergency regulations after
required federal approvals are obtained.  The department may adjust
interim payment percentages to hospitals in order to approximate
final settlement and may control or freeze charges in order to carry
out this section.
   (2) This section shall cease to apply to a hospital when the
department enters into a contract, pursuant to Article 2.6
(commencing with Section 14081), either with that hospital or with
other hospitals to the exclusion of that hospital for services
covered under the contracts.
   (b) Notwithstanding any other provision of law, the department may
make interim rate adjustments and also implement collection
procedures to recover overpayments to hospitals, at tentative and
final settlement.  These recoveries shall be based on audits or
examinations made by or on behalf of the department pursuant to
Sections 10722 and 14170, including the application of Sections
51536, 51537, and 51539 of Title 22 of the California Administrative
Code at tentative and final settlement.  Recovery may be made whether
or not appeals by the hospitals are pending.  Collection of
overpayments shall be made in accordance with Section 14172.5.
   (c) The amendment of this section made at the 1985 portion of the
1985-86 Regular Session of the Legislature does not constitute a
change in, but is declaratory of, the existing law.  This declaration
shall not apply to any lawsuits filed on or before July 9, 1985.
   (d) No new payment system may be implemented without specific
authorization from the Legislature.
   (e) Notwithstanding any other provision of law, reimbursement for
out-of-state acute inpatient hospital services provided to Medi-Cal
beneficiaries shall not exceed the current statewide average of
contract rates for acute inpatient hospital services negotiated by
the California Medical Assistance Commission or the actual billed
charges, whichever is less.
14105.17.  (a) Each hospital designated by the department as a
critical access hospital, and certified as such by the Secretary of
the United States Department of Health and Human Services under the
federal Medicare rural hospital flexibility program, shall be
eligible for supplemental payments for Medi-Cal covered outpatient
services rendered to Medi-Cal eligible persons.
   (b) Payments made pursuant to subdivision (a) shall be contingent
upon receipt of federal financial participation, and shall be limited
by the appropriation in the annual Budget Act for the nonfederal
share of these payments.  Supplemental payments shall be apportioned
among critical access hospitals based upon their number of Medi-Cal
outpatient visits.
   (c) Nothing in this section shall be interpreted as meaning that a
critical access hospital is not a general acute care hospital.
   (d) The department shall promptly seek any necessary federal
approvals for the implementation of this section.  If necessary to
obtain federal approval, the department may, for federal purposes,
limit implementation of this section to those payments that are
allowable expenses under Title XIX of the federal Social Security Act
(Subchapter 19 (commencing with Section 1396) of Chapter 7 of Title
42 of the United States Code).  If federal approval is not obtained
for implementation of this section, this section shall become
inoperative.
   (e) The department may adopt emergency regulations in accordance
with the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 1 of Title 2 of the Government
Code) to implement this section.  One initial adoption of the
emergency regulations and one readoption of the initial regulations
shall be deemed to be an emergency and necessary for the immediate
preservation of the public peace, health and safety, or general
welfare.  Initial emergency regulations and the first readoption of
those regulations shall be exempt from review by the Office of
Administrative Law.  The emergency regulations authorized by this
section shall be submitted to the Office of Administrative Law for
filing with the Secretary of State and publication in the California
Code of Regulations, and shall remain in effect for no more than 180
days.  If the department adopts emergency regulations pursuant to
this section, the department shall seek prior input from
representatives of the hospital industry, including the California
Healthcare Association.
14105.18.  (a) Notwithstanding any other provision of law, provider
rates of payment for services rendered in all of the following
programs shall be identical to the rates of payment for the same
service performed by the same provider type pursuant to the Medi-Cal
program.
   (1) The California Children's Services Program established
pursuant to Article 5 (commencing with Section 123800) of Chapter 3
of Part 2 of Division 106 of the Health and Safety Code.
   (2) The Genetically Handicapped Person's Program established
pursuant to Article 1 (commencing with Section 125125) of Chapter 2
of Part 5 of Division 106 of the Health and Safety Code.
   (3) The Breast and Cervical Cancer Early Detection Program
established pursuant to Article 1.5 (commencing with Section 104150)
of Chapter 2 of Part 1 of Division 103 of the Health and Safety Code
and the breast cancer programs specified in Section 30461.6 of the
Revenue and Taxation Code.
   (4) The State-Only Family Planning Program established pursuant to
Division 24 (commencing with Section 24000).
   (5) The Family Planning, Access, Care, and Treatment (Family PACT)
Waiver Program established pursuant to subdivision (aa) of Section
14132.
   (b) The director may identify in regulations other programs not
listed in subdivision (a) in which providers shall be paid rates of
payment that are identical to the rates of payments in the Medi-Cal
program pursuant to subdivision (a).
   (c) Notwithstanding subdivision (a), services provided under any
of the programs described in subdivisions (a) and (b) may be
reimbursed at rates greater than the Medi-Cal rate that would
otherwise be applicable if those rates are adopted by the director in
regulations.
14105.19.  (a) Due to the significant state budget deficit projected
for the 2003-04 fiscal year, and in order to implement changes in
the level of funding for health care services, the Director of Health
Services shall reduce provider payments as specified in this
section.
   (b) (1) Payments shall be reduced by 5 percent for Medi-Cal
program services for dates of service on and after January 1, 2004.
However, on the effective date of the act that amended this paragraph
during the 2005 Regular Session, the reduction described in this
paragraph shall not apply with respect to Medi-Cal program services
for dates of service from January 1, 2004, to December 31, 2005,
inclusive.
   (2) Payments shall be reduced by 5 percent for non-Medi-Cal
programs described in Section 14105.18, for dates of service on and
after January 1, 2004.
   (3) The payments made to managed health care plans shall be
reduced by the actuarial equivalent amount of 5 percent at the time
of the plan's next rate determination.
   (4) Reductions to payments for durable medical equipment shall be
made at the discretion of the director. If any reduction is made
pursuant to this paragraph, the reduction may not exceed 5 percent.
   (c) The services listed below shall be exempt from the payment
reductions specified in subdivision (b):
   (1) Acute hospital inpatient services.
   (2) Federally qualified health clinic services.
   (3) Rural health clinic services.
   (4) Outpatient services billed by a hospital.
   (5) Payments to state hospitals or developmental centers.
   (6) Payments to long-term care facilities as defined by the
department, including, but not limited to, freestanding nursing
facilities, distinct-part nursing facilities, intermediate care
facilities for developmentally disabled individuals, subacute care
units of skilled nursing facilities, rural swing beds, ventilator
weaning services, special treatment program services, adult day
health care centers, and hospice room and board services.
   (7) Clinical laboratory or laboratory services as defined in
Section 51137.2 of Title 22 of the California Code of Regulations.
   (8) Contract services as designated by the Director of Health
Services pursuant to subdivision (e).
   (9) Supplemental reimbursement provided pursuant to Sections
14105.27, 14105.95, and 14105.96.
   (10) Services provided on or after July 1, 2004, through the
California Children's Services Program pursuant to Article 5
(commencing with Section 123800) of Chapter 3 of Part 2 of Division
106 of the Health and Safety Code, the Genetically Handicapped
Persons Program, pursuant to Article 1 (commencing with Section
125125) of Chapter 2 of Part 5 of Division 106 of the Health and
Safety Code, the Child Health and Disability Prevention Program
pursuant to Article 6 (commencing with Section 124025) of Chapter 3
of Part 2 of Division 106 of the Health and Safety Code, the
Multipurpose Senior Services Program pursuant to Chapter 8
(commencing with Section 9560) of Division 8.5, the Breast and
Cervical Cancer Early Detection Program established pursuant to
Article 1.3 (commencing with Section 104150) of Chapter 2 of Part 1
of Division 103 of the Health and Safety Code, and the breast cancer
programs specified in Section 30461.6 of the Revenue and Taxation
Code.
   (11) Legend and nonlegend drugs dispensed by pharmacy providers
reimbursed pursuant to Section 14105.45, effective September 1, 2004.
   (d) Subject to the exception for services listed in subdivision
(c), the payment reductions required by subdivision (b) shall apply
to the services rendered by any provider who may be authorized to
bill for the service, including, but not limited to, physicians,
podiatrists, nurse practitioners, certified nurse midwives, nurse
anesthetists, and organized outpatient clinics.
   (e) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement this section by means of provider bulletin,
or similar instruction, without taking regulatory action.
   (f) The department shall promptly seek all necessary federal
approvals in order to implement this section, including necessary
amendments to the state plan.
   (g) This section shall remain in effect only until January 1,
2007, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2007, deletes or extends
that date.
14105.2.  (a) The allowable markup payable for the dispensing of
medical supplies by assistive device and sickroom supply dealers and
pharmacies shall not exceed 23 percent of the cost of the item
dispensed, as defined by the department.
   (b) Payment for diabetic testing supplies shall not exceed the
cost of the item dispensed, as defined by the department, plus a fee
equal to the maximum professional fee component used in the payment
for legend generic drug types.
14105.21.  (a) An assistive device and sickroom supply dealer may
not bill the Medi-Cal program for prosthetic and orthotic appliances.
   (b) A pharmacy may not bill the Medi-Cal program for prosthetic or
orthotic appliances, unless the pharmacy is certified by the
National Community Pharmacists Association and only for prosthetic
and orthotic appliances that have been identified pursuant to
subdivision (c) or otherwise approved by the department.
   (c) The department shall establish a list of covered services and
maximum allowable reimbursement rates, subject to Section 14107.7,
for prosthetic and orthotic appliances, and the list shall be
published in provider manuals.
   (d) Reimbursement for prosthetic and orthotic appliances, as
defined in Section 51160 of Title 22 of the California Code of
Regulations, may not exceed 80 percent of the lowest maximum
allowance for California established by the federal Medicare program
for the same or similar services.
   (e) The department shall repeal Section 51515 of Title 22 of the
California Code of Regulations, as it read on the effective date of
the act adding this section.
   (f) The department may implement this section by provider manual
or bulletin.  Notwithstanding the provisions of the Administrative
Procedure Act, Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of the Government Code, actions under this section
shall not be subject to the rulemaking provisions of the
Administrative Procedure Act or to the review and approval of the
Office of Administrative Law.
14105.22.  Reimbursement for clinical laboratory or laboratory
services, as defined in Section 51137.2 of Title 22 of the California
Code of Regulations, may not exceed 80 percent of the lowest maximum
allowance established by the federal Medicare program for the same
or similar services.
14105.23.  (a) Reimbursement for portable X-ray transportation
services, as defined in paragraph (2) of subdivision (b) of Section
51531 of Title 22 of the California Code of Regulations, shall not
exceed 100 percent of the lowest maximum allowance for California
established by the federal Medicare Program for the same or similar
services.
   (b) Notwithstanding subdivision (a) of Section 14105 and the
rulemaking provisions of Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 of Title 2 of the Government Code, the
director may establish the rates of reimbursement for the services
described in subdivision (a) by means of a provider bulletin or
manual, or similar instructions.
14105.24.  (a) Clinics and hospital outpatient departments, except
for emergency rooms, owned or operated by Los Angeles County that
participated in the California Section 1115 Medicaid Demonstration
Project for Los Angeles County (No. 11-W-00076/9) and received 100
percent cost-based reimbursement pursuant to the Special Terms and
Conditions of that waiver shall continue to be reimbursed under a
cost-based methodology on and after July 1, 2005.
   (b) Reimbursement to clinics and hospitals described in
subdivision (a) shall be at 100 percent of reasonable and allowable
costs for Medi-Cal services rendered to Medi-Cal beneficiaries.
Reasonable and allowable costs shall be determined in accordance with
applicable cost-based reimbursement provisions of the following
regulations and publications:
   (1) The Medicare reimbursement methodology as specified at
Sections 405.2460 to 405.2470, inclusive, of Title 42 of the Code of
Federal Regulations, together with applicable definitions in Subpart
X of Part 405 of Title 42 of the Code of Federal Regulations to the
extent those definitions are applied by the department in connection
with payments to federally qualified health centers in California.
   (2) Cost reimbursement principles outlined in Part 413 (commencing
with Section 413.1) of Title 42 of the Code of Federal Regulations.
In the event of a conflict between the provisions of Part 405 and
Part 413, the provisions of Part 405 shall govern.
   (3) "Cost Principles for State, Local, and Indian Tribe
Governments" (OMB Circular A-87).
   (4) "Rural Health and FQHC Manual" (CMS Publication 27).
   (5) Subdivision (e) of Section 14087.325 and any implementing
regulations.
   (c) The methodology for reimbursement adopted by the state to
comply with Section 1396a(aa) of Title 42 of the United States Code
shall not be applicable to clinics and hospitals that are paid
pursuant to this section.
   (d) This section shall be implemented on the effective date
established by the federal Centers for Medicare and Medicaid Services
for an amendment to the California Medicaid State Plan that approves
the cost-based reimbursement methodology for the clinics and
hospitals described in subdivision (b).
   (e) Notwithstanding subdivision (a) of Section 14105, and the
rulemaking provisions of Chapter 3.5 (commencing with Section 11340)
of Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement and administer the cost-based rates of
reimbursement described in this section by means of provider
bulletins or manuals, or similar instructions.
14105.25.  (a) Notwithstanding any other provision of law, to the
extent permitted by federal law and regulations, the maximum rate of
reimbursement under the Medi-Cal program for any service or item that
is a benefit under Part B of the Medicare program, excluding
physician and diagnostic clinical laboratory services, shall not
exceed the lowest maximum allowance established by the federal
Medicare program for that service or item in any area of the state.
   (b) The director shall reduce the rate of reimbursement for any
service or item, as required, to comply with subdivision (a).
   (c) The director shall administer this section and establish
standards, procedures, and rates of reimbursement, as the director
deems necessary in carrying out this section.  Reimbursement rates
are not required to be adopted as regulations pursuant to the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
14105.26.  (a) Each eligible facility, as described in paragraph (2)
of subdivision (b), may, in addition to the rate of payment that the
facility would otherwise receive for skilled nursing services,
receive supplemental Medi-Cal reimbursement to the extent provided in
this section.
   (b) (1) Projects eligible for supplemental reimbursement shall
include any new capital projects for which final plans have been
submitted to the appropriate review agency after January 1, 2000, and
before January 1, 2003.  For purposes of this section, "capital
project" means the construction, expansion, replacement, remodeling,
or renovation of an eligible facility, including buildings and fixed
equipment.  A "capital project" does not include the provision of
furnishings or of equipment that is not fixed equipment.
   (2) A facility shall be eligible only if the submitting entity had
all of the following additional characteristics during the 1998
calendar year:
   (A) Provided services to Medi-Cal beneficiaries.
   (B) Was a distinct part of an acute care hospital providing
skilled nursing care and supportive care to patients whose primary
need is for the availability of skilled nursing care on an extended
basis.  For the purposes of this section, "acute care hospital" means
the facilities defined in subdivision (a) or (b), or both, of
Section 1250 of the Health and Safety Code.
   (C) Had not less than 300 licensed skilled nursing beds.
   (D) Had an average skilled nursing Medi-Cal patient census of not
less than 80 percent of the total skilled nursing patient days.
   (E) Was owned by a county or city and county.
   (c) (1) An eligible facility seeking to qualify for supplemental
reimbursement shall submit documentation to the department regarding
debt service on revenue bonds or other financing instruments used for
financing the capital project.
   (2) The department shall confirm in writing project eligibility
under this section.
   (d) (1) Capital projects receiving funding shall include only the
upgrading or construction of buildings and equipment to a level
required by currently accepted medical practice standards, including
projects designed to correct Joint Commission on Accreditation of
Hospitals and Health Systems, fire and life safety, seismic, or other
related regulatory standards.
   (2) Capital projects receiving funding may expand service capacity
as needed to maintain current or reasonably foreseeable necessary
bed capacity to meet the needs of Medi-Cal beneficiaries after giving
consideration to bed capacity needed for other patients, including
unsponsored patients.
   (3) Supplemental reimbursement shall only be made for capital
projects, or for that portion of capital projects that provide
skilled nursing services, and that are available and accessible to
patients eligible for services under this chapter.
   (e) An eligible facility's supplemental reimbursement for a
capital project qualifying pursuant to this section shall be
calculated and paid as follows:
   (1) For any fiscal year for which the facility is eligible to
receive supplemental reimbursement, the facility shall report to the
department the amount of debt service on the revenue bonds or other
financing instruments issued to finance the capital project.
   (2) For each fiscal year in which an eligible facility requests
reimbursement, the department shall establish the ratio of skilled
nursing Medi-Cal days of care provided by the eligible facility to
total skilled nursing patient days of care provided by the eligible
facility.  The ratio shall be established using data obtained from
audits performed by the department, and shall be applied to the
corresponding fiscal year of debt service on the revenue bonds or
other financing instruments issued to finance the capital project.
   (3) The amount of debt service that will be submitted to the
federal Health Care Financing Administration for the purpose of
claiming reimbursement for each fiscal year shall equal the amount
determined annually in paragraph (1) multiplied by the percentage
figure determined in paragraph (2).
   (4) The supplemental reimbursement to an eligible facility shall
be equal to the amount of federal financial participation received as
a result of the claims submitted pursuant to paragraph (2) of
subdivision (j).
   (5) In no instance shall the total amount of supplemental
reimbursement received under this section combined with that received
from all other sources dedicated exclusively to debt service exceed
100 percent of the debt service for the capital project over the life
of the loan, revenue bond, or other financing mechanism.
   (6) A facility qualifying for and receiving supplemental
reimbursement pursuant to this section shall continue to receive
reimbursement until the qualifying loan, revenue bond, or other
financing mechanism is paid off, and as long as the facility meets
the requirements of paragraph (3) of subdivision (d).
   (7) The supplemental Medi-Cal reimbursement provided by this
section shall be distributed under a payment methodology based on
skilled nursing services provided to Medi-Cal patients at the
eligible facility, either on a per diem basis, a per discharge basis,
or any other federally permissible basis.  The department shall seek
approval from the federal Health Care Financing Administration for
the payment methodology to be utilized, and shall not make any
payment pursuant to this section prior to obtaining that approval.
   (8) The supplemental reimbursement provided by this section shall
not commence prior to the date upon which the hospital submits to the
department a copy of the certificate of occupancy for the capital
project.
   (f) (1) It is the Legislature's intent in enacting this section to
provide a funding source for a portion of the construction costs of
eligible facilities without any expenditure from the state General
Fund.
   (2) The state share of the amount of the debt service submitted to
the federal Health Care Financing Administration for purposes of
supplemental reimbursement shall be paid with county-only funds and
certified to the state as provided in subdivision (g).  Any amount of
the costs of the capital project that are not reimbursed by federal
funds shall be borne solely by the eligible facility.
   (3) Prior to receiving any funding through this section, an
eligible facility shall demonstrate its ability to cover all of the
anticipated costs of construction, including those not reimbursed
through federal funding.
   (g) The county or city and county, on behalf of any eligible
facility, shall do all of the following:
   (1) Certify, in conformity with the requirements of Section 433.51
of Title 42 of the Code of Federal Regulations, that the claimed
expenditures for the capital project are eligible for federal
financial participation.
   (2) Provide evidence supporting the certification as specified by
the department.
   (3) Submit data, as specified by the department, to determine the
appropriate amounts to claim as expenditures qualifying for financial
participation.
   (4) Keep, maintain, and have readily retrievable, the records as
specified by the department in order to fully disclose reimbursement
amounts to which the eligible facility is entitled, and any other
records required by the federal Health Care Financing Administration.
   (h) The department may require that any county or city and county
seeking supplemental reimbursement under this section enter into an
interagency agreement with the department for the purpose of
implementing this section.
   (i) All payments received by an eligible facility pursuant to this
section shall be placed in a special account, the funds of which
shall be used exclusively for the payment of expenses related to the
eligible capital project.
   (j) (1) The department shall promptly seek any necessary federal
approvals for the implementation of this section.  If necessary to
obtain federal approval, the department may, for federal purposes,
limit the program to those costs that are allowable expenditures
under Title XIX of the federal Social Security Act (Subchapter 19
(commencing with Section 1396) of Chapter 7 of Title 42 of the United
States Code).  If federal approval is not obtained for
implementation of this section, this section shall become
inoperative.
   (2) The department shall submit claims for federal financial
participation for the expenditures for debt service that are
allowable expenditures under federal law.
   (3) The department shall, on an annual basis, submit any necessary
materials to the federal government to provide assurances that
claims for federal financial participation will include only those
expenditures that are allowable under federal law.
   (k) Supplemental reimbursement paid under this section shall not
duplicate any reimbursement received by an eligible facility pursuant
to this chapter for construction costs that would otherwise be
eligible for reimbursement under this section.  In no event shall the
total Medi-Cal reimbursement pursuant to this chapter to a facility
eligible under this section be less than what would have been paid
had this section not existed.
   (l) In the event there is a final judicial determination by any
court of appellate jurisdiction or a final determination by the
administrator of the federal Health Care Financing Administration
that the supplemental reimbursement provided in this section must be
made to any facility not described therein, this section shall become
immediately inoperative.
   (m) Any and all funds expended pursuant to this section shall be
subject to review and audit by the department.
14105.27.  (a) Each eligible facility, as described in subdivision
(b) may, in addition to the rate of payment that the facility would
otherwise receive for skilled nursing services, receive supplemental
Medi-Cal reimbursement to the extent provided in this section.
   (b) A facility shall be eligible for supplemental reimbursement
only if the facility has all of the following characteristics
continuously during the department's rate year beginning August 1,
2001, and subsequent rate years:
   (1) Provides services to Medi-Cal beneficiaries.
   (2) Is a distinct part of an acute care hospital providing skilled
nursing services.  For purposes of this section, "acute care
hospital" means the facilities described by subdivision (a) or (b),
or both, of Section 1250 of the Health and Safety Code.
   (3) Is owned or operated by a county, city, city and county, or
health care district organized pursuant to Chapter 1 (commencing with
Section 32000) of Division 23 of the Health and Safety Code.
   (c) An eligible facility's supplemental reimbursement pursuant to
this section shall be calculated and paid as follows:
   (1) The supplemental reimbursement to an eligible facility, as
described in paragraph (4), shall be equal to the amount of federal
financial participation received as a result of the claims submitted
pursuant to paragraph (2) of subdivision (g).
   (2) In no instance shall the amount certified pursuant to
paragraph (1) of subdivision (e), when combined with the amount
received from all other sources of reimbursement from the Medi-Cal
program, exceed 100 percent of projected costs, as determined
pursuant to the Medi-Cal State Plan, for distinct part skilled
nursing services at each facility.
   (3) Costs associated with the provision of subacute services
pursuant to Section 14132.25 shall not be certified for supplemental
reimbursement pursuant to this section.
   (4) The supplemental Medi-Cal reimbursement provided by this
section shall be distributed under a payment methodology based on
skilled nursing services provided to Medi-Cal patients at the
eligible facility, either on a per diem basis, a per discharge basis,
or any other federally permissible basis.  The department shall seek
approval from the federal Centers for Medicare and Medicaid Services
for the payment methodology to be utilized, and shall not make any
payment pursuant to this section prior to obtaining that approval.
   (d) (1) It is the Legislature's intent in enacting this section to
provide the supplemental reimbursement described in this section
without any expenditure from the General Fund.
   (2) The state share of the supplemental reimbursement submitted to
the federal Centers for Medicare and Medicaid Services for purposes
of claiming federal financial participation shall be paid only with
funds from the governmental entities described in paragraph (3) of
subdivision (b) and certified to the state as provided in subdivision
(e).
   (e) The particular governmental entity, described in paragraph (3)
of subdivision (b), on behalf of any eligible facility shall do all
of the following:
   (1) Certify, in conformity with the requirements of Section 433.51
of Title 42 of the Code of Federal Regulations, that the claimed
expenditures for distinct part nursing facility services are eligible
for federal financial participation.
   (2) Provide evidence supporting the certification as specified by
the department.
   (3) Submit data as specified by the department to determine the
appropriate amounts to claim as expenditures qualifying for federal
financial participation.
   (4) Keep, maintain, and have readily retrievable, any records
specified by the department to fully disclose reimbursement amounts
to which the eligible facility is entitled, and any other records
required by the federal Centers for Medicare and Medicaid Services.
   (f) The department may require that any governmental entity,
described in paragraph (3) of subdivision (b), seeking supplemental
reimbursement under this section enter into an interagency agreement
with the department for the purpose of implementing this section.
   (g) (1) The department shall promptly seek any necessary federal
approvals, including a federal medicaid waiver, for the
implementation of this section.  If necessary to obtain federal
approval, the department may limit the program to those costs that
are allowable expenditures under Title XIX of the federal Social
Security Act (Subchapter 19 (commencing with Section 1396) of Chapter
7 of Title 42 of the United States Code).  If federal approval is
not obtained for implementation of this section, this section shall
become inoperative.
   (2) The department shall submit claims for federal financial
participation for the expenditures for the services described in
subdivision (e) that are allowable expenditures under federal law.
   (3) The department shall, on an annual basis, submit any necessary
materials to the federal government to provide assurances that
claims for federal financial participation will include only those
expenditures that are allowable under federal law.
   (h) In the event there is a final judicial determination by any
court of appellate jurisdiction or a final determination by the
administrator of the federal Centers for Medicare and Medicaid
Services that the supplemental reimbursement provided in this section
must be made to any facility not described in this section, this
section shall become immediately inoperative.
   (i) All funds expended pursuant to this section are subject to
review and audit by the department.
14105.3.  (a) The department is considered to be the purchaser, but
not the dispenser or distributor, of prescribed drugs under the
Medi-Cal program for the purpose of enabling the department to obtain
from manufacturers of prescribed drugs the most favorable price for
those drugs furnished by one or more manufacturers, based upon the
large quantity of the drugs purchased under the Medi-Cal program, and
to enable the department, notwithstanding any other provision of
state law, to obtain from the manufacturers discounts, rebates, or
refunds based on the quantities purchased under the program, insofar
as may be permissible under federal law.  Nothing in this section
shall interfere with usual and customary distribution practices in
the drug industry.
   (b) The department may enter into exclusive or nonexclusive
contracts on a bid or negotiated basis with manufacturers,
distributors, dispensers, or suppliers of appliances, durable medical
equipment, medical supplies, and other product-type health care
services and with laboratories for clinical laboratory services for
the purpose of obtaining the most favorable prices to the state and
to assure adequate quality of the product or service.  This
subdivision shall not apply to pharmacies licensed pursuant to
Section 4080 of the Business and Professions Code.
   (c) Notwithstanding subdivision (b), the department may not enter
into a contract with a clinical laboratory unless the clinical
laboratory operates in conformity with Chapter 3 (commencing with
Section 1200) of Division 2 of the Business and Professions Code and
the regulations adopted thereunder, and Section 263a of Title 42 of
the United States Code and the regulations adopted thereunder.
   (d) The department shall contract with manufacturers of
single-source drugs on a negotiated basis, and with manufacturers of
multisource drugs on a bid or negotiated basis.
   (e) In carrying out contracting activity for this or any section
associated with the Medi-Cal list of contract drugs, notwithstanding
Section 19130 of the Government Code, the department may contract,
either directly or through the fiscal intermediary, for pharmacy
consultant staff necessary to accomplish the contracting process or
treatment authorization request reviews.  The fiscal intermediary
contract, including any contract amendment, system change pursuant to
a change order, and project or systems development notice shall be
exempt from Part 2 (commencing with Section 10100) of Division 2 of
the Public Contract Code, Chapter 7 (commencing with Section 11700)
of Part 1 of Division 3 of Title 2 of the Government Code, and any
policies, procedures, or regulations authorized by these provisions.
   (f) In order to achieve maximum cost savings the Legislature
hereby determines that an expedited contract process for contracts
under this section is necessary.  Therefore contracts under this
section shall be exempt from Chapter 2 (commencing with Section
10290) of Part 2 of Division 2 of the Public Contract Code.
   (g) For purposes of implementing the contracting provisions
specified in this section, the department shall do all of the
following:
   (1) Ensure adequate access for Medi-Cal patients to quality
laboratory testing services in the geographic regions of the state
where contracting occurs.
   (2) Consult with the statewide association of clinical
laboratories and other appropriate stakeholders on the implementation
of the contracting provisions specified in this section to ensure
maximum access for Medi-Cal patients consistent with the savings
targets projected by the 2002-03 Budget Conference Committee for
clinical laboratory services provided under the Medi-Cal program.
   (3) Consider which types of laboratories are appropriate for
implementing the contracting provisions specified in this section,
including independent laboratories, outreach laboratory programs of
hospital based laboratories, clinic laboratories, physician office
laboratories, and group practice laboratories.
14105.31.  For purposes of the Medi-Cal contract drug list, the
following definitions shall apply:
   (a) "Single-source drug" means a drug that is produced and
distributed under an original New Drug Application approved by the
federal Food and Drug Administration.  This shall include a drug
marketed by the innovator manufacturer and any cross-licensed
producers or distributors operating under the New Drug Application,
and shall also include a biological product, except for vaccines,
marketed by the innovator manufacturer and any cross-licensed
producers or distributors licensed by the federal Food and Drug
Administration pursuant to Section 262 of Title 42 of the United
States Code.  A drug ceases to be a single-source drug when the same
drug in the same dosage form and strength manufactured by another
manufacturer is approved by the federal Food and Drug Administration
under the provisions for an Abbreviated New Drug Application.
   (b) "Best price" means the negotiated price, or the manufacturer's
lowest price available to any class of trade organization or entity,
including, but not limited to, wholesalers, retailers, hospitals,
repackagers, providers, or governmental entities within the United
States, that contracts with a manufacturer for a specified price for
drugs, inclusive of cash discounts, free goods, volume discounts,
rebates, and on- or off-invoice discounts or credits, shall be based
upon the manufacturer's commonly used retail package sizes for the
drug sold by wholesalers to retail pharmacies.
   (c) "Equalization payment amount" means the amount negotiated
between the manufacturer and the department for reimbursement by the
manufacturer, as specified in the contract.  The equalization payment
amount shall be based on the difference between the manufacturer's
direct catalog price charged to wholesalers and the manufacturer's
best price, as defined in subdivision (b).
   (d) "Manufacturer" means any person, partnership, corporation, or
other institution or entity that is engaged in the production,
preparation, propagation, compounding, conversion, or processing of
drugs, either directly or indirectly by extraction from substances of
natural origin, or independently by means of chemical synthesis, or
by a combination of extraction and chemical synthesis, or in the
packaging, repackaging, labeling, relabeling, and distribution of
drugs.
   (e) "Price escalator" means a mutually agreed upon price specified
in the contract, to cover anticipated cost increases over the life
of the contract.
   (f) "Medi-Cal pharmacy costs" or "Medi-Cal drug costs" means all
reimbursements to pharmacy providers for services or merchandise,
including single-source or multiple-source prescription drugs,
over-the-counter medications, and medical supplies, or any other
costs billed by pharmacy providers under the Medi-Cal program.
   (g) "Medicaid rebate" means the rebate payment made by drug
manufacturers pursuant to Section 1927 of the federal Social Security
Act (42 U.S.C. Sec. 1396r-8).
   (h) "State rebate" means any negotiated rebate under the Drug
Discount Program in addition to the medicaid rebate.
   (i) "Date of mailing" means the date that is evidenced by the
postmark date by the United States Postal Service or other common
mail carrier on the envelope.
14105.33.  (a) The department may enter into contracts with
manufacturers of single-source and multiple-source drugs, on a bid or
nonbid basis, for drugs from each major therapeutic category, and
shall maintain a list of those drugs for which contracts have been
executed.
   (b) (1) Contracts executed pursuant to this section shall be for
the manufacturer's best price, as defined in Section 14105.31, which
shall be specified in the contract, and subject to agreed-upon price
escalators, as defined in that section.  The contracts shall provide
for an equalization payment amount, as defined in Section 14105.31,
to be remitted to the department quarterly.  The department shall
submit an invoice to each manufacturer for the equalization payment
amount, including supporting utilization data from the department's
prescription drug paid claims tapes within 30 days of receipt of the
Centers for Medicare and Medicaid Services' file of manufacturer
rebate information.  In lieu of paying the entire invoiced amount, a
manufacturer may contest the invoiced amount pursuant to procedures
established by the federal Centers for Medicare and Medicaid Services'
Medicaid Drug Rebate Program Releases or regulations by mailing a
notice, that shall set forth its grounds for contesting the invoiced
amount, to the department within 38 days of the department's mailing
of the state invoice and supporting utilization data.  For purposes
of state accounting practices only, the contested balance shall not
be considered an accounts receivable amount until final resolution of
the dispute pursuant to procedures established by the federal
Centers for Medicare and Medicaid Services' Medicaid Drug Rebate
Program Releases or regulations that results in a finding of an
underpayment by the manufacturer.  Manufacturers may request, and the
department shall timely provide, at cost, Medi-Cal provider level
drug utilization data, and other Medi-Cal utilization data necessary
to resolve a contested department-invoiced rebate amount.
   (2) The department shall provide for an annual audit of
utilization data used to calculate the equalization amount to verify
the accuracy of that data.  The findings of the audit shall be
documented in a written audit report to be made available to
manufacturers within 90 days of receipt of the report from the
auditor.  Any manufacturer may receive a copy of the audit report
upon written request.  Contracts between the department and
manufacturers shall provide for any equalization payment adjustments
determined necessary pursuant to an audit.
   (3) Utilization data used to determine an equalization payment
amount shall exclude data from both of the following:
   (A) Health maintenance organizations, as defined in Section 300e
(a) of Title 42 of the United States Code, including those
organizations that contract under Section 1396b(m) of Title 42 of the
United States Code.
   (B) Capitated plans that include a prescription drug benefit in
the capitated rate, and that have negotiated contracts for rebates or
discounts with manufacturers.
   (c) In order that Medi-Cal beneficiaries may have access to a
comprehensive range of therapeutic agents, the department shall
ensure that there is representation on the list of contract drugs in
all major therapeutic categories.  Except as provided in subdivision
(a) of Section 14105.35, the department shall not be required to
contract with all manufacturers who negotiate for a contract in a
particular category.  The department shall ensure that there is
sufficient representation of single-source and multiple-source drugs,
as appropriate, in each major therapeutic category.
   (d) The department shall select the therapeutic categories to be
included on the list of contract drugs, and the order in which it
seeks contracts for those categories.  The department may establish
different contracting schedules for single-source and multiple-source
drugs within a given therapeutic category.
   (e) (1) In order to fully implement subdivision (d), the
department shall, to the extent necessary, negotiate or renegotiate
contracts to ensure there are as many single-source drugs within each
therapeutic category or subcategory as the department determines
necessary to meet the health needs of the Medi-Cal population.  The
department may determine in selected therapeutic categories or
subcategories that no single-source drugs are necessary because there
are currently sufficient multiple-source drugs in the therapeutic
category or subcategory on the list of contract drugs to meet the
health needs of the Medi-Cal population.  However, in no event shall
a beneficiary be denied continued use of a drug which is part of a
prescribed therapy in effect as of September 2, 1992, until the
prescribed therapy is no longer prescribed.
   (2) In the development of decisions by the department on the
required number of single-source drugs in a therapeutic category or
subcategory, and the relative therapeutic merits of each drug in a
therapeutic category or subcategory, the department shall consult
with the Medi-Cal Contract Drug Advisory Committee.  The committee
members shall communicate their comments and recommendations to the
department within 30 business days of a request for consultation, and
shall disclose any associations with pharmaceutical manufacturers or
any remuneration from pharmaceutical manufacturers.
   (f) In order to achieve maximum cost savings, the Legislature
declares that an expedited process for contracts under this section
is necessary.  Therefore, contracts entered into on a nonbid basis
shall be exempt from Chapter 2 (commencing with Section 10290) of
Part 2 of Division 2 of the Public Contract Code.
   (g) In no event shall a beneficiary be denied continued use of a
drug that is part of a prescribed therapy in effect as of September
2, 1992, until the prescribed therapy is no longer prescribed.
   (h) Contracts executed pursuant to this section shall be
confidential and shall be exempt from disclosure under the California
Public Records Act (Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code).
   (i) The department shall provide individual notice to Medi-Cal
beneficiaries at least 60 calendar days prior to the effective date
of the deletion or suspension of any drug from the list of contract
drugs.  The notice shall include a description of the beneficiary's
right to a fair hearing and shall encourage the beneficiary to
consult a physician to determine if an appropriate substitute
medication is available from Medi-Cal.
   (j) In carrying out the provisions of this section, the department
may contract either directly, or through the fiscal intermediary,
for pharmacy consultant staff necessary to initially accomplish the
treatment authorization request reviews.
   (k) (1) Manufacturers shall calculate and pay interest on late or
unpaid rebates.  The interest shall not apply to any prior period
adjustments of unit rebate amounts or department utilization
adjustments.
   (2) For state rebate payments, manufacturers shall calculate and
pay interest on late or unpaid rebates for quarters that begin on or
after the effective date of the act that added this subdivision.
   (3) Following final resolution of any dispute pursuant to
procedures established by the federal Centers for Medicare and
Medicaid Services' Medicaid Drug Rebate Program Releases or
regulations regarding the amount of a rebate, any underpayment by a
manufacturer shall be paid with interest calculated pursuant to
subdivisions (m) and (n), and any overpayment, together with interest
at the rate calculated pursuant to subdivisions (m) and (n), shall
be credited by the department against future rebates due.
   (l) Interest pursuant to subdivision (k) shall begin accruing 38
calendar days from the date of mailing of the invoice, including
supporting utilization data sent to the manufacturer.  Interest shall
continue to accrue until the date of mailing of the manufacturer's
payment.
   (m) Except as specified in subdivision (n), interest rates and
calculations pursuant to subdivision (k) for medicaid rebates and
state rebates shall be identical and shall be determined by the
federal Centers for Medicare and Medicaid Services' Medicaid Drug
Rebate Program Releases or regulations.
   (n) If the date of mailing of a state rebate payment is 69 days or
more from the date of mailing of the invoice, including supporting
utilization data sent to the manufacturer, the interest rate and
calculations pursuant to subdivision (k) shall be as specified in
subdivision (m), however the interest rate shall be increased by 10
percentage points.  This subdivision shall apply to payments for
amounts invoiced for any quarters that begin on or after the
effective date of the act that added this subdivision.
   (o) If the rebate payment is not received, the department shall
send overdue notices to the manufacturer at 38, 68, and 98 days after
the date of mailing of the invoice, and supporting utilization data.
  If the department has not received a rebate payment, including
interest, within 180 days of the date of mailing of the invoice,
including supporting utilization data, the manufacturer's contract
with the department shall be deemed to be in default and the contract
may be terminated in accordance with the terms of the contract.  For
all other manufacturers, if the department has not received a rebate
payment, including interest, within 180 days of the date of mailing
of the invoice, including supporting utilization data, all of the
drug products of those manufacturers shall be made available only
through prior authorization effective 270 days after the date of
mailing of the invoice, including utilization data sent to
manufacturers.
   (p) If the manufacturer provides payment or evidence of payment to
the department at least 40 days prior to the proposed date the drug
is to be made available only through prior authorization pursuant to
subdivision (o), the department shall terminate its actions to place
the manufacturers' drug products on prior authorization.
   (q) The department shall direct the state's fiscal intermediary to
remove prior authorization requirements imposed pursuant to
subdivision (o) and notify providers within 60 days after payment by
the manufacturer of the rebate, including interest.  If a contract
was in place at the time the manufacturers' drugs were placed on
prior authorization, removal of prior authorization requirements
shall be contingent upon good faith negotiations and a signed
contract with the department.
   (r) A beneficiary may obtain drugs placed on prior authorization
pursuant to subdivision (o) if the beneficiary qualifies for
continuing care status.  To be eligible for continuing care status, a
beneficiary must be taking the drug when its manufacturer is placed
on prior authorization status.  Additionally, the department shall
have received a claim for the drug with a date of service that is
within 100 days prior to the date the manufacturer was placed on
prior authorization.
   (s) A beneficiary may remain eligible for continuing care status,
provided that a claim is submitted for the drug in question at least
every 100 days and the date of service of the claim is within 100
days of the date of service of the last claim submitted for the same
drug.
   (t) Drugs covered pursuant to Sections 14105.43 and 14133.2 shall
not be subject to prior authorization pursuant to subdivision (o),
and any other drug may be exempted from prior authorization by the
department if the director determines that an essential need exists
for that drug, and there are no other drugs currently available
without prior authorization that meet that need.
   (u) It is the intent of the Legislature in enacting subdivisions
(k) to (t), inclusive, that the department and manufacturers shall
cooperate and make every effort to resolve rebate payment disputes
within 90 days of notification by the manufacturer to the department
of a dispute in the calculation of rebate payments.
14105.332.  State and federal rebates that are owed to the state for
drugs dispensed to fee-for-service Medi-Cal beneficiaries shall not
be reduced to the state if a manufacturer reports, to the Centers for
Medicare and Medicaid Services or the department, a revised drug
product's average manufacturer price or best price as these terms are
defined pursuant to Section 1927 of the federal Social Security Act
(42 U.S.C. Sec. 1396r-8) for any calendar quarter in which the rebate
was due.
14105.336.  (a) The department shall reduce reimbursements to
pharmacists by fifty cents ($0.50) per prescription, effective
January 1, 1995, for all drug prescription claims reimbursed through
the Medi-Cal program.
   (b) This section shall become inoperative on September 1, 2004.
14105.337.  (a) Effective January 1, 2000, the department shall
increase reimbursement to pharmacists by twenty-five cents ($0.25)
per prescription for all drug prescription claims reimbursed through
the Medi-Cal program.
   (b) Effective July 1, 2002, the department shall increase
reimbursement to pharmacists by an additional fifteen cents ($0.15)
per prescription for all drug prescription claims reimbursed through
the Medi-Cal program.
   (c) (1) The department shall reduce reimbursement to pharmacists
in the amount reimbursement was increased pursuant to subdivisions
(a) and (b) with respect to pharmacy services rendered on and after
the date that this subdivision is enacted.  Claims submitted by
pharmacists for beneficiaries residing in a nursing facility shall be
exempt from this subdivision.
   (2) This subdivision shall become inoperative on July 1, 2004.
   (d) This section shall become inoperative on September 1, 2004.
14105.34.  (a) The department shall provide for an annual written
report of Medi-Cal pharmacy costs or Medi-Cal drug costs, as defined
in subdivision (f) of Section 14105.31.
   (b) The annual report shall be consistent with the relevant
sections of the Quarterly Report of Expenditures for the Medi-Cal
Assistance Program, known as the HCFA-64 Report, provided to the
Centers for Medicare and Medicaid Services.  The report shall include
the following expenditure and receipt information:
   (1) The total annual equalization payment amounts received by the
department pursuant to agreements with the Centers for Medicare and
Medicaid Services of the United States Department of Health and Human
Services.
   (2) The total annual equalization payment amounts received
pursuant to state contracts with drug manufacturers.
   (3) Total drug cost amounts upon which equalization payments were
made.
14105.35.  (a) (1) On and after July 1, 1990, drugs included on the
Medi-Cal drug formulary shall be included on the list of contract
drugs until the department and the manufacturer have concluded
contract negotiations or the department suspends the drug from the
list of contract drugs pursuant to the provisions of this
subdivision.
   The department shall, in writing, invite any manufacturer with
single-source drug products on the formulary as of July 1, 1990, to
enter into negotiations relative to the retention of its drug or
drugs.  As to the issue of cost, the department shall accept the
manufacturer's best price as sufficient for purposes of entering into
a contract to retain the drug or drugs on the list of contract
drugs.
   If the department and a manufacturer enter into a contract for
retention of a drug or drugs on the list of contract drugs, the drug
or drugs shall be retained on the list of contract drugs for the
effective term of the contract.
   If a manufacturer refuses to enter into negotiations with the
department pursuant to this subdivision, or if after 30 days of
negotiation, the manufacturer has not agreed to execute a contract
for a drug at the manufacturer's best price, the department may
suspend from the list of contract drugs the manufacturer's
single-source drug in question for a period of at least 180 days.
The department shall lift the suspension upon execution of a contract
for that drug.  Consistent with the provisions of this section, the
department shall delete the Medi-Cal drug formulary specified in
paragraphs (b), (c), (d), and (e) of Section 59999 of Title 22 of the
California Code of Regulations.
   (2) On and after July 1, 1990, the director may retain a drug on
the Medi-Cal list of contract drugs even if no contract is executed
with a manufacturer, if the director determines that an essential
need exists for that drug, and there are no other drugs currently on
the formulary that meet that need.
   (3) The director may delete a drug from the list of contract drugs
if the director determines that the drug presents problems of safety
or misuse.  The director's decision as to safety shall be based upon
published medical literature, and the director's decision as to
misuse shall be based on published medical literature and claims data
supplied by the fiscal intermediary.
   (b) Any reference to the Medi-Cal drug formulary by statute or
regulation shall be construed as referring to the list of contract
drugs.
   (c) (1) Any drug in the process of being added to the formulary by
contract agreement pursuant to Section 14105.3, executed prior to
the effective date of this section, shall be added to the list of
contract drugs.
   (2) Contracts pursuant to Section 14105.3 executed prior to
January 1, 1991, shall be considered to be contracts executed
pursuant to Section 14105.33, and the department shall exempt the
drugs included in these contracts from the initial therapeutic
category review in which they would normally be considered.
   (3) Nothing in this section shall be construed to require the
department to discontinue negotiations into which it has entered with
any manufacturer as of the effective date of this section.
Contracts entered into as a result of these negotiations shall be
exempt from the initial therapeutic category review in which they
would normally be considered.
14105.37.  (a) The department shall notify each manufacturer of
drugs in therapeutic categories selected pursuant to Section 14105.33
of the provisions of Sections 14105.31 to 14105.42, inclusive.
   (b) If, within 30 days of notification, a manufacturer does not
enter into negotiations for a contract pursuant to those sections,
the department may suspend or delete from the list of contract drugs,
or refuse to consider for addition, drugs of that manufacturer in
the selected therapeutic categories.
   (c) If, after 120 days from the initial notification, a contract
is not executed for a drug currently on the list of contract drugs,
the department may suspend or delete the drug from the list of
contract drugs.
   (d) If, within 120 days from the initial notification, a contract
is executed for a drug currently on the list of contract drugs, the
department shall retain the drug on the list of contract drugs.
   (e) If, within 120 days from the date of the initial notification,
a contract is executed for a drug not currently on the list of
contract drugs, the department shall add the drug to the list of
contract drugs.
   (f) The department shall terminate all negotiations 120 days after
the initial notification.
   (g) The department may suspend or delete any drug from the list of
contract drugs at the expiration of the contract term or when the
contract between the department and the manufacturer of that drug is
terminated.
   (h) In the absence of a contract, the department may suspend or
delete any drug from the list of contract drugs.
   (i) Any drug suspended from the list of contract drugs pursuant to
this section or Section 14105.35 shall be subject to prior
authorization, as if that drug were not on the list of contract
drugs.
   (j) Any drug suspended from the list of contract drugs pursuant to
this section or Section 14105.35 may be deleted from the list of
contract drugs in accordance with Section 14105.38.
14105.38.  (a) (1) In the event the department determines a drug
should be deleted from the list of contract drugs, the department
shall conduct a public hearing, as provided in this section, to
receive comment on the impact of removing the drug.
   (2) (A) The department shall provide written notice 30 days prior
to the hearing.
   (B) The department shall send the notice required by this
subdivision to the manufacturer of the drug proposed to be deleted
and to organizations representing Medi-Cal beneficiaries.
   (b) (1) The hearing panel shall consist of the Chief, Medi-Cal
Drug Discount Program, who shall serve as chair, and the Medi-Cal
Contract Drug Advisory Committee.
   (2) The hearing shall be recorded and transcribed, and the
transcript available for public review.
   (3) Subsequent to hearing all public comment, and within 30 days
of the hearing, each panel member shall submit a recommendation
regarding deletion of the drug and the reason for the recommendation
to the director.
   (c) The director shall consider public comments provided at the
hearing and the recommendations of each panel member in determining
whether to delete the drug.
14105.39.  (a) (1) A manufacturer of a new single-source drug may
request inclusion of its drug on the list of contract drugs pursuant
to Section 14105.33 provided all of the following conditions are met:
   (A) The request is made within 12 months of approval for marketing
by the federal Food and Drug Administration.
   (B) The manufacturer agrees to negotiate a contract with the
department to provide the drug at the manufacturer's best price.
   (C) (i) The manufacturer provides the department with necessary
information, as specified by the department, in the request.
   (ii) Notwithstanding clause (i), either of the following may be
submitted by the manufacturer in lieu of the Summary Basis of
Approval prepared by the federal Food and Drug Administration for
that drug:
   (I) The federal Food and Drug Administration's approval or
approvable letter for the drug and federal Food and Drug
Administration's approved labeling.
   (II) The federal Food and Drug Administration's medical officers'
and pharmacologists' reviews and the federal Food and Drug
Administration's approved labeling.
   (D) The department had concluded contracting for the therapeutic
category in which the drug is included prior to approval of the drug
by the federal Food and Drug Administration.
   (2) Within 90 days from receipt of the request, the department
shall evaluate the request using the criteria identified in
subdivision (d), and shall submit the drug to the Medi-Cal Contract
Drug Advisory Committee.
   (b) Any petition for the addition to or deletion of a drug to the
Medi-Cal drug formulary submitted prior to July 31, 1990, shall be
deemed to be denied.  A manufacturer who has submitted a petition
deemed denied may request inclusion of that drug on the list of
contract drugs provided all of the following conditions are met:
   (1) The manufacturer agrees to negotiate for a contract with the
department to provide the drug at the manufacturer's best price.
   (2) The manufacturer provides the department with necessary
information, as specified by the department, in the request.
   (3) The manufacturer submits the request to the department prior
to October 1, 1990.
   (c) (1) To ensure that the health needs of Medi-Cal beneficiaries
are met consistent with the intent of this chapter, the department
shall, when evaluating a decision to execute a contract, and when
evaluating drugs for retention on, addition to, or deletion from, the
list of contract drugs, use all of the following criteria:
   (A) The safety of the drug.
   (B) The effectiveness of the drug.
   (C) The essential need for the drug.
   (D) The potential for misuse of the drug.
   (E) The cost of the drug.
   (2) The deficiency of a drug when measured by one of these
criteria may be sufficient to support a decision that the drug should
not be added or retained, or should be deleted from the list.
However, the superiority of a drug under one criterion may be
sufficient to warrant the addition or retention of the drug,
notwithstanding a deficiency in another criterion.
   (d) (1) A manufacturer of single-source drugs denied a contract
pursuant to this section or Section 14105.33 or 14105.37, may file an
appeal of that decision with the director within 30 calendar days of
the department's written decision.
   (2) Within 30 calendar days of the manufacturer's appeal, the
director shall request a recommendation regarding the appeal from the
Medi-Cal Contract Drug Advisory Committee.  The committee shall
provide its recommendation in writing, within 30 calendar days of the
director's request.
   (3) The director shall issue a final decision on the appeal within
30 calendar days of the recommendation.
   (e) Deletions made to the list of contract drugs, including those
made pursuant to Section 14105.37, shall become effective no sooner
than 30 days after publication of the changes in provider bulletins.
   (f) A manufacturer of a drug deleted from, or not added to, the
list of contract drugs may request inclusion of the drug on the list
of preferred prior authorization drugs that is hereby established as
a subset of the list of contract drugs.  To ensure that the health
needs of Medi-Cal beneficiaries are met, the department shall
evaluate the request pursuant to subdivision (c).  The department
shall give preference for prior authorization drugs based on the
medical need or continuing care of the beneficiary.  The department
may contract with manufacturers of drugs on the list of preferred
prior authorization drugs.  Contracts executed pursuant to this
subdivision are subject to Section 14105.33.
   (g) Changes made to the list of contract drugs under this or any
other section are exempt from the requirements of the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340), Chapter 4
(commencing with Section 11370), and Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code), and shall not be subject to the review and approval of the
Office of Administrative Law.
14105.395.  (a) The department may implement utilization controls
through the establishment of guidelines, protocols, algorithms, or
criteria for drugs, medical supplies, durable medical equipment, and
enteral formulae.  The department shall publish the guidelines,
protocols, algorithms, or criteria in the pharmacy and medical
provider manuals.
   (b) The department shall issue providers written notice of changes
pursuant to subdivision (a) at least 30 days prior to
implementation.
   (c) Changes made pursuant to this section are exempt from the
requirements of the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340), Chapter 4 (commencing with Section
11370), and Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code), and shall not be
subject to the review and approval of the Office of Administrative
Law.  The department shall consult with interested parties and
appropriate stakeholders in implementing this section with respect to
all of the following:
   (1) Notifying the provider representatives of the proposed change.
   (2) Scheduling at least one meeting to discuss the change.
   (3) Allowing for written input regarding the change.
   (4) Providing advance notice on the implementation and effective
date of the change.
14105.4.  (a) The director shall appoint a Medi-Cal Contract Drug
Advisory Committee for the purpose of providing scientific and
medical analysis on drugs contained on the list of contract drugs.
The duties of the committee shall be as follows:
   (1) To review drugs in the Medi-Cal list of contract drugs and
make written recommendations to the director as to the addition of
any drug or the deletion of any drug from the list.  These
recommendations shall be in accordance with subdivision (c) of
Section 14105.39.
   (2) To review and report in writing to the director as to the
comparative therapeutic effect of drugs in accordance with Section
14053.5.
   (3) To prepare a fair, impartial, and independent recommendation
in writing, regarding appeals from manufacturers made pursuant to
subdivision (d) of Section 14105.39.
   (b) The committee shall consist of at least one representative
from each of the following groups:
   (1) Physicians.
   (2) Pharmacists.
   (3) Schools of pharmacy or pharmacologists.
   (4) Medi-Cal beneficiaries.
   (c) Members of the committee shall be reimbursed for necessary
travel and other expenses incurred in the performance of official
committee duties.
   (d) In order to provide sufficient scientific information and
analysis in the therapeutic categories under review, the director may
replace a representative if required for specific expertise.
   (e) The director shall notify the committee of the decisions made
on the recommendations.
14105.405.  (a) A Medi-Cal beneficiary, within 90 days of receipt of
the director's notice to beneficiaries pursuant to subdivision (i)
of Section 14105.33, informing them of the decision to delete or
suspend a drug from the list of contract drugs, may request a fair
hearing pursuant to Chapter 7 (commencing with Section 10950) of Part
2.
   (b) Any beneficiary filing a fair hearing request regarding the
deletion or suspension of a drug from the list of contract drugs
shall be granted a treatment authorization request for that drug
until a final decision is adopted by the director.  Should the
beneficiary seek judicial review of the director's decision, a
treatment authorization request shall be granted for that drug until
a final decision is issued by the court.
   (c) (1) Any Medi-Cal beneficiary, within one year of the director'
s decision pursuant to Section 10959, may file a petition with the
superior court, under the provisions of Section 1094.5 of the Code of
Civil Procedure, praying for a review of both the legal and factual
basis for the director's decision.
   (2) The director shall be the sole respondent in these
proceedings.
   (d) Any Medi-Cal beneficiary injured as a result of being denied a
drug which is determined to be medically necessary may sue for
injunctive or declaratory relief to review the director's decision to
delete or suspend a drug from the list of contract drugs.
14105.406.  The director shall, in considering suspension or
deletion of drugs from the list of contract drugs, ensure that the
department has the ability to process drug treatment authorization
requests (TARs) without substantial degradation of the level of
service, including response time, to providers which was in effect
July 1, 1990.
   In considering suspension or deletion of drugs, the director shall
seek the advice of the Chief of the Field Services Branch and the
Medi-Cal Contract Drug Advisory Committee.
   If the treatment authorization request reports provided in
subdivision (b) of Section 14105.42 indicate a substantial
degradation in the level of service, including response time, for
processing TARs, the director shall, within 60 days, hold a public
hearing on the functioning of the TAR system.
   Subsequent to the hearing, the director shall consult with at
least two members of each group represented on the Medi-Cal Contract
Drug Advisory Committee as provided in subdivision (b) of Section
14105.4 and take appropriate action to remedy the problem areas
discussed in the report and in the public hearing.
   Based upon the information gathered as a result of the reports and
public hearing referred to above, and in consultation with the
Medi-Cal Contract Drug Advisory Committee, the director may add drugs
which previously had been suspended or deleted to the list of
contract drugs.
14105.41.  Moneys accruing to the department from contracts executed
pursuant to Section 14105.33 shall be deposited in the Health Care
Deposit Fund, and shall be subject to appropriation by the
Legislature.
14105.42.  (a) The department shall report to the Legislature after
the first three major therapeutic categories have been reviewed and
contracts executed.  The report shall include the estimated savings,
number of manufacturers entering negotiations, number of contracts
executed, number of drugs added and deleted, and impact on Medi-Cal
beneficiaries and providers.
   (b) The department shall report to the Legislature, through the
annual budget process, on the cost-effectiveness of contracts
executed pursuant to Section 14105.33.
14105.425.  The provisions of Sections 14105.4 to 14105.41,
inclusive, and Section 14105.65 shall not preclude the department
from taking emergency regulatory action as it deems appropriate.
   This section shall become operative on January 1, 1997.
14105.43.  (a) (1) Notwithstanding other provisions of this chapter,
any drug which is approved by the federal Food and Drug
Administration for use in the treatment of acquired immune deficiency
syndrome (AIDS) or an AIDS-related condition shall be deemed to be
approved for addition to the Medi-Cal list of contract drugs only for
the purpose of treating AIDS or an AIDS-related condition, for the
period prior to the completion of the procedures established pursuant
to Section 14105.33.
   (2) (A) In addition to any drug that is deemed to be approved
pursuant to paragraph (1), any drug that meets any of the following
criteria shall be a Medi-Cal benefit, subject to utilization
controls:
   (i) Any vaccine to protect against human immunodeficiency virus
(HIV) infection.
   (ii) Any antiviral agent, immune modulator, or other agent to be
administered to persons who have been infected with human
immunodeficiency virus to counteract the effects of that infection.
   (iii) Any drug or biologic used to treat opportunistic infections
associated with acquired immune deficiency syndrome, that have been
found to be medically accepted indications and that has either been
approved by the federal Food and Drug Administration or recognized
for that use in one of the following:
   (I) The American Medical Association Drug Evaluations.
   (II) The United States Pharmacopoeia Dispensing Information.
   (III) Two articles from peer reviewed medical journals that
present data supporting the proposed use or uses as generally safe
and effective.
   (iv) Any drug or biologic used to treat the chemotherapy-induced
suppression of the human immune system resulting from the treatment
of acquired immune deficiency syndrome.
   (3) The department shall add any drug deemed to be approved
pursuant to paragraph (1) to the Medi-Cal list of contract drugs or
allow the provision of the drug as a Medi-Cal benefit, subject to
utilization controls, pursuant to paragraph (2), only if the
manufacturer of the drug has executed a contract with the Centers for
Medicare and Medicaid Services which provides for rebates in
accordance with Section 1396r-8 of Title 42 of the United States
Code.
   (b) Any drug deemed to be approved pursuant to paragraph (1) of
subdivision (a) shall be immediately added to the Medi-Cal list of
contract drugs, and shall be exempt from the contract requirements of
Section 14105.33.
   (c) If it is determined pursuant to subdivision (c) of Section
14105.39 that a drug to which subdivision (a) applies should not be
placed on the Medi-Cal list of contract drugs, that drug shall no
longer be deemed to be approved for addition to the list of contract
drugs pursuant to subdivision (a).
14105.435.  (a) Within 60 days of the approval of a drug in
accordance with subdivision (a) of Section 14105.43, the department
shall assign to that drug a reimbursement code, and provide notice to
providers that the drug is on the Medi-Cal list of contract drugs.
   (b) In the event that a manufacturer has not notified the
department in writing of the approval of a drug by the United States
Food and Drug Administration for the treatment of acquired immune
deficiency syndrome (AIDS) or an AIDS-related condition within 15
days of that approval, the department shall be granted an additional
30 days to comply with subdivision (a).  Written notification from
the drug manufacturer shall include a copy of the United States Food
and Drug Administration approval letter and the official labeling for
the drug.
14105.436.  (a) Effective July 1, 2002, all pharmaceutical
manufacturers shall provide to the department a state rebate, in
addition to rebates pursuant to other provisions of state or federal
law, for any drug products that have been added to the Medi-Cal list
of contract drugs pursuant to Section 14105.43 or 14133.2 and
reimbursed through the Medi-Cal outpatient fee-for-service drug
program. The state rebate shall be negotiated as necessary between
the department and the pharmaceutical manufacturer. The negotiations
shall take into account offers such as rebates, discounts, disease
management programs, and other cost savings offerings and shall be
retroactive to July 1, 2002.
   (b) The department may use existing administrative mechanisms for
any drug for which the department does not obtain a rebate pursuant
to subdivision (a). The department may only use those mechanisms in
the event that, by February 1, 2003, the manufacturer refuses to
provide the additional rebate.
   (c) In no event shall a beneficiary be denied continued use of a
drug that is part of a prescribed therapy and that is the subject of
an administrative mechanism pursuant to subdivision (b) until the
prescribed therapy is no longer prescribed.
14105.44.  (a) The department shall establish an expedited review
process to examine the effectiveness of investigational drugs and
investigational services, and their eligibility for Medi-Cal
reimbursement.
   (b) The department shall adopt emergency regulations pursuant to
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 3 of the Government Code to implement subdivision (a).  The
adoption of the regulations shall be deemed to be an emergency and
necessary for the immediate preservation of the public peace, health
or safety.  Notwithstanding the provisions of Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code, emergency regulations adopted by the department in
order to implement subdivision (b) shall not be subject to the review
and approval of the Office of Administrative Law.  These regulations
shall become effective immediately upon filing with the Secretary of
State.
14105.45.  (a) For purposes of this section, the following
definitions shall apply:
   (1) "Average sales price" means, of a drug or biological, the
sales price for a National Drug Code for a calendar quarter for a
manufacturer for a unit, calculated as follows:
   (A) The manufacturer's sales to all purchasers, excluding sales
exempt under subparagraph (B), of a drug or biological in the United
States in the calendar quarter, divided by the total number of the
units of that drug or biological sold by the manufacturer in that
calendar quarter.
   (B) In calculating the manufacturer's average sales price, the
following sales shall be excluded:
   (i) Sales exempt from inclusion in the determination of "best
price" under Section 1927(c)(1)(C)(i) of the Social Security Act (42
U.S.C. Sec.  1396r-8(c)(1)(C)(i)).
   (ii) Any other sales as the Secretary of the United States
Department of Health and Human Services identifies as sales to an
entity that are merely nominal in amount, as applied for purposes of
Section 1927(c)(1)(C)(ii)(III) of the Social Security Act (42 U.S.C.
Sec. 1396r-8(c)(1)(C)(ii)(III)), except as the secretary may
otherwise provide.
   (C) In calculating the manufacturer's average sales price, the
price shall include volume discounts, prompt pay discounts, cash
discounts, free goods that are contingent on any purchase
requirement, chargebacks, and rebates, other than rebates under
Section 1927 of the Social Security Act (42 U.S.C. Sec. 1396r-8).
After 2004, the secretary may include in the manufacturer's average
sales price other price concessions, which may be based on
recommendations of the Inspector General of the United States
Department of Health and Human Services, that would result in a
reduction of the cost to the purchaser.
   (D) In the case of a drug or biological during an initial period,
not to exceed a full calendar quarter, in which data on the prices
for sales for the drug or biological are not sufficiently available
from the manufacturer to compute an average sales price for the drug
or biological, the department may determine the amount payable under
this section for the drug or biological based on the wholesale
selling price.
   (2) "Average wholesale price" means the price for a drug product
listed in the department's primary price reference source.
   (3) "Direct price" means the price for a drug product purchased by
a pharmacy directly from a drug manufacturer listed in the
department's primary reference source.
   (4) "Estimated acquisition cost" means the department's best
estimate of the price generally and currently paid by providers for a
drug product sold by a particular manufacturer or principal labeler
in a standard package.
   (5) "Federal upper limit" means the maximum per unit reimbursement
when established by the Centers for Medicare and Medicaid Services
and published by the department in Medi-Cal pharmacy provider
bulletins and manuals.
   (6) "Generically equivalent drugs" means drug products with the
same active chemical ingredients of the same strength, quantity, and
dosage form, and of the same generic drug name, as determined by the
United States Adopted Names (USAN) and accepted by the federal Food
and Drug Administration (FDA), as those drug products having the same
chemical ingredients.
   (7) "Legend drug" means any drug whose labeling states "Caution:
Federal law prohibits dispensing without prescription," "Rx only," or
words of similar import.
   (8) "Maximum allowable ingredient cost" (MAIC) means the maximum
amount the department will reimburse Medi-Cal pharmacy providers for
generically equivalent drugs.
   (9) "Innovator multiple source drug," "noninnovator multiple
source drug," and "single source drug" have the same meaning as those
terms are defined in Section 1396r-8(k)(7) of Title 42 of the United
States Code.
   (10) "Nonlegend drug" means any drug whose labeling does not
contain the statement referenced in paragraph (7).
   (11) "Wholesale selling price" means the weighted (by unit volume)
mean price, including discounts and rebates, paid by a pharmacy to a
wholesale drug distributor.
   (12) "Selling price" means the price used in the establishment of
the estimated acquisition cost.  The department shall base the
selling price on the average sales price reported by manufacturers
pursuant to subdivision (c).  The selling price shall not be
considered confidential and shall be subject to disclosure under the
California Public Records Act (Chapter 3.5 (commencing with Section
6250) of Division 7 of Title 1 of the Government Code).
   (b) (1) Reimbursement to Medi-Cal pharmacy providers for legend
and nonlegend drugs shall consist of the estimated acquisition cost
of the drug plus a professional fee for dispensing.  The professional
fee shall be seven dollars and twenty-five cents ($7.25) per
dispensed prescription.  The professional fee for legend drugs
dispensed to a beneficiary residing in a skilled nursing facility or
intermediate care facility shall be eight dollars ($8) per dispensed
prescription.  For purposes of this paragraph "skilled nursing
facility" and "intermediate care facility" shall have the same
meaning as defined in Division 5 (commencing with Section 70001) of
Title 22 of the California Code of Regulations.
   (2) The department shall establish the estimated acquisition cost
of legend and nonlegend drugs as follows:
   (A) For single source and innovator multiple source drugs, the
estimated acquisition cost shall be equal to the lowest of the
average wholesale price minus 17 percent, the selling price, the
federal upper limit, or the MAIC.
   (B) For noninnovator multiple source drugs, the estimated
acquisition cost shall be equal to the lowest of the average
wholesale price minus 17 percent, the selling price, the federal
upper limit, or the MAIC.
   (C) The department shall not use the direct price paid by
pharmacies to drug manufacturers to establish estimated acquisition
cost.
   (3) For purposes of paragraph (2), the department shall establish
a list of MAICs for generically equivalent drugs, which shall be
published in pharmacy provider bulletins and manuals.  The department
shall update the list of MAICs and establish additional MAICs in
accordance with all of the following:
   (A) The department shall base the MAIC on the mean of the
wholesale selling prices of drugs generically equivalent to the
particular innovator drug that are available in California from
wholesale drug distributors selected by the department.
   (B) The department shall notify each selected wholesale drug
distributor, in writing, that the wholesale drug distributor has been
identified as a source of wholesale selling price information.
   (C) Wholesale drug distributors notified pursuant to subparagraph
(B) shall, no later than 30 days after the end of each month, and in
a format determined by the department, provide to the department the
wholesale selling price of all legend and nonlegend drugs sold to
pharmacies.
   (D) The department shall update MAICs at least every three months
and notify Medi-Cal providers at least 30 days prior to the effective
date of a MAIC.
   (E) The failure of a wholesaler to report wholesale selling prices
pursuant to subparagraph (C) of paragraph (3) of subdivision (b)
shall result in the director denying payment for all drugs supplied
by that wholesaler to Medi-Cal program beneficiaries.  The denial of
payment shall be effective no sooner than 30 days after notifying
pharmacy providers of the change through a provider bulletin.
   (F) All pricing information reported by a wholesale distributor to
the department pursuant to this section shall be considered
confidential and corporate proprietary information and shall not be
subject to disclosure under the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1
of the Government Code).
   (c) (1) Manufacturers and principal labelers of legend and
nonlegend drugs shall, no later than 30 days after the end of each
calendar quarter, and in a format determined by the department,
provide to the department the average sales price of each of the
manufacturer's legend and nonlegend drugs.
   (2) The department shall update the Medi-Cal claims processing
system to reflect the selling price of drugs not later than 62
calendar days after the end of each calendar quarter.
   (3) For manufacturers that fail to provide average selling price
information pursuant to this section, the department may subject
their drugs' availability to prior authorization.  The provisions of
this subdivision shall be included in contracts or contract
amendments entered into by the department pursuant to Section
14105.3, 14105.33, 14105.37, or 14105.39, and manufacturers shall
continue rebate payments according to the rebate provisions in the
contracts.  Nothing in this paragraph shall affect a Medi-Cal
beneficiary's ability to receive continuity of care for 60 days as
contained in subdivision (i) of Section 14105.33.
   (4) All pricing information reported by manufacturers and
principal labelers of legend and nonlegend drugs to the department
pursuant to this section shall be considered confidential and
corporate proprietary information and shall not be subject to
disclosure under the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code.
   (d) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may take the actions specified in this section by means of
a provider bulletin or notice, policy letter, or other similar
instructions, without taking regulatory action.
14105.47.  (a) (1) The department shall establish a list of medical
supplies.  The list shall specify utilization controls to be applied
to each medical supply product.
   (2) The utilization controls specified shall include, but not be
limited to, those provided by regulation of the department.  The
department shall repeal Section 59998 of Title 22 of the California
Code of Regulations, which establishes requirements for medical
supplies.
   (3) The department shall notify providers at least 30 days prior
to the effective date of a change in utilization controls.
   (b) (1) The department shall establish a list of maximum allowable
product costs (MAPCS) for medical supplies, which shall be published
in provider bulletins.
   (2) The department shall repeal the provisions of Section 51520.1
of Title 22 of the California Code of Regulations.
   (3) The department shall update existing MAPCS and establish
additional MAPCS in accordance with all of the following:
   (A) In establishing the MAPCS, the director shall assure that
eligible persons shall receive medical supply products that are
available to the public generally, without discrimination or
segregation based purely on economic disability.
   (B) All related medical supply products within each particular
medical supply type available for retail distribution shall be
reviewed by the department in consultation with representatives from
the California Association of Medical Product Suppliers and the
California Pharmacists Association.
   (C) The department shall base MAPCS on the mean of the wholesale
selling price of related medical supply products that are available
in California.  For purposes of this section, "wholesale selling
price" means the price, including discounts and rebates, paid by a
provider to a wholesaler, distributor, or manufacturer for a medical
supply product.
   (D) The department shall notify Medi-Cal providers at least 30
days prior to the effective date of MAPCS.
   (c) Notwithstanding the provisions of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of the Government Code,
actions under this section shall not be subject to the Administrative
Procedure Act or to the review and approval of the Office of
Administrative Law.
14105.48.  (a) The department shall establish a list of covered
services and maximum allowable reimbursement rates for durable
medical equipment as defined in Section 51160 of Title 22 of the
California Code of Regulations and the list shall be published in
provider manuals. The list shall specify utilization controls to be
applied to each type of durable medical equipment.
   (b) Reimbursement for durable medical equipment, except
wheelchairs, wheelchair accessories, and speech-generating devices
and related accessories, shall be the lesser of (1) the amount billed
pursuant to Section 51008.1 of Title 22 of the California Code of
Regulations, or (2) an amount that does not exceed 80 percent of the
lowest maximum allowance for California established by the federal
Medicare program for the same or similar item or service, or (3) the
guaranteed acquisition cost negotiated by means of the contracting
process provided for pursuant to Section 14105.3 plus a percentage
markup to be established by the department.
   (c) Reimbursement for wheelchairs, wheelchair accessories, and
speech-generating devices and related accessories shall be the lesser
of (1) the amount billed pursuant to Section 51008.1 of Title 22 of
the California Code of Regulations, or (2) an amount that does not
exceed 100 percent of the lowest maximum allowance for California
established by the federal Medicare program for the same or similar
item or service, or (3) the guaranteed acquisition cost negotiated by
means of the contracting process provided for pursuant to Section
14105.3 plus a percentage markup to be established by the department.
   (d) Reimbursement for all durable medical equipment billed to the
Medi-Cal program utilizing codes with no specified maximum allowable
rate shall be the lesser of (1) the amount billed pursuant to Section
51008.1 of Title 22 of the California Code of Regulations, or (2)
the guaranteed acquisition cost negotiated by means of the
contracting process provided for pursuant to Section 14105.3 plus a
percentage markup to be established by the department, or (3) the
actual acquisition cost plus a markup to be established by the
department, or (4) the manufacturer's suggested retail purchase price
reduced by a percentage discount not to exceed 20 percent, or (5) a
price established through targeted product-specific cost containment
provisions developed with providers.
   (e) Reimbursement for all durable medical equipment supplies and
accessories billed to the Medi-Cal program shall be the lesser of (1)
the amount billed pursuant to Section 51008.1 of Title 22 of the
California Code of Regulations, or (2) the acquisition cost plus a 23
percent markup.
   (f) Any regulation in Division 3 of Title 22 of the California
Code of Regulations that contains provisions for reimbursement rates
for durable medical equipment shall be amended or repealed effective
for dates of service on or after the date of the act adding this
section.
   (g) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of the Government Code, actions under this
section shall not be subject to the Administrative Procedure Act or
to the review and approval of the Office of Administrative Law.
   (h) The department shall consult with interested parties and
appropriate stakeholders in implementing this section with respect to
all of the following:
   (1) Notifying the provider representatives of the proposed change.
   (2) Scheduling at least one meeting to discuss the change.
   (3) Allowing for written input regarding the change.
   (4) Providing advance notice on the implementation and effective
date of the change.
   (i) The department may require providers of durable medical
equipment to appeal Medicare denials for dually eligible
beneficiaries as a condition of Medi-Cal payment.
14105.485.  (a) Commencing July 1, 2006, any provider of custom
rehabilitation equipment and custom rehabilitation technology
services to a Medi-Cal beneficiary shall have on staff, either as an
employee or independent contractor, or have a contractual
relationship with, a qualified rehabilitation professional who was
directly involved in determining the specific custom rehabilitation
equipment needs of the patient and was directly involved with, or
closely supervised, the final fitting and delivery of the custom
rehabilitation equipment.
   (b) Commencing January 1, 2006, a medical provider shall conduct a
physical examination of an individual before prescribing a motorized
wheelchair or scooter for a Medi-Cal beneficiary. The medical
provider shall complete a certificate of medical necessity, developed
by the department, that documents the medical condition that
necessitates the motorized wheelchair or scooter, and verifies that
the patient is capable of using the wheelchair or scooter safely.
   (c) For purposes of this section, the following definitions apply:
   (1) "Custom rehabilitation equipment" means any item, piece of
equipment, or product system, whether modified or customized, that is
used to increase, maintain, or improve functional capabilities with
respect to mobility and reduce anatomical degradation and
complications of individuals with disabilities. Custom rehabilitation
equipment includes, but is not limited to, nonstandard manual
wheelchairs, power wheelchairs and seating systems, power scooters
that are specially configured, ordered, and measured based on patient
height, weight, and disability, specialized wheelchair electronics
and cushions, custom bath equipment, standers, gait trainers, and
specialized strollers.
   (2) "Custom rehabilitation technology services" means the
application of enabling technology systems designed and assembled to
meet the needs of a specific person experiencing any permanent or
long-term loss or abnormality of physical or anatomical structure or
function with respect to mobility. These services include, but are
not limited to, the evaluation of the needs of a patient with a
disability, including an assessment of the patient for the purpose of
ensuring that the proposed equipment is appropriate, the
documentation of medical necessity, the selection, fit,
customization, maintenance, assembly, repair, replacement, pick up
and delivery, and testing of equipment and parts, and the training of
an assistant caregiver and of a patient who will use the equipment
or individuals who will assist the client in using the equipment.
   (3) "Qualified rehabilitation professional" means an individual to
whom any one of the following applies:
   (A) The individual is a physical therapist licensed pursuant to
the Business and Professions Code, occupational therapist licensed
pursuant to the Business and Professions Code, or other qualified
health care professional approved by the department.
   (B) The individual is a registered member in good standing of the
National Registry of Rehabilitation Technology Suppliers (NRRTS), or
other credentialing organization recognized by the department.
   (C) The individual has successfully passed one of the following
credentialing examinations administered by the Rehabilitation
Engineering and Assistive Technology Society of North America
(RESNA):
   (i) The Assistive Technology Supplier examination.
    (ii) The Assistive Technology Practitioner examination.
    (iii) The Rehabilitation Engineering Technologist examination.
14105.49.  (a) (1) The department shall establish a list of hearing
aids and hearing aid accessories and determine the maximum allowable
product cost for each hearing aid product provided as a benefit under
the Medi-Cal program.
   (2) The list established pursuant to paragraph (1) shall be
published in provider manuals.  Notwithstanding the rulemaking
provisions of the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of the
Government Code), actions of the department under this section shall
not be subject to the Administrative Procedure Act or to the review
and approval of the Office of Administrative Law.
   (b) The maximum reimbursement rate for hearing aids and hearing
aid accessories may not exceed the lesser of the following:
   (1) The billed amount.
   (2) The cost of the item, plus a percentage markup as determined
by the department.
   (3) The rate established by the department's contracting program.
14105.5.  The director or prepaid health plans shall make no payment
for services rendered prior to January 1, 1977, to any health
facility that secures a license under the provisions of Chapter 2
(commencing with Section 1250) of Division 2 of the Health and Safety
Code after July 1, 1970, covering a new facility or additional bed
capacity or the conversion of existing bed capacity to a different
license category, unless the licensee received a favorable final
decision by the voluntary area health planning agency in the area,
the consumer members of a voluntary area health planning agency
acting as an appeals body or the Advisory Health Council pursuant to
Sections 127155 to 127235, inclusive, of the Health and Safety Code;
or unless the licensee had filed an application for a license prior
to January 1, 1970, and the application met all then-existing
requirements and regulations of the appropriate state agency at the
time of application including, at least, preliminary submission of
plans, and if the licensee commences construction of his or her
project prior to July 1, 1971, and if the licensee has on file with
the department a notarized affidavit from the building department
having jurisdiction indicating that substantial progress on the
approved project was attained by January 1, 1973, and the licensee
has on file with the county recorder and department a valid notice of
construction completion indicating January 1, 1974, as the
completion date; except that the department shall extend the
foregoing dates by no more than a total of two years in the case of
projects where delay has resulted from the death of the original
applicant, and shall extend the foregoing dates by no more than a
total of one year in the case of projects where other good cause has
been shown why the extension should be granted.  The exception
provided for in the preceding sentence with respect to applications
filed prior to January 1, 1970, except for transfers executed before
November 30, 1970, or after July 1, 1971, shall not apply to
transferees of the applications of the original applicants.
   Voluntary area health planning agencies may extend, until July 1,
1972, the date upon which applicants, qualifying under the exception
in this section, shall commence construction, if the voluntary area
health planning agencies declare that good cause has been shown why
the extension should be granted, provided that an applicant applying
for the extension had, prior to January 1, 1970, received approval of
a health planning association in the county wherein the applicant is
located.  Applicants receiving extension of the construction
commencement date shall have on file with the department a notarized
affidavit from the building department having jurisdiction indicating
that substantial progress on the approved project was attained by
January 1, 1974, and have on file with the county recorder and
department a valid notice of construction completion indicating
January 1, 1975, as the completion date; except that the department
shall extend each of the foregoing dates by no more than a total of
one year in the case of projects where good cause has been shown why
the extension should be granted.
   (a) For the purposes of this section, "substantial progress" is
defined and evidenced as follows:
   (1) For structures of three or fewer stories, completion of the
foundations and footings; the structural frame; the mechanical,
electrical, and plumbing rough-in; the rough flooring; the exterior
walls and windows; and the finished roof.
   (2) For structures of more than three stories, a contractor's
schedule of work shall be filed with the department by January 1,
1973.  Every three months thereafter, until completion, evidence
shall be submitted to the department that construction is progressing
on that schedule.
   (b) For the purposes of this section, construction of a project is
deemed commenced on the date the applicant was so notified by the
department, if so notified, or on the date the applicant has
completed not less than all of the following:
   (1) Submission to the appropriate state agency of a written
agreement executed between the applicant and a licensed general
contractor to construct and complete the facility within a designated
time schedule in accordance with final architectural plans and
specifications approved by the agency.
   (2) Obtaining the initial permits or approval for commencing work
on the project that is customarily issued for projects of the scope
of applicant by the governmental agency having jurisdiction over the
construction.
   (3) Completion of construction work on the project to such a
degree as to justify and require a progress payment by the applicant
to the general contractor under terms of the construction agreement.
14105.51.  (a) The department shall establish "capped rental"
reimbursement for specific items of durable medical equipment.  Items
in this category shall be reimbursed on a monthly rental basis not
to exceed a period of continuous use of 10 months.  After 10 months
of rental have been paid, the provider shall continue to provide the
item without charge, except for maintenance and servicing fees, until
the medical necessity ends or Medi-Cal coverage ceases.  Monthly
reimbursement for the rental of these specific items of durable
medical equipment may not exceed 80 percent of the lowest maximum
allowance for California established by the federal Medicare program
for the same or similar item or service.
   (b) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of the Government Code, actions under
subdivision (a) shall not be subject to the rulemaking provisions of
the Administrative Procedure Act or to the review and approval of the
Office of Administrative Law.
   (c) The department shall consult with interested parties and
appropriate stakeholders in determining which items will be subject
to capped rental, including doing all of the following:
   (1) Notifying provider representatives of the items that will be
subject to capped rental.
   (2) Scheduling at least one meeting to discuss the items.
   (3) Allowing for written input regarding the items.
   (4) Providing advance notice of the effective date on and after
which the items will be subject to capped rental.
14105.6.  No health facility licensed under the provisions of
Chapter 2 (commencing with Section 1250) of Division 2 of the Health
and Safety Code shall be entitled to receive, or shall receive, any
payment whatsoever from the director, or from any prepaid health
plan, for any services rendered to any Medi-Cal program beneficiary
if the health facility has commenced construction of a project after
January 1, 1977, and the health facility has failed to obtain a
certificate of need covering such project issued pursuant to Part 1.5
(commencing with Section 437) of Division 1 of the Health and Safety
Code.  Upon commencement of such a project, or as soon thereafter as
possible, the director or the prepaid health plan shall notify the
facility in writing of termination of all payments for any services
rendered in any portion of the facility after 30 days from the date
the notice is mailed.
   For the purposes of this section, a "project" shall mean any
project for which a certificate of need is required pursuant to Part
1.5 (commencing with Section 437) of Division 1 of the Health and
Safety Code.
14105.7.  (a) In order to fairly reimburse pharmacies for the
furnishing of prescription drugs to Medi-Cal beneficiaries, the
director shall update allowable drug product prices within seven days
of receiving notice of a drug product price change. Notice to the
director shall include, but not be limited to, publication of the
price change in the supplier's catalog or supplement or in nationally
distributed drug price reference guides.
   (b) No regulation reducing allowable drug product cost
reimbursement or removing a drug from the Medi-Cal list of contract
drugs shall be operative until at least 30 days after eligible
pharmacies have been mailed a notice of the reimbursement limitation
by the department or the fiscal intermediary.
   (c) The director shall limit the rate of payment for the
professional fee portion of prescription services rendered under this
chapter pursuant to Section 4064 of the Business and Professions
Code or Section 11201 of the Health and Safety Code and the
professional fee portion of prescription services rendered as a
refill immediately subsequent to such prescription to ensure that the
total professional fee paid for the two services does not exceed the
professional fee paid for the same prescription refill when provided
as a routine service.
14105.8.  (a) The department may enter into contracts with
manufacturers of enteral formulae that can be used as a therapeutic
regimen to prevent serious disability or death in patients with
medically diagnosed conditions that preclude the full use of regular
food, on a bid or nonbid basis.  The department shall maintain a list
of those products for which contracts have been executed.  Rebates
created by these contracts shall be managed through the department's
drug rebate accounting system.
   (b) For the purpose of this benefit, enteral formulae is defined
as those products that have been classified by the Statistical
Analysis Durable Medical Equipment Regional Carrier (SADMERC) into
one of the product classifications used for reimbursement in the
Medicare program.  SADMERC classified enteral formulae, Category V:
modular components do not meet the test as a replacement for regular
food pursuant to subdivision (a) and shall not be a benefit of the
Medi-Cal program, except that the Medi-Cal program may deem a SADMERC
Category V classified enteral formulae as a benefit when the
department determines that the use of the product is neither
investigational nor experimental when used as a therapeutic regimen
to prevent serious disability or death in patients with medically
diagnosed conditions.  Infant formulas and enteral formulae covered
by the Woman, Infant and Children (WIC) program for individuals
enrolled in WIC shall not be a benefit of the Medi-Cal program.
   (c) In order that Medi-Cal beneficiaries may have access to a
comprehensive range of enteral formulae pursuant to subdivision (a),
the department shall ensure that there is representation on the list
of both general use and specialized use enteral formulae.  The
Medi-Cal program may deem an enteral formulae not classified by
SADMERC as a benefit if it meets the medical need of patients with
medically diagnosed conditions that preclude the full use of regular
food.
   (d) In order to achieve maximum cost savings, the Legislature
declares that an expedited process for contracts under this section
is necessary.  Therefore, contracts entered into on a nonbid basis
shall be exempt from Chapter 2 (commencing with Section 10290) of
Part 2 of Division 2 of the Public Contract Code.
   (e) (1) A manufacturer of an enteral formulae denied a contract
pursuant to this section may file an appeal of that decision with the
director within 30 calendar days of the department's written
decision.
   (2) The director shall issue a final decision on the appeal within
60 calendar days of the postmark date of the appeal.
   (f) Deletions made to the list of enteral formulae shall become
effective no sooner than 30 days after publication of the changes in
provider bulletins.
   (g) Changes made to the list of enteral formulae under this or any
other section are exempt from the requirements of the Administrative
Procedure Act (Chapter 3.5 (commencing with Section 11340), Chapter
4 (commencing with Section 11370), and Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code), and shall not be subject to the review and approval of the
Office of Administrative Law.
   (h) In no event shall a beneficiary be denied continued use of an
enteral formulae, pursuant to subdivisions (b) and (j), that has been
deleted from the list of enteral formulae.  To be eligible for
continuing care status under this subdivision, a beneficiary must be
taking the enteral formulae product when the product is deleted.
Additionally, the department shall have received a claim for the
enteral formulae product with a date of service that is within 100
days prior to the date the product was deleted.  A beneficiary shall
remain eligible for continuing care status provided that a claim is
submitted for the enteral formulae product in question at least every
100 days and the date of service of the claim is within 100 days of
the date of service of the last claim submitted for the same enteral
formulae product.
   (i) The department shall provide individual notice to Medi-Cal
beneficiaries at least 60 calendar days prior to the effective date
of the deletion of any enteral formulae from the list of enteral
formulae.  The notice shall include a description of the beneficiary'
s right to a fair hearing and shall encourage the beneficiary to
consult a physician to determine if an appropriate substitute enteral
formulae is available from Medi-Cal.
   (j) Enteral formulae authorized pursuant to subdivision (a) shall
be available only through prior authorization.  The department may
designate those enteral formulae that are without a contract as not
being a benefit of the Medi-Cal program, except in the case of
continuing care as described in subdivision (h) of this section.
   (k) Contracts executed pursuant to this section shall be
confidential and shall be exempt from disclosure under the California
Public Records Act (Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code).
   (l) (1) Manufacturers shall calculate and pay interest on late or
unpaid rebates.
   (2) Interest pursuant to paragraph (1) shall begin accruing 38
calendar days from the date of mailing of the quarterly invoice,
including supporting utilization data sent to the manufacturer.
Interest shall continue to accrue until the date of mailing of the
manufacturer's payment.
   (3) Interest rates and calculations pursuant to paragraph (1)
shall be identical and shall be equal to the drug rebate interest
rates as determined by the federal Centers for Medicare and Medicaid
Services' Medicaid Drug Rebate Program Releases or regulations.
   (4) If the date of mailing of a state rebate payment is 69 days of
more from the date of mailing of the invoice, including supporting
utilization data sent to the manufacturer, the interest rate shall be
as specified in paragraph (3), however the interest rate shall be
increased by 10 percentage points.
   (m) The department may adopt emergency regulations to implement
this section in accordance with the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
14105.85.  Effective July 1, 2002, payment for enteral formulae
dispensed by a pharmacy provider shall be based on the estimated
acquisition cost for that product plus a percentage markup to be
determined by the department in consultation with provider
representatives from the California Association of Medical Product
Suppliers and the California Pharmacists Association.  The percentage
markup shall consider the costs of handling, storage, delivery, and
billing for those products.  Any changes to the percentage markup may
be implemented with 30-day notice to the provider community via a
provider bulletin or other specific notification to providers.
14105.86.  (a) For the purposes of this section, the following
definitions apply:
   (1) (A) "Average selling price" means the average unit price
charged by the manufacturer to wholesalers for drugs distributed to
the retail pharmacy class of trade, including sales to wholesalers,
pharmacies, physician offices, home health care providers, nursing
homes, pharmacy benefit managers, and distributors.
   (B) "Average selling price" excludes direct sales to hospitals,
health maintenance organizations, and wholesalers or distributors
when the drug is relabeled under the wholesaler's or distributor's
national drug code number.  It also excludes prices charged to the
Indian Health Service, the Department of Veterans Affairs, a state
veteran's home receiving funds under Subchapter V (commencing with
Section 1741) of Title 38 of the United States Code, the Department
of Defense, the Public Health Service, or a covered entity described
in Section 340B(a)(4) of the United States Public Health Service Act,
any price charged under the federal Supply Schedule of the General
Services Administration, any prices used under a state pharmaceutical
assistance program, or any depot prices and single award contract
prices, as defined by the secretary of any agency of the state or
federal government.
   (2) "Blood factors" means plasma protein therapies and their
recombinant analogs.  Blood factors include, but are not limited to,
all of the following:
   (A) Coagulation factors, including:
   (i) Factor VIII, nonrecombinant.
   (ii) Factor VIII, porcine.
   (iii) Factor VIII, recombinant.
   (iv) Factor IX, nonrecombinant.
   (v) Factor IX, complex.
   (vi) Factor IX, recombinant.
   (vii) Antithrombin III.
   (viii) Anti-inhibitor factor.
   (ix) Von Willebrand factor.
   (B) Immune Globulin Intravenous.
   (C) Alpha-1 Proteinase Inhibitor.
   (b) The reimbursement for blood factors shall be by national drug
code number and shall not exceed 120 percent of the average selling
price of the preceding quarter.
   (c) The average selling price for blood factors of manufacturers
or distributors that do not report an average selling price pursuant
to subdivision (a) shall be identical to the average manufacturer's
price that the manufacturer or distributor reports to the federal
United States Centers for Medicare and Medicaid Services.  The
reporting of an average selling price that does not meet the
requirement of this subdivision shall result in that blood factor no
longer being considered a covered benefit.  This reporting shall be
done on the national drug code level.
   (d) The average selling price shall be based on the criteria in
subdivision (a) and reported to the department on a quarterly basis.
   (e) Changes made to the list of covered blood factors under this
or any other section shall be exempt from the requirements of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340), Chapter 4 (commencing with Section 11370), and Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code), and shall not be subject to the review and
approval of the Office of Administrative Law.
14105.95.  (a) Each eligible facility, as described in subdivision
(b), may, in addition to the rate of payment that the facility would
otherwise receive for adult day health services, receive supplemental
Medi-Cal reimbursement to the extent provided in this section.
   (b) A facility shall be eligible for supplemental reimbursement
only if the facility has all of the following characteristics
continuously during a state fiscal year commencing with the 2002
fiscal year, and thereafter:
   (1) Provides services to Medi-Cal beneficiaries.
   (2) Is an adult day health center, licensed pursuant to Chapter
3.3 (commencing with Section 1570) of Division 2 of the Health and
Safety Code.
   (3) Is owned or operated by a county, city, city and county, or
health care district organized pursuant to Chapter 1 (commencing with
Section 32000) of Division 23 of the Health and Safety Code.
   (c) An eligible facility's supplemental reimbursement pursuant to
this section shall be calculated and paid as follows:
   (1) The supplemental reimbursement to an eligible facility, as
described in subdivision (b), shall be equal to the amount of federal
financial participation received as a result of the claims submitted
pursuant to paragraph (2) of subdivision (g).
   (2) In no instance shall the amount certified pursuant to
paragraph (1) of subdivision (e), when combined with the amount
received from all other sources of reimbursement from the Medi-Cal
program, exceed 100 percent of projected costs, as determined
pursuant to the Medi-Cal State Plan, for adult day health services at
each facility.
   (3) The supplemental Medi-Cal reimbursement provided by this
section shall be distributed under a payment methodology based on
adult day health services provided to Medi-Cal patients at the
eligible facility, either on a per-visit basis or any other federally
permissible basis.  The department shall seek approval from the
federal Centers for Medicare and Medicaid Services for the payment
methodology to be utilized, and may not make any payment pursuant to
this section prior to obtaining that approval.
   (d) (1) It is the Legislature's intent in enacting this section to
provide the supplemental reimbursement described in this section
without any expenditure from the General Fund.
   (2) The state share of the supplemental reimbursement submitted to
the federal Centers for Medicare and Medicaid Services for purposes
of claiming federal financial participation shall be paid only with
funds from the governmental entities described in paragraph (3) of
subdivision (b) and certified to the state as provided in subdivision
(e).
   (e) A particular governmental entity described in paragraph (3) of
subdivision (b), on behalf of any eligible facility owned or
operated by the entity shall do all of the following:
   (1) Certify, in conformity with the requirements of Section 433.51
of Title 42 of the Code of Federal Regulations, that the claimed
expenditures for outpatient services are eligible for federal
financial participation.
   (2) Provide evidence supporting the certification as specified by
the department.
   (3) Submit data as specified by the department to determine the
appropriate amounts to claim as expenditures qualifying for federal
financial participation.
   (4) Keep, maintain, and have readily retrievable, any records
specified by the department to fully disclose reimbursement amounts
to which the eligible facility is entitled, and any other records
required by the federal Centers for Medicare and Medicaid Services.
   (f) An eligible facility as described in subdivision (b), as a
condition of receiving supplemental reimbursement under this section,
shall enter into, and maintain, a contract with the department for
the purpose of implementing this section, and to reimburse the
department for its administrative costs of implementing this section.
   (g) (1) The department shall promptly seek any necessary federal
approvals for the implementation of this section.  If necessary to
obtain federal approval, the department may limit the program to
those costs that are allowable expenditures under Title XIX of the
federal Social Security Act (Subchapter 19 (commencing with Section
1396) of Chapter 7 of Title 42 of the United States Code).  If
federal approval is not obtained for implementation of this section,
this section shall become inoperative.
   (2) The department shall submit claims for federal financial
participation for the expenditures for the services described in
subdivision (e) that are allowable expenditures under federal law.
   (3) The department shall, on an annual basis, submit any necessary
materials to the federal government to provide assurances that
claims for federal financial participation will include only those
expenditures that are allowable under federal law.
   (h) All funds expended pursuant to this section are subject to
review and audit by the department.
   (i) This section shall become inoperative in the event, and on the
date, of a final judicial determination by any court of appellate
jurisdiction or a final determination by the administrator of the
federal Centers for Medicare and Medicaid Services that the
supplemental reimbursement provided in this section must be made to
any facility not described in this section.
14105.96.  (a) Each eligible facility, as described in subdivision
(b), may, in addition to the rate of payment that the facility would
otherwise receive for Medi-Cal outpatient services, receive
supplemental Medi-Cal reimbursement to the extent provided in this
section.
   (b) A facility shall be eligible for supplemental reimbursement
only if the facility has all of the following characteristics
continuously during a state fiscal year commencing with the 2002
fiscal year, and thereafter:
   (1) Provides services to Medi-Cal beneficiaries.
   (2) Is an acute care hospital providing outpatient hospital
services.  For purposes of this paragraph, "acute care hospital"
means the facilities described by subdivision (a) or (b), or both, of
Section 1250 of the Health and Safety Code.
   (3) Is owned or operated by a county, city, city and county, the
University of California, or health care district organized pursuant
to Division 23 (commencing with Section 32000) of the Health and
Safety Code.
   (c) An eligible facility's supplemental reimbursement pursuant to
this section shall be calculated and paid as follows:
   (1) The supplemental reimbursement to an eligible facility, as
described in subdivision (b), shall be equal to the amount of federal
financial participation received as a result of the claims submitted
pursuant to paragraph (2) of subdivision (g).
   (2) In no instance shall the amount certified pursuant to
paragraph (1) of subdivision (e), when combined with the amount
received from all other sources of reimbursement from the Medi-Cal
program, exceed 100 percent of projected costs, as determined
pursuant to the Medi-Cal State Plan, for outpatient services at each
facility.
   (3) The supplemental Medi-Cal reimbursement provided by this
section shall be distributed under a payment methodology based on
outpatient services provided to Medi-Cal patients at the eligible
facility, either on a per-visit basis, per-procedure basis, or any
other federally permissible basis.  The department shall seek
approval from the federal Centers for Medicare and Medicaid Services
for the payment methodology to be utilized, and may not make any
payment pursuant to this section prior to obtaining that approval.
   (d) (1) It is the Legislature's intent in enacting this section to
provide the supplemental reimbursement described in this section
without any expenditure from the General Fund.
   (2) The state share of the supplemental reimbursement submitted to
the federal Centers for Medicare and Medicaid Services for purposes
of claiming federal financial participation shall be paid only with
funds from the governmental entities described in paragraph (3) of
subdivision (b) and certified to the state as provided in subdivision
(e).
   (e) A particular governmental entity, described in paragraph (3)
of subdivision (b), on behalf of any eligible facility owned or
operated by the entity, shall do all of the following:
   (1) Certify, in conformity with the requirements of Section 433.51
of Title 42 of the Code of Federal Regulations, that the claimed
expenditures for the outpatient services are eligible for federal
financial participation.
   (2) Provide evidence supporting the certification as specified by
the department.
   (3) Submit data as specified by the department to determine the
appropriate amounts to claim as expenditures qualifying for federal
financial participation.
   (4) Keep, maintain, and have readily retrievable, any records
specified by the department to fully disclose reimbursement amounts
to which the eligible facility is entitled, and any other records
required by the federal Centers for Medicare and Medicaid Services.
   (f) An eligible facility as described in subdivision (b), as a
condition of receiving supplemental reimbursement under this section,
shall enter into and maintain a contract with the department for the
purpose of implementing this section, and to reimburse the
department for its administrative costs of operating this program.
   (g) (1) The department shall promptly seek any necessary federal
approvals for the implementation of this section.  If necessary to
obtain federal approval, the department may limit the program to
those costs that are allowable expenditures under Title XIX of the
federal Social Security Act (Subchapter 19 (commencing with Section
1396) of Chapter 7 of Title 42 of the United States Code).  If
federal approval is not obtained for implementation of this section,
this section shall become inoperative.
   (2) The department shall submit claims for federal financial
participation for the expenditures for the services described in
subdivision (e) that are allowable expenditures under federal law.
   (3) The department shall, on an annual basis, submit any necessary
materials to the federal government to provide assurances that
claims for federal financial participation will include only those
expenditures that are allowable under federal law.
   (h) This section shall become inoperative in the event, and on the
date, of a final judicial determination by any court of appellate
jurisdiction or a final determination by the administrator of the
federal Centers for Medicare and Medicaid Services that the
supplemental reimbursement provided in this section must be made to
any facility not described in this section.
14105.97.  (a) The department shall annually develop an outpatient
disproportionate share factor for each hospital in California that
receives Medi-Cal payments for outpatient services.  That factor
shall be the ratio of the sum of Medi-Cal gross outpatient revenue,
county indigent programs gross outpatient revenue, and the outpatient
component of other charity deductions from revenue, to total gross
outpatient revenue.  A hospital with a disproportionate factor that
exceeds the mean factor for all hospitals in the state shall receive
supplemental Medi-Cal payments in direct proportion to the level of
the hospital's disproportionate factor. This subdivision shall only
apply to payments for services provided by disproportionate share
hospitals on or after July 1, 1993.
   (b) Notwithstanding subdivision (a), the outpatient
disproportionate share factors for children's hospitals shall be no
less than the amounts that would have been established had the
disproportionate factors for all hospitals been computed as the ratio
of the sum of Medi-Cal gross outpatient revenue, the outpatient
component of county indigent programs contractual adjustments, and
the outpatient component of other charity deductions from revenue, to
total gross outpatient revenue.
   (c) The outpatient component of county indigent programs
contractual adjustments shall be determined by calculating the ratio
of county indigent programs gross outpatient revenue to county
indigent programs gross total revenue, by multiplying that ratio by
county indigent programs contractual adjustments.  The outpatient
component of other charity deductions from revenue shall be
determined by calculating the ratio of other payors gross outpatient
revenue to other payors gross total revenue, and multiplying that
ratio by the sum of other charity deductions from revenue and
teaching allowances for University of California teaching hospitals.
   (d) For purposes of computing the outpatient disproportionate
share factors, the department shall use the data from the Office of
Statewide Health Planning and Development quarterly financial and
utilization reports, as adjusted by the office for the calendar year
preceding the state fiscal year in which the disproportionate factors
will be effective.  The department shall use the data existing on
the office's statewide data base as of April 15 of each year.  For
the purposes of this section, a hospital shall submit to the office
by April 1 of each year any adjustments to its quarterly reports for
the preceding calendar year.  The office shall make its statewide
data base, as adjusted, available to the department by April 20 of
each year.
   (e) Augmentation rates shall be applied to hospitals with all
inclusive rates at the point of final audit settlement and shall be
included in subsequent interim reimbursement rates.
   (f) (1) If the department deems it necessary to issue general
rules in order to implement, interpret, or make specific this section
or to establish procedures to implement this section, these rules
may be issued without complying with the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code) and shall remain in effect for a
period of 180 days.
   (2) Thereafter, any rules that are necessary to implement,
interpret, or make specific this section or that govern departmental
procedures shall be adopted in compliance with the Administrative
Procedure Act.
   (3) The adoption, pursuant to paragraph (1), of any emergency
regulations that are filed with the Office of Administrative Law
within one year of the effective date of this act shall be deemed to
be an emergency and necessary for the immediate preservation of the
public peace, health, or safety.
14105.98.  (a) The following definitions shall apply for purposes of
this section:
   (1) "Disproportionate share list" means an annual list of
disproportionate share hospitals that provide acute inpatient
services issued by the department for purposes of this section.
   (2) "Fund" means the Medi-Cal Inpatient Payment Adjustment Fund,
created pursuant to Section 14163.
   (3) "Eligible hospital" means a hospital included on a
disproportionate share list, which is eligible to receive payment
adjustments under this section with respect to a particular state
fiscal year.
   (4) "Hospital" means a health facility that is licensed pursuant
to Chapter 2 (commencing with Section 1250) of Division 2 of the
Health and Safety Code to provide acute inpatient hospital services,
and includes all components of the facility.
   (5) "Payment adjustment" or "payment adjustment amount" means an
amount paid under this section for acute inpatient hospital services
provided by a disproportionate share hospital.
   (6) "Payment adjustment year" means the particular state fiscal
year with respect to which payments are to be made to eligible
hospitals under this section.
   (7) "Payment adjustment program" means the system of Medi-Cal
payment adjustments for acute inpatient hospital services established
by this section.
   (8) "Annualized Medi-Cal inpatient paid days" means the total
number of Medi-Cal acute inpatient hospital days, regardless of dates
of service, for which payment was made by or on behalf of the
department to a hospital, under present or previous ownership, during
the most recent calendar year ending prior to the beginning of a
particular payment adjustment year, including all Medi-Cal acute
inpatient covered days of care for hospitals which are paid on a
different basis than per diem payments.
   (9) "Low-income utilization rate" means a percentage rate
determined by the department in accordance with the requirements of
Section 1396r-4(b)(3) of Title 42 of the United States Code, and
included on a disproportionate share list.
   (10) "Low-income number" means a hospital's low-income utilization
rate rounded down to the nearest whole number, and included on a
disproportionate share list.
   (11) "1991 Peer Grouping Report" means the final report issued by
the department dated May 1991, entitled "Hospital Peer Grouping."
   (12) "Major teaching hospital" means a hospital that meets the
definition of a university teaching hospital, major nonuniversity
teaching hospital, or large teaching emphasis hospital as set forth
on page 51 of the 1991 Peer Grouping Report.
   (13) "Children's hospital" means a hospital that meets the
definition of a children's hospital--state defined, as set forth on
page 53 of the 1991 Peer Grouping Report, or which is listed in
subdivision (a), or subdivisions (c) to (g), inclusive, of Section
16996.
   (14) "Acute psychiatric hospital" means a hospital that meets the
definition of an acute psychiatric hospital, a combination
psychiatric/alcohol-drug rehabilitation hospital, or a psychiatric
health facility, to the extent the facility is licensed to provide
acute inpatient hospital service, as set forth on page 52 of the 1991
Peer Grouping Report.
   (15) "Alcohol-drug rehabilitation hospital" means a hospital that
meets the definition of an alcohol-drug rehabilitation hospital as
set forth on page 52 of the 1991 Peer Grouping Report.
   (16) "Emergency services hospital" means a hospital that is a
licensed provider of basic emergency services as described in
Sections 70411 to 70419, inclusive, of Title 22 of the California
Code of Regulations, or that is a licensed provider of comprehensive
emergency medical services as described in Sections 70451 to 70459,
inclusive, of Title 22 of the California Code of Regulations.
   (17) "Medi-Cal day of acute inpatient hospital service" means any
acute inpatient day of service attributable to patients who, for
those days, were eligible for medical assistance under the California
state plan, including any day of service that is reimbursed on a
basis other than per diem payments.
   (18) "Total per diem composite amount" means, for each eligible
hospital for a particular payment adjustment year, the total of the
various per diem payment adjustment amounts to be paid to the
hospital for each eligible day as calculated under the applicable
provisions of this section.
   (19) "Supplemental lump-sum payment adjustment" means a lump-sum
amount paid under this section for acute inpatient hospital services
provided by a disproportionate share hospital.
   (20) "Projected total payment adjustment amount" means, for each
eligible hospital for a particular payment adjustment year, the
amount calculated by the department as the projected maximum total
amount the hospital is expected to receive under the payment
adjustment program for the particular payment adjustment year
(including all per diem payment adjustment amounts and any applicable
supplemental lump-sum payment adjustments).
   (21) "To align the program with the federal allotment" means to
modify the size of the payment adjustment program to be as close as
reasonably feasible to, but not to exceed, the estimated or actual
maximum state disproportionate share hospital allotment for the
particular federal fiscal year for California under Section 1396r-4
(f) of Title 42 of the United States Code.
   (22) "Descending pro rata basis" means an allocation methodology
under which a pool of funds is distributed to hospitals on a pro rata
basis until one of the recipient hospitals reaches its maximum
payment limit, after which all remaining amounts in the pool are
distributed on a pro rata basis to the recipient hospitals that have
not reached their maximum payment limits, until another hospital
reaches its maximum payment limit, and which process is repeated
until the entire pool of funds has been distributed among the
recipient hospitals.
   (23) "Secondary supplemental payment adjustment" means a payment
adjustment amount, whether paid or payable, to an eligible hospital
as a second type of supplemental distribution earned as of June 30,
1996, with respect to the 1995-96 payment adjustment year.
   (24) "OBRA 1993 payment limitation" means the hospital-specific
limitation on the total annual amount of payment adjustments to each
eligible hospital under the payment adjustment program that can be
made with federal financial participation under Section 1396r-4(g) of
Title 42 of the United States Code, as implemented pursuant to the
Medi-Cal State Plan.
   (25) "Public hospital" means a hospital that is licensed to a
county, a city, a city and county, the State of California, the
University of California, a local health care district, a local
health authority, or any other political subdivision of the state.
   (26) "Nonpublic hospital" means a hospital that satisfies all of
the following:
   (A) The hospital does not meet the definition of a public hospital
as described in paragraph (25).
   (B) The hospital does not meet the definition of a
nonpublic-converted hospital as described in paragraph (27).
   (C) The hospital does not meet the definition of a converted
hospital as described in paragraph (28).
   (27) "Nonpublic-converted hospital" means a hospital that
satisfies all of the following, or, if two or more inpatient
facilities are licensed by the department under a consolidated
license, a hospital as to which any component of the hospital
satisfies all of the following:
   (A) The hospital does not meet the definition of a public hospital
as described in paragraph (25).
   (B) The hospital or such component, at any time during the 1994-95
payment adjustment year, was a public hospital as described in
paragraph (25), whether or not the hospital or such component
currently is located at the same site as it was located when it was a
public hospital.
   (C) The hospital does not meet the definition of a converted
hospital as described in paragraph (28).
   (28) "Converted hospital" means a hospital that satisfies both of
the following:
   (A) The hospital does not meet the definition of a public hospital
as described in paragraph (25).
   (B) The hospital, at any time during the 1999-2000 payment
adjustment year, was an eligible hospital meeting the definition of a
public hospital as described in paragraph (25), whether or not the
hospital currently is located at the same site as it was located when
it was a public hospital.
   (29) "Remained in operation" or "remains in operation" means that,
except for closure or other cessation of services caused by natural
disasters or other events beyond the hospital's reasonable control,
including labor disputes, the hospital was licensed to provide
hospital inpatient services, and continued to provide, or was
available to provide, hospital inpatient services to Medi-Cal
patients throughout the particular time period in question.
   (30) "Maximum state disproportionate share hospital allotment for
California" means, with respect to the 1998 federal fiscal year and
subsequent federal fiscal years, that amount specified for California
under Section 1396r-4(f) of Title 42 of the United State Code for
that fiscal year, divided by the federal medical assistance
percentage applicable for federal financial participation purposes
for Medi-Cal program expenditures with respect to that same federal
fiscal year.
   (31) "Applicable federal fiscal year" means, with respect to the
2000-01 payment adjustment year and subsequent payment adjustment
years, the federal fiscal year that commences on October 1 of the
particular payment adjustment year.
   (32) "Medical assistance increment" means the federal medical
assistance percentage applicable for federal financial participation
purposes for Medi-Cal program expenditures, expressed as a
percentage, less the number one-half, expressed as a percentage.
   (b) For each fiscal year commencing with 1991-92, there shall be
Medi-Cal payment adjustment amounts paid to hospitals pursuant to
this section.  The amount of payments made and the eligible hospitals
for each payment adjustment year shall be determined in accordance
with the provisions of this section.  The payments are intended to
support health care services rendered by disproportionate share
hospitals.
   (c) For each fiscal year commencing with 1991-92, the department
shall issue a disproportionate share list.  The list shall be
developed in accordance with subdivisions (e) and (f), and shall
serve as a basis for payments under this section for the particular
payment adjustment year.
   (d) (1) Except as otherwise provided by this section, the payment
adjustment amounts under this section shall be distributed as a
supplement to, and concurrent with, payments on all billings for
Medi-Cal acute inpatient hospital services that are paid through
Medi-Cal claims payment systems on or after July 1, 1991.  In
connection with those billings, the department shall pay payment
adjustment amounts in accordance with subdivision (g), (h), (i), or
(j), as applicable, to any hospital qualifying under subdivision (e).
  In addition, the department shall pay to each of those hospitals
any supplemental lump-sum payment adjustment amounts that are
payable, and shall adjust payment amounts, in accordance with
applicable provisions of this section.  The nonfederal share of all
payment adjustment amounts shall be funded by amounts from the fund.
The department shall obtain federal matching funds for the payment
adjustment program through customary Medi-Cal accounting procedures.
   (2) As a limitation to paragraph (1), all payment adjustment
amounts under this section, which are due with respect to billings
paid through Medi-Cal claims payment systems on or after July 1,
1991, shall be suspended until the time federal approval is first
obtained for the payment adjustment program as part of the Medi-Cal
program.  For purposes of this paragraph, federal approval requires
both (i) approval by appropriate federal agencies of an amendment to
the Medi-Cal State Plan, as referred to in subdivision (o), and (ii)
confirmation by appropriate federal agencies regarding the
availability of federal financial participation for the payment
adjustment program at a level of at least 40 percent of the
percentage of federal financial participation that is normally
applicable for Medi-Cal expenditures for acute inpatient hospital
services.  At the time federal approval is first obtained, the
department shall proceed pursuant to subparagraphs (A) and (B) in
connection with the suspended payment adjustment amounts.
   (A) Except as provided by subdivision (l), or by any other
subdivision of this section, any payment adjustment amounts which
were suspended shall, within 60 days, be paid for all those billings
paid through Medi-Cal claims payment systems during periods of time,
on or after July 1, 1991, for which federal approval is first
effective for the payment adjustment program.
   (B) Payment adjustment amounts shall not be paid in connection
with any Medi-Cal billings which were paid through Medi-Cal claims
payment systems during any period of time for which federal approval
is not effective for the payment adjustment program.
   (3) As a limitation to paragraph (1), the amendments to this
section enacted during calendar year 1993 shall not be implemented
until the department has obtained any approvals that are necessary
under federal law.  Until all necessary federal approvals are
obtained, the payment adjustment program shall continue as though no
amendments had been enacted during calendar year 1993.  When all
necessary federal approvals have been obtained, the amendments
enacted during calendar year 1993, shall be implemented effective as
of the earliest effective date permissible under federal law.
   (4) As a limitation to paragraph (1), amendments to this section
enacted during calendar year 1994 shall not be implemented until the
department has obtained any approvals that are necessary under
federal law.  Until all necessary federal approvals are obtained, the
payment adjustment program shall continue as though no amendments
had been enacted during calendar year 1994.  When all necessary
federal approvals have been obtained, the amendments enacted during
calendar year 1994 shall be implemented effective as of the earliest
effective date permissible under federal law.  Notwithstanding any
other provision of law, on or after the date that federal approval is
obtained the payments made prior to that date with respect to the
1994-95 payment adjustment year or subsequent payment adjustment
years shall be deemed nonfinal payments for purposes of this section
and Section 14163.  Any of those amounts paid or payable prior to
that date shall then be compared to the payments that would have been
made pursuant to the program changes as approved by the federal
government for all periods of time permissible under federal law, and
the difference, if any, shall be paid or recouped by the department,
as appropriate.
   (5) As a limitation to paragraph (1), amendments to this section
enacted during June 1996 shall not be implemented until the
department has obtained any approvals that are necessary under
federal law.  Until all necessary federal approvals are obtained, the
payment adjustment program shall continue as though no amendments
had been enacted during June 1996.  When all necessary federal
approvals have been obtained, the amendments enacted during June 1996
shall be implemented effective as of the earliest effective date
permissible under federal law.  Notwithstanding any other provision
of law, on or after the date that federal approval is obtained, the
payments made prior to that date with respect to the 1995-96 payment
adjustment year shall be deemed nonfinal payments for purposes of
this section and Section 14163.  Any of those amounts paid or payable
prior to that date shall then be compared to the payments that would
have been made pursuant to the program changes as approved by the
federal government for all periods of time permissible under federal
law, and the difference, if any, shall be paid or recouped by the
department, as appropriate.
   (6) As a limitation to paragraph (1), any amendment of this
section enacted during the period August 1, 1996, to September 30,
1996, inclusive, shall not be implemented until the department has
obtained any approvals that are necessary under federal law.  Until
all necessary federal approvals are obtained, the payment adjustment
program shall continue as though no amendments had been enacted
during the period August 1, 1996, to September 30, 1996, inclusive.
When all necessary federal approvals have been obtained, the
amendments enacted during the period August 1, 1996, to September 30,
1996, inclusive, shall be implemented effective as of the earliest
effective date permissible under federal law.  Notwithstanding any
other provision of law, on or after the date that federal approval is
obtained, the payments made prior to that date with respect to the
1996-97 payment adjustment year shall be deemed nonfinal payments for
purposes of this section and Section 14163.  Any of those amounts
paid or payable prior to that date shall then be compared to the
payments that would have been made pursuant to the program changes as
approved by the federal government for all periods of time
permissible under federal law, and the difference, if any, shall be
paid or recouped by the department, as appropriate.
   (7) As a limitation to paragraph (1), any amendment of this
section enacted during the period September 1, 1997, to September 30,
1997, inclusive, shall not be implemented until the department has
obtained any approvals that are appropriate under federal law.  Until
appropriate federal approvals are obtained, the payment adjustment
program shall continue as though amendments had not been enacted
during the period September 1, 1997, to September 30, 1997,
inclusive.  When appropriate federal approvals have been obtained,
the amendments enacted during the period September 1, 1997, to
September 30, 1997, inclusive, shall be implemented effective as of
the earliest effective date permissible under federal law.
Notwithstanding any other provision of law, on or after the date that
federal approval is obtained, the payments made prior to that date
with respect to the 1997-98 payment adjustment year shall be deemed
nonfinal payments for purposes of this section and Section 14163.
Any of those amounts paid or payable prior to that date shall then be
compared to the payments that would have been made pursuant to the
program changes as approved by the federal government for all periods
of time permissible under federal law, and the difference, if any,
shall be paid or recouped by the department, as appropriate.
   (8) As a limitation to paragraph (1), any amendment of this
section enacted during the 1998 calendar year shall not be
implemented until the department has obtained any approvals that are
appropriate under federal law.  Until appropriate federal approvals
are obtained, the payment adjustment program shall continue as though
amendments had not been enacted during the 1998 calendar year.  When
appropriate federal approvals have been obtained, the amendments
enacted during the 1998 calendar year shall be implemented effective
as of the earliest effective date permissible under federal law.
Notwithstanding any other provision of law, on or after the date that
federal approval is obtained, the payments made prior to that date
with respect to the particular payment adjustment year shall be
deemed nonfinal payments for purposes of this section and Section
14163.  Any of those amounts paid or payable prior to that date shall
then be compared to the payments that would have been made pursuant
to the program changes as approved by the federal government for all
periods of time permissible under federal law, and the difference, if
any, shall be paid or recouped by the department, as appropriate.
   (9) As a limitation to paragraph (1), any amendment of this
section enacted during the period of June 1, 1999, to June 30, 1999,
inclusive, shall not be implemented until the department has obtained
any approvals that are appropriate under federal law.  Until
appropriate federal approvals are obtained, the payment adjustment
program shall continue as though amendments had not been enacted
during the period of June 1, 1999, to June 30, 1999, inclusive.  When
appropriate federal approvals have been obtained, the amendments
enacted during the period of June 1, 1999, to June 30, 1999,
inclusive, shall be implemented effective as of the earliest
effective date permissible under federal law.  Notwithstanding any
other provision of law, on or after the date that federal approval is
obtained, the payments made prior to that date with respect to the
particular payment adjustment year shall be deemed nonfinal payments
for purposes of this section and Section 14163.  Any of those amounts
paid or payable prior to that date shall then be compared to the
payments that would have been made pursuant to the program changes as
approved by the federal government for all periods of time
permissible under federal law, and the difference, if any, shall be
paid or recouped by the department, as appropriate.
   (10) As a limitation to paragraph (1), any amendment of this
section enacted during the period of June 1, 2000, to June 30, 2000,
inclusive, shall not be implemented until the department has obtained
any approvals that are appropriate under federal law.  Until
appropriate federal approvals are obtained, the payment adjustment
program shall continue as though amendments had not been enacted
during the period of June 1, 2000, to June 30, 2000, inclusive.  When
appropriate federal approvals have been obtained, the amendments
enacted during the period of June 1, 2000, to June 30, 2000,
inclusive, shall be implemented effective as of the earliest
effective date permissible under federal law.  Notwithstanding any
other provision of law, on or after the date that federal approval is
obtained, the payments made prior to that date with respect to the
particular payment adjustment year shall be deemed nonfinal payments
for purposes of this section and Section 14163.  Any of those amounts
paid or payable prior to that date shall then be compared to the
payments that would have been made pursuant to the program changes as
approved by the federal government for all periods of time
permissible under federal law, and the difference, if any, shall be
paid or recouped by the department, as appropriate.
   (e) To qualify for payment adjustment amounts under this section,
a hospital shall have been included on the disproportionate share
list for the particular payment adjustment year.  The list shall
consist of those hospitals which satisfy both of the following
requirements:
   (1) The hospital shall meet the federal requirements for
disproportionate share status set forth in subsection (d) of Section
1396r-4 of Title 42 of the United States Code.
   (2) Either of the following shall apply:
   (A) The hospital's medicaid inpatient utilization rate, as defined
in Section 1396r-4(b)(2) of Title 42 of the United States Code,
shall be at least one standard deviation above the mean medicaid
inpatient utilization rate for hospitals receiving medicaid payments
in the state.
   (B) The hospital's low-income utilization rate shall exceed 25
percent.
   (f) (1) For the 1991-92 payment adjustment year, a
disproportionate share list shall be issued by the department no
later than 65 days after the enactment of this section.  For
subsequent payment adjustment years, a tentative listing shall be
prepared by the department at least 60 days before the beginning of
the particular payment adjustment year, and a disproportionate share
list shall be issued no later than five days after the beginning of
the particular payment adjustment year.  All state agencies shall
take all necessary steps to supply the most recent data available to
the department to meet these deadlines.  The Office of Statewide
Health Planning and Development shall provide to the department
quarterly access to the edited and unedited confidential patient
discharge data files for all Medi-Cal eligible patients.  The
department shall maintain the confidentiality of that data to the
same extent as is required of the Office of Statewide Health Planning
and Development.  In addition, the Office of Statewide Health
Planning and Development shall provide to the department no later
than March 1 of each year, the data specified by the department, as
the data existed on the statewide data base file as of February 1 of
each year (except that for the 1991-92 payment adjustment year, the
Office of Statewide Health Planning and Development shall provide
data as it existed on the statewide data base file as of August 30,
1991), from all of the following:
   (A) Hospital annual disclosure reports, filed with the Office of
Statewide Health Planning and Development pursuant to Section 443.31
or 128735 of the Health and Safety Code, for hospital fiscal years
which ended during the calendar year ending 13 months prior to the
applicable February 1.
   (B) Annual reports of hospitals, filed with the Office of
Statewide Health Planning and Development pursuant to Section 439.2
or 127285 of the Health and Safety Code, for the calendar year ending
13 months prior to the applicable February 1.
   (C) Hospital patient discharge data reports, filed with the Office
of Statewide Health Planning and Development pursuant to subdivision
(g) of Section 443.31 or 128735 of the Health and Safety Code, for
the calendar year ending 13 months prior to the applicable February
1.
   (D) Any other materials on file with the Office of Statewide
Health Planning and Development.
   (2) The disproportionate share list shall show all of the
following:
   (A) The name and license number of the hospital.
   (B) Expressed as a percentage, the hospital's Medi-Cal utilization
rate and low-income utilization rate as referred to in paragraph (2)
of subdivision (e).  The department shall determine these rates in
accordance with paragraph (4).
   (C) Based on the hospital's low-income utilization rate, the
hospital's low-income number.
   (3) The department shall determine a hospital's satisfaction of
paragraph (1) of subdivision (e) based on the most recent annual data
available, as it existed on the Office of Statewide Health Planning
and Development statewide data base file as of February 1 of each
year, and August 30 for the 1991-92 payment adjustment year, whether
the data relates to operations under present or previous ownership.
   (4) To determine a hospital's Medi-Cal inpatient utilization rate
and low-income utilization rate for purposes of disproportionate
share lists, the department shall utilize the same methodology,
formulae, and data sources as set forth in connection with interim
determinations in Attachment 4.19-A of the Medi-Cal State Plan
(effective on or about July 1, 1990), and as subsequently amended by
Medi-Cal State Plan amendments relating to the payment adjustment
program submitted to and approved by the federal Health Care
Financing Administration, except that the following shall apply:
                                       (A) The calculations shall not
be interim, but shall be final for purposes of this section.
   (B) To the extent permitted by federal law, the payment adjustment
amounts provided to hospitals pursuant to this section shall not be
included for any purpose in the calculations and determinations made
pursuant to this section.
   (C) Any other variation otherwise required by this section or by
federal law.
   (D) The data utilized by the department shall relate to the
hospital under present and previous ownership.  When there has been a
change of ownership, a change in the location of the main hospital
facility, or a material change in patient admission patterns during
the 24 months immediately prior to the payment adjustment year, and
the change has resulted in a diminution of access for Medi-Cal
inpatients at the hospital, all as determined by the department, the
department shall, to the extent permitted by federal law, utilize
current data that are reflective of the diminution of access, even if
the data are not annual data.
   (E) Unless expressly provided otherwise by this section, the
hospital's low-income utilization rate shall be based on the most
recent annual data available from annual hospital reports existing on
the Office of Statewide Health Planning and Development data base
file as of February 1 of each year.
   (F) (i) If, for the 1994-95 payment adjustment year, some or all
of the annual data elements available to the department from hospital
reports filed with the Office of Statewide Health Planning and
Development for purposes of computing hospital low-income utilization
rates are different than in prior years due to changes in data
reporting requirements of the Office of Statewide Health Planning and
Development or changes in other state health care programs, the
department shall take the necessary steps to obtain from hospitals
appropriate data in order to clarify the annual data filed with the
Office of Statewide Health Planning and Development.  This shall be
done by the department in order to ensure that low-income utilization
rates are determined in a manner as equivalent as possible to the
approach and methodology used for the 1991-92 payment adjustment
year.
   (ii) The efforts of the department to obtain and apply data for
the purposes described in clause (i) shall include a survey to
collect, from one or more hospitals, any data necessary to calculate
the low-income utilization rates in accordance with clause (i).  The
purpose for the survey shall be to clarify the data already included
by hospitals in their annual reports submitted to the Office of
Statewide Health Planning and Development.  The data requested by the
department in the survey may include, among other things,
information regarding the manner in which payments made to hospitals
under this section were reported by the hospitals to the Office of
Statewide Health Planning and Development.  The data requested may
also include information regarding the manner in which hospitals
reported figures relating to charity care, bad debts, and amounts
received in connection with state or local indigent care programs.
   (iii) In connection with any survey conducted under clause (ii),
the department may require that hospitals submit responses in
accordance with a deadline established by the department, and that
the responses be supported by a verification of a hospital
representative.  Should any hospital not respond on a timely basis in
accordance with protocols established by the department, the
department shall utilize prior year data, adjusted by the department
in its discretion, to calculate the hospital's low-income utilization
rate.
   (G) Notwithstanding any other provision of law, all payment
adjustment amounts, including per diem payment adjustment amounts and
supplemental lump-sum payment adjustments, paid or payable to a
hospital under this section, shall be recorded on an accrual basis of
accounting in reports filed by the hospital with the Office of
Statewide Health Planning and Development or the department.
   (5) For purposes of payment adjustment amounts under this section,
each disproportionate share list shall be considered complete when
issued by the department pursuant to paragraph (1).  Nothing on a
disproportionate share list, once issued by the department, shall be
modified for any reason, other than mathematical or typographical
errors or omissions on the part of the department or the Office of
Statewide Health Planning and Development in preparation of the list.
   (6) No Medi-Cal State Plan amendment of the type referred to in
paragraph (4) shall be valid if inconsistent with this section.  For
those Medi-Cal State Plan amendments of the type referred to in
paragraph (4), to be initially submitted to the federal Health Care
Financing Administration on or after the operative date of this
paragraph, these amendments shall be provided to representatives of
the hospital industry, including, but not limited to, the California
Healthcare Association, as soon as possible, but in no event less
than 30 days prior to submission of the amendment to the federal
Health Care Financing Administration.  If, in the public interest,
the director determines that exigent circumstances necessitate that
the 30-day requirement cannot be met, the director shall immediately
in writing advise the Chairperson of the Senate Committee on Health
and Human Services and the Assembly Committee on Health of the
exigent circumstances and the department's timetable for providing
the amendment to the hospital industry.
   (g) For each Medi-Cal day of acute inpatient hospital service paid
by or on behalf of the department during a payment adjustment year,
regardless of dates of service, to a hospital on the applicable
disproportionate share list, where that hospital, on the first day of
the payment adjustment year, is a major teaching hospital, the
hospital shall be paid the sum of all of the following amounts,
except as limited by other applicable provisions of this section:
   (1) A minimum payment adjustment of three hundred dollars ($300).
   (2) The sum of the following amounts, minus three hundred dollars
($300):
   (A) A ninety dollar ($90) payment adjustment for each percentage
point, from 25 percent to 29 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (B) A seventy dollar ($70) payment adjustment for each percentage
point, from 30 percent to 34 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (C) A fifty dollar ($50) payment adjustment for each percentage
point, from 35 percent to 44 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (D) A thirty dollar ($30) payment adjustment for each percentage
point, from 45 percent to 64 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (E) A ten dollar ($10) payment adjustment for each percentage
point, from 65 percent to 80 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (3) If the sum calculated under paragraph (2) is less than zero,
it shall be disregarded for payment purposes.
   (h) For each Medi-Cal day of acute inpatient hospital service paid
by or on behalf of the department during a payment adjustment year,
regardless of dates of service, to a hospital on the applicable
disproportionate share list, where that hospital, on the first day of
the payment adjustment year, is a children's hospital, the hospital
shall be paid the sum of four hundred fifty dollars ($450), except as
limited by other applicable provisions of this section.
   (i) For each Medi-Cal day of acute inpatient hospital service paid
by or on behalf of the department during a payment adjustment year,
regardless of dates of service, to a hospital on the applicable
disproportionate share list, where that hospital, on the first day of
the payment adjustment year, is an acute psychiatric hospital or an
alcohol-drug rehabilitation hospital, the hospital shall be paid the
sum of all of the following amounts, except as limited by other
applicable provisions of this section:
   (1) A minimum payment adjustment of fifty dollars ($50).
   (2) The sum of the following amounts, minus fifty dollars ($50):
   (A) A ten dollar ($10) payment adjustment for each percentage
point, from 25 to 29 percent, inclusive, of the hospital's low-income
number as shown on the disproportionate share list.
   (B) A seven dollar ($7) payment adjustment for each percentage
point, from 30 to 34 percent, inclusive, of the hospital's low-income
number as shown on the disproportionate share list.
   (C) A five dollar ($5) payment adjustment for each percentage
point, from 35 to 44 percent, inclusive, of the hospital's low-income
number as shown on the disproportionate share list.
   (D) A two dollar ($2) payment adjustment for each percentage
point, from 45 to 64 percent, inclusive, of the hospital's low-income
number as shown on the disproportionate share list.
   (E) A one dollar ($1) payment adjustment for each percentage
point, from 65 to 80 percent, inclusive, of the hospital's low-income
number as shown on the disproportionate share list.
   (3) If the sum calculated under paragraph (2) is less than zero,
it shall be disregarded for payment purposes.
   (j) For each Medi-Cal day of acute inpatient hospital service paid
by or on behalf of the department during a payment adjustment year,
regardless of dates of service, to a hospital on the applicable
disproportionate share list, where that hospital does not meet the
criteria for receiving payments under subdivision (g), (h), or (i)
above, the hospital shall be paid the sum of all of the following
amounts, except as limited by other applicable provisions of this
section:
   (1) A minimum payment adjustment of one hundred dollars ($100).
   (2) If the hospital is an emergency services hospital at the time
the payment adjustment is paid, a two hundred dollar ($200) payment
adjustment.
   (3) The sum of the following amounts minus one hundred dollars
($100), and minus an additional two hundred dollars ($200) if the
hospital is an emergency services hospital at the time the payment
adjustment is paid:
   (A) A forty dollar ($40) payment adjustment for each percentage
point, from 25 percent to 29 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (B) A thirty-five dollar ($35) payment adjustment for each
percentage point, from 30 percent to 34 percent, inclusive, of the
hospital's low-income number as shown on the disproportionate share
list.
   (C) A thirty dollar ($30) payment adjustment for each percentage
point, from 35 percent to 44 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (D) A twenty dollar ($20) payment adjustment for each percentage
point, from 45 percent to 64 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (E) A fifteen dollar ($15) payment adjustment for each percentage
point, from 65 percent to 80 percent, inclusive, of the hospital's
low-income number as shown on the disproportionate share list.
   (4) If the sum calculated under paragraph (3) is less than zero,
it shall be disregarded for payment purposes.
   (k) (1) For any particular payment adjustment year, no hospital
may qualify for payments under more than one subdivision among
subdivisions (g), (h), (i), and (j).  If any hospital qualifies under
more than one subdivision, the department shall determine which
subdivision shall apply for payments.
   (2) For each payment adjustment year beginning with 1992-93, the
total applicable per diem payment adjustment amount calculated for
each eligible hospital pursuant to subdivision (g), (h), (i), or (j)
shall be adjusted by a percentage identical to the percentage
increase in transfer amounts that the department has authorized for
use pursuant to paragraph (1) of subdivision (h) of Section 14163 for
the particular fiscal year.
   (3) If an eligible hospital ordinarily is paid by or on behalf of
the department for Medi-Cal acute inpatient hospital services based
on a payment methodology other than per diem payments, the eligible
hospital shall receive payment adjustment amounts under subdivision
(g), (h), (i), or (j) of this section based on its approved Medi-Cal
days of acute inpatient hospital care, in the same fashion as all
other eligible hospitals under this section.
   (l) (1) (A) In determining Medi-Cal days of service for purposes
of payment adjustments under this section, the department shall
recognize all acute inpatient hospital days of service required to be
taken into account under federal law.
   (B) For the 1992-93 payment year, the department may consider the
Medi-Cal days of service provided by the qualifying hospitals for
Medi-Cal patients covered by the prepaid health plans contracting
directly with the Medi-Cal program in achieving their maximum
payments.
   (C) For 1993-94 and subsequent payment years, the department may
consider the Medi-Cal days of service provided by hospitals for
Medi-Cal patients covered by the prepaid health plans contracting
directly with the Medi-Cal program in determining the Medi-Cal
utilization rate and the maximum days of payment.  Additionally, the
department may consider the days of service provided by the
qualifying hospitals for Medi-Cal patients covered by the prepaid
health plans contracting directly with the Medi-Cal program in
achieving their maximum payments in those payment years.
   (D) In order to meet the requirements of subparagraph (C), the
Office of Statewide Health Planning and Development shall provide to
the department quarterly access to all data elements on the edited
and unedited confidential patient discharge data files, including
Social Security account numbers.  The department shall match these
data with the department's Medi-Cal Eligibility Data System files to
extract any data necessary to meet the requirements of subparagraph
(C).  The department shall maintain the confidentiality of all
patient discharge data to the same extent as is required of the
Office of Statewide Health Planning and Development.
   (2) Notwithstanding paragraph (1), there shall be, for each
eligible hospital, a maximum limit on the number of Medi-Cal acute
inpatient hospital days for which payment adjustment amounts may be
paid under this section with respect to each payment adjustment year.
  The maximum limit shall be that number of days that equals 80
percent of the eligible hospital's annualized Medi-Cal inpatient paid
days, as determined from all Medi-Cal paid claims records available
through April 1 preceding the beginning of the payment adjustment
year.
   (m) No payment rate for any service rendered by any hospital under
the Medi-Cal selective provider contracting program shall be reduced
as a result of this section.
   (n) Notwithstanding any other provision of law, to the extent
consistent with federal law, and except as provided by this section,
no maximum payment limit shall be placed on the amount of Medi-Cal
payment adjustments which may be made to disproportionate share
hospitals.  The payments made to disproportionate share hospitals
pursuant to this section and Section 14105.99 shall not cause any
other amounts paid or payable to a hospital to be deemed in excess of
any applicable maximum payment limit.
   (o) The department shall promptly seek any necessary federal
approvals in order to implement this section, including any
amendments.  Pursuant to Section 1396r-4 of Title 42 of the United
States Code, and related federal medicaid statutes and regulations,
payment adjustment systems for inpatient hospital services rendered
by disproportionate share hospitals shall be included in a state's
medicaid plan.  Therefore, the department shall, prior to the end of
the calendar quarter during which this section is enacted or amended,
submit for federal approval an amendment to the Medi-Cal State Plan
in connection with the payment adjustment program.
   (p) (1) The department shall compute, prior to the beginning of
each payment adjustment year, the projected size of the payment
adjustment program for the particular payment adjustment year.  To do
so, the department shall determine the projected total payment
adjustment amount for each eligible hospital, and shall add these
amounts together to determine the projected total size of the
program.  To the extent this projected total figure for the program
exceeds the portion of the maximum state disproportionate share
hospital allotment for California under federal law that the
department anticipates will be available for the period in question,
the department shall reduce the total per diem composite amounts of
the various eligible hospitals in the fashion described below so that
the allotment in question will not be exceeded.
   (2) As an initial step, all total per diem composite amounts for
the entire payment adjustment year shall be reduced proportionately
not to exceed 2 percent of each total per diem composite amount.
   (3) If the reductions authorized by paragraph (2) are insufficient
to align the program with the federal allotment for California,
then, to the extent permitted by federal law, the following shall
apply:
   (A) The adjusted total per diem composite amounts, as calculated
under paragraph (2), shall remain in effect for each eligible
hospital whose low-income number is 30 percent or more.
   (B) The adjusted total per diem composite amounts, as calculated
under paragraph (2), for all other eligible hospitals shall be
further reduced proportionately to align the program with the federal
allotment, but in no event to a level that is less than 65 percent
of the total per diem composite amount that would have been payable
to the eligible hospital had no reductions taken place.
   (4) If the steps set forth in paragraph (3) are not permissible
under federal law, or are not adequate to align the program with the
federal allotment, the adjusted total per diem composite amounts for
all eligible hospitals for the entire payment adjustment year shall
be further reduced proportionately to align the program with the
federal allotment, but in no event to a level that would result in
adjusted total per diem composite amounts that are less than 65
percent of the total per diem composite amounts that would have been
payable had no reductions taken place.
   (5) When all eligible hospitals have been reduced to the
65-percent level set forth in paragraphs (3) and (4), the adjusted
total per diem composite amounts for all eligible hospitals shall be
further reduced proportionately as necessary to align the program
with the federal allotment.
   (6) This subdivision shall not apply to the 1995-96 payment
adjustment year.
   (q) (1) If it is necessary to apply the provisions of paragraph
(3) of subdivision (p) at any time, the department shall, as soon as
practicable, evaluate why the insufficiency arose and identify the
projected occurrence and duration of any future insufficiencies.
   (2) If the department determines as a result of the evaluations
under paragraph (1) that (A) implementation of paragraph (3) of
subdivision (p) will likely be necessary to resolve additional
insufficiencies for the current payment adjustment year or the next
payment adjustment year; and (B) that the level of federal financial
participation realized by the payment adjustment program, for the
current payment adjustment year as a whole, will be less than 30
percent of the percentage of federal financial participation that
normally is applicable for Medi-Cal expenditures for acute inpatient
hospital services, and that the level of federal financial
participation for the payment adjustment program is expected to
continue to remain below that 30-percent level for the next payment
adjustment year as a whole, the department shall, as soon as
practicable, implement paragraphs (3) and (4).
   (3) If the department determines that the circumstances described
in paragraph (2) are present, the payment adjustment program shall be
terminated, effective as of the earliest date permissible under
federal law.  In that event, all installment payments to the fund
which are already due pursuant to Section 14163 at the time of the
department's determination shall remain due, and shall be collected
by the Controller.  However, installment payments which are not yet
due at that time shall not become due.
   (4) Within 90 days after the termination of the payment adjustment
program, as referred to in paragraph (3), or as soon as practicable,
the department shall determine whether any amounts remain in the
fund that are not needed to pay prior payment adjustment amounts
under this section.  If remaining amounts exist in the fund, they
shall be refunded to transferor entities on a pro rata basis, within
45 days after the date of the department's determination.
   (r) (1) The state shall be held harmless from any federal
disallowance resulting from payments made under this section, and
from payments made to hospitals based on transfers accepted by the
department under Section 14164.  Any hospital that has received
payments under this section, or based on transfers accepted by the
department under Section 14164, shall be liable for any audit
exception or federal disallowance only with respect to the payments
made to that hospital.  The department shall recoup from a hospital
the amount of any audit exception or federal disallowance in the
manner authorized by applicable laws and regulations.
   (2) Notwithstanding any other provisions of law, if any payment
adjustment that has been paid, or that otherwise would have been
payable to an eligible hospital under this section, exceeds the OBRA
1993 payment limitation for the particular hospital, the department
shall withhold or recoup the payment adjustment amount that exceeds
the limitation.  The nonfederal component of the amount withheld or
recouped shall be redeposited in, or shall remain in, the fund, as
applicable, until used for the purposes described in paragraph (2) of
subdivision (j) of Section 14163.
   (s) (1) The department may utilize existing administrative appeal
procedures for purposes of any appealable matter that arises under
the payment adjustment program.  The matters that may be appealed
shall be limited to those related to the following:
   (A) Paragraph (5) of subdivision (f).
   (B) State audit disallowances of amounts paid to hospitals under
the payment adjustment program.
   (2) Calculations which are final pursuant to paragraph (4) or (5)
of subdivision (f) or the procedures or data on which those
calculations are based, shall not be appealed.
   (t) (1) Except as provided in paragraph (2), the department shall
take all appropriate steps permitted by law and the Medi-Cal State
Plan to ensure the following for all years of the payment adjustment
program:
   (A) That well-baby (nursery) days and acute administrative days
are included in the payment adjustment program in the same fashion as
all other Medi-Cal days of acute inpatient hospital service.
   (B) That, to the same extent as any other Medi-Cal days of acute
inpatient hospital service, well-baby (nursery) days and acute
administrative days are included as payable days under the payment
adjustment program and in the total of annualized Medi-Cal inpatient
paid days.
   (C) That, if pursuant to paragraph (2), any well-baby (nursery)
days or acute administrative days are not included in the payment
adjustment program for payment purposes for any parts of the 1992-93
or 1993-94 payment adjustment years, all those days are nevertheless
included in the total of annualized Medi-Cal inpatient paid days for
all purposes under the payment adjustment program, unless otherwise
barred by paragraph (2).
   (2) In no event shall paragraph (1) be implemented in a fashion
that is inconsistent with federal medicaid law or the Medi-Cal State
Plan.
   (u) (1) For the 1993-94 payment adjustment year, each eligible
hospital shall also be eligible to receive a supplemental lump-sum
payment adjustment, which shall be payable as a result of the
hospital being included on the disproportionate share list as of
September 30, 1993.  For purposes of federal medicaid rules,
including Section 447.297(d) of Title 42 of the Code of Federal
Regulations, the supplemental payment adjustments shall be applicable
to the federal fiscal year that ends on September 30, 1993.
   (2) The availability of supplemental payment adjustments under
this subdivision shall be determined as follows:
   (A) The final maximum state disproportionate share hospital
allotment for California under the provisions of applicable federal
medicaid rules shall be identified for the 1993 federal fiscal year.
This final allotment is two billion one hundred ninety-one million
four hundred fifty-one thousand dollars ($2,191,451,000), as
specified at page 43186 of Volume 58 of the Federal Register.
   (B) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, that are applicable to
the 1993 federal fiscal year shall be determined.  The applicability
of the per diem payment adjustment amounts to the 1993 federal fiscal
year shall be determined in accordance with federal medicaid rules,
including Sections 447.297(d)(3) and 447.298 of Title 42 of the Code
of Federal Regulations.
   (C) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, supplemental lump-sum payment
adjustments shall be made under this subdivision in accordance with
paragraph (3).
   (3) The amount of the supplemental lump-sum payment adjustment to
each eligible hospital shall be computed as follows:
   (A) The projected total of all per diem payment adjustment amounts
payable to each particular eligible hospital under this section for
the 1993-94 payment adjustment year shall be determined.  For each
hospital, this figure shall be identical to the figure used for the
same hospital in the calculations regarding transfer amounts under
subdivision (h) of Section 14163 for the 1993-94 state fiscal year.
   (B) The projected totals for all eligible hospitals determined
under subparagraph (A) shall be added together to determine an
aggregate total of all projected per diem payment adjustments for the
1993-94 payment adjustment year.  This figure shall be identical to
the aggregate figure for all hospitals used in the calculations
regarding transfer amounts under subdivision (h) of Section 14163 for
the 1993-94 state fiscal year.
   (C) The figure determined for each eligible hospital under
subparagraph (A) shall be divided by the aggregate figure determined
under subparagraph (B), yielding a percentage figure for each
hospital.
   (D) The percentage figure determined for each hospital under
subparagraph (C) shall be multiplied by the positive remainder
calculated under subparagraph (C) of paragraph (2).
   (E) The product as so determined for each eligible hospital under
subparagraph (D) shall be the supplemental lump-sum payment
adjustment amount payable to the particular hospital.
                           (4) The department shall make partial
payments of the supplemental lump-sum payment adjustments to eligible
hospitals on or before January 1, 1994.  The department shall make
final calculations regarding the supplemental lump-sum payments based
on data available as of March 1, 1994, and shall distribute the
final payments promptly thereafter.
   (5) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.  In doing so, the
department shall comply with any procedures instituted by the Health
Care Financing Administration in connection with Sections 447.297(d)
(3) and 447.298 of Title 42 of the Code of Federal Regulations.
   (v) (1) For the 1993-94 payment adjustment year, each eligible
hospital that remains in operation as of June 30, 1994, shall also be
eligible to receive a supplemental lump-sum payment adjustment,
which shall be payable as a result of the hospital being a
disproportionate share hospital in operation as of that date.
   (2) The availability of supplemental lump-sum payment adjustments
under this subdivision shall be determined by the department as
follows:
   (A) The final maximum state disproportionate share hospital
allotment for California under the provisions of applicable federal
medicaid rules shall be identified for the 1994 federal fiscal year.
This final allotment is two billion one hundred ninety-one million
four hundred fifty-one thousand dollars ($2,191,451,000), as
specified on page 22676 of Volume 59 of the Federal Register.
   (B) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, that are applicable to
the period October 1, 1993, through June 30, 1994, shall be
determined.  The applicability of the per diem payment adjustment
amounts to this period of time shall be determined in accordance with
federal medicaid rules, including Sections 447.297(d)(3) and 447.298
of Title 42 of the Code of Federal Regulations.
   (C) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, supplemental lump-sum payment
adjustments shall be made under this subdivision in accordance with
paragraph (3).
   (3) The amount of the supplemental lump-sum payment adjustment to
each hospital shall be computed as follows:
   (A) The projected total of all other payment adjustment amounts
payable to each particular hospital under this section applicable to
the 1993-94 payment adjustment year shall be determined.  For each
hospital, this figure shall be identical to the sum of the figures
used for the same hospital in the calculations regarding transfer
amounts under subdivision (h) of Section 14163 for the 1993-94 state
fiscal year, not including the supplemental lump-sum payments
described in this subdivision.
   (B) The projected totals for all hospitals determined under
subparagraph (A) shall be added together to determine an aggregate
total.  This aggregate total shall be identical to the aggregate
figure for all hospitals used in the calculations regarding transfer
amounts under subdivision (h) of Section 14163 for the 1993-94 state
fiscal year, not including the supplemental lump-sum payments
described in this subdivision.
   (C) The figure determined for each hospital under subparagraph (A)
shall be divided by the aggregate figure determined under
subparagraph (B), yielding a percentage figure for each hospital.
   (D) The percentage figure determined for each hospital under
subparagraph (C) shall be multiplied by the positive remainder
calculated under subparagraph (C) of paragraph (2).
   (E) The product determined under subparagraph (D) for each
hospital shall be the supplemental lump-sum payment adjustment amount
payable to the particular hospital, which shall be payable because
the facility is a disproportionate share hospital in operation as of
June 30, 1994.
   (4) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments to hospitals on or before
October 31, 1994.
   (5) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.  In doing so, the
department shall comply with any procedures instituted by the Health
Care Financing Administration in connection with Sections 447.297(d)
(3) and 447.298 of Title 42 of the Code of Federal Regulations.
   (w) (1) For the 1994-95 payment adjustment year, each eligible
hospital that remains in operation as of June 30, 1995, shall also be
eligible to receive a supplemental lump-sum payment adjustment,
which shall be payable as a result of the hospital being a
disproportionate share hospital in operation as of that date.
   (2) The availability of supplemental lump-sum payment adjustments
under this subdivision shall be determined by the department as
follows:
   (A) The final maximum state disproportionate share hospital
allotment for California under the provisions of applicable federal
medicaid rules shall be identified for the 1995 federal fiscal year.
   (B) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, that are applicable to
the period October 1, 1994, through June 30, 1995, shall be
determined.  The applicability of the per diem payment adjustment
amounts to this period of time shall be determined in accordance with
federal medicaid rules, including Sections 447.297(d)(3) and 447.298
of Title 42 of the Code of Federal Regulations.
   (C) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, supplemental lump-sum payment
adjustments shall be made under this subdivision in accordance with
paragraph (3).
   (3) The amount of the supplemental lump-sum payment adjustment to
each hospital shall be computed as follows:
   (A) The projected total of all other payment adjustment amounts
payable to each particular hospital under this section applicable to
the 1994-95 payment adjustment year shall be determined.  For each
hospital, this figure shall be identical to the sum of the figures
used for the same hospital in the calculations regarding transfer
amounts under subdivision (h) of Section 14163 for the 1994-95 state
fiscal year, not including the supplemental lump-sum payments
described in this subdivision.
   (B) The projected totals for all hospitals determined under
subparagraph (A) shall be added together to determine an aggregate
total.  This aggregate total shall be identical to the aggregate
figure for all hospitals used in the calculations regarding transfer
amounts under subdivision (h) of Section 14163 for the 1994-95 state
fiscal year, not including the supplemental lump-sum payments
described in this subdivision.
   (C) The figure determined for each hospital under subparagraph (A)
shall be divided by the aggregate figure determined under
subparagraph (B), yielding a percentage figure for each hospital.
   (D) The percentage figure determined for each hospital under
subparagraph (C) shall be multiplied by the positive remainder
calculated under subparagraph (C) of paragraph (2).
   (E) The product as so determined under subparagraph (D) for each
hospital shall be the supplemental lump-sum payment adjustment amount
payable to the particular hospital, which shall be payable because
the facility is a disproportionate share hospital in operation as of
June 30, 1995.
   (4) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments to hospitals on or before
October 31, 1995.
   (5) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.  In doing so, the
department shall comply with any procedures instituted by the Health
Care Financing Administration in connection with Sections 447.297(d)
(3) and 447.298 of Title 42 of the Code of Federal Regulations.
   (x) (1) With respect to per diem payment adjustments otherwise
payable in connection with the period of July 1 through September 30
of the 1994-95 payment adjustment year, payment adjustment amounts
shall be adjusted as described in paragraph (2).
   (2) No per diem payment adjustment amounts shall be payable in
connection with the period of July 1 through September 30 of the
1994-95 payment adjustment year.  The Medi-Cal days of acute
inpatient hospital service paid by or on behalf of the department
that otherwise would have given rise to payment adjustment amounts
with respect to this period of time shall not count toward the
maximum limit set forth in paragraph (2) of subdivision (l).
   (y) Notwithstanding any other provision of law, except subdivision
(z), the payment adjustment program for the 1995-96 payment
adjustment year shall be structured as set forth below.
   (1) (A) The department shall, in the manner used for prior years,
compute the projected total payment adjustment amounts for all
eligible hospitals, by determining for each eligible hospital its
total per diem composite amount and multiplying that figure by 80
percent of the hospital's annualized Medi-Cal inpatient paid days.
   (B) The products of the calculations under subparagraph (A) for
all eligible hospitals shall be added together.  The sum of all these
figures shall be the unadjusted projected total payment adjustment
program for the 1995-96 payment adjustment year.
   (2) The remaining amount available as part of the state
disproportionate share hospital allotment for California under
applicable federal rules for July 1995 through September 1995 (as
part of the 1995 federal fiscal year) shall be recognized as being
zero.
   (3) The department shall estimate what the state disproportionate
share hospital allotment for California will be for the 1996 federal
fiscal year under applicable federal rules.  The estimate shall not
exceed the allotment that was applicable for California for the 1995
federal fiscal year.
   (4) The estimate identified by the department under paragraph (3)
shall be reduced by subtracting the total amount of the supplemental
lump-sum payments paid or payable under subdivisions (v) and (w).
   (5) The remainder determined under paragraph (4) shall be added to
the amount determined under paragraph (2).  The total of those two
amounts shall be the unadjusted tentative size of the payment
adjustment program for the 1995-96 payment adjustment year.
   (6) The total per diem composite amount computed for each eligible
hospital under subparagraph (A) of paragraph (1) shall be modified
as follows:
   (A) The department shall reduce the total per diem composite
amount for each eligible hospital by multiplying the amount by an
identical percentage.  The percentage figure to be used for this
purpose shall be that percentage that is derived by dividing the
amount determined under paragraph (5) by the unadjusted projected
total payment adjustment program amount determined under subparagraph
(B) of paragraph (1).
   (B) The percentage figure derived under subparagraph (A) shall be
applied to the total per diem composite amount for each eligible
hospital, yielding an adjusted total per diem composite amount for
each hospital for the 1995-96 payment adjustment year.
   (C) (i) The adjusted total per diem composite amount determined
under subparagraph (B) for each eligible hospital shall be multiplied
by 80 percent of the hospital's annualized Medi-Cal inpatient paid
days.
   (ii) The amount computed for each hospital under clause (i) shall
be compared to the OBRA 1993 payment limitation that, in accordance
with applicable provisions of the Medi-Cal State Plan, the department
has computed for the particular hospital.
   (iii) Where the amount computed under clause (i) for the
particular hospital is less than the OBRA 1993 payment limitation for
the hospital, the amount computed under clause (i) shall be used for
purposes of clause (v).
   (iv) Where the amount computed under clause (i) for the particular
hospital exceeds the OBRA 1993 payment limitation for the hospital,
the amount computed under clause (i) shall be reduced to an amount
equal to the OBRA 1993 payment limitation for the particular
hospital.  The amount as so reduced shall be used for purposes of
clause (v).
   (v) The amount for each hospital, as determined under either
clause (iii) or clause (iv), as applicable, shall be the adjusted
projected total payment adjustment amount for the hospital for the
1995-96 payment adjustment year.
   (D) The adjusted figures computed for all eligible hospitals under
subparagraph (C) shall be added together, yielding the adjusted
tentative size of the payment adjustment program for the 1995-96
payment adjustment year.
   (7) The adjusted tentative size of the payment adjustment program
for the 1995-96 payment adjustment year as determined under
subparagraph (D) of paragraph (6), and the adjusted projected total
payment adjustment amount for each eligible hospital, as determined
under subparagraph (C) of paragraph (6), shall be distributed as
follows:
   (A) No per diem payment adjustment amounts shall be payable in
connection with the period of July 1 through September 30 of the
1995-96 payment adjustment year.  The Medi-Cal days of acute
inpatient hospital service paid by or on behalf of the department
that otherwise would have given rise to payment adjustment amounts
with respect to this period of time shall not count toward the
maximum limit set forth in paragraph (2) of subdivision (l).
   (B) For all eligible hospitals, the adjusted per diem composite
amounts (as determined under subparagraph (B) of paragraph (6)) shall
be the amounts payable with respect to the period of October 1
through June 30 of the 1995-96 payment adjustment year, subject to
the applicable provisions of subdivision (z).
   (8) For the 1995-96 payment adjustment year, each eligible
hospital that remains in operation as of June 30, 1996, shall also be
eligible to receive a supplemental lump-sum payment adjustment,
which shall be payable as a result of the facility being a
disproportionate share hospital in operation as of that date.  The
availability of supplemental lump-sum payment adjustments under this
paragraph shall be determined by the department as follows:
   (A) The adjusted projected total payment adjustment amount for
each hospital, as determined under subparagraph (C) of paragraph (6),
shall be identified.
   (B) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, that are applicable to
the period July 1, 1995, through June 30, 1996, shall be determined
for each hospital, taking into account subparagraph (A) of paragraph
(7).  The applicability of the per diem payment adjustment amounts to
this period of time shall be determined in accordance with federal
medicaid rules, including Sections 447.297(d)(3) and 447.298 of Title
42 of the Code of Federal Regulations.
   (C) The amount determined under subparagraph (B) for each hospital
shall be subtracted from the amount identified under subparagraph
(A) for each hospital.  If the remainder is a positive figure for the
particular hospital, the supplemental lump-sum payment adjustment
for the hospital shall be the positive remainder amount, which shall
be payable because the facility is a disproportionate share hospital
in operation as of June 30, 1996.
   (D) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments under this paragraph on or
before September 30, 1996.
   (9) Except as provided in subparagraph (C), for the 1995-96
payment adjustment year each eligible hospital that remains in
operation as of June 30, 1996, shall also be eligible to receive a
secondary supplemental payment adjustment, which shall be payable as
a result of the facility being a disproportionate share hospital in
operation as of that date.  The availability of secondary
supplemental payment adjustments under this paragraph shall be
determined by the department as follows:
   (A) The maximum amount of secondary supplemental payment
adjustments available pursuant to this paragraph shall be calculated
as follows:
   (i) The total amount of all per diem payment adjustment amounts,
whether paid or payable, for the 1995-96 payment adjustment year, as
determined under subparagraph (B) of paragraph (8), shall be
identified.
   (ii) The total amount of all supplemental lump-sum payment
adjustments, whether paid or payable, as determined under
subparagraph (C) of paragraph (8), shall be identified.
   (iii) The department shall estimate the total amount of payment
adjustments under this section that it anticipates will be applicable
to the period July 1, 1996, through September 30, 1996.  The
applicability of the payment adjustment amounts to this period of
time shall be determined in accordance with federal medicaid rules,
including Sections 447.297(d)(3) and 447.298 of Title 42 of the Code
of Federal Regulations.
   (iv) The department shall identify the amount of the final maximum
state disproportionate share hospital allotment for California for
the 1996 federal fiscal year under applicable federal rules.  The
amount identified shall not exceed two billion one hundred ninety-one
million four hundred fifty-one thousand dollars ($2,191,451,000).
   (v) The amounts identified or estimated under clauses (i), (ii),
and (iii) shall be added together, and the sum of these amounts shall
be subtracted from the amount identified under clause (iv).  The
remainder determined from this calculation, or the amount of two
hundred million dollars ($200,000,000), whichever is less, shall be
the maximum amount available for secondary supplemental payment
adjustments under this paragraph.
   (B) The maximum amount available for secondary supplemental
payment adjustments, as identified under clause (v) of subparagraph
(A), shall be distributed to eligible hospitals as follows:
   (i) The total amount of all per diem payment adjustments and
supplemental lump-sum payment adjustments relating to the 1995-96
payment adjustment year, whether paid or payable, shall be identified
for each eligible hospital.  However, notwithstanding any other
provision of law, those hospitals referred to in subparagraph (C)
shall not be included in this step, and shall not receive any
secondary supplemental payment adjustments, as described in
subparagraph (C).
   (ii) For purposes of secondary supplemental payment adjustments,
the eligible hospitals shall be classified into various groups.  No
hospital may qualify for more than one of these groups.
Notwithstanding subclause (II), the hospitals described in
subparagraph (C) shall not be included in any of these groups.  The
following groups of hospitals shall be recognized:
   (I) "State of California hospitals," which shall include all
eligible hospitals that, as of July 1, 1995, were licensed to the
State of California or to the University of California.
   (II) "County hospitals," which shall include all eligible
hospitals that, as of July 1, 1995, were licensed to a county or a
city and county, but shall exclude those hospitals referred to in
subparagraph (C).
   (III) "Other public hospitals," which shall include all eligible
hospitals that, as of July 1, 1995, were licensed to a local hospital
district, a local health authority, a city, or any other noncounty
political subdivision of the state.
   (IV) "Children's hospitals," which shall include all eligible
hospitals that, as of July 1, 1995, were included in the children's
hospital group under subdivision (h).
   (V) "Other nonpublic hospitals," which shall include all eligible
hospitals that are not included in any group described in subclauses
(I) through (IV).
   (iii) The amount determined to be the maximum amount of secondary
supplemental payment adjustments under clause (v) of subparagraph (A)
shall first be allocated among the groups of hospitals referred to
in clause (ii), as follows:
   (I) "State of California hospitals":  64.35 percent of the maximum
amount.
   (II) "County hospitals":  18.095 percent of the maximum amount.
   (III) "Other public hospitals":  0.65 percent of the maximum
amount.
   (IV) "Children's hospitals":  6.755 percent of the maximum amount.
   (V) "Other nonpublic hospitals":  10.15 percent of the maximum
amount.
   (iv) (I) The amount of funds allocated pursuant to clause (iii) to
each of the particular groups of hospitals referred to in clauses
(ii) and (iii) shall then be distributed as secondary supplemental
payment adjustments among the eligible hospitals within each
particular group.  The secondary supplemental distributions shall be
made on a descending pro rata basis within each group.  Each cycle of
the descending pro rata distribution shall be considered to be a
phase of the process.  As described in subclauses (II) to (V),
inclusive, in each phase of the descending pro rata distribution, the
pro rata share of the distribution to each hospital that remains
eligible to receive additional distributions shall be computed based
on the ratio of the total payment adjustments that the particular
hospital has already earned under the payment adjustment program for
the 1995-96 payment adjustment year, as compared to the total payment
adjustments already earned by the other hospitals in the particular
group that remain eligible to receive the additional distributions.
   (II) For the first phase, the total amount of payment adjustments
under this section for the 1995-96 payment adjustment year, including
all per diem payment adjustments and all supplemental lump-sum
payment adjustments, that are determined by the department as already
being paid or payable to each hospital eligible for the distribution
shall be determined.
   (III) The figures determined under subclause (II) for each
hospital in the particular group shall be added together to determine
an aggregate total.
   (IV) The figures determined for each hospital under subclause (II)
shall be divided by the aggregate total determined under subclause
(III), yielding a percentage figure for each hospital.
   (V) The percentage figure determined for each hospital under
subclause (IV) shall be applied to the maximum portion of the funds
allocated to the particular group under clause (iii) that can be
distributed in the particular phase until a hospital in the
particular group reaches the limitation set forth in clause (v).
   (v) For each hospital, no secondary supplemental payment
adjustment shall be paid to the extent that either of the following
conditions exist:
   (I) The secondary supplemental payment adjustment would cause the
total of all payment adjustments to the hospital under this section
relating to the 1995-96 payment adjustment year to exceed the amount
that is the product of multiplying 0.95 times the particular hospital'
s OBRA 1993 payment limitation for the 1995-96 payment adjustment
year, as computed by the department in accordance with applicable
provisions of the Medi-Cal State Plan.
   (II) Without regard to any secondary supplemental payment
adjustment, the hospital has already received or has earned payment
adjustments relating to the 1995-96 payment adjustment year that
equal or exceed the product referred to in subclause (I).
   (vi) Any secondary supplemental payment adjustment amount, or
portion thereof, that otherwise would have been payable to a
particular hospital under this paragraph, but that is barred by the
limitation described in clause (v), shall be distributed by the
department through additional phases of the descending pro rata
distribution process to those hospitals within the same group, as set
forth in clauses (ii) and (iii), as the particular hospital.  For
each additional phase, the mathematical steps referred to in
subclauses (II) to (V), inclusive, of clause (iv) shall be repeated
for those hospitals that have not reached the limitation set forth in
clause (v).  The phases shall continue until the funds allocated to
the particular group under clause (iii) have been fully exhausted.
No such distribution, however, shall be in an amount that would cause
any hospital to exceed the limitation set forth in clause (v).
   (C) Notwithstanding any other provision of law, prior to the
allocation or distribution of any secondary supplemental payment
adjustments, hospitals that, as of July 1, 1995, were part of a
county-operated health system of three or more eligible hospitals
licensed to the county, shall be deemed to have reached the
limitations on total payments described in subclause (II) of clause
(v) of subparagraph (B).  Data regarding payment adjustments earned
by these hospitals with respect to the 1995-96 payment adjustment
year, whether paid or payable, shall be included in the computations
under subparagraph (A), but excluded from the computations under
subparagraph (B).
   (D) The department shall make payments of the secondary
supplemental payment adjustments to hospitals on or before November
30, 1996.
   (10) The final total amount of per diem payment adjustments paid
by the department for the 1995-96 payment adjustment year, plus the
final total amount of supplemental lump-sum payment adjustments and
secondary supplemental payment adjustments paid by the department for
the 1995-96 payment adjustment year, shall be the maximum size of
the payment adjustment program for the 1995-96 payment adjustment
year.
   (11) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.  In doing so, the
department shall comply with any procedures instituted by the Health
Care Financing Administration in connection with Sections 447.297(d)
(3) and 447.298 of Title 42 of the Code of Federal Regulations.
   (z) (1) (A) Notwithstanding any other provision of law (except for
subparagraph (B)), all Medi-Cal days of acute inpatient hospital
service paid by or on behalf of the department that give rise to
payment adjustment amounts with respect to the period October 1,
1994, through June 30, 1995, shall be treated as involving 1.4 days
for purposes of payment adjustments with respect to this period of
time.  As a result, each per diem payment adjustment amount otherwise
payable to the hospital in connection with these days shall be
increased by 40 percent.  The Medi-Cal days in question shall be
treated as involving 1.4 days toward the maximum limit set forth in
paragraph (2) of subdivision (l).  The Medi-Cal days in question
shall be treated as involving 1.0 days for purposes of determining
the hospital's annualized Medi-Cal inpatient paid days for the next
applicable payment adjustment year.
   (B) For the 1994-95 payment adjustment year, no eligible hospital
shall receive total payment adjustments, including per diem payment
adjustment amounts and any supplemental lump-sum payment adjustment
amounts, in excess of the projected total payment adjustment amounts
that were computed or recomputed, as applicable, for the hospital by
the department with respect to the 1994-95 payment adjustment year.
For each hospital, this maximum figure shall not exceed the sum of
the following two components:
                     (i) The final figure computed by the department
as the hospital's total per diem composite amount (including any
applicable adjustments under subdivision (p)), multiplied by 80
percent of the hospital's annualized Medi-Cal inpatient paid days.
   (ii) The amount calculated by the department as the hospital's pro
rata share (based on the figures for all hospitals computed under
clause (i)) of the remainder determined by subtracting (I) the sum of
the figures computed for all hospitals under clause (i) from (II)
the final maximum state disproportionate share hospital allotment for
California under applicable federal rules for the 1995 federal
fiscal year.
   (C) Any payment adjustment amount that otherwise would be payable
to a hospital, but that is barred by subparagraph (B), shall be
withheld or recouped by the department and distributed on a
descending pro rata basis as part of the supplemental lump-sum
distribution described in subdivision (w) to those hospitals that
have not reached their maximum figures as described in subparagraph
(B).
   (2) (A) Notwithstanding any other provision of law, except for
subparagraph (B), all Medi-Cal days of acute inpatient hospital
service paid by or on behalf of the department that give rise to
payment adjustment amounts with respect to the period October 1,
1995, through June 30, 1996, shall be treated as involving 1.4 days
for purposes of payment adjustments with respect to this period of
time.  As a result, each per diem payment adjustment amount otherwise
payable to the hospital in connection with these days shall be
increased by 40 percent.  The Medi-Cal days in question shall be
treated as involving 1.4 days toward the maximum limit set forth in
paragraph (2) of subdivision (l).  The Medi-Cal days in question
shall be treated as involving 1.0 days for purposes of determining
the hospital's annualized Medi-Cal inpatient paid days for the next
applicable payment adjustment year.
   (B) For the 1995-96 payment adjustment year, no eligible hospital
shall receive total payment adjustments, including per diem payment
adjustment amounts, supplemental lump-sum payment adjustment amounts,
and secondary supplemental payment adjustments in excess of the
hospital's OBRA 1993 payment limitation as computed by the department
pursuant to the Medi-Cal State Plan.  No hospital shall receive
secondary supplemental payment adjustments to the extent the payment
adjustments would be inconsistent with paragraph (9) of subdivision
(y).
   (C) Any payment adjustment amount that otherwise would be payable
to a hospital, but that is barred by subparagraph (B), shall be
withheld or recouped by the department and thereafter distributed to
other eligible hospitals, refunded to transferors, or otherwise
processed in accordance with this section and Section 14163.
   (3) Notwithstanding any other provision of law, to the extent
necessary or appropriate to implement and administer the amendments
to this section enacted during the 1994 calendar year, the department
may utilize an approach involving interim payments, with
reconciliation to final payments within a reasonable time.
   (aa) (1) For the 1996-97 payment adjustment year, each eligible
hospital that remains in operation as of June 30, 1997, shall also be
eligible to receive a supplemental lump-sum payment adjustment, that
shall be payable as a result of the facility being a
disproportionate share hospital in operation as of that date.  The
availability of supplemental lump-sum payment adjustments under this
paragraph shall be determined by the department as follows:
   (A) The projected total payment adjustment amount for each
hospital, as determined by the department at the outset of the
payment adjustment year, including any reductions arising from
payment limitations under this section, shall be identified.  For
each hospital, this amount shall be identical to the amount that was
used for the same hospital in the calculations made at the outset of
the 1996-97 state fiscal year regarding transfer amounts under
subdivision (h) of Section 14163 for that fiscal year.
   (B) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, that are applicable to
the period July 1, 1996, through June 30, 1997, shall be determined
for each hospital.  The applicability of the per diem payment
adjustment amounts to this period of time shall be determined in
accordance with federal medicaid rules including Sections 447.297(d)
(3) and 447.298 of Title 42 of the Code of Federal Regulations.
   (C) The amount determined under subparagraph (B) for each hospital
shall be subtracted from the amount identified under subparagraph
(A) for each hospital.  If the remainder is a positive figure for the
particular hospital, the supplemental lump-sum payment adjustment
for the hospital shall be the positive remainder amount, which shall
be payable because the facility is a disproportionate share hospital
in operation as of June 30, 1997.
   (D) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments under this paragraph on or
before September 30, 1997.
   (2) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.  In doing so, the
department shall comply with any procedures instituted by the Health
Care Financing Administration in connection with Sections 447.297(d)
(3) and 447.298 of Title 42 of the Code of Federal Regulations.
   (ab) (1) For the 1997-98 payment adjustment year, eligible
hospitals that meet the requirements of this subdivision and that
remain in operation as of September 30, 1997, shall be eligible to
receive a special supplemental payment adjustment, which shall be
payable as a result of the facility being a disproportionate share
hospital in operation as of that date.  For purposes of federal
medicaid rules, including Section 447.297(d) of Title 42 of the Code
of Federal Regulations, the special supplemental payment adjustments
shall be applicable to the federal fiscal year that ends on September
30, 1997.
   (2) The availability of special supplemental payment adjustments
under this subdivision shall be determined as follows:
   (A) The final maximum state disproportionate share hospital
allotment for California under the provisions of applicable federal
medicaid rules shall be identified for the 1997 federal fiscal year.
   (B) The total amount of all per diem payment adjustment amounts
and supplemental payment adjustments under this section (exclusive of
any payments under this subdivision) applicable to the 1997 federal
fiscal year, whether paid or payable, shall be determined.  The
applicability of per diem payment adjustment amounts and supplemental
payment adjustments of all types to the 1997 federal fiscal year
shall be determined in accordance with federal medicaid rules,
including Sections 447.297(d)(3) and 447.298 of Title 42 of the Code
of Federal Regulations.
   (C) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, special supplemental payment
adjustments shall be made under this subdivision in accordance with
paragraph (3).  The positive remainder shall be the maximum amount of
special supplemental payment adjustments under this subdivision.
   (3) (A) For purposes of these special supplemental payment
adjustments, only hospitals that can be categorized into either of
the two groups specified in clauses (i) and (ii) shall be eligible to
receive the supplemental payment adjustments, and no hospital may
qualify for more than one of the two groups.  The following groups of
hospitals shall be recognized:
   (i) "Public hospitals," which shall include all eligible hospitals
that, as of July 1, 1997, met the definition of a public hospital.
   (ii) "Nonpublic hospitals," which shall include all eligible
hospitals that, as of July 1, 1997, met the definition of a nonpublic
hospital.
   (B) The amount determined to be the maximum amount of special
supplemental payment adjustments under subparagraph (C) of paragraph
(2) shall first be allocated between the two groups of hospitals
referred to in subparagraph (A) as follows:
   (i) "Public hospitals":  74.885 percent of the maximum amount.
   (ii) "Nonpublic hospitals":  25.115 percent of the maximum amount.
   (C) The amount of funds allocated pursuant to subparagraph (B) to
each of the particular groups of hospitals referred to in
subparagraphs (A) and (B) shall then be distributed as special
supplemental payment adjustments among the eligible hospitals within
each particular group as follows:
   (i) The department shall compute the projected total payment
adjustment amounts for all eligible hospitals for the 1997-98 payment
adjustment year, exclusive of any payments under this subdivision,
subdivision (ad), or subdivision (af), by determining for each
eligible hospital its total per diem composite amount and multiplying
that figure by the maximum number of the hospital's Medi-Cal
inpatient paid days determined under paragraph (2) of subdivision
(l).  For purposes of this clause, the determinations shall be
without regard to the OBRA 1993 payment limitations.
   (ii) The amount computed under clause (i) for each hospital
described in subparagraph (A) shall be compared to the amount that is
the product of multiplying 0.95 times the OBRA 1993 payment
limitation that, in accordance with applicable provisions of the
Medi-Cal State Plan, the department has computed for the particular
hospital for the 1997-98 payment adjustment year.
   (iii) Where the amount computed under clause (i) for the
particular hospital is equal to or exceeds the product computed for
the hospital under clause (ii), the hospital shall not receive a
special supplemental payment adjustment.  Data regarding hospitals
that have reached this limitation shall not be used for purposes of
clauses (v) through (viii).
   (iv) Where the amount computed under clause (i) for the particular
hospital is less than the product computed for the hospital under
clause (ii), the amount computed under clause (i) for the hospital
shall be used for purposes of clauses (v) through (viii).
   (v) The figures determined under clause (iv) for each hospital in
the particular group shall be added together to determine an
aggregate total for each group.
   (vi) The figures determined for each hospital under clause (iv)
shall be divided by the aggregate total determined under clause (v)
for the particular group, yielding a percentage figure for each
hospital.
   (vii) The percentage figure determined for each hospital under
clause (vi) shall be applied to the maximum portion of the funds
allocated to the particular group under subparagraph (B), to
determine the hospital's pro rata share of the special supplemental
lump-sum payment adjustments.  Except, however, in the case of a
nonpublic hospital that, as of July 1, 1997, meets the definition of
a children's hospital, such pro rata share otherwise determined shall
be multiplied by a factor of 1.09, yielding a modified pro rata
share.  The pro rata share for the other nonpublic hospitals shall be
reduced accordingly, yielding a modified pro rata share, so that the
maximum portion of the funds allocated to the nonpublic hospitals
group will not be exceeded.  The pro rata share or modified pro rata
share, as applicable, for each hospital, as computed under this
clause, shall also be used for all purposes relating to descending
pro rata distributions under clause (viii).
   (viii) In no event shall a hospital receive special supplemental
payment adjustment amounts in excess of the difference between the
product computed for the hospital under clause (ii) and the amount
computed for the hospital under clause (i).  Any special supplemental
payment adjustment amount, or portion thereof, that otherwise would
have been payable under this paragraph to a hospital, but that is
barred by this limitation, shall be distributed on a descending pro
rata basis to those hospitals within the same group.
   (D) The department shall make interim and final payments of the
special supplemental payment adjustments to hospitals on or before
February 28, 1998.
   (4) The department shall implement this subdivision only if
consistent with federal medicaid law and the Medi-Cal State Plan, and
only if the department determines that federal financial
participation is available.
   (ac) Notwithstanding any other provision of law, the payment
adjustment program with respect to the period October 1, 1997 through
June 30, 1998, shall be structured as set forth below and in
subdivisions (ad) and (af).  However, if the effective date of the
Medi-Cal State Plan amendment relating to this subdivision is later
than October 1, 1997, as approved by the federal Health Care
Financing Administration, all references in this subdivision to the
period October 1, 1997, through June 30, 1998, shall be references to
the period that commences on that effective date and continues
through June 30, 1998.
   (1) (A) The department shall utilize the computations made
pursuant to clause (i) of subparagraph (C) of paragraph (3) of
subdivision (ab) of the projected total payment adjustment amounts
for all eligible hospitals for the entire 1997-98 payment adjustment
year, exclusive of any supplemental payments under subdivision (ab),
(ad), or (af).
   (B) The computed amount referred to in subparagraph (A) for each
hospital shall be compared to the OBRA 1993 payment limitation that,
in accordance with applicable provisions of the Medi-Cal State Plan,
the department has computed for the particular hospital.
   (C) Where the computed amount referred to in subparagraph (A) for
the particular hospital exceeds the OBRA 1993 payment limitation for
the hospital, the amount computed under subparagraph (A) shall be
reduced to an amount equal to the OBRA 1993 payment limitation for
the particular hospital.  The amount so reduced shall be used for
purposes of subparagraph (E).
   (D) Where the computed amount referred to in subparagraph (A) for
the particular hospital is equal to or less than the OBRA 1993
payment limitation for the hospital, the computed amount referred to
in subparagraph (A) shall be used for purposes of subparagraph (E).
   (E) The amounts determined under subparagraphs (C) and (D) for all
eligible hospitals shall be added together, yielding an aggregate
sum.  The aggregate sum shall be the unadjusted projected total
payment adjustment program for the entire 1997-98 payment adjustment
year, exclusive of any supplemental payments under subdivision (ab)
or (ad).
   (2) The initial maximum size of the payment adjustment program for
the entire 1997-98 payment adjustment year shall be set at one
billion seven hundred fifty million dollars ($1,750,000,000),
exclusive of any supplemental payments under subdivision (ab) or
(ad).
   (3) The department shall increase or decrease the amount
determined for each eligible hospital under subparagraph (C) or (D)
of paragraph (1), as applicable, by multiplying the amount by an
identical percentage, yielding the hospital's tentative adjusted
projected total payment adjustment amount for the 1997-98 payment
adjustment year.  The identical percentage figure to be used for this
purpose shall be that percentage that is derived by dividing the
amount set forth in paragraph (2) by the aggregate sum determined
under subparagraph (E) of paragraph (1).  Except, however, the amount
determined for a hospital under subparagraph (C) or (D) of paragraph
(1) shall not be increased if it would exceed the OBRA 1993 payment
limitation for the hospital.
   (4) The tentative adjusted projected total payment adjustment
amount computed for each eligible hospital under paragraph (3) shall
be further adjusted as follows:
   (A) (i) For each eligible hospital that met the definition of a
nonpublic-converted hospital as of July 1, 1997, the hospital's
tentative adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic-converted hospital adjustment factor."
The applicable adjustment factor shall be that which is necessary to
result in an amount, for each hospital, equal to the amount used for
the particular hospital under subparagraph (E) of paragraph (1).  The
amount so adjusted shall be used for purposes of clause (iii).
   (ii) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, applicable to the period
July 1, 1997, through September 30, 1997, shall be determined for
each hospital referred to in clause (i).  The applicability of the
per diem payment adjustment amounts to the period July 1, 1997,
through September 30, 1997, shall be determined in accordance with
federal medicaid rules, including Sections 447.297(d)(3) and 447.298
of Title 42 of the Code of Federal Regulations.  However, if the
effective date of the Medi-Cal State Plan amendment relating to this
subdivision is later than October 1, 1997, as approved by the federal
Health Care Financing Administration, all determinations under this
clause shall include per diem payment adjustment amounts applicable
to the period July 1, 1997, through the date that is one day prior to
that effective date.
   (iii) The amount determined for each hospital under clause (i)
shall be reduced by the amount determined under clause (ii) for the
hospital.  The resulting figure shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 1997, through June 30, 1998, which shall be paid to the
hospital in accordance with paragraph (5).
   (B) (i) For each eligible hospital that met the definition of a
nonpublic hospital as of July 1, 1997, the hospital's tentative
adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic hospital adjustment factor."  The
applicable adjustment factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each nonpublic hospital
described above shall be added together.
   (II) The amount identified in paragraph (2) shall be divided by
2.38.  The resulting figure shall then be reduced by the sum of the
amounts determined for all nonpublic-converted hospitals under
clauses (ii) and (iii) of subparagraph (A).
   (III) The amount computed under subclause (II) shall be divided by
2, and the result thereof further reduced by the amount of
thirty-seven million five hundred thousand dollars ($37,500,000).
   (IV) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (III) by the
amount derived in subclause (I).
   (ii) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, applicable to the period
July 1, 1997, through September 30, 1997, shall be determined for
each hospital referred to in clause (i).  The applicability of the
per diem payment adjustment amounts to the period July 1, 1997,
through September 30, 1997, shall be determined in accordance with
federal medicaid rules including Sections 447.297(d)(3) and 447.298
of Title 42 of the Code of Federal Regulations.  However, if the
effective date of the Medi-Cal State Plan amendment relating to this
subdivision is later than October 1, 1997, as approved by the federal
Health Care Financing Administration, all determinations under this
clause shall include per diem payment adjustment amounts applicable
to the period July 1, 1997, through the date that is one day prior to
that effective date.
   (iii) The amount determined for each hospital under clause (i)
shall be reduced by the amount determined under clause (ii) for the
hospital.  The resulting figure shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 1997, through June 30, 1998, which shall be paid to the
hospital in accordance with paragraph (5).
   (C) (i) For each eligible hospital that met the definition of a
public hospital as of July 1, 1997, the hospital's tentative adjusted
projected total payment adjustment amount shall be multiplied by a
"public hospital adjustment factor."  The  applicable adjustment
factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each public hospital
described above shall be added together.
   (II) The amount identified in paragraph (2) shall be reduced by
the sum of the amounts determined for all nonpublic-converted
hospitals under clauses (ii) and (iii) of subparagraph (A) and the
sum of the amounts determined for all nonpublic hospitals under
clauses (ii) and (iii) of subparagraph (B).
   (III) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (II) by the
amount derived in subclause (I).
   (ii) The total amount of all per diem payment adjustment amounts
under this section, whether paid or payable, applicable to the period
July 1, 1997, through September 30, 1997, shall be determined for
each hospital referred to in clause (i).  The applicability of the
per diem payment adjustment amounts to the period July 1, 1997,
through September 30, 1997, shall be determined in accordance with
federal medicaid rules, including Sections 447.297(d)(3) and 447.298
of Title 42 of the Code of Federal Regulations.  However, if the
effective date of the Medi-Cal State Plan amendment relating to this
subdivision is later than October 1, 1997, as approved by the federal
Health Care Financing Administration, all determinations under this
clause shall include per diem payment adjustment amounts applicable
to the period July 1, 1997, through the date that is one day prior to
that effective date.
   (iii) The amount determined for each hospital under clause (i)
shall be reduced by the amount determined under clause (ii) for the
hospital.  The resulting figure shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 1997, through June 30, 1998, which shall be paid to the
hospital in accordance with paragraph (5).
   (5) The final adjusted projected total payment adjustment amount
determined for each eligible hospital for the period October 1, 1997,
through June 30, 1998, shall be distributed in 16 or fewer equal
installments to be paid no later than the 10th and 25th day of each
month during the period that commences on the effective date of the
Medi-Cal State Plan amendment relating to this subdivision, as
approved by the federal Health Care Financing Administration, and
continues through May 25, 1998.
   (6) Notwithstanding any other provision of law, for the entire
1997-98 payment adjustment year, no eligible hospital shall receive
total payment adjustments, including per diem payment adjustments,
payments under this subdivision, and any supplemental payments under
subdivision (ab) or (ad), in excess of the hospital's OBRA 1993
payment limitation as computed by the department pursuant to the
Medi-Cal State Plan.  No hospital shall receive any special
supplemental payment adjustments or supplemental lump-sum payment
adjustments to the extent the payments would be inconsistent with
subdivision (ab) or (ad), respectively.
   (7) The aggregate sum of the final adjusted projected total
payment adjustment amounts computed under paragraph (4) for each
eligible hospital for the period October 1, 1997, through June 30,
1998, plus the aggregate sum of the amounts determined for each
eligible hospital under clause (ii) of subparagraph (A) of paragraph
(4), clause (ii) of subparagraph (B) of paragraph (4) and clause (ii)
of subparagraph (C) of paragraph (4), shall be the maximum size of
the payment adjustment program for the entire 1997-98 payment
adjustment year, exclusive of the special supplemental payment
adjustments provided for under subdivision (ab) and the supplemental
lump-sum payment adjustments provided for under subdivision (ad).
   (8) The department shall implement this subdivision only if
consistent with federal medicaid law and the Medi-Cal State Plan, and
only if the department determines that federal financial
participation is available.
   (ad) (1) For the 1997-98 payment adjustment year, eligible
hospitals that meet the requirements of this subdivision and that
remain in operation as of June 30, 1998, shall be eligible to receive
a supplemental lump-sum payment adjustment, which shall be payable
as a result of the facility being a disproportionate share hospital
in operation as of that date, but only if the hospital has remained
in operation for the period October 1, 1997, to June 30, 1998,
inclusive.
   (2) The amount of supplemental lump-sum payment adjustments
available to hospitals under this subdivision shall be four hundred
five million dollars ($405,000,000).
   (3) (A) For purposes of these supplemental lump-sum payment
adjustments, only hospitals that can be categorized into either of
the two groups specified in clauses (i) and (ii) shall be eligible to
receive the supplemental payment adjustments, and no hospital may
qualify for more than one of the two groups.  The following groups of
hospitals shall be recognized:
   (i) "Public hospitals," which shall include all eligible hospitals
that, as of July 1, 1997, met the definition of a public hospital.
   (ii) "Nonpublic hospitals," which shall include all eligible
hospitals that, as of July 1, 1997, met the definition of a nonpublic
hospital.
   (B) The amount of supplemental lump-sum payment adjustments as
referred to in paragraph (2) shall first be allocated between the two
groups of hospitals referred to in subparagraph (A) as follows:
   (i) "Public hospitals":  72.17 percent of the amount.
   (ii) "Nonpublic hospitals":  27.83 percent of the amount.
   (C) The amount of funds allocated pursuant to subparagraph (B) to
each of the particular groups of hospitals referred to in
subparagraphs (A) and (B) shall then be distributed as supplemental
lump-sum payment adjustments among the eligible hospitals within each
particular group as follows:
   (i) The department shall identify for each eligible hospital the
total amount of payment adjustments under this section (exclusive of
any payments under this subdivision and subdivision (af)) applicable
to the 1997-98 payment adjustment year, whether paid or payable.  The
applicability of the payment adjustment amounts to this period of
time shall be determined in accordance with federal medicaid rules,
including Sections 447.297(d)(3) and 447.298 of Title 42 of the Code
of Federal Regulations.
   (ii) The amount identified for each hospital under clause (i)
shall be compared to the OBRA 1993 payment limitation that, in
accordance with applicable provisions of the Medi-Cal State Plan, the
department has computed for the particular hospital for the 1997-98
payment adjustment year.
   (iii) Where the amount computed under clause (i) for the
particular hospital is equal to or exceeds the OBRA 1993 payment
limitation for the hospital, the hospital shall not receive a
supplemental lump-sum payment adjustment.  Data regarding hospitals
that have reached this limitation shall not be used for purposes of
clauses (v) through (viii).
                      (iv) Where the amount computed under clause (i)
for the particular hospital is less than the OBRA 1993 payment
limitation for the hospital, the amount computed under clause (i)
minus that amount paid or payable to the hospital under subdivision
(ab) shall be used for purposes of clauses (v) through (viii).
   (v) The figures determined under clause (iv) for each hospital in
the particular group shall be added together to determine an
aggregate total for each group.
   (vi) The figures determined for each hospital under clause (iv)
shall be divided by the aggregate total determined under clause (v)
for the particular group, yielding a percentage figure for each
hospital.
   (vii) The percentage figure determined for each hospital under
clause (vi) shall be applied to the maximum portion of the funds
allocated to the particular group under subparagraph (B), to
determine the hospital's pro rata share of the supplemental lump-sum
payment adjustments.  Except, however, in the case of a nonpublic
hospital that, as of July 1, 1997, meets the definition of a children'
s hospital, the pro rata share otherwise determined shall be
multiplied by a factor of 1.09, yielding a modified pro rata share.
The pro rata share for the other nonpublic hospitals shall be reduced
accordingly, yielding a modified pro rata share, so that the maximum
portion of the funds allocated to the nonpublic hospitals group will
not be exceeded.  The pro rata share or modified pro rata share, as
applicable, for each hospital, as computed under this clause, shall
also be used for all purposes relating to descending pro rata
distributions under clause (viii).
   (viii) In no event shall a hospital receive supplemental lump-sum
payment adjustment amounts in excess of the difference between the
OBRA 1993 payment limitation for the hospital and the amount computed
for the hospital under clause (i).  Any supplemental lump-sum
payment adjustment amount, or portion thereof, that otherwise would
have been payable under this paragraph to a hospital, but that is
barred by this limitation, shall be distributed on a descending pro
rata basis to those hospitals within the same group.
   (D) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments to hospitals on or before
August 15, 1998.
   (4) The department shall implement this subdivision only if
consistent with federal medicaid law and the Medi-Cal State Plan, and
only if the department determines that federal financial
participation is available.
   (5) Notwithstanding any other provision of law, the payment
adjustments, data, and related aspects of subdivision (af) shall not
be taken into account for any purpose under this subdivision,
subdivision (ab), or subdivision (ac).
   (ae) (1) In the event that any provision of subdivision (ab),
(ac), or (ad), as reflected in a proposed Medi-Cal State Plan
amendment, is not approved by the federal Health Care Financing
Administration, the director shall modify the proposed Medi-Cal State
Plan amendment in a manner intended to be consistent with all
applicable federal requirements.  Subject to the requirements of
federal law, in developing the modified proposed Medi-Cal State Plan
amendment, the director shall, to the extent practicable,
incorporate, implement, and modify, as necessary, the payment
methodologies applicable to the 1997-98 payment adjustment year in a
manner that is as consistent as possible with the approach and intent
of subdivisions (ab), (ac), and (ad), respectively.
   (2) In the event that any provision of subdivision (af), (ag),
(ah), (ai), or (aj), as reflected in a proposed Medi-Cal State Plan
amendment, is not approved by the federal Health Care Financing
Administration, the director shall modify that proposed Medi-Cal
State Plan amendment in a manner intended to be consistent with all
applicable federal requirements.  Subject to the requirements of
federal law, in developing the modified proposed Medi-Cal State Plan
amendment, the director shall, to the extent practicable,
incorporate, implement, and modify, as necessary, the payment
methodologies applicable to the 1997-98, 1998-99, and 1999-2000
payment adjustment years in a manner that is as consistent as
possible with the approach and intent of subdivisions (af), (ag),
(ah), (ai), and (aj), respectively.
   (3) In the event that any provision of subdivision (ak), (al),
(am), or (an), as reflected in a proposed Medi-Cal State Plan
amendment, is not approved by the federal Health Care Financing
Administration, the director shall modify that proposed Medi-Cal
State Plan amendment in a manner intended to be consistent with all
applicable federal requirements.  Subject to the requirements of
federal law, in developing the modified proposed Medi-Cal State Plan
amendment, the director shall, to the extent practicable, and after
consulting with representatives of the hospital industry, including,
but not limited to, the California Healthcare Association,
incorporate, implement, and modify, as necessary, the payment
methodologies applicable to the 2000-01 payment adjustment year and
subsequent payment adjustment years in a manner that is as consistent
as possible with the approach and intent of subdivisions (ak), (al),
(am), and (an), respectively.
   (af) (1) The provisions of this subdivision shall apply for the
1997-98 payment adjustment year, and, for all purposes under the
program, shall be implemented subsequent to the provisions of
subdivisions (ab), (ac), and (ad).  Under this subdivision, eligible
hospitals that, as of October 1, 1997, were part of a county-operated
health system of three or more eligible hospitals licensed to the
county, and that are in operation as of June 30, 1998, shall be
eligible to receive an additional supplemental lump-sum payment
adjustment, which shall be payable as a result of the facility being
a disproportionate share hospital in operation as of that date, but
only if the hospital has remained in operation for the period October
1, 1997, through June 30, 1998.
   (2) The maximum amount of additional supplemental lump-sum payment
adjustments under this subdivision shall be one hundred sixty-six
million dollars ($166,000,000).
   (3) The maximum amount of funds specified under paragraph (2)
shall be distributed as additional supplemental lump-sum payment
adjustments among the hospitals eligible under this subdivision as
follows:
   (A) The department shall identify for each eligible hospital the
total amount of payment adjustments under this section (exclusive of
any payments under this subdivision) applicable to the 1997-98
payment adjustment year, whether paid or payable.  The applicability
of the payment adjustment amounts to this period of time shall be
determined in accordance with federal medicaid rules, including
Sections 447.297(d)(3) and 447.298 of Title 42 of the Code of Federal
Regulations.
   (B) The amount identified for each hospital under subparagraph (A)
shall be compared to the OBRA 1993 payment limitation that, in
accordance with applicable provisions of the Medi-Cal State Plan, the
department has computed for the particular hospital for the 1997-98
payment adjustment year.
   (C) Where the amount computed under subparagraph (A) for the
particular hospital is equal to or exceeds the OBRA 1993 payment
limitation for the hospital, the hospital shall not receive an
additional supplemental lump-sum payment adjustment.  Data regarding
hospitals that have reached this limitation shall not be used for
purposes of subparagraphs (E) through (H).
   (D) Where the amount computed under subparagraph (A) for the
particular hospital is less than the OBRA 1993 payment limitation for
the hospital, the amount computed under subparagraph (A) shall be
used for purposes of subparagraphs (E) through (H).
   (E) The figures determined under subparagraph (D) for each
hospital eligible to receive additional supplemental lump-sum payment
adjustments under this subdivision shall be added together to
determine an aggregate total.
   (F) The figures determined for each hospital under subparagraph
(D) shall be divided by the aggregate total determined under
subparagraph (E), yielding a percentage figure for each hospital.
   (G) The percentage figure determined for each hospital under
subparagraph (F) shall be applied to the maximum amount specified in
paragraph (2), to determine the hospital's pro rata share of the
additional supplemental lump-sum payment adjustments.
   (H) In no event shall a hospital receive additional supplemental
lump-sum payment adjustment amounts in excess of the difference
between the OBRA 1993 payment limitation for the hospital and the
amount computed for the hospital under subparagraph (A).  Any
additional supplemental lump-sum payment adjustment amount, or
portion thereof, that otherwise would have been payable under this
paragraph to a hospital, but that is barred by this limitation, shall
be distributed on a descending pro rata basis to those hospitals
eligible for distributions under this subdivision that have not
reached their OBRA 1993 payment limitation.
   (4) The department shall make interim and final payments of the
additional supplemental lump-sum payment adjustments to hospitals on
or before August 15, 1998.
   (5) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (ag) Notwithstanding any other provision of law, the payment
adjustment program for the 1998-99 payment adjustment year shall be
structured as set forth below and in subdivision (ah).
   (1) (A) The department shall compute the projected total payment
adjustment amounts for all eligible hospitals for the 1998-99 payment
adjustment year by determining for each eligible hospital its total
per diem composite amount and multiplying that figure by the maximum
number of the hospital's Medi-Cal inpatient paid days determined
under paragraph (2) of subdivision (l).  For purposes of this
subparagraph, these determinations shall be without regard to the
OBRA 1993 payment limitations.  With respect to a public hospital
that, as of July 1, 1998, is part of a county-operated health system
of three or more eligible hospitals licensed to the county, the
projected total payment adjustment amount shall be reduced by an
amount equal to the amount paid or payable to the hospital under
subdivision (af).
   (B) The computed amount referred to in subparagraph (A) for each
hospital shall be compared to the OBRA 1993 payment limitation that,
in accordance with applicable provisions of the Medi-Cal State Plan,
the department has computed for the particular hospital.
   (C) Where the computed amount referred to in subparagraph (A) for
the particular hospital exceeds the OBRA 1993 payment limitation for
the hospital, the amount computed under subparagraph (A) shall be
reduced to an amount equal to the OBRA 1993 payment limitation for
the particular hospital.  The amount so reduced shall be used for
purposes of subparagraph (E).  Except, however, with respect to a
public hospital that, as of July 1, 1998, is part of a
county-operated health system of three or more eligible hospitals
licensed to the county, the amount as so reduced shall be increased
by an amount equal to the amount paid or payable to the hospital
under subdivision (af), and used for purposes of subparagraph (E).
   (D) Where the computed amount referred to in subparagraph (A) for
the particular hospital is equal to or less than the OBRA 1993
payment limitation for the hospital, the computed amount referred to
in subparagraph (A) shall be used for purposes of subparagraph (E).
Except, however, with respect to a public hospital that, as of July
1, 1998, is part of a county-operated health system of three or more
eligible hospitals licensed to the county, the computed amount shall
be increased by an amount equal to the amount paid or payable to the
hospital under subdivision (af), and used for purposes of
subparagraph (E).
   (E) The amounts determined under subparagraphs (C) and (D) for all
eligible hospitals shall be added together, yielding an aggregate
sum.  The aggregate sum shall be the unadjusted projected total
payment adjustment program for the 1998-99 payment adjustment year,
exclusive of any supplemental payment adjustments under subdivision
(ah).
   (2) The initial maximum size of the payment adjustment program for
the 1998-99 payment adjustment program shall be set at one billion
seven hundred fifty million dollars ($1,750,000,000), exclusive of
any supplemental payment adjustments under subdivision (ah).
   (3) (A) The department shall increase or decrease the amount
determined for each eligible hospital under subparagraph (C) or (D)
of paragraph (1), as applicable, by multiplying the amount by an
identical percentage, yielding the hospital's tentative adjusted
projected total payment adjustment amount for the 1998-99 payment
adjustment year.  The identical percentage figure to be used for this
purpose shall be that percentage that is derived by dividing the
amount set forth in paragraph (2) by the aggregate sum determined
under subparagraph (E) of paragraph (1).  Except, however, the amount
determined for a hospital under subparagraph (C) or (D) of paragraph
(1), as applicable, shall not be increased so that it would exceed
the OBRA 1993 payment limitation for the hospital, and, where that
would otherwise occur, the remaining amount that would have been
allocated to the particular hospital shall be reallocated to all
other hospitals (that have not reached their OBRA 1993 payment
limitation) on a pro rata basis so that the aggregate sum of the
tentative adjusted projected total payment adjustment amounts for all
hospitals equals the amount set forth in paragraph (2).
   (B) (i) With respect to a public hospital that, as of July 1,
1998, is part of a county-operated health system of three or more
eligible hospitals licensed to the county, the amount determined
under subparagraph (C) or (D) of paragraph (1), as applicable, shall
be reduced by an amount equal to the amount paid or payable to the
hospital under subdivision (af), prior to applying the OBRA 1993
payment limitation under subparagraph (A).
   (ii) Notwithstanding clause (i), all other computations under
subparagraph (A), including the determination of the hospital's pro
rata share of any reallocations, shall be made as though the
reduction described in clause (i) had not occurred.
   (4) The tentative adjusted projected total payment adjustment
amount computed for each eligible hospital under paragraph (3) shall
be further adjusted as follows:
   (A) (i) For each eligible hospital that meets the definition of a
nonpublic-converted hospital as of July 1, 1998, the hospital's
tentative adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic-converted hospital adjustment factor."
The applicable adjustment factor shall be that which is necessary to
result for each such hospital in an amount equal to the amount used
for the particular hospital under subparagraph (E) of paragraph (1).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the 1998-99
payment adjustment year, which shall be paid to the hospital in
accordance with paragraph (5).
   (B) (i) For each eligible hospital that meets the definition of a
converted hospital as of July 1, 1998, the hospital's tentative
adjusted projected total payment adjustment amount shall be
multiplied by a "converted hospital adjustment factor."  The
applicable adjustment factor shall be that which is necessary to
result for each such hospital in an amount equal to:  (I) the maximum
number of the hospital's annualized Medi-Cal inpatient paid days
determined under paragraph (2) of subdivision (l); multiplied by (II)
the total per diem composite amount determined for the hospital, the
calculation of the per diem composite amount being restricted by a
maximum low-income number of 40 percent for the hospital, regardless
if the hospital's low-income number would otherwise be higher.  In no
case shall the product of this calculation exceed the amount used
for the particular hospital under subparagraph (E) of paragraph (1).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the 1998-99
payment adjustment year, which shall be paid to the hospital in
accordance with paragraph (5).
   (C) (i) For each eligible hospital that meets the definition of a
nonpublic hospital as of July 1, 1998, the hospital's tentative
adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic hospital adjustment factor."  The
applicable adjustment factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each nonpublic hospital
described above shall be added together.
   (II) The amount identified in paragraph (2) shall be divided by
2.347.  The resulting figure shall then be reduced by the sum of the
amounts determined for all nonpublic-converted hospitals under clause
(ii) of subparagraph (A) and the amounts determined for all
converted hospitals under clause (ii) of subparagraph (B).
   (III) The amount computed under subclause (II) shall be divided by
2, and the result thereof further reduced by the amount of
thirty-seven million five hundred thousand dollars ($37,500,000).
   (IV) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (III) by the
amount derived in subclause (I).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the 1998-99
payment adjustment year, which shall be paid to the hospital in
accordance with paragraph (5).  Except, however, in no case shall the
final adjusted projected total payment adjustment amount exceed the
hospital's OBRA 1993 payment limitation, and, where that would
otherwise occur, the remaining amount that would have been allocated
to the particular hospital shall be reallocated to all other
nonpublic hospitals (that have not reached their OBRA 1993 payment
limitation) on a pro rata basis so that the aggregate sum of the
final adjusted projected total payment adjustment amounts for all
nonpublic hospitals equals the amount derived in subclause (III) of
clause (i).
   (D) (i) For each eligible hospital that meets the definition of a
public hospital as of July 1, 1998, the hospital's tentative adjusted
projected total payment adjustment amount shall be multiplied by a
"public hospital adjustment factor."  The applicable adjustment
factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each public hospital
described above shall be added together.
   (II) The amount identified in paragraph (2) shall be reduced by
the sum of the amounts determined for all nonpublic-converted
hospitals under clause (ii) of subparagraph (A), the amounts
determined for all converted hospitals under clause (ii) of
subparagraph (B) and the amounts determined for all nonpublic
hospitals under clause (ii) of subparagraph (C).
   (III) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (II) by the
amount derived in subclause (I).
   (ii) The product determined for each hospital under clause (i)
shall be further adjusted as follows:
   (I) The product shall be reduced as necessary so as not to exceed
the hospital's OBRA 1993 payment limitation.
   (II) With respect to a public hospital that, as of July 1, 1998,
is part of a county-operated health system of three or more eligible
hospitals licensed to the county, the product shall, prior to the
application of subclause (I), be reduced by an amount equal to the
amount paid or payable to the hospital under subdivision (af).
   (III) Any amounts that would otherwise have been allocated to a
hospital but for the hospital's OBRA 1993 payment limitation as
applied under subclause (I) shall be reallocated to all other public
hospitals (that have not reached their OBRA 1993 payment limitation)
on a pro rata basis.  With respect to a public hospital described in
subclause (II), the hospital's pro rata share of any reallocated
amounts shall be based on the product derived for the hospital under
clause (i).
   (IV) The amount determined for each hospital pursuant to subclause
(I) and subclause (II), as applicable (including the reduction under
subclause (II)), plus any reallocations to the hospital under
subclause (III), shall be the final adjusted projected total payment
adjustment amount for the hospital for the 1998-99 payment adjustment
year, which shall be paid to the hospital in accordance with
paragraph (5).
   (5) The final adjusted projected total payment adjustment amount
determined for each eligible hospital for the 1998-99 payment
adjustment year shall be distributed as set forth below.
   (A) With respect to the period July 1, 1998, through September 30,
1998, payment adjustment amounts shall be payable only to those
eligible hospitals that, as of July 1, 1998, were not part of a
county-operated health system of three or more eligible hospitals
licensed to the county.
   (i) The maximum amount of payment adjustments payable to eligible
hospitals under this paragraph for the period of July 1, 1998,
through September 30, 1998, shall be determined as follows:
   (I) The maximum state disproportionate share hospitals allotment
for California under the provisions of applicable federal medicaid
rules shall be identified for the 1998 federal fiscal year.  This
maximum allotment is two billion one hundred seventeen million eight
hundred ninety-nine thousand six hundred sixty-eight dollars
($2,117,899,668).
   (II) The total amount of all payment adjustments under this
section (exclusive of any payments under this subparagraph)
applicable to the 1998 federal fiscal year, whether paid or payable,
shall be determined.  The applicability of payment adjustment amounts
to the 1998 federal fiscal year shall be determined in accordance
with federal medicaid rules, including Sections 447.297(d)(3) and
447.298 of Title 42 of the Code of Federal Regulations.
   (III) The figure determined under subclause (II) shall be
subtracted from the figure identified under subclause (I).  The
positive remainder shall be the maximum amount of payment adjustments
payable with respect to the period July 1, 1998, through September
30, 1998, under this subparagraph.
   (ii) With respect to an eligible hospital that, as of July 1,
1998, meets the definition of a nonpublic-converted hospital, the
maximum amount payable for the period July 1, 1998, through September
30, 1998, shall be equal to the product of the final adjusted
projected total payment adjustment amount determined for the hospital
pursuant to paragraph (4), multiplied by a fraction that is computed
as follows:
   (I) The maximum amount derived in subclause (III) of clause (i)
shall be increased by an amount equal to the total amount of payment
adjustments paid or payable under subdivision (af).
   (II) The figure derived in subclause (I) shall be divided by the
amount specified in paragraph (2).
   (iii) With respect to an eligible hospital that, as of July 1,
1998, meets the definition of a converted hospital, the maximum
amount payable for the period July 1, 1998, through September 30,
1998, shall be equal to the product of the final adjusted projected
total payment adjustment amount determined for the hospital pursuant
to paragraph (4), multiplied by a fraction that is computed as
follows:
   (I) The maximum amount derived in subclause (III) of clause (i)
shall be increased by an amount equal to the total amount of payment
adjustments paid or payable under subdivision (af).
   (II) The figure derived in subclause (I) shall be divided by the
amount specified in paragraph (2).
   (iv) With respect to an eligible hospital that, as of July 1,
1998, meets the definition of a nonpublic hospital, the maximum
amount payable for the period July 1, 1998, through September 30,
1998, shall be equal to the product of the final adjusted projected
total payment adjustment amount determined for the hospital pursuant
to paragraph (4), multiplied by a fraction that is computed as
follows:
   (I) The maximum amount derived in subclause (III) of clause (i)
shall be increased by an amount equal to the total amount of payment
adjustments paid or payable under subdivision (af).
   (II) The figure derived in subclause (I) shall be divided by the
amount specified in paragraph (2).
   (v) With respect to an eligible hospital that, as of July 1, 1998,
meets the definition of a public hospital, the maximum amount
payable for the period July 1, 1998, through September 30, 1998,
shall be equal to the product of the final adjusted projected total
payment adjustment amount determined for the hospital pursuant to
paragraph (4), multiplied by a fraction that is computed as follows:
   (I) The maximum amount derived in subclause (III) of clause (i)
shall be reduced by the sum of the amounts determined for all
nonpublic-converted hospitals under clause (ii), the amounts
determined for all converted hospitals under clause (iii) and the
amounts determined for all nonpublic hospitals under clause (iv).
   (II) The amounts computed under paragraph (4) with respect to all
public hospitals that are subject to this subparagraph (A) shall be
added together, yielding an aggregate sum.
   (III) The figure derived in subclause (I) shall be divided by the
aggregate sum derived in subclause (II).
   (vi) The resulting product determined for each hospital pursuant
to clauses (ii) through (v), as applicable, shall be distributed to
the hospital in three equal installments, each payable as of the last
day of each month from July 1998 through September 1998.  However,
no hospital shall receive an installment for any month in which the
hospital does not remain in operation for the entire month.  To the
extent that any hospital is not entitled to receive an installment
that otherwise would be payable but for the hospital's failure to
remain in operation through the last day of a particular month, the
amount that would have been paid to the hospital shall be
redistributed among those hospitals within the same hospital group
(as those groups are described in clauses (ii) through (v)) that
remain in operation from July 1, 1998, through September 30, 1998, to
be distributed on a pro rata basis.  The redistributed amounts shall
be payable as of September 30, 1998.
   (B) (i) With respect to the period October 1, 1998, through June
30, 1999, payment adjustment amounts shall be payable to each
eligible hospital in the amount equal to the final adjusted projected
total payment adjustment amount determined for the hospital pursuant
to paragraph (4), less any payment adjustments paid or payable to
the hospital, or payment adjustments that would have been payable but
for the hospital's failure to remain in operation for a particular
month, under subparagraph (A).  The payment adjustments shall be
distributed in eight equal amounts, each payable as of the last day
of each month from October 1998 through May 1999.  However, no
hospital shall receive an installment for any month in which the
hospital does not remain in operation for the entire month.
                              (ii) To the extent that any hospital of
either of the hospital types described in clause (iv) or (v) of
subparagraph (A) is not entitled to receive an installment that
otherwise would be payable but for the hospital's failure to remain
in operation through the last day of a particular month, the amount
that would have been paid to the hospital shall be redistributed
among those hospitals of the same hospital type that remain in
operation from October 1, 1998, through June 30, 1999, to be
distributed on a pro rata basis.  The redistributed amounts shall be
payable as of June 30, 1999.
   (iii) With respect to a public hospital that, as of July 1, 1998,
is part of a county-operated health system of three or more eligible
hospitals licensed to the county, the hospital's pro rata share of
any reallocations under clause (ii) shall be based on the final
adjusted projected total payment adjustment amount determined for the
hospital pursuant to paragraph (4), as increased by an amount equal
to the amount paid or payable to the hospital under subdivision (af).
   (6) Notwithstanding any other provision of law, for the 1998-99
payment adjustment year, no eligible hospital shall receive total
payment adjustments in excess of the hospital's OBRA 1993 payment
limitation as computed by the department pursuant to the Medi-Cal
State Plan.
   (7) The aggregate sum of the final adjusted projected total
payment adjustment amounts computed under paragraph (4) for each
eligible hospital shall be the maximum size of the payment adjustment
program for the 1998-99 payment adjustment year, exclusive of the
supplemental payment adjustments provided for under subdivision (ah).
   (8) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (ah) (1) For the 1998-99 payment adjustment year, eligible
hospitals that meet the requirements of this subdivision and that are
in operation as of June 30, 1999, shall be eligible to receive a
supplemental lump-sum payment adjustment, which shall be payable as a
result of the facility being a disproportionate share hospital in
operation as of that date, but only if the hospital has remained in
operation for the period October 1, 1998, through June 30, 1999.
   (2) The availability of supplemental lump-sum payment adjustments
under this subdivision shall be determined as follows:
   (A) The maximum state disproportionate share hospital allotment
for California under the provisions of applicable federal medicaid
rules shall be identified for the 1999 federal fiscal year.  It is
estimated that this amount will be two billion seventy-one million
seven hundred seventy-four thousand nine hundred seventy-six dollars
($2,071,774,976).
   (B) The total amount of all payment adjustment amounts under this
section (exclusive of any payments under this subdivision) applicable
to the 1999 federal fiscal year, whether paid or payable, shall be
determined.  The applicability of payment adjustment amounts to the
1999 federal fiscal year shall be determined in accordance with
federal medicaid rules, including Sections 447.297(d)(3) and 447.298
of Title 42 of the Code of Federal Regulations.
   (C) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, supplemental lump-sum payment
adjustments shall be made under this subdivision in accordance with
paragraph (3).  The positive remainder shall be the maximum amount of
supplemental lump-sum payment adjustments under this subdivision.
   (3) (A) For purposes of supplemental lump-sum payment adjustments
under this subdivision, only hospitals that can be categorized into
either of the two groups specified in clauses (i) and (ii) below
shall be eligible to receive the supplemental payment adjustments,
and no hospital may qualify for more than one of the two groups.  The
following groups of hospitals shall be recognized:
   (i) "Public hospitals," which shall include all eligible hospitals
that, as of July 1, 1998, met the definition of a public hospital.
   (ii) "Nonpublic hospitals," which shall include all eligible
hospitals that, as of July 1, 1998, met the definition of a nonpublic
hospital.
   (B) The amount determined to be the maximum amount of supplemental
lump-sum payment adjustments under subparagraph (C) of paragraph (2)
shall first be allocated between the two groups of hospitals
referred to in subparagraph (A) as follows:
   (i) "Public hospitals":  72.78 percent of the maximum amount.
   (ii) "Nonpublic hospitals":  27.22 percent of the maximum amount.
   (C) The amount of funds allocated pursuant to subparagraph (B) to
each of the particular groups of hospitals referred to in
subparagraphs (A) and (B) shall then be distributed as supplemental
lump-sum payment adjustments among the eligible hospitals within each
particular group as follows:
   (i) The department shall identify for each eligible hospital the
total amount of payment adjustments under this section (exclusive of
any payments under this subdivision) applicable to the 1998-99
payment adjustment year, whether paid or payable.  The applicability
of the payment adjustment amounts to this period of time shall be
determined in accordance with federal medicaid rules, including
Sections 447.297(d)(3) and 447.298 of Title 42 of the Code of Federal
Regulations.
   (ii) The amount identified for each hospital under clause (i)
shall be compared to the OBRA 1993 payment limitation that, in
accordance with applicable provisions of the Medi-Cal State Plan, the
department has computed for the particular hospital for the 1998-99
payment adjustment year.
   (iii) Where the amount computed under clause (i) for the
particular hospital is equal to or exceeds the OBRA 1993 payment
limitation for the hospital, the hospital shall not receive a
supplemental lump-sum payment adjustment.  Data regarding hospitals
that have reached this limitation shall not be used for purposes of
clauses (v) through (viii).
   (iv) Where the amount computed under clause (i) for the particular
hospital is less than the OBRA 1993 payment limitation for the
hospital, the amount computed under clause (i) shall be used for
purposes of clauses (v) through (viii).  Except, however, with
respect to a public hospital that, as of July 1, 1998, was part of a
county-operated health system of three or more eligible hospitals
licensed to the county, the amount computed under clause (i) plus the
amounts paid or payable to the hospital pursuant to subdivision (af)
shall be used for purposes of clauses (v) through (vii), while the
amount computed under clause (i) only shall be used for purposes of
applying the limitation described in clause (viii).
   (v) The figures determined under clause (iv) for each hospital in
the particular group shall be added together to determine an
aggregate total for each group.
   (vi) The figures determined for each hospital under clause (iv)
shall be divided by the aggregate total determined under clause (v)
for the particular group, yielding a percentage figure for each
hospital.
   (vii) The percentage figure determined for each hospital under
clause (vi) shall be applied to the maximum portion of the funds
allocated to the particular group under subparagraph (B), to
determine the hospital's pro rata share of the supplemental lump-sum
payment adjustments.  Except, however, in the case of a nonpublic
hospital that, as of July 1, 1998, met the definition of a children's
hospital, the pro rata share otherwise determined shall be
multiplied by a factor of 1.09, yielding a modified pro rata share.
The pro rata share for the other nonpublic hospitals shall be reduced
accordingly, yielding a modified pro rata share, so that the maximum
portion of the funds allocated to the nonpublic hospitals group will
not be exceeded.  The pro rata share or modified pro rata share, as
applicable, for each hospital, as computed under this clause, shall
also be used for all purposes relating to descending pro rata
distributions under clause (viii).
   (viii) In no event shall a hospital receive supplemental lump-sum
payment adjustment amounts in excess of the difference between the
OBRA 1993 payment limitation for the hospital and the amount computed
for the hospital under clause (i).  Any supplemental lump-sum
payment adjustment amount, or portion thereof, that otherwise would
have been payable under this paragraph to a hospital, but that is
barred by this limitation, shall be distributed on a descending pro
rata basis to those hospitals within the same group.
   (D) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments to hospitals on or before
August 15, 1999.
   (4) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (ai) Notwithstanding any other provision of law, no payment
adjustment amounts shall be payable in connection with the period of
July 1 through September 30 of the 1999-2000 payment adjustment year.
  The payment adjustment program with respect to the period October
1, 1999, through June 30, 2000, shall be structured as set forth
below and in subdivision (aj).
   (1) (A) The department shall compute the projected total payment
adjustment amounts for all eligible hospitals for the 1999-2000
payment adjustment year, by determining for each eligible hospital
its total per diem composite amount and multiplying that figure by
the maximum number of the hospital's Medi-Cal inpatient paid days
determined under paragraph (2) of subdivision (l).  For purposes of
this subparagraph, these determinations shall be without regard to
the OBRA 1993 payment limitations.
   (B) The computed amount referred to in subparagraph (A) for each
hospital shall be compared to the OBRA 1993 payment limitation that,
in accordance with applicable provisions of the Medi-Cal State Plan,
the department has computed for the particular hospital.
   (C) Where the computed amount referred to in subparagraph (A) for
the particular hospital exceeds the OBRA 1993 payment limitation for
the hospital, the amount computed under subparagraph (A) shall be
reduced to an amount equal to the OBRA 1993 payment limitation for
the particular hospital.  The amount so reduced shall be used for
purposes of subparagraph (E).
   (D) Where the computed amount referred to in subparagraph (A) for
the particular hospital is equal to or less than the OBRA 1993
payment limitation for the hospital, the computed amount referred to
in subparagraph (A) shall be used for purposes of subparagraph (E).
   (E) The amounts determined under subparagraphs (C) and (D) for all
eligible hospitals shall be added together, yielding an aggregate
sum.  The aggregate sum shall be the unadjusted projected total
payment adjustment program for the period of October 1, 1999, through
June 30, 2000, exclusive of any supplemental payment adjustments
under subdivision (aj).
   (2) The initial maximum size of the payment adjustment program for
the period October 1, 1999, through June 30, 2000, shall be set at
one billion seven hundred fifty million dollars ($1,750,000,000),
exclusive of any supplemental payment adjustments under subdivision
(aj).
   (3) The department shall increase or decrease the amount
determined for each eligible hospital under subparagraph (C) or (D)
of paragraph (1), as applicable, by multiplying the amount by an
identical percentage, yielding the hospital's tentative adjusted
projected total payment adjustment amount for the period October 1,
1999, through June 30, 2000.  The identical percentage figure to be
used for this purpose shall be that percentage that is derived by
dividing the amount set forth in paragraph (2) by the aggregate sum
determined under subparagraph (E) of paragraph (1).  Except, however,
the amount determined for a hospital under subparagraphs (C) or (D)
of paragraph (1) shall not be increased so that it would exceed the
OBRA 1993 payment limitation for the hospital, and, where that would
otherwise occur, the remaining amount that would have been allocated
to the particular hospital shall be reallocated to all other
hospitals (that have not reached their OBRA 1993 payment limitation)
on a pro rata basis so that the aggregate sum of the tentative
adjusted projected total payment adjustment amount for all hospitals
equals the amount set forth in paragraph (2).
   (4) The tentative adjusted projected total payment adjustment
amount computed for each eligible hospital under paragraph (3) shall
be further adjusted as follows:
   (A) (i) For each eligible hospital that meets the definition of a
nonpublic-converted hospital as of July 1, 1999, the hospital's
tentative adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic-converted hospital adjustment factor."
The applicable adjustment factor shall be that which is necessary to
result in an amount for each such hospital equal to the amount used
for the particular hospital under subparagraph (E) of paragraph (1).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 1999, through June 30, 2000, which shall be paid to the
hospital in accordance with paragraph (5).
   (B) (i) For each eligible hospital that meets the definition of a
converted hospital as of July 1, 1999, the hospital's tentative
adjusted projected total payment adjustment amount shall be
multiplied by a "converted hospital adjustment factor."  The
applicable adjustment factor shall be that which is necessary to
result for each such hospital in an amount equal to:  (I) the maximum
number of the hospital's annualized Medi-Cal inpatient paid days
determined under paragraph (2) of subdivision (l); multiplied by (II)
the total per diem composite amount determined for the hospital, the
calculation of the per diem composite amount being restricted by a
maximum low-income number of 40 percent for the hospital, regardless
if the hospital's low-income number would otherwise be higher.  In no
case shall the product of this calculation exceed the amount used
for the particular hospital under subparagraph (E) of paragraph (1).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 1999, through June 30, 2000, which shall be paid to the
hospital in accordance with paragraph (5).
   (C) (i) For each eligible hospital that meets the definition of a
nonpublic hospital as of July 1, 1999, the hospital's tentative
adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic hospital adjustment factor."  The
applicable adjustment factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each nonpublic hospital
shall be added together.
   (II) The amount identified in paragraph (2) shall be divided by
2.130.  The resulting figure shall then be reduced by the sums of the
amounts determined for all nonpublic-converted hospitals under
clause (ii) of subparagraph (A) and all converted hospitals under
clause (ii) of subparagraph (B).
   (III) The amount computed under subclause (II) shall be divided by
2, and the result thereof further reduced by the amount of
thirty-seven million five hundred thousand dollars ($37,500,000).
   (IV) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (III) by the
amount derived in subclause (I).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 1999, through June 30, 2000, which shall be paid to the
hospital in accordance with paragraph (5).  Except, however, in no
case shall the final adjusted projected total payment adjustment
amount exceed the hospital's OBRA 1993 payment limitation, and, where
that would otherwise occur, the remaining amount that would have
been allocated to the particular hospital shall be reallocated to all
other nonpublic hospitals (that have not reached their OBRA 1993
payment limitation) on a pro rata basis so that the aggregate sum of
the final adjusted projected total payment adjustment amounts for all
nonpublic hospitals equals the amount derived in subclause (III) of
clause (i).
   (D) (i) For each eligible hospital that meets the definition of a
public hospital as of July 1, 1999, the hospital's tentative adjusted
projected total payment adjustment amount shall be multiplied by a
"public hospital adjustment factor."  The applicable adjustment
factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each public hospital
described above shall be added together.
   (II) The amount identified in paragraph (2) shall be reduced by
the sums of the amounts determined for all nonpublic-converted
hospitals under clause (ii) of subparagraph (A) and all converted
hospitals under clause (ii) of subparagraph (B), and the sum of the
amounts determined for all nonpublic hospitals under clause (ii) of
subparagraph (C).
   (III) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (II) by the
amount derived in subclause (I).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 1999, through June 30, 2000, which shall be paid to the
hospital in accordance with paragraph (5).  Except, however, in no
case shall the final adjusted projected total payment adjustment
amount exceed the hospital's OBRA 1993 payment limitation, and, where
that would otherwise occur, the remaining amount that would have
been allocated to the particular hospital shall be reallocated to all
other public hospitals (that have not reached their OBRA 1993
payment limitation) on a pro rata basis so that the aggregate sum of
the final adjusted projected total payment adjustment amounts for all
public hospitals equals the amount derived in subclause (II) of
clause (i).
   (5) (A) The final adjusted projected total payment adjustment
amount determined for each eligible hospital for the period October
1, 1999, through June 30, 2000, shall be distributed to the hospital
in 8 equal installments, each payable as of the last day of each
month from October 1999 through May 2000.  However, no hospital shall
receive an installment for any month in which the hospital does not
remain in operation for the entire month.
   (B) To the extent that any hospital of either of the hospital
types described in subparagraph (C) or (D) of paragraph (4) is not
entitled to receive an installment that otherwise would be payable
but for the hospital's failure to remain in operation through the
last day of a particular month, the amount that would have been paid
to the hospital shall be redistributed among those hospitals of the
same hospital type that remain in operation from October 1, 1999,
through June 30, 2000, to be distributed on a pro rata basis.  The
redistributed amounts shall be payable as of June 30, 2000.
   (6) Notwithstanding any other provision of law, with respect to a
hospital that meets the definition of a public hospital as of July 1,
1999, the provisions of paragraphs (1) through (5) shall initially
be implemented for the period October 1, 1999, through December 31,
1999, without application of the OBRA 1993 payment limitations.  As
of January 1, 2000, the department shall recalculate all
determinations under paragraphs (1) through (5) for the payment
adjustment year, taking into account the hospital's OBRA 1993 payment
limitation as determined pursuant to federal medicaid law in
existence as of January 1, 2000, and adjust, as necessary, the
monthly payment installments from January 2000 through May 2000 to
take into account any modifications to the recalculated amounts
payable for the period October 1999 through December 1999 as may
arise from the application of this paragraph.
   (7) Notwithstanding any other provision of law, for the entire
1999-2000 payment adjustment year, no eligible hospital shall receive
total payment adjustments in excess of the hospital's OBRA 1993
payment limitation as computed by the department pursuant to the
Medi-Cal State Plan.
   (8) The aggregate sum of the final adjusted projected total
payment adjustment amounts computed under paragraph (4) for each
eligible hospital for the period October 1, 1999, through June 30,
2000, shall be the maximum size of the payment adjustment program for
the entire 1999-2000 payment adjustment year, exclusive of the
supplemental payment adjustments provided for under subdivision (aj).
   (9) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (aj) (1) For the 1999-2000 payment adjustment year, eligible
hospitals that meet the requirements of this subdivision and that are
in operation as of June 30, 2000, shall be eligible to receive a
supplemental lump-sum payment adjustment, which shall be payable as a
result of the facility being a disproportionate share hospital in
operation as of that date, but only if the hospital has remained in
operation for the period October 1, 1999, through June 30, 2000.
   (2) The availability of supplemental lump-sum payment adjustments
under this subdivision shall be determined as follows:
   (A) The maximum state disproportionate share hospital allotment
for California under the provisions of applicable federal medicaid
rules shall be identified for the 2000 federal fiscal year.
   (B) The total amount of all payment adjustment amounts under this
section (exclusive of any payments under this subdivision) applicable
to the 2000 federal fiscal year, whether paid or payable, shall be
determined.  The applicability of payment adjustment amounts to the
2000 federal fiscal year shall be determined in accordance with
federal medicaid rules, including Sections 447.297(d)(3) and 447.298
of Title 42 of the Code of Federal Regulations.
   (C) (i) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, supplemental lump-sum payment
adjustments shall be made under this subdivision in accordance with
this subparagraph and paragraph (3).
   (ii) The positive remainder derived under clause (i) shall be the
maximum amount of supplemental lump-sum payment adjustments under
this subdivision where:  (I) effective for at least the 1999-2000
payment adjustment year, federal legislation is enacted regarding the
application of the OBRA 1993 payment limitation with provisions
substantially similar in effect to Section 4721(e) of the federal
Balanced Budget Act of 1997 (P.L.  105-33) as that related to the
1997-98 and 1998-99 payment adjustment years; and (II) all necessary
amendments to the Medi-Cal State Plan implementing that federal
legislation as it relates to the 1999-2000 payment adjustment year
have been approved by the federal Health Care Financing
Administration.
   (iii) If any element set forth in clause (ii) is not satisfied,
the maximum amount of supplemental lump-sum payment adjustments under
this subdivision shall be the lesser of:  (I) the positive remainder
derived in clause (i); or (II) one hundred six million dollars
($106,000,000).
   (3) (A) For purposes of supplemental lump-sum payment adjustments
under this subdivision, only hospitals that can be categorized into
either of the two groups specified in clauses (i) and (ii) below
shall be eligible to receive the supplemental payment adjustments,
and no hospital may qualify for more than one of the two groups.  The
following groups of hospitals shall be recognized:
   (i) "Public hospitals," which shall include all eligible hospitals
that, as of July 1, 1999, met the definition of a public hospital.
   (ii) "Nonpublic hospitals," which shall include all eligible
hospitals that, as of July 1, 1999, met the definition of a nonpublic
hospital.
   (B) The amount determined to be the maximum amount of supplemental
lump-sum payment adjustments under subparagraph (C) of paragraph (2)
shall first be allocated between the two groups of hospitals
referred to in subparagraph (A) as follows:
   (i) "Public hospitals":  71.64 percent of the maximum amount.
   (ii) "Nonpublic hospitals":  28.36 percent of the maximum amount.
   (C) The amount of funds allocated pursuant to subparagraph (B) to
each of the particular groups of hospitals referred to in
subparagraphs (A) and (B) shall then be distributed as supplemental
lump-sum payment adjustments among the eligible hospitals within each
particular group as follows:
   (i) The department shall identify for each eligible hospital the
total amount of payment adjustments under this section (exclusive of
any payments under this subdivision) applicable to the 1999-2000
payment adjustment year, whether paid or payable.  The applicability
of the payment adjustment amounts to this period of time shall be
determined in accordance with federal medicaid rules, including
Sections 447.297(d)(3) and 447.298 of Title 42 of the Code of Federal
Regulations.
   (ii) The amount identified for each hospital under clause (i)
shall be compared to the OBRA 1993 payment limitation that, in
accordance with applicable provisions of the Medi-Cal State Plan, the
department has computed for the particular hospital for the
1999-2000 payment adjustment year.  For all purposes under this
subdivision, calculations of the OBRA 1993 payment limitations for
public hospitals shall not be performed prior to January 1, 2000, as
referred to in paragraph (6) of subdivision (ai).
   (iii) Where the amount computed under clause (i) for the
particular hospital is equal to or exceeds the OBRA 1993 payment
limitation for the hospital, the hospital shall not receive a
supplemental lump-sum payment adjustment.  Data regarding hospitals
that have reached this limitation shall not be used for purposes of
clauses (v) through (viii).
   (iv) Where the amount computed under clause (i) for the particular
hospital is less than the OBRA 1993 payment limitation for the
hospital, the amount computed under clause (i) shall be used for
purposes of clauses (v) through (viii).
   (v) The figures determined under clause (iv) for each hospital in
the particular group shall be added together to determine an
aggregate total for each group.
   (vi) The figures determined for each hospital under clause (iv)
shall be divided by the aggregate total determined under clause (v)
for the particular group, yielding a percentage figure for each
hospital.
   (vii) The percentage figure determined for each hospital under
clause (vi) shall be applied to the maximum portion of the funds
allocated to the particular group under subparagraph (B), to
determine the hospital's pro rata share of the supplemental lump-sum
payment adjustments.  Except, however, in the case of a nonpublic
hospital that, as of July 1, 1999, met the definition of a children's
hospital, that pro rata share otherwise determined shall be
multiplied by a factor of 1.09, yielding a modified pro rata share.
The pro rata share for the other nonpublic hospitals shall be reduced
accordingly, yielding a modified pro rata share, so that the maximum
portion of the funds allocated to the nonpublic hospitals group will
not be exceeded.  The pro rata share or modified pro rata share, as
applicable, for each hospital, as computed under this clause, shall
also be used for all purposes relating to descending pro rata
distributions under clause (viii).
    (viii) In no event shall a hospital receive supplemental lump-sum
payment adjustment amounts in excess of the difference between the
OBRA 1993 payment limitation for the hospital and the amount computed
for the hospital under clause (i).  Any supplemental lump-sum
payment adjustment amount, or portion thereof, that otherwise would
have been payable under this paragraph to a hospital, but that is
barred by this limitation, shall be distributed on a descending pro
rata basis to those hospitals within the same group.
   (D) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments to hospitals on or before
August 15, 2000.
   (4) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (ak) Notwithstanding any other provision of law, no payment
adjustment amounts shall be payable in connection with the period of
July 1 through September 30 of the 2000-01 payment adjustment year.
The payment adjustment program with respect to the period October 1,
2000, through June 30, 2001, shall be structured as set forth below
and in subdivision (al).
   (1) (A) The department shall compute the projected total payment
adjustment amounts for all eligible hospitals for the 2000-01 payment
adjustment year, by determining for each eligible hospital its total
per diem composite amount and multiplying that figure by the maximum
number of the hospital's Medi-Cal inpatient paid days determined
under paragraph (2) of subdivision (l).  For purposes of this
subparagraph, these determinations shall be without regard to the
OBRA 1993 payment limitations.  Notwithstanding the foregoing, with
respect to a hospital that, as of July 1, 2000, meets the definition
of converted hospital, the amount otherwise determined under this
subparagraph shall be reduced as necessary so as not to exceed the
total amount of all payment adjustment amounts payable to the
hospital under this section for that payment adjustment year in which
the hospital was last an eligible hospital meeting the definition of
a public hospital.
   (B) The computed amount referred to in subparagraph (A) for each
hospital shall be compared to the OBRA 1993 payment limitation that,
in accordance with applicable provisions of the Medi-Cal State Plan,
the department has computed for the particular hospital.
   (C) Where the computed amount referred to in subparagraph (A) for
the particular hospital exceeds the OBRA 1993 payment limitation for
the hospital, the amount computed under subparagraph (A) shall be
reduced to an amount equal to the OBRA 1993 payment limitation for
the particular hospital.  The amount so reduced shall be used for
purposes of subparagraph (E).
   (D) Where the computed amount referred to in subparagraph (A) for
the particular hospital is equal to or less than the OBRA 1993
payment limitation for the hospital, the computed amount referred to
in subparagraph (A) shall be used for purposes of subparagraph (E).
   (E) The amounts determined under subparagraphs (C) and (D) for all
eligible hospitals shall be added together, yielding an aggregate
sum.  The aggregate sum shall be the unadjusted projected total
payment adjustment program for the period of October 1, 2000, through
June 30, 2001, exclusive of any supplemental payment adjustments
under subdivision (al).
   (2) The initial maximum size of the payment adjustment program for
the period October 1, 2000, through June 30, 2001, shall be set at
one billion seven hundred fifty million dollars ($1,750,000,000),
exclusive of any supplemental payment adjustments under subdivision
(al).
   (3) The department shall increase or decrease the amount
determined for each eligible hospital under subparagraph (C) or (D)
of paragraph (1), as applicable, by multiplying the amount by an
identical percentage, yielding the hospital's tentative adjusted
projected total payment adjustment amount for the period October 1,
2000, through June 30, 2001.  The identical percentage figure to be
used for this purpose shall be that percentage that is derived by
dividing the amount set forth in paragraph (2) by the aggregate sum
determined under subparagraph (E) of paragraph (1).  Notwithstanding
the foregoing, however, the amount determined for a hospital under
subparagraphs (C) or (D) of paragraph (1) shall not be increased so
that it would exceed the OBRA 1993 payment limitation for the
hospital, and, where that would otherwise occur, the remaining amount
that would have been allocated to the particular hospital shall be
reallocated to all other hospitals (that have not reached their OBRA
1993 payment limitation) on a pro rata basis so that the aggregate
sum of the tentative adjusted projected total payment adjustment
amount for all hospitals equals the amount set forth in paragraph
(2).
   (4) The tentative adjusted projected total payment adjustment
amount computed for each eligible hospital under paragraph (3) shall
be further adjusted as follows:
   (A) (i) For each eligible hospital that meets the definition of a
nonpublic-converted hospital as of July 1, 2000, the hospital's
tentative adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic-converted hospital adjustment factor."
The applicable adjustment factor for the particular hospital shall be
0.81; except however, where the hospital also meets the definition
of a major teaching hospital as of July 1, 2000, the applicable
adjustment factor shall be that which is necessary to result in an
amount for the particular hospital equal to forty million dollars
($40,000,000).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 2000, through June 30, 2001, which shall be paid to the
hospital in accordance with paragraph (5).  Notwithstanding the
foregoing, however, in no case shall the final adjusted projected
total payment adjustment amount exceed the hospital's OBRA 1993
payment limitation.
   (B) (i) For each eligible hospital that meets the definition of a
converted hospital as of July 1, 2000, the hospital's tentative
adjusted projected total payment adjustment amount shall be
multiplied by a "converted hospital adjustment factor," derived as
follows:
   (I) The maximum OBRA 1993 payment limitation specified by federal
law, expressed as a maximum percentage of uncompensated care costs,
that is applicable to the hospital for the 2000-01 payment adjustment
year shall be subtracted from that maximum percentage of
uncompensated care costs that the hospital was subject to as a public
hospital during the 1999-2000 payment adjustment year.
   (II) The converted hospital adjustment factor shall be that figure
derived in subclause (I), expressed as a fraction, subtracted from
1.00.
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 2000, through June 30, 2001, which shall be paid to the
hospital in accordance with paragraph (5).  Notwithstanding the
foregoing, however, in no case shall the final adjusted projected
total payment adjustment amount exceed the hospital's OBRA 1993
payment limitation.
   (C) (i) For each eligible hospital that meets the definition of a
nonpublic hospital as of July 1, 2000, the hospital's tentative
adjusted projected total payment adjustment amount shall be
multiplied by a "nonpublic hospital adjustment factor."  The
applicable adjustment factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each nonpublic hospital
shall be added together.
   (II) The amount identified in paragraph (2) shall be divided by
2.1527.
   (III) The amount derived under subclause (II) shall be reduced by
the sum of the amounts determined for all nonpublic-converted
hospitals under clause (ii) of subparagraph (A), and the sum of the
amounts determined for all converted hospitals under clause (ii) of
subparagraph (B) that exceed that amount equal to 31 percent of all
payment adjustment amounts payable to each converted hospital under
this section for that payment adjustment year in which the hospital
was last an eligible hospital meeting the definition of a public
hospital.
   (IV) The amount computed under subclause (III) shall be divided by
2, and the result thereof further reduced by the amount of
thirty-three million five hundred thousand dollars ($33,500,000).
   (V) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (IV) by the
amount derived in subclause (I).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 2000, through June 30, 2001, which shall be paid to the
hospital in accordance with paragraph (5).  Notwithstanding the
foregoing, however, in no case shall the final adjusted projected
total payment adjustment amount exceed the hospital's OBRA 1993
payment limitation, and, where that would otherwise occur, the
remaining amount that would have been allocated to the particular
hospital shall be reallocated to all other nonpublic hospitals (that
have not reached their OBRA 1993 payment limitation) on a pro rata
basis so that the aggregate sum of the final adjusted projected total
payment adjustment amounts for all nonpublic hospitals equals the
amount derived in subclause (IV) of clause (i).
   (D) (i) For each eligible hospital that meets the definition of a
public hospital as of July 1, 2000, the hospital's tentative adjusted
projected total payment adjustment amount shall be multiplied by a
"public hospital adjustment factor."  The applicable adjustment
factor shall be derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each public hospital
described above shall be added together.
   (II) The amount identified in paragraph (2) shall be reduced by
the sums of the amounts determined for all nonpublic-converted
hospitals under clause (ii) of subparagraph (A) and all converted
hospitals under clause (ii) of subparagraph (B), and the sum of the
amounts determined for all nonpublic hospitals under clause (ii) of
subparagraph (C).
   (III) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (II) by the
amount derived in subclause (I).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1, 2000, through June 30, 2001, which shall be paid to the
hospital in accordance with paragraph (5).  Notwithstanding the
foregoing, however, in no case shall the final adjusted projected
total payment adjustment amount exceed the hospital's OBRA 1993
payment limitation, and, where that would otherwise occur, the
remaining amount that would have been allocated to the particular
hospital shall be reallocated to all other public hospitals (that
have not reached their OBRA 1993 payment limitation) on a pro rata
basis so that the aggregate sum of the final adjusted projected total
payment adjustment amounts for all public hospitals equals the
amount derived in subclause (II) of clause (i).
   (5) (A) The final adjusted projected total payment adjustment
amount determined for each eligible hospital for the period October
1, 2000, through June 30, 2001, shall be distributed to the hospital
in 8 equal installments, each payable as of the last day of each
month from October 2000 through May 2001.  However, no hospital shall
receive an installment for any month in which the hospital does not
remain in operation for the entire month.
   (B) To the extent that any hospital of either of the hospital
types described in subparagraph (C) or (D) of paragraph (4) is not
entitled to receive an installment that otherwise would be payable
but for the hospital's failure to remain in operation through the
last day of a particular month, the amount that would have been paid
to the hospital shall be redistributed among those hospitals of the
same hospital type that remain in operation from October 1, 2000,
through June 30, 2001, to be distributed on a pro rata basis.  The
redistributed amounts shall be payable as of June 30, 2001.
   (6) If, effective for the 2001 federal fiscal year, federal
legislation is enacted that amends Section 1396r-4(f) of Title 42 of
the United States Code to increase the amount for California for that
fiscal year above the amount that would have otherwise been
identified pursuant to that section as in existence on January 1,
2000, the department shall implement the provisions of paragraphs (1)
through (5) as modified below.
   (A) The department shall determine the maximum state
disproportionate share hospital allotment for California for the 2001
federal fiscal year under the provisions of applicable federal
medicaid rules.
   (B) The department shall determine the maximum state
disproportionate share hospital allotment for California for the 2001
federal fiscal year that would have resulted had Section 1396r-4(f)
of Title 42 of the United States Code not been amended from the
version of that section as in existence on January 1, 2000.
   (C) The amount determined under subparagraph (B) shall be
subtracted from the amount determined under subparagraph (A).
   (D) For purposes of the calculations set forth in paragraph (3)
regarding each hospital's tentative adjusted projected total payment
adjustment amount, the initial amount as set forth in paragraph (2)
shall, in each instance prior to its application in those
calculations, be increased by the amount derived in subparagraph (C).
   (E) The difference derived in subparagraph (C) shall be divided by
the amount determined in subparagraph (B).  The resulting fraction
shall be multiplied by 1.145, and the result thereof added to 1.00,
yielding a factor for purposes of modifying the determination of the
applicable nonpublic hospital adjustment factor pursuant to
subparagraph (F).
   (F) The amount determined under subclause (II) of clause (i) of
subparagraph (C) of paragraph (4) shall be multiplied by the factor
derived in subparagraph (E).  The resulting amount shall be used for
purposes of the calculations set forth in subclause (III) of clause
(i) of subparagraph (C) of paragraph (4).
   (G) For purposes of the calculations set forth in clause (i) of
subparagraph (D) of paragraph (4) regarding the determination of the
applicable public hospital adjustment factor, the initial amount as
set forth in paragraph (2) shall, in each instance prior to its
application in those calculations, be increased by the amount derived
in subparagraph (C).
   (7) Notwithstanding any other provision of law, for the entire
2000-01 payment adjustment year, no eligible hospital shall receive
total payment adjustments in excess of the hospital's OBRA 1993
payment limitation as computed by the department pursuant to the
Medi-Cal State Plan.
   (8) The aggregate sum of the final adjusted projected total
payment adjustment amounts computed under paragraph (4) for each
eligible hospital for the period October 1, 2000, through June 30,
2001, shall be the maximum size of the payment adjustment program for
the entire 2000-01 payment adjustment year, exclusive of the
supplemental payment adjustments provided for under subdivision (al).
   (9) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (al) (1) For the 2000-01 payment adjustment year, eligible
hospitals that meet the requirements of this subdivision and that are
in operation as of June 30, 2001, shall be eligible to receive a
supplemental lump-sum payment adjustment, which shall be payable as a
result of the facility being a disproportionate share hospital in
operation as of that date, but only if the hospital has remained in
operation for the period October 1, 2000, through June 30, 2001.
   (2) The availability of supplemental lump-sum payment adjustments
under this subdivision shall be determined as follows:
   (A) The maximum state disproportionate share hospital allotment
for California under the provisions of applicable federal medicaid
rules shall be identified for the 2001 federal fiscal year.
   (B) The total amount of all payment adjustment amounts under this
section (exclusive of any payments under this subdivision) applicable
to the 2001 federal fiscal year, whether paid or payable, shall be
determined.  The applicability of payment adjustment amounts to the
2001 federal fiscal year shall be determined in accordance with
federal medicaid rules.
   (C) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, supplemental lump-sum payment
adjustments shall be made under this subdivision in accordance with
this subparagraph and paragraph (3).  The positive remainder so
derived shall be the maximum amount of supplemental lump-sum payment
adjustments under this subdivision.
   (3) (A) For purposes of supplemental lump-sum payment adjustments
under this subdivision, only hospitals that can be categorized into
either of the two groups specified in clauses (i) and (ii) below
shall be eligible to receive the supplemental payment adjustments,
and no hospital may qualify for more than one of the two groups.  The
following groups of hospitals shall be recognized:
   (i) "Public hospitals," which shall include all eligible hospitals
that, as of July 1, 2000, met the definition of a public hospital.
   (ii) "Nonpublic hospitals," which shall include all eligible
hospitals that, as of July 1, 2000, met the definition of a nonpublic
hospital.
   (B) The amount determined to be the maximum amount of supplemental
lump-sum payment adjustments under subparagraph (C) of paragraph (2)
shall first be allocated between the two groups of hospitals
referred to in subparagraph (A) as follows:
   (i) "Public hospitals":  75 percent of the maximum amount.
   (ii) "Nonpublic hospitals":  25 percent of the maximum amount.
   (C) The amount of funds allocated pursuant to subparagraph (B) to
each of the particular groups of hospitals referred to in
subparagraphs (A) and (B) shall then be distributed as supplemental
lump-sum payment adjustments among the eligible hospitals within each
particular group as follows:
   (i) The department shall identify for each eligible hospital the
total amount of payment adjustments under this section, exclusive of
any payments under this subdivision, applicable to the 2000-01
payment adjustment year, whether paid or payable.  The applicability
of the payment adjustment amounts to this period of time shall be
determined in accordance with federal medicaid rules.
   (ii) The amount identified for each hospital under clause (i)
shall be compared to the OBRA 1993 payment limitation that, in
accordance with applicable provisions of the Medi-Cal State Plan, the
department has computed for the particular hospital for the 2000-01
payment adjustment year.
   (iii) Where the amount computed under clause (i) for the
particular hospital is equal to or exceeds the OBRA 1993 payment
limitation for the hospital, the hospital shall not receive a
supplemental lump-sum payment adjustment.  Data regarding hospitals
that have reached this limitation shall not be used for purposes of
clauses (v) through (viii).
   (iv) Where the amount computed under clause (i) for the particular
hospital is less than the OBRA 1993 payment limitation for the
hospital, the amount computed under clause (i) shall be used for
purposes of clauses (v) through (viii).
   (v) The figures determined under clause (iv) for each hospital in
the particular group shall be added together to determine an
aggregate total for each group.
   (vi) The figures determined for each hospital under clause (iv)
shall be divided by the aggregate total determined under clause (v)
for the particular group, yielding a percentage figure for each
hospital.
   (vii) The percentage figure determined for each hospital under
clause (vi) shall be applied to the maximum portion of the funds
allocated to the particular group under subparagraph (B), to
determine the hospital's pro rata share of the supplemental lump-sum
payment adjustments.  Notwithstanding the foregoing, however, in the
case of a nonpublic hospital that, as of July 1, 2000, met the
definition of a children's hospital, that pro rata share otherwise
determined shall be multiplied by a factor of 1.69, yielding a
modified pro rata share to be applied only with respect to the first
one million dollars ($1,000,000) of the funds allocated pursuant to
clause (ii) of subparagraph (B), and, with respect to the remainder
of the funds so allocated, the pro rata share otherwise determined
shall be multiplied by a factor of 1.09, yielding a modified pro rata
share to be applied.  The pro rata share for the other nonpublic
hospitals shall be reduced accordingly, yielding a modified pro rata
share, so that the maximum portion of the funds allocated to the
nonpublic hospitals group will not be exceeded.  The pro rata share
or modified pro rata share, as applicable, for each hospital, as
computed under this clause, shall also be used for all purposes
relating to descending pro rata distributions under clause (viii).
   (viii) In no event shall a hospital receive supplemental lump-sum
payment adjustment amounts in excess of the difference between the
OBRA 1993 payment limitation for the hospital and the amount computed
for the hospital under clause (i).  Any supplemental lump-sum
payment adjustment amount, or portion thereof, that otherwise would
have been payable under this paragraph to a hospital, but that is
barred by this limitation, shall be distributed on a descending pro
rata basis to those hospitals within the same group.
   (D) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments to hospitals on June 30,
2001.
   (4) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (am) Notwithstanding any other provision of law, no payment
adjustment amounts shall be payable in connection with the period of
July 1 through September 30 of the 2001-02 payment adjustment year
and subsequent payment adjustment years.  The payment adjustment
program with respect to the period October 1 through June 30 of the
2001-02 payment adjustment year and subsequent payment adjustment
years shall be structured as set forth below and in subdivision (an).
   (1) (A) The department shall compute the projected total payment
adjustment amounts for all eligible hospitals for the applicable
payment adjustment year, by determining for each eligible hospital
its total per diem composite amount and multiplying that figure by
the maximum number of the hospital's Medi-Cal inpatient paid days
determined under paragraph (2) of subdivision (l).  For purposes of
this subparagraph, these determinations shall be without regard to
the OBRA 1993 payment limitations.  Notwithstanding the foregoing,
with respect to a hospital that, as of July 1 of the applicable
payment adjustment year, meets the definition of a converted
hospital, the amount otherwise determined under this subparagraph
shall be reduced as necessary so as not to exceed the total amount of
all payment adjustment amounts payable to the hospital under this
section for that payment adjustment year in which the hospital was
last an eligible hospital meeting the definition of a public
hospital.
   (B) The computed amount referred to in subparagraph (A) for each
hospital shall be compared to the OBRA 1993 payment limitation that,
in accordance with applicable provisions of the Medi-Cal State Plan,
the department has computed for the particular hospital.
   (C) Where the computed amount referred to in subparagraph (A) for
the particular hospital exceeds the OBRA 1993 payment limitation for
the hospital, the amount computed under subparagraph (A) shall be
reduced to an amount equal to the OBRA 1993 payment limitation for
the particular hospital.  The amount so reduced shall be used for
purposes of subparagraph (E).
   (D) Where the computed amount referred to in subparagraph (A) for
the particular hospital is equal to or less than the OBRA 1993
payment limitation for the hospital, the computed amount referred to
in subparagraph (A) shall be used for purposes of subparagraph (E).
   (E) The amounts determined under subparagraphs (C) and (D) for all
eligible hospitals shall be added together, yielding an aggregate
sum.  The aggregate sum shall be the unadjusted projected total
payment adjustment program for the period of October 1 through June
30 of the applicable payment adjustment year, exclusive of any
supplemental payment adjustments under subdivision (an).
   (2) (A) The department shall determine the maximum state
disproportionate share hospital allotment for California for the
applicable federal fiscal year under the provisions of applicable
federal medicaid rules.
   (B) The initial maximum size of the payment adjustment program for
the period October 1 through June 30 of each applicable payment
adjustment year, shall be set at one billion six hundred million
dollars ($1,600,000,000), exclusive of any supplemental payment
adjustments under subdivision (an).
   (3) The department shall increase or decrease the amount
determined for each eligible hospital under subparagraph (C) or (D)
of paragraph (1), as applicable, by multiplying the amount by an
identical percentage, yielding the hospital's tentative adjusted
projected total payment adjustment amount for the period October 1
through June 30 of the applicable payment adjustment year.  The
identical percentage figure to be used for this purpose shall be that
percentage that is derived by dividing the amount set forth in
subparagraph (B) of paragraph (2) by the aggregate sum determined
under subparagraph (E) of paragraph (1).  Notwithstanding the
foregoing, however, the amount determined for a hospital under
subparagraph (C) or (D) of paragraph (1) shall not be increased so
that it would exceed the OBRA 1993 payment limitation for the
hospital, and, where that would otherwise occur, the remaining amount
that would have been allocated to the particular hospital shall be
reallocated to all other hospitals (that have not reached their OBRA
1993 payment limitation) on a pro rata basis so that the aggregate
sum of the tentative adjusted projected total payment adjustment
amount for all hospitals equals the amount set forth in subparagraph
(B) of paragraph (2).
   (4) The tentative adjusted projected total payment adjustment
amount computed for each eligible hospital under paragraph (3) shall
be further adjusted as follows:
                                                           (A) (i)
For each eligible hospital that meets the definition of a
nonpublic-converted hospital as of July 1 of the applicable payment
adjustment year, the hospital's tentative adjusted projected total
payment adjustment amount shall be multiplied by a
"nonpublic-converted hospital adjustment factor."  The applicable
adjustment factor for the particular hospital shall be 0.835; except,
however, where the hospital also meets the definition of a major
teaching hospital as of July 1 of the applicable payment adjustment
year, the applicable adjustment factor shall be the lesser of 1.00,
or that which is necessary to result in an amount for the particular
hospital equal to thirty-five million eight hundred thousand dollars
($35,800,000).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1 through June 30 of the applicable payment adjustment year,
which shall be paid to the hospital in accordance with paragraph (5).
  Notwithstanding the foregoing, however, in no case shall the final
adjusted projected total payment adjustment amount exceed the
hospital's OBRA 1993 payment limitation.
   (B) (i) For each eligible hospital that meets the definition of a
converted hospital as of July 1 of the applicable payment adjustment
year, the hospital's tentative adjusted projected total payment
adjustment amount shall be multiplied by a "converted hospital
adjustment factor," derived as follows:
   (I) The maximum OBRA 1993 payment limitation specified by federal
law, expressed as a maximum percentage of uncompensated care costs,
that is applicable to the hospital for the particular payment
adjustment year shall be subtracted from that maximum percentage of
uncompensated care costs that the hospital was subject to as a public
hospital during the 1999-2000 payment adjustment year.
   (II) The converted hospital adjustment factor shall be that figure
derived in subclause (I), expressed as a fraction, subtracted from
1.00.
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1 through June 30 of the applicable payment adjustment year,
which shall be paid to the hospital in accordance with paragraph (5).
  Notwithstanding the foregoing, however, in no case shall the final
adjusted projected total payment adjustment amount exceed the
hospital's OBRA 1993 payment limitation.
   (C) (i) For each eligible hospital that meets the definition of a
nonpublic hospital as of July 1 of the applicable payment adjustment
year, the hospital's tentative adjusted projected total payment
adjustment amount shall be multiplied by a "nonpublic hospital
adjustment factor."  The applicable adjustment factor shall be
derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each nonpublic hospital
shall be added together.
   (II) The amount identified in subparagraph (B) of paragraph (2)
shall be divided by 2.237.
   (III) The resulting figure in subclause (II) shall be increased by
an amount equal to the product of the medical assistance increment
multiplied by the maximum amount identified in subparagraph (A) of
paragraph (2).
   (IV) The amount derived under subclause (III) shall be reduced by
the sum of the amounts determined for all nonpublic-converted
hospitals under clause (ii) of subparagraph (A), and the sum of the
amounts determined for all converted hospitals under clause (ii) of
subparagraph (B) that exceed that amount equal to 31 percent of all
payment adjustment amounts payable to each converted hospital under
this section for that payment adjustment year in which the hospital
was last an eligible hospital meeting the definition of a public
hospital.
   (V) The amount computed under subclause (IV) shall be divided by
2, and the result thereof further reduced by the amount of
thirty-three million five hundred thousand dollars ($33,500,000).
   (VI) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (V) by the
amount derived in subclause (I).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1 through June 30 of the applicable payment adjustment year,
which shall be paid to the hospital in accordance with paragraph (5).
  Notwithstanding the foregoing, however, in no case shall the final
adjusted projected total payment adjustment amount exceed the
hospital's OBRA 1993 payment limitation, and where that would
otherwise occur, the remaining amount that would have been allocated
to the particular hospital shall be reallocated to all other
nonpublic hospitals (that have not reached their OBRA 1993 payment
limitation) on a pro rata basis so that the aggregate sum of the
final adjusted projected total payment adjustment amounts for all
nonpublic hospitals equals the amount derived in subclause (V) of
clause (i).
   (D) (i) For each eligible hospital that meets the definition of a
public hospital as of July 1 of the applicable payment adjustment
year, the hospital's tentative adjusted projected total payment
adjustment amount shall be multiplied by a "public hospital
adjustment factor."  The applicable adjustment factor shall be
derived as follows:
   (I) The tentative adjusted projected total payment adjustment
amounts determined under paragraph (3) for each public hospital
described above shall be added together.
   (II) The amount identified in subparagraph (B) of paragraph (2)
shall be reduced by the sums of the amounts determined for all
nonpublic-converted hospitals under clause (ii) of subparagraph (A)
and all converted hospitals under clause (ii) of subparagraph (B) and
the sum of the amounts determined for all nonpublic hospitals under
clause (ii) of subparagraph (C).
   (III) The applicable adjustment factor shall be that ratio that
results from dividing the amount derived in subclause (II) by the
amount derived in subclause (I).
   (ii) The resulting product shall be the final adjusted projected
total payment adjustment amount for the hospital for the period
October 1 through June 30 of the applicable payment adjustment year,
which shall be paid to the hospital in accordance with paragraph (5).
  Notwithstanding the foregoing, however, in no case shall the final
adjusted projected total payment adjustment amount exceed the
hospital's OBRA 1993 payment limitation, and, where that would
otherwise occur, the remaining amount that would have been allocated
to the particular hospital shall be reallocated to all other public
hospitals that have not reached their OBRA 1993 payment limitation on
a pro rata basis so that the aggregate sum of the final adjusted
projected total payment adjustment amounts for all public hospitals
equals the amount derived in subclause (II) of clause (i).
   (5) (A) The final adjusted projected total payment adjustment
amount determined for each eligible hospital for the period October 1
through June 30 of the applicable payment adjustment year shall be
distributed to the hospital in 8 equal installments, each payable as
of the last day of each month from October through May of the
applicable payment adjustment year.  However, no hospital shall
receive an installment for any month in which the hospital does not
remain in operation for the entire month.
   (B) To the extent that any hospital of either of the hospital
types described in subparagraph (C) or (D) of paragraph (4) is not
entitled to receive an installment that otherwise would be payable
but for the hospital's failure to remain in operation through the
last day of a particular month, the amount that would have been paid
to the hospital shall be redistributed among those hospitals of the
same hospital type that remain in operation from October 1 through
June 30 of the applicable payment adjustment year, to be distributed
on a pro rata basis.  The redistributed amounts shall be payable as
of June 30 of the applicable payment adjustment year.
   (6) If, with respect to the 2001-02 payment adjustment year or any
subsequent payment adjustment year, the amount identified for
California for the applicable federal fiscal year pursuant to Section
1396r-4(f) of Title 42 of the United States Code exceeds the amount
of eight hundred seventy-seven million dollars ($877,000,000), the
department shall implement the provisions of paragraphs (1) through
(5) with respect to the applicable payment adjustment year as
modified below.
   (A) The department shall determine the maximum state
disproportionate share hospital allotment for California under the
provisions of applicable federal medicaid rules.
   (B) The department shall calculate the maximum state
disproportionate share hospital allotment for California, by
substituting in the calculation the amount of eight hundred
seventy-seven million dollars ($877,000,000), as though that amount
was identified for California for the applicable federal fiscal year
pursuant to Section 1396r-4(f) of Title 42 of the United States Code.
   (C) The amount determined under subparagraph (B) shall be
subtracted from the amount determined under subparagraph (A).
   (D) For purposes of the calculations set forth in paragraph (3)
regarding each hospital's tentative adjusted projected total payment
adjustment amount, the initial amount as set forth in subparagraph
(B) of paragraph (2) shall, in each instance prior to its application
in those calculations, be increased by the amount derived in
subparagraph (C).
   (E) The difference derived in subparagraph (C) shall be divided by
the amount determined in subparagraph (B).
   (F) For purposes of the determination made under clause (i) of
subparagraph (A) of paragraph (4) regarding nonpublic-converted
hospitals that also meet the definition of a major teaching hospital,
the amount of thirty-five million eight hundred thousand dollars
($35,800,000) as specified therein shall be multiplied by a number
equal to the sum of the fraction derived in subparagraph (E) plus the
number 1.00.
   (G) The fraction derived in subparagraph (E) shall be multiplied
by 1.226, and the result thereof added to 1.00, yielding a factor for
purposes of modifying the determination of the applicable nonpublic
hospital adjustment factor pursuant to subparagraphs (H) and (I).
   (H) The amount determined under subclause (II) of clause (i) of
subparagraph (C) of paragraph (4) shall be multiplied by the factor
derived in subparagraph (G), and the resulting amount shall be used
for purposes of the calculations set forth in subclause (III) of
clause (i) of subparagraph (C) of paragraph (4), as modified by
subparagraph (I) below.
   (I) For purposes of the calculations in subclause (III) of clause
(i) of subparagraph (C) of paragraph (4), the recalculated maximum
amount derived in subparagraph (B) shall be used in lieu of the
maximum amount determined in subparagraph (A) of paragraph (2).
   (J) For purposes of the calculations set forth in subclause (II)
of clause (i) of subparagraph (D) of paragraph (4) regarding the
determination of the applicable public hospital adjustment factor,
the initial amount as set forth in subparagraph (B) of paragraph (2)
shall, in each instance prior to its application in those
calculations, be increased by the amount derived in subparagraph (C).
   (7) Notwithstanding any other provision of law, for the entire
payment adjustment year, no eligible hospital shall receive total
payment adjustments in excess of the hospital's OBRA 1993 payment
limitation as computed by the department pursuant to the Medi-Cal
State Plan.
   (8) The aggregate sum of the final adjusted projected total
payment adjustment amounts computed under paragraph (4) for each
eligible hospital for the period October 1 through June 30 of the
applicable payment adjustment year, shall be the maximum size of the
payment adjustment program for the entire payment adjustment year,
exclusive of the supplemental payment adjustments provided for under
subdivision (an).
   (9) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
   (an) (1) For the 2001-02 payment adjustment year and subsequent
payment adjustment years, eligible hospitals that meet the
requirements of this subdivision and that are in operation as of June
30 of the applicable payment adjustment year, shall be eligible to
receive a supplemental lump-sum payment adjustment, which shall be
payable as a result of the facility being a disproportionate share
hospital in operation as of that date, but only if the hospital has
remained in operation for the period October 1 through June 30 of the
applicable payment adjustment year.
   (2) The availability of supplemental lump-sum payment adjustments
under this subdivision shall be determined as follows:
   (A) The maximum state disproportionate share hospital allotment
for California under the provisions of applicable federal medicaid
rules shall be identified for the applicable federal fiscal year.
   (B) The total amount of all payment adjustment amounts under this
section, exclusive of any payments under this subdivision, applicable
to the applicable federal fiscal year, whether paid or payable,
shall be determined.  The applicability of payment adjustment amounts
to the 2000 federal fiscal year shall be determined in accordance
with federal medicaid rules.
   (C) The figure determined under subparagraph (B) shall be
subtracted from the figure identified under subparagraph (A).  If the
remainder is a positive figure, supplemental lump-sum payment
adjustments shall be made under this subdivision in accordance with
this subparagraph and paragraph (3).  The positive remainder so
derived shall be the maximum amount of supplemental lump-sum payment
adjustments under this subdivision for the applicable payment
adjustment year.
   (3) (A) For purposes of supplemental lump-sum payment adjustments
under this subdivision, only hospitals that can be categorized into
either of the two groups specified in clauses (i) and (ii) below
shall be eligible to receive the supplemental payment adjustments,
and no hospital may qualify for more than one of the two groups.  The
following groups of hospitals shall be recognized:
   (i) "Public hospitals," which shall include all eligible hospitals
that, as of July 1 of the applicable payment adjustment year, met
the definition of a public hospital.
   (ii) "Nonpublic hospitals," which shall include all eligible
hospitals that, as of July 1 of the applicable payment adjustment
year, met the definition of a nonpublic hospital.
   (B) The amount determined to be the maximum amount of supplemental
lump-sum payment adjustments under subparagraph (C) of paragraph (2)
shall first be allocated between the two groups of hospitals
referred to in subparagraph (A) as follows:
   (i) "Public hospitals":  75 percent of the maximum amount.
   (ii) "Nonpublic hospitals":  25 percent of the maximum amount.
   (C) The amount of funds allocated pursuant to subparagraph (B) to
each of the particular groups of hospitals referred to in
subparagraphs (A) and (B) shall then be distributed as supplemental
lump-sum payment adjustments among the eligible hospitals within each
particular group as follows:
   (i) The department shall identify for each eligible hospital the
total amount of payment adjustments under this section, exclusive of
any payments under this subdivision, applicable to the payment
adjustment year, whether paid or payable.  The applicability of the
payment adjustment amounts to this period of time shall be determined
in accordance with federal medicaid rules.
   (ii) The amount identified for each hospital under clause (i)
shall be compared to the OBRA 1993 payment limitation that, in
accordance with applicable provisions of the Medi-Cal State Plan, the
department has computed for the particular hospital for the
applicable payment adjustment year.
   (iii) Where the amount computed under clause (i) for the
particular hospital is equal to or exceeds the OBRA 1993 payment
limitation for the hospital, the hospital shall not receive a
supplemental lump-sum payment adjustment.  Data regarding hospitals
that have reached this limitation shall not be used for purposes of
clauses (v) through (viii).
   (iv) Where the amount computed under clause (i) for the particular
hospital is less than the OBRA 1993 payment limitation for the
hospital, the amount computed under clause (i) shall be used for
purposes of clauses (v) through (viii).
   (v) The figures determined under clause (iv) for each hospital in
the particular group shall be added together to determine an
aggregate total for each group.
   (vi) The figures determined for each hospital under clause (iv)
shall be divided by the aggregate total determined under clause (v)
for the particular group, yielding a percentage figure for each
hospital.
   (vii) The percentage figure determined for each hospital under
clause (vi) shall be applied to the maximum portion of the funds
allocated to the particular group under subparagraph (B), to
determine the hospital's pro rata share of the supplemental lump-sum
payment adjustments.  Notwithstanding the foregoing, however, in the
case of a nonpublic hospital that, as of July 1 of the applicable
payment adjustment year, met the definition of a children's hospital,
that pro rata share otherwise determined shall be multiplied by a
factor of 1.69, yielding a modified pro rata share to be applied only
with respect to the first one million dollars ($1,000,000) of the
funds allocated pursuant to clause (ii) of subparagraph (B), and,
with respect to the remainder of the funds so allocated, the pro rata
share otherwise determined shall be multiplied by a factor of 1.09,
yielding a modified pro rata share to be applied.  The pro rata share
for the other nonpublic hospitals shall be reduced accordingly,
yielding a modified pro rata share, so that the maximum portion of
the funds allocated to the nonpublic hospitals group will not be
exceeded.  The pro rata share or modified pro rata share, as
applicable, for each hospital, as computed under this clause, shall
also be used for all purposes relating to descending pro rata
distributions under clause (viii).
   (viii) In no event shall a hospital receive supplemental lump-sum
payment adjustment amounts in excess of the difference between the
OBRA 1993 payment limitation for the hospital and the amount computed
for the hospital under clause (i).  Any supplemental lump-sum
payment adjustment amount, or portion thereof, that otherwise would
have been payable under this paragraph to a hospital, but that is
barred by this limitation, shall be distributed on a descending pro
rata basis to those hospitals within the same group.
   (D) The department shall make interim and final payments of the
supplemental lump-sum payment adjustments to hospitals on June 30 of
the applicable payment adjustment year.
   (4) The department shall implement this subdivision only to the
extent consistent with federal medicaid law and the Medi-Cal State
Plan, and only to the extent that the department determines that
federal financial participation is available.
14105.982.  (a) (1) The department may adopt emergency regulations
in accordance with Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 1 of Title 2 of the Government Code to specify a
process for the preparation and issuance of any or all of the
following:
   (A) The tentative listing, as that term is used in paragraph (1)
of subdivision (f) of Section 14105.98.
   (B) The disproportionate share list, as that term is used in
paragraphs (1) and (2) of subdivision (f) of Section 14105.98.
   (C) Hospital-specific payment determinations pursuant to Section
14105.98.
   (2) The process may include, but shall not be limited to, all of
the following:
   (A) Identification of the particular information to be prepared
and issued.
   (B) The opportunity for an affected hospital to review its
individual hospital data elements.
   (C) The timeframes for issuance and review of the items described
in paragraph (1).
   (D) The circumstances under which updated or corrected data may be
accepted and used by the department.
   (b) The initial adoption of the emergency regulations and one
readoption of the initial regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the public
peace, health and safety, or general welfare.  The initial emergency
regulations and the first readoption of those regulations shall be
exempt from review by the Office of Administrative Law.  The
emergency regulations authorized by this section shall be submitted
to the Office of Administrative Law for filing with the Secretary of
State and publication in the California Code of Regulations, and
shall remain in effect for no more than 180 days.  Before adopting
any emergency regulations pursuant to this section, the department
shall seek input from representatives of the hospital industry,
including, but not limited to, the California Healthcare Association.
14105.985.  (a) (1) Disproportionate share payment augmentation
programs shall be maintained for eligible providers pursuant to
Section 14087.5, 14088, 14089, 14093, or 14200.
   (2) The department shall make payment augmentations directly to
eligible providers.
   (b) (1) Inpatient days provided by licensed hospitals to Medi-Cal
beneficiaries under contract to managed care contractors who are
contracting with the department under Section 14087.5, 14088, 14093,
14200, or 14490 shall be included in the department's calculation of
annualized Medi-Cal inpatient paid days for use in determining the
hospital's medicaid inpatient hospitalization rate under Section
14105.98.
   (2) Managed care contractors subject to paragraph (1) shall report
inpatient days subject to paragraph (1) to the department.
   (c) Revenue for inpatient services provided for Medi-Cal
beneficiaries received by hospitals under contract to managed care
contractors who are contracting with the department under Section
14087.5, 14088, 14093, 14200, or 14490 shall be included in the
percentage rate calculations for the determination of the low-income
utilization rate under Section 14105.98.
14105.986.  (a) Any children's hospital as defined in Section 10727
that holds a consolidated license issued pursuant to subparagraph (C)
of paragraph (4) of subdivision (b) of Section 1250.8 of the Health
and Safety Code may be evaluated for eligibility for payments under
subdivision (c) of Section 14105.98 no earlier than January 1, 2000,
using data related to all physical plants appearing on the
consolidated license.  For purposes of calculating the appropriate
amount of the payment adjustment under subdivision (l) of Section
14105.98 for these children's hospitals, the department shall use
data relating only to the children's hospital or any other physical
plant appearing on the consolidated license which is not more than 15
miles from the children's hospital and shall exclude data relating
to any physical plant added to the consolidated license pursuant to
subparagraph (C) of paragraph (4) of subdivision (b) of Section
1250.8 of the Health and Safety Code.
   (b) The department shall not implement this section unless all of
the following occur:
   (1) Federal financial participation is available.
   (2) The federal Health Care Financing Administration approves a
state plan amendment to implement this section.
   (3) All data necessary to complete the evaluations and
calculations required by subdivision (a) are provided to the
department from the same sources described in Section 14105.98 and in
the approved state plan existing on July 1, 1998.  In no event shall
data directly provided by a children's hospital be utilized for
these evaluations and calculations.
14105.99.  (a) For purposes of this section, "Attachment 4.19-A"
means the Medi-Cal payment adjustment system for acute inpatient
hospital services set forth in Attachment 4.19-A of the Medi-Cal
State Plan which became effective on or about July 1, 1990.
   (b) (1) It is the intent of the Legislature that the annual
appropriation for, and distribution of, payments pursuant to
Attachment 4.19-A shall be reduced as a result of the payment
adjustment program set forth in Section 14105.98, but only when
federal approval, as described in paragraph (2) of subdivision (d) of
Section 14105.98, is gained for that payment adjustment program.
   (2) When the payment adjustment program set forth in Section
14105.98 gains federal approval, Attachment 4.19-A shall become
inoperative and any appropriated amount for Attachment 4.19-A that is
unexpended shall revert to the Health Care Deposit Fund for use in
support of the Medi-Cal program.
14106.  If a Medi-Cal provider negotiates a rate of payment for
inpatient, outpatient, or ancillary services with a prepaid health
plan under contract with the department pursuant to Chapter 8
(commencing with Section 14200) of this part which is lower than or
equal to the lesser of reasonable costs, customary charges, or the
schedule of maximum allowances, the rate shall not affect the
director's determination of reasonable costs, customary charges, or
schedule of maximum allowances.
14106.2.  Insofar as permitted by federal law, for purposes of
determining the reasonable costs of any service reimbursable under
the provisions of this chapter, or determining prospective per capita
rates of payment or cost-basis reimbursement under Chapter 8
(commencing with Section 14200) or Chapter 8.7 (commencing with
Section 14520), any gifts, grants, or endowments received by the
provider of such services or prepaid health plan, and any income
earned by the investment or deposit thereof, shall not be deducted
from the operating costs of such provider or plan.
   It is the intent of the Legislature, in enacting this section, to
encourage philanthropic support of health facilities and other
providers of services to Medi-Cal beneficiaries.
14106.6.  The director shall establish and update annually a rate
schedule of reimbursement for paramedic services which provides
reimbursement based upon reasonable cost standards of the department.
   Notwithstanding any other provision of law, and to the extent
federal financial participation is available, any city, county, or
special district providing paramedic services as set forth in
subdivision (s) of Section 14132, shall reimburse the Health Care
Deposit Fund for the state costs of paying such medical claims.
Funds allocated to the county from the County Health Services Fund
pursuant to Part 4.5 (commencing with Section 16700) of Division 9 of
the Welfare and Institutions Code may be utilized by the county or
city to make such reimbursement. Nothing in this chapter shall be
construed to require a city, county, or special district providing,
or contracting for, paramedic services as part of a program
established under Article 3 (commencing with Section 1480) of Chapter
2.5 of Division 2 of the Health and Safety Code, to seek Medi-Cal
reimbursement for services rendered to eligible Medi-Cal recipients.
   This section shall be in effect only to the extent federal
financial participation is available.
14107.  (a) Any person, including any applicant or provider as
defined in Section 14043.1, or billing agent, as defined in Section
14040.1, who engages in any of the activities identified in
subdivision (b) is punishable by imprisonment as set forth in
subdivisions (c) , (d), and (e), by a fine not exceeding three times
the amount of the fraud or improper reimbursement or value of the
scheme or artifice, or by both this fine and imprisonment.
   (b) The following activities are subject to subdivision (a):
   (1) A person, with intent to defraud, presents for allowance or
payment any false or fraudulent claim for furnishing services or
merchandise under this chapter or Chapter 8 (commencing with Section
14200).
   (2) A person knowingly submits false information for the purpose
of obtaining greater compensation than that to which he or she is
legally entitled for furnishing services or merchandise under this
chapter or Chapter 8 (commencing with Section 14200).
   (3) A person knowingly submits false information for the purpose
of obtaining authorization for furnishing services or merchandise
under this chapter or Chapter 8 (commencing with Section 14200).
   (4) A person knowingly and willfully executes, or attempts to
execute, a scheme or artifice to do either of the following:
   (A) Defraud the Medi-Cal program or any other health care program
administered by the department or its agents or contractors.
   (B) Obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property owned by,
or under the custody or control of, the Medi-Cal program or any other
health care program administered by the department or its agents or
contractors, in connection with the delivery of or payment for health
care benefits, services, goods, supplies, or merchandise.
   (c) A violation of subdivision (a) is punishable by imprisonment
in a county jail, or in the state prison for two, three, or five
years.
   (d) If the execution of a scheme or artifice to defraud as defined
in paragraph (4) of subdivision (b) is committed under circumstances
likely to cause or that do cause two or more persons great bodily
injury, as defined in Section 12022.7 of the Penal Code, or serious
bodily injury, as defined in paragraph (4) of subdivision (f) of
Section 243 of the Penal Code, a term of four years, in addition and
consecutive to the term of imprisonment imposed in subdivision (c),
shall be imposed for each person who suffers great bodily injury or
serious bodily injury.
   The additional terms provided in this subdivision shall not be
imposed unless the facts showing the circumstances that were likely
to cause or that did cause great bodily injury or serious bodily
injury to two or more persons are charged in the accusatory pleading
and admitted or found to be true by the trier of fact.
   (e) If the execution of  a scheme or artifice to defraud, as
defined in paragraph (4) of subdivision (b) results in a death which
constitutes a second degree murder, as defined in Section 189 of the
Penal Code, the offense shall be punishable, upon conviction,
pursuant to subdivision (a) of Section 190 of the Penal Code.
   (f) Any person, including an applicant or provider as defined in
Section 14043.1, or billing agent, as defined in Section 14040.1, who
has engaged in any of the activities subject to fine or imprisonment
under this section, shall be subject to the asset forfeiture
provisions for criminal profiteering.
   (g) Pursuant to Section 923 of the Penal Code, the Attorney
General may convene a grand jury to investigate and indict for any of
the activities subject to fine, imprisonment, or asset forfeiture
under this section.
   (h) The enforcement remedies provided under this section are not
exclusive and shall not preclude the use of any other criminal or
civil remedy.  However, an act or omission punishable in different
ways by this section and other provisions of law shall not be
punished under more than one provision, but the penalty to be imposed
shall be determined as set forth in Section 654 of the Penal Code.
14107.1.  Any provider on whose behalf improper claims are submitted
for authorization or payment under this chapter may be required to
submit all such claims over the provider's own signature for whatever
time period the department determines appropriate.
14107.11.  (a) Upon receipt of reliable evidence that would be
admissible under the administrative adjudication provisions of
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, of fraud or willful misrepresentation
by a provider as defined in Section 14043.1, under the Medi-Cal
program or the commencement of a suspension under Section 14123, the
department may do any of the following:
   (1) Collect any Medi-Cal program overpayment identified through an
audit or examination, or any portion thereof from any provider.
Notwithstanding Section 100171 of the Health and Safety Code, a
provider may appeal the collection of overpayments under this section
pursuant to procedures established in Article 5.3 (commencing with
Section 14170).  Overpayments collected under this section shall not
be returned to the provider during the pendency of any appeal and may
be offset to satisfy audit or appeal findings if the findings are
against the provider.  Overpayments will be returned to a provider
with interest if findings are in favor of the provider.
   (2) Withhold payment for any goods, services, supplies, or
merchandise, or any portion thereof.  The department shall notify the
provider within five days of any withholding of payment under this
section.  The notice shall do all of the following:
   (A) State that payments are being withheld in accordance with this
subdivision and that the withholding is for a temporary period and
will not continue after it is determined that the evidence of fraud
or willful misrepresentation is insufficient or when legal
proceedings relating to the alleged fraud or willful
misrepresentation are complete.
   (B) Cite the circumstances under which the withholding of the
payments will be terminated.
   (C) Specify, when appropriate, the type or types of claims for
which payment is being withheld.
   (D) Inform the provider of the right to submit written evidence
that would be admissible under the administrative adjudication
provisions of Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, for consideration by
the department.
   (3) Notwithstanding Section 100171 of the Health and Safety Code,
a provider may appeal a withholding of payment pursuant to Section
14043.65.  Payments withheld under this section shall not be returned
to the provider during the pendency of any appeal and may be offset
to satisfy audit or appeal findings.
   (b) The director may, in consultation with interested parties,
adopt regulations to implement this section as necessary.  These
regulations may be adopted as emergency regulations in accordance
with the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) Part 1 of Division 3 of Title 2 of the Government
Code) and the adoption of the regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the public
peace, health and safety, or general welfare.  The director shall
transmit these emergency regulations directly to the Secretary of
State for filing and the regulations shall become effective
immediately upon filing.  Upon completion of the formal regulation
adoption process and prior to the expiration of the 120-day duration
period of emergency regulations, the director shall transmit directly
to the Secretary of State the adopted regulations, the rulemaking
file, and the certification of compliance as required by subdivision
(e) of Section 11346.1 of the Government Code.
   (c) For purposes of this section, "provider" means any individual,
partnership, group, association, corporation, institution, or
entity, and the officers, directors, employees, or agents thereof,
that provide services, goods, supplies, or merchandise, directly or
indirectly, to a Medi-Cal beneficiary, and that has been enrolled in
the Medi-Cal program.
14107.12.  (a) The Department of Justice may pay, pursuant to
subdivision (d), from funds recovered by the Department of Justice,
and only to the extent that the money may be used for this purpose, a
reward to any person who furnishes information leading to the
recovery of not less than one hundred dollars ($100) of public funds
paid for services or goods rendered under the Medi-Cal program due to
an act or omission by a individual or entity from which recovery is
sought and that is the basis of a conviction of a Medi-Cal provider
of services or goods in violation of any statutory criminal
prohibition within the jurisdiction of the Bureau of Medi-Cal Fraud
and Elder Abuse pursuant to Section 12528 of the Government Code.
   (b) No reward shall be paid for information under this section
unless the information relates to the specific activities of a
specific individual or entity, and specifies the time period during
which the prohibited activities occurred.
   (c) No reward shall be paid under this section to a federal,
state, or local public employee or any individual contracting with a
state or local agency for information discovered by the employee
during the course of his or her duties as a federal, state, or local
agency employee or pursuant to a contract with that agency.
   (d) The amount of a reward under this section shall be determined
by the Department of Justice, and shall not exceed 10 percent of the
restitution recovered or one thousand dollars ($1,000), whichever is
less.  No reward shall be paid until all recoverable funds have been
collected from the individual or entity convicted of a violation of
statutory prohibitions listed in subdivision (a).
   (e) A determination by the Department of Justice of the
eligibility of an individual to receive a reward, the amount and
appropriateness of a reward under this section, and the timing of the
payment of the reward shall be deemed to be final and shall not be
subject to administrative appeal or judicial review.
   (f) Subject to subdivision (g), payments made under authority of
this section shall be disregarded for purposes of determining
eligibility for any Medi-Cal program, for the CalWORKs program, for
the Food Stamp Program, for the County Medical Services Program, and
for any other means-tested public benefit program for which
California has authority to establish the rules for determining
eligibility.
   (g) The income disregard described in subdivision (f) shall not be
effective, with respect to an identified program, until the first
day of the third month from the month in which any necessary federal
approval is obtained.  The income disregard provided for in
subdivision (f) shall only be implemented to the extent that federal
financial participation is obtained.
14107.13.  (a) (1) The department, in conjunction with the
Department of Justice, shall identify those areas of the
fee-for-service Medi-Cal program that are at greatest risk of fraud
or abuse.
   (2) In an effort to curb the fraud and abuse, the department shall
do one or both of the following:
   (A) Request confirmation of service from beneficiaries that
services or goods were actually received.
   (B) Request confirmation of service from referring and rendering
providers that the referring providers actually authorized and the
rendering providers actually delivered services or goods underlying
claims for reimbursement.
   (3) For purposes of this section, "areas" includes, but is not
limited to, provider types, services, aid code categories, and
geographic areas.
   (b) For any fee-for-service benefit, the department shall provide
a notice to confirm service to the following:
   (1) The recipient of the benefits.
   (A) Notices under this paragraph shall be provided no more
frequently than once per calendar month and shall detail all benefits
reportedly received that are relevant to the suspected fraudulent or
abusive activity identified in paragraph (1) of subdivision (a).
   (B) Notwithstanding subparagraph (A), a notice shall not be
provided to a beneficiary who has not received benefits that are
relevant to the suspected fraudulent or abusive activity identified
in paragraph (1) of subdivision (a).
   (2) The referring and rendering providers of benefits.
   (A) Notices under this paragraph shall be provided no more
frequently than one per calendar month and shall detail all referrals
for benefits and all benefits rendered that are relevant to the
suspected fraudulent or abusive activity identified in paragraph (1)
of subdivision (a).
   (B) Notwithstanding subparagraph (A), a notice shall not be sent
to a provider who has made no referrals for benefits nor rendered
benefits that are relevant to the suspected fraudulent or abusive
activity identified in paragraph (1) of subdivision (a).
   (C) Notwithstanding subparagraph (A), a notice shall not be sent
to a provider who receives a remittance advice from the state.
   (D) Subject to subdivision (e), notices under this paragraph shall
be sent to the provider's mailing address, facsimile number, or
electronic mail address, of record with the appropriate licensing
agency.
   (c) The notices required by this section shall be sent for as long
as the department, in conjunction with the Department of Justice,
deems it necessary for fraud control purposes.
   (d) The notices required by this section shall be adopted jointly
by the department and the Department of Justice.
   (e) The notices required by this section shall be transmitted
electronically, via facsimile, or by mail, whichever is most
cost-effective, practicable, and consistent with state and federal
privacy laws and regulations.
   (f) Notices sent to beneficiaries pursuant to paragraph (1) of
subdivision (b) shall comply with the Medi-Cal threshold language
requirements that apply to Medi-Cal managed care plans.
14107.2.  (a) Any person who solicits or receives any remuneration,
including, but not restricted to, any kickback, bribe, or rebate,
directly or indirectly, overtly or covertly, in cash or in valuable
consideration of any kind either:    (1) In return for the referral,
or promised referral, of any individual to a person for the
furnishing or arranging for the furnishing of any service or
merchandise for which payment may be made in whole or in part under
this chapter or Chapter 8 (commencing with Section 14200); or   (2)
In return for the purchasing, leasing, ordering, or arranging for or
recommending the purchasing, leasing, or ordering of any goods,
facility, service or merchandise for which payment may be made, in
whole or in part, under this chapter or Chapter 8 (commencing with
Section 14200) of this part,
is punishable upon a first conviction by imprisonment in the county
jail for not longer than one year or state prison, or by a fine not
exceeding ten thousand dollars ($10,000), or by both the imprisonment
and fine.  A second or subsequent conviction shall be punishable by
imprisonment in the state prison.
   (b) Any person who offers or pays any remuneration, including, but
not restricted to, any kickback, bribe, or rebate, directly or
indirectly, overtly or covertly, in cash or in valuable consideration
of any kind either:   (1) To refer any individual to a person for
the furnishing or arranging for furnishing of any service or
merchandise for which payment may be made, in whole or in part, under
this chapter or Chapter 8 (commencing with Section 14200); or
(2) To purchase, lease, order, or arrange for or recommend the
purchasing, leasing or ordering of any goods, facility, service or
merchandise for which payment may be made in whole or in part under
this chapter or Chapter 8 (commencing with Section 14200),
is punishable upon a first conviction by imprisonment in the county
jail for not longer than one year or state prison, or by a fine not
exceeding ten thousand dollars ($10,000), or by both the imprisonment
and fine.  A second or subsequent conviction shall be punishable by
imprisonment in the state prison.
   (c) Subdivisions (a) and (b) shall not apply to either of the
following:
   (1) Any amount paid by an employer to an employee, who has a bona
fide employment relationship with that employer, for employment with
provision of covered items or services.
   (2) A discount or other reduction in price obtained by a provider
of services or other entity under this chapter or Chapter 8
(commencing with Section 14200), if the reduction in price is
properly disclosed and reflected in the costs claimed or charges made
by the provider or entity under this chapter or Chapter 8
(commencing with Section 14200).  This paragraph shall not apply to
consultant pharmaceutical services rendered to nursing facilities nor
to all categories of intermediate care facilities for the
developmentally disabled.
   (d) For purposes of this section "kickback" means a rebate or
anything of value or advantage, present or prospective, or any
promise or undertaking to give any such rebate or thing of value or
advantage, with a corrupt intent to unlawfully influence the person
to whom it is given in actions undertaken by that person in his or
her public, professional, or official capacity.
   (e) The enforcement remedies provided under this section are not
exclusive and shall not preclude the use of any other criminal or
civil remedy.
14107.3.  Any person who knowingly and willfully charges, solicits,
accepts, or receives, in addition to any amount payable under this
chapter, any gift, money, contribution, donation, or other
consideration as a precondition to providing services or merchandise
to a Medi-Cal beneficiary for any service or merchandise in the
Medi-Cal program's scope of benefits in addition to a claim submitted
to the Medi-Cal program under this chapter or Chapter 8 (commencing
with Section 14200), except either:     (1) To collect payments due
under a contractual or legal entitlement pursuant to subdivision (b)
of Section 14000; or     (2) To bill a long-term care patient or
representative for the amount of the patient's share of the cost; or
    (3) As provided under Section 14019.3, is punishable upon a first
conviction by imprisonment in the county jail for not longer than
one year or state prison, or by a fine not to exceed ten thousand
dollars ($10,000), or both such imprisonment and fine.  A second or
subsequent conviction shall be punishable by imprisonment in the
state prison.
14107.4.  (a) Any person who, with the intent to defraud, certifies
as true and correct any cost report, submitted by a hospital to a
state agency for reimbursement pursuant to Section 14170, who
knowingly fails to disclose in writing on the cost report any
significant beneficial interest, as defined in subdivision (d), which
the owners of the provider, or members of the provider governing
board, or employees of the provider, or independent contractor of the
provider, have in the contractors or vendors to the providers, is
guilty of a public offense.
   (b) Any person who, with the intent to defraud, knowingly causes
any material false information to be included in any cost report
submitted by a hospital to a state agency for reimbursement pursuant
to Section 14170 shall be guilty of  an offense punishable by
imprisonment in the state prison, or by a fine not exceeding ten
thousand dollars ($10,000), or by a fine and imprisonment, or by
imprisonment in the county jail not exceeding one year, or by a fine
not exceeding five thousand dollars ($5,000), or by both a fine and
imprisonment.
   (c) The provider's chief executive officer shall certify that any
cost report submitted by a hospital to a state agency for
reimbursement pursuant to Section 14170 shall be true and correct.
In the case of a hospital which is operated as a unit of a
coordinated group of health facilities and under common management,
either the hospital's chief executive officer or administrator, or
the chief financial officer of the operating region of which the
hospital is a part, shall certify to the accuracy of the report.
   (d) As used in this section, "significant beneficial interest"
means any financial interest that is equal to or greater than
twenty-five thousand dollars ($25,000) of ownership interest or 5
percent of the whole ownership or any other contractual or
compensatory arrangement with vendors or contractors or immediate
family members of vendors or contractors.  "Immediate family" means
spouse, son, daughter, father, mother, father-in-law, mother-in-law,
daughter-in-law, or son-in-law.  Interests held by these persons
specified in subdivision (a) and members of these person's immediate
family should be combined and included as a single interest.
   (e) Any person who violates the provisions of subdivision (a) is
punishable by imprisonment in the county jail for a period not to
exceed one year or in the state prison, or by fine not to exceed five
thousand dollars ($5,000), or by both such fine and imprisonment.
14107.5.  (a) The department may, pursuant to regulations adopted
pursuant to subdivision (b), rescind the privileges of a provider of
durable medical equipment or incontinence supplies who fails to
satisfy the requirements of this section to bill and receive payment
for services provided under this chapter.
   (b) The department shall adopt regulations to define the specific
causes for which the authority of a Medi-Cal provider of durable
medical equipment or incontinence supplies to bill and receive
payment for services provided under this chapter may be rescinded for
violation of this section.
   (c) The department shall not rescind the authority of a Medi-Cal
provider of durable medical equipment or incontinence supplies to
bill and receive payment under this chapter without a prior hearing,
unless any of the following conditions exist:
   (1) The provider has failed to provide material information to the
department pursuant to Section 14125.8.
   (2) The provider has knowingly furnished false information on any
application for provider enrollment.
   (3) The provider has knowingly filed false claims for
reimbursement under this chapter.
14108.  Any developmentally disabled recipient under this chapter
receiving care in a nursing facility or any category of intermediate
care facility for the developmentally disabled is entitled as a part
of the therapeutic and rehabilitative program, to be temporarily
absent from the facilities.  The State Department of Health Services
shall, with consultation from the State Department of Developmental
Services, adopt regulations establishing the periods of time and
conditions under which temporary absences shall be permitted.  The
regulations shall require that absences be in accordance with an
individual program plan and provide for absences due to
hospitalization for an acute condition.  The limits on temporary
leaves of absence established by the Department of Health Services by
regulation shall not be less than 30 days per year.
   During these temporary absences the State Department of Health
Services shall reimburse the facility for the cost of maintaining the
vacant accommodations at a rate determined by the department which
shall be less than the regular rate.
14108.1.  Any recipient receiving care in a nursing facility under
this chapter, as part of a certified special treatment program for
mentally disordered persons, or as a part of a mental health
therapeutic and rehabilitative program approved and certified by a
local mental health director, is entitled to be temporarily absent
from those facilities.  The State Department of Health Services
shall, with consultation from the State Department of Mental Health,
develop regulations within 60 days of the effective date of this act
establishing the periods of time and conditions under which temporary
absences shall be permitted.  These regulations shall require that
absences be in accordance with an individual patient care plan and
also provide for absences due to hospitalization for an acute
condition.  The limits on temporary leaves of absence established by
the State Department of Health Services by regulation shall not be
less than 30 days per year.
   During these temporary absences, the State Department of Health
Services shall reimburse the facility for the cost of maintaining the
vacant accommodations at a rate to be determined by the department
which shall be less than the normal reimbursement rate.
14108.2.  Except as provided by Section 14108 and Section 14108.1,
any recipient of services under this chapter who is residing in a
long-term care facility shall be permitted to be temporarily absent
from such facilities for up to 18 days per year, not including days
of bed hold for acute hospitalization.  The department may approve
additional days of leave on an individual basis, not to exceed 12
days per year, exclusive of days of bed hold for acute
hospitalization.
   All such leaves of absence shall be in accordance with an
individual patient care plan as approved by the attending physician.
The director shall adopt regulations establishing the conditions
under which additional leave days shall be authorized.  The director
may establish reasonable limits on the duration of any period of
absence.
14109.  In determining the medical needs of any person eligible
under this chapter, and the amount of health care such person is
entitled to receive, the department shall include the cost of any
deductibles or, cost sharing or similar charge imposed in connection
with benefits to which such person may be entitled under the federal
program of health insurance for the aged and disabled, except that
for those individuals 65 years of age or over, who prior to July 1,
1973, were ineligible under the federal program of health insurance
for the aged, the director may include such costs.
14109.5.  Notwithstanding the provisions of Section 14109, effective
January 1, 1982, the reimbursement rate for costs specified in
Section 14109 for all services, including, but not limited to,
hospital inpatient services, shall, to the extent feasible, not
exceed the reimbursement rate for similar services established under
this chapter.  For purposes of this section, effective October 1,
1992, the reimbursement rates established under this chapter for
hospital inpatient services shall be no greater than the amounts paid
by the Medicare program for similar services.
   The fiscal intermediary shall expedite the implementation of any
change order resulting only from this section.  The department shall
provide sufficient funding for any such change order to enable the
fiscal intermediary to implement such change order expeditiously and
to not have to divert staff or other resources from existing contract
tasks, including but not limited to those resources dedicated to the
implementation of all other change orders.
14109.6.  Notwithstanding Section 14109, effective September 1,
1997, and pursuant to Section 1396a(n) of Title 42 of the United
States Code, as amended by Section 4714 of the federal Balanced
Budget Act of 1997, the reimbursement rate for costs specified in
Section 14109 for all services, including, but not limited to,
hospital inpatient services, shall, to the extent feasible, not
exceed the reimbursement rate for similar services established under
this chapter.  Effective for dates of service on or after September
1, 1997, the reimbursement rates established under this chapter for
hospital inpatient services shall be no greater than the amounts paid
by the Medicare program for similar services.  Notwithstanding the
provisions of this section, Section 14109.5 shall remain in effect
for dates of service prior to September 1, 1997.  It is the intent of
the Legislature that regulations and the amendments to the medicaid
state plan previously adopted pursuant to Section 14109.5 shall
remain in effect for purposes of this section until amended or
otherwise modified by the department.
14110.  No payment for care or services shall be made under Medi-Cal
to a medical or health care facility unless it has been certified by
the department for participation, and it meets one of the following:
   (a) It is licensed by the department.
   (b) It is licensed by a comparable agency in another state.
   (c) It is exempt from licensure.
   (d) It is operated by the Regents of the University of California.
   (e) It meets the utilization review plan criteria for
certification or is certified as an institutional provider of
services under Title XVIII of the Federal Social Security Act and
regulations issued thereunder.
   Nothing in this section shall preclude payments for care for aged
patients in medical facilities or institutions operated or licensed
by the department, or the State Department of Mental Health, State
Department of Developmental Services, State Department of Social
Services, or Department of Rehabilitation.
   The department shall certify facilities licensed pursuant to
subdivision (e) of Section 1250 of the Health and Safety Code for
participation in the program within 30 calendar days of receipt of a
complete application or date of licensure, whichever is greater, if
the facility meets all the requirements for certification.  The
department for claims purposes only, shall issue a provider number to
facilities which meet all certification requirements within 30
calendar days of the date of certification or 60 calendar days of
licensure, whichever is greater.
14110.05.  (a) The department shall ensure that nursing facility
applicants have access to assistance in identifying and securing the
information necessary to complete the Medi-Cal application and to
make the eligibility determination.
   (b) The department shall ensure that Medi-Cal applications for
nursing facility residents are processed in a timely manner in
accordance with state and federal laws and regulations.
14110.1.  Medi-Cal reimbursements for long-term care in any hospital
shall be  at a rate not to exceed the maximum rate paid for
long-term care in nursing facilities which are distinct parts of
acute care hospitals, except for patients whose medical or nursing
needs exceed the level of care provided in nursing facilities.
14110.15.  (a) The department shall develop, collect, and maintain,
in an electronic format, all data elements in the minimum data set
specified by the federal government.  The data base shall incorporate
the data required for preadmission screening and annual resident
reviews, and Medi-Cal treatment authorization requests.  The
department shall make the format of this new data base available to
the public.
   (b) All skilled nursing facilities and nursing facilities required
by federal law to complete the minimum data set form shall provide
the data to the department in a manner and form prescribed by the
director.  The director may require that the submission of that data
shall be in an electronic format.
   (c) The department shall design the minimum data set data base in
a manner that maintains resident confidentiality and that allows the
use of the data by other authorized state agencies, including, but
not limited to, the Office of Statewide Health Planning and
Development and the Department of Mental Health.  To the extent
possible, those other state agencies shall obtain the minimum data
set and preadmission screening and annual resident review data from
the department's data base established and maintained pursuant to
this section.
   (d) To the fullest extent possible, the department shall use the
minimum data set data base to meet the requirements of the current
treatment authorization request review process and shall automate use
of the minimum data set information for that purpose.
   (e) This section shall not be construed to prohibit the department
or any other state agency from requiring additional information that
is not available from the minimum data set data base in order to
meet other data needs.
   (f) The department shall implement this section no later than the
date specified by the federal government for facility completion of
automation of the minimum data set data.  The department shall,
within a reasonable time, make necessary system changes to begin the
use of the automated minimum data set data to meet its treatment
authorization and preadmission screening and annual resident review
data requirements.  To the fullest extent possible, these system
changes shall be anticipated and commenced in advance of the federal
government's final implementation date.
   (g) The system shall be developed and implemented in consultation
with representatives of the long-term care industry and other
interested parties, such as physicians and other health care
professionals.
   (h) The department shall implement the development of the minimum
data set data base only if federal funds are available for that
purpose.  Development of the data system applications for use of the
automated minimum data set data base by the department are subject to
federal approval and federal financial participation for the
affected systems.
14110.2.  The director shall, unless precluded by federal law or
regulation, amend the state plan under Title XIX of the Social
Security Act to conform to the policy directions and budgetary
decisions of the Legislature, as reflected in the Budget Act for each
fiscal year.
14110.3.  Until the Secretary of Health, Education and Welfare
establishes, by regulation, standards in accordance with Title XIX of
the Federal Social Security Act for intermediate care facilities,
there shall be no requirement for the provision of intermediate care
in nursing homes; however, a nursing home may elect to waive the
provisions of this section and voluntarily apply to the department to
provide intermediate care in its facility.
14110.4.  (a) All laundry services for all apparel, linen, garments,
towels, and hospital gowns shall be provided by a nursing facility
or any category of intermediate care facility for the developmentally
disabled at no cost to a recipient under this chapter.  These
laundry services shall be considered as part of the basic care
provided by the facility under the daily rate provided for pursuant
to this chapter.  The director shall, if necessary, adjust the daily
rate to provide for the costs of these services.  A facility may,
however, charge the patient a fee to provide special drycleaning or
treatment for a garment needing this care, when the garment is owned
by the patient and when the regular laundry service is not
appropriate.
   (b) A facility shall provide a periodic hair trim as part of its
care for all patients who are recipients under this chapter.  This
service shall be included as part of the daily rate provided for
pursuant to this chapter.  The director shall, if necessary, adjust
the daily rate to provide for the costs of these services.  A
facility may, however, charge a fee for beauty shop services for
patients who request special treatments or styling of their hair.
   (c) The director shall seek all federal funds available for
implementation of this section.
14110.5.  Effective January 1, 1977, no payment for any prescription
ophthalmic device shall be made under Medi-Cal if that device does
not meet the standards adopted by the department, the State Board of
Optometry or the Division of Licensing of the Medical Board of
California under Section 2541.3 of the Business and Professions Code.
14110.55.  For the purposes of the pilot program established under
Section 14495.10, the department shall develop a reimbursement rate
for continuous skilled nursing care services provided by a
participating health facility to developmentally disabled individuals
who meet the federal waiver eligibility criteria.  The reimbursement
rate shall be determined in accordance with a methodology that shall
be developed by the department.  The department may elect to
establish individual patient-specific rates.
14110.6.  (a) The director shall adopt regulations, establishing
payment rates for nursing facilities, intermediate care
facilities/developmentally disabled, and intermediate care
facilities/developmentally disabled-habilitative as defined in
Section 1250 of the Health and Safety Code, which are sufficient to
provide an increase of one dollar and ninety-six cents ($1.96) per
patient day for patients receiving skilled nursing services, one
dollar and fifty-eight cents ($1.58) per patient day, for patients
receiving intermediate care services, two dollars and twenty-nine
cents ($2.29) per patient day for intermediate care
facilities/developmentally disabled patients, to be used for wage
increases and benefits to all employees, except a licensed nursing
home administrator or an administrator-in-training and two dollars
and thirty-five cents ($2.35) per patient day for intermediate care
facilities/developmentally disabled-habilitative patients in
facilities with 4 to 6 beds, and one dollar and ninety-eight cents
($1.98) per patient day for intermediate care
facilities/developmentally disabled-habilitative patients in
facilities with 7 to 15 beds, to be used for wage increases and
benefits to all direct care staff.  However, if either (1) the entry
level wages of the lowest paid nonadministrative employee of a
nursing facility, intermediate care facility/developmentally
disabled, or intermediate care facility/developmentally
disabled-habilitative, exceeds six dollars ($6) per hour as of August
1, 1984; or (2) upon the election of a county board of supervisors,
for any nursing facility, intermediate care facility/developmentally
disabled, or intermediate care facility/developmentally
disabled-habilitative, which is operated by a county, the funds
received pursuant to regulations adopted pursuant to this section
shall be used solely for labor costs directly related to providing
patient care services in order to meet patients' needs including the
uses of funds provided for under subdivision (d) of Section 14110.7.
Any increase in wages and benefits required by this section shall be
in addition to any future mandatory increases required by federal or
state law.  The rate shall provide funding for the portion of
additional costs necessary to implement the wage and benefit increase
required by this section attributable to Medi-Cal patients.  The
portion of those additional costs shall be the same as the ratio of
Medi-Cal patients to the total number of patients in the facility.
These regulations shall be adopted, effective March 15, 1985, for
skilled nursing facilities, intermediate care facilities, and
intermediate care facilities/developmentally disabled, and by October
1, 1985, for intermediate care facilities/developmentally
disabled-habilitative.  Commencing October 1, 1990, these
requirements shall become operative for nursing facilities.
   (b) Each nursing facility or intermediate care
facility/developmentally disabled, or, for the period prior to
October 1, 1990, each skilled nursing facility or intermediate care
facility, shall certify all of the following:
   (1) All employees, except a licensed nursing home administrator or
an administrator-in-training of a licensed nursing home, shall
receive at least the prevailing federal or state minimum wage rate
plus the average hourly wage increase established pursuant to Chapter
19 of the Statutes of 1978, and this section.
   (2) All employees of the facility, except a licensed administrator
or administrator-in-training, shall be paid not less than the sum of
the employee's actual rate of pay as of the effective date of the
Medi-Cal rate increase provided for under Section 14110.7 plus the
amount of the adjustment specified pursuant to this section, or not
less than the applicable agreed to rate plus the amount of the
adjustment, whichever is greater.
   (3) Any wage increase required pursuant to Section 1268.5 of the
Health and Safety Code, is in addition to any minimum wages provided
in this section.
   (4) For purposes of determining the amount of Medi-Cal funds to be
distributed for employee wages and benefits, the total Medi-Cal
patient days recorded by the facility in the month of December 1983
shall be multiplied by the amount per patient day specified in
subdivision (a) plus the amount provided by Chapter 19 of the
Statutes of 1978.  The new wage levels shall be determined by
dividing the Medi-Cal funds received by the nonovertime hours worked
by covered employees in December 1983, plus any adjustments due to
additional employees as specified in Section 14110.7 and adjustments
to reflect employee benefit allowances.
   (c) Each intermediate care facility/developmentally
disabled-habilitative shall certify all of the following:
   (1) All direct care staff, as defined in the department's
regulations developed pursuant to Section 1267.7 of the Health and
Safety Code, shall receive at least the prevailing federal or state
minimum wage plus the average hourly wage increase pursuant to this
section.
   (2) For purposes of determining the amount of Medi-Cal funds to be
distributed for intermediate care facilities/developmentally
disabled-habilitative for employee wages and benefits, the total
Medi-Cal patient days in the month of December 1984, shall be
multiplied by the amount per patient day specified in subdivision
(a).  The new wage level shall be determined by dividing the Medi-Cal
funds received by the nonovertime hours by covered direct care
employees in December 1984, and adjustments to reflect employee
benefit allowances.
   (d) The director shall order the inspection of relevant payroll
and personnel records of facilities which are reimbursed for Medi-Cal
patients under the rate of reimbursement established pursuant to
subdivision (a) to ensure that the wage and benefit increases
provided for have been implemented.
   (e) The department shall, commencing August 1, 1999, increase the
Medi-Cal reimbursement for level A and level B nursing facilities
solely to provide funds for salaries, wages, and benefits increases
for direct care staff.  For the purposes of this subdivision, "direct
care staff" means registered nurses, licensed vocational nurses, and
nurse assistants, who provide direct patient care.  The amount of
funds to be provided to each level A and level B facility pursuant to
this subdivision shall be calculated on a per patient day basis, and
shall be added to the per diem rate paid to each facility.  The
amount of funds provided under this subdivision to each nursing
facility peer group shall be published in a Medi-Cal provider
bulletin.  Level A and level B facilities shall compensate their
registered nurses, licensed vocational nurses, and nurse assistants
that portion of the rate increase provided under this subdivision in
the form of salaries, wages, and benefits increases for their direct
care staff.  The total amount to be passed through by each facility
shall be the per diem amount received by the facility pursuant to
this subdivision times the facility's number of Medi-Cal patient
days.
   (f) Subject to an appropriation for this purpose in the Budget Act
of 2000, in addition to the increase specified in subdivision (e),
the department shall, commencing August 1, 2000, increase the
Medi-Cal reimbursement rate for nursing facilities, intermediate care
facilities/developmentally disabled, intermediate care
facilities/developmentally disabled-habilitative, and intermediate
care facilities/developmentally disabled-nursing solely to provide
funds for salaries, wages, and benefits increases for direct care
staff and other staff, subject to all of the following:
   (1) For purposes of this subdivision "direct care staff in nursing
facilities" means the following:
   (A) Registered nurses and licensed vocational nurses, when
employed in the performance of direct care to patients.
   (B) Employees in the nurse assistant classification employed in
the performance of direct care to patients at a freestanding or
distinct-part nursing facility, including job titles such as nursing
aide, aide, practical nurse, orderly, nurse assistant, and certified
nurse assistant.
   (C) Employees performing respiratory therapy services for Medi-Cal
pediatric subacute patients, including job titles such as
respiratory care practitioner, respiratory technician, respiratory
therapist inhalation technician, and inhalation therapist.
   (2) For purposes of this subdivision, "direct care staff in
intermediate care facilities/developmentally disabled, intermediate
care facilities/developmentally disabled-habilitative, and
intermediate care facilities/developmentally disabled-nursing" means
all of the following:
   (A) Qualified mental retardation professionals employed in the
performance of direct care to patients.
   (B) Lead personnel employed in the performance of direct care to
patients.  Lead personnel described in this subparagraph shall not be
considered to be supervisory.
   (C) Employees in the nurse assistant classification employed in
the performance of direct care to patients at a freestanding or
distinct-part nursing facility, including job titles such as nurse
assistants and aides.
   (D) Other nonsupervisory staff providing direct patient care.
   (E) Registered nurses and licensed vocational nurses, if employed
in the performance of direct care to patients.
   (3) For purposes of paragraphs (1) and (2), "direct care staff"
shall not include registered nurses or other personnel performing
supervisory functions or housekeeping or maintenance staff in any
facility.
   (4) For purposes of this subdivision, "other staff" means all of
the following personnel:
   (A) Linen and laundry staff.
   (B) Plant operations and maintenance staff.
   (C) Housekeeping staff.
   (D) Dietary staff.
   (5) (A) The amount of funds to be provided to each facility
pursuant to this subdivision shall be added to the per diem rate paid
to each facility on a per patient day basis.
   (B) The per diem amount of funds provided to each facility type
and peer group pursuant to this subdivision shall be published in a
Medi-Cal provider bulletin.  Nursing facilities that are part of an
acute care hospital and subacute facilities shall be notified of
their per diem amount provided pursuant to this subdivision in a
separate letter to each facility.
   (6) (A) Facilities receiving funds pursuant to this subdivision
shall compensate staff that portion of the rate increase provided
pursuant to this subdivision in the form of salaries, wages, and
benefits increases.  The total amount to be passed through pursuant
to this subdivision by each facility shall be the per diem amount
received by the facility pursuant to this subdivision multiplied by
the facility's number of Medi-Cal patient days.
   (B) Each direct care and other staff employee classification shall
receive a portion of the rate increase provided pursuant to this
subdivision in the form of an increase in salary, wage, and benefits.
  The facility may allocate the amounts that each classification may
receive, but the amount shall not be nominal or zero.
   (C) Funds passed through pursuant to this subdivision for purposes
of salary, wages, or benefits increases may not be used for any
salary, wage, or benefit increase that were committed to by a
facility prior to August 1, 2000, nor may these funds be used for any
salaries, wages, or benefits that the facility would have paid in
the absence of this subdivision.
   (D) Funds passed through pursuant to this subdivision for purposes
of salary, wages, or benefits increases may not be distributed to
direct care and other staff in the form of bonuses.  These funds may,
however, be used to provide retroactive pay increases if those wage
increases also increase the employee's base salary rate.
   (7) The base from which direct care and other staff salaries,
wages, and benefits shall be increased shall be the aggregate per
hour salaries, wages, and benefits for the period of August 1, 1999,
to July 31, 2000, inclusive.
   (8) The department may inspect relevant payroll and personnel
records of facilities receiving funds pursuant to this subdivision in
order to ensure that the salary, wage, and benefit increases
provided for pursuant to this subdivision have been implemented.
   (9) Each facility receiving funds from the department, or from a
county organized health system described in paragraph (10) pursuant
to this subdivision shall certify on the form provided by the
department that these funds were expended for increased direct care
and other staff salary, wages, and benefits increases in accordance
with this subdivision.  The facility shall return the form to the
department by October 1, 2001.  The facility shall submit a copy of
the completed form to all collective bargaining agents with whom the
facility has collective bargaining agreements for direct care and
other staff at the facility.
   (10) County organized health systems contracting with the
department pursuant to Article 2.8 (commencing with Section 14087.5)
and Article 7 (commencing with Section 14490) of Chapter 8 shall
certify to the department, in a manner to be specified by the
department, that the August 1, 2000, wage pass-through funds,
received pursuant to this section in the form of capitated rate
payments, were passed through to the facilities described in this
subdivision.
   (g) Any facility which is paid under the rate provided for in
subdivision (a), (e), or (f) which the director finds has not made
the wage and benefit increases provided for shall be liable for the
amount of funds paid to the facility based upon the wage and benefit
requirements provided for by this section but not distributed to
employees for wages and benefits, plus a penalty equal to 10 percent
of the funds not so distributed.  The facility shall be subject to
Section 14107.
14110.7.  (a) The director shall adopt regulations increasing the
minimum number of equivalent nursing hours per patient required in
skilled nursing facilities to 3.2, in skilled nursing facilities with
special treatment programs to 2.3, in intermediate care facilities
to 1.1, and in intermediate care facilities/developmentally disabled
to 2.7.
   (b) (1) The director shall adopt regulations that shall establish
the minimum number of equivalent nursing hours per patient required
in the following, for the first year of implementation of the first
year of rates established pursuant to this article:
   (A) 2.6 hours for skilled nursing facilities.
   (B) 1.9 hours for skilled nursing facilities with special
treatment programs.
   (C) 0.9 hours for intermediate care facilities.
   (D) 2.2 hours for intermediate care facilities/developmentally
disabled.
   (2) The staffing standards established by paragraph (1) shall
become effective concurrently with the establishment of the first
reimbursement rates under this article.
   (3) The director shall adopt regulations that establish the
minimum number of equivalent nursing hours per patient required in
skilled nursing facilities at 2.7 for the second year of
implementation of rates established pursuant to this article.
   (c) (1) The Legislature finds and declares all of the following:
   (A) The one-year transition phase from 2.6 to 2.7 equivalent
nursing hours allows ample time to restructure staffing.
   (B) The 4 percent augmentation to reimburse for direct patient
care, as defined in paragraph (2) of subdivision (b) of Section
14126.60, provides funds to cover additional expenses, if any,
incurred by facilities to implement this staffing standard.
   (2) Subject to the appropriation of sufficient funds, the
department may adopt regulations to increase the minimum number of
equivalent nursing hours required of facilities subject to this
section per patient beyond 2.7 nursing hours per patient day.
   (d) (1) The department shall identify those skilled nursing
facilities that are in compliance with the 3.0 minimum double nursing
hour standards, as defined in subdivision (a) of Section 1276.5 of
the Health and Safety Code, but have actual staffing ratios below
2.5, as of July 1, 1990, and shall not enforce the 2.7 equivalent
nursing hours with respect to those facilities until the third year
of implementation of the rates established under this article.
   (2) The department shall periodically review facilities that have
actual staffing ratios described in paragraph (1) to ensure that they
are making sufficient progress toward 2.7 hours.
   (e) Notwithstanding paragraph (1) of subdivision (d), commencing
January 1, 2000, the minimum number of nursing hours per patient day
required in skilled nursing facilities shall be 3.2, without regard
to the doubling of nursing hours as described in paragraph (1) of
subdivision (b) of Section 1276.5 of the Health and Safety Code, and
except as set forth in Section 1276.9 of the Health and Safety Code.
14110.8.  (a) For the purposes of this section:
   (1) "Facility" means any long-term health care facility as defined
in subdivisions (c), (d), (e), (g), and (h) of Section 1250 of the
Health and Safety Code.
   (2) "Resident" means a person who is a facility resident or
patient and a Medi-Cal beneficiary and whose facility care is being
paid for in whole or in part by Medi-Cal.
   (3) "Agent" means a person who manages, uses, or controls those
funds or assets of the resident that legally are required to be used
to pay the resident's share of cost and other charges not paid for by
the Medi-Cal program.
   (4) "Responsible party" means a person other than the resident or
potential resident, who, by virtue of signing or cosigning an
admissions agreement of a facility, either together with, or on
behalf of, a potential resident, becomes personally responsible or
liable for payment of any portion of the charges incurred by the
resident while in the facility.  A person who signs or cosigns a
facility's admissions agreement by virtue of being an agent under a
power of attorney for health care or an attorney-in-fact under a
durable power of attorney executed by the potential resident, a
conservator of the person or estate of the potential resident, or a
representative payee, is not a responsible party under this section,
and does not thereby assume personal responsibility or liability for
payment of any charges incurred by the resident, except to the extent
that the person, or the resident's conservator or representative
payee is an agent as defined in paragraph (3).
   (b) No facility may require or solicit, as a condition of
admission into the facility, that a Medi-Cal beneficiary have a
responsible party sign or cosign the admissions agreement.  No
facility may accept or receive, as a condition of admission into the
facility, the signature or cosignature of a responsible party for a
Medi-Cal beneficiary.
   (c) A facility may require, as a condition of admission, where a
resident has an agent, that the resident's agent sign or cosign the
admissions agreement and agree to distribute to the facility promptly
when due, the share of cost and any other charges not paid for by
the Medi-Cal program which the resident or his or her agent has
agreed to pay.  The financial obligation of the agent shall be
limited to the amount of the resident's funds received but not
distributed to the facility.  A new agent who did not sign or cosign
the admissions agreement shall be held responsible to distribute
funds in accordance with this section.
   (d) When a resident on non-Medi-Cal status converts to Medi-Cal
coverage, any security deposit paid to the facility by the resident
or on the resident's behalf as a condition of admission to the
facility shall be returned and the obligations and responsibilities
of the resident or responsible party during the time period when the
resident is covered by Medi-Cal shall be limited to the obligations
and responsibilities provided for under the Medi-Cal program.  In the
event that the resident becomes ineligible for Medi-Cal coverage at
any time subsequent to converting to Medi-Cal coverage, the resident
and responsible party shall be bound by the terms of the original
admission agreement, or any admission agreement in effect at the time
the Medi-Cal coverage commenced.
   (e) When a resident on non-Medi-Cal status converts to Medi-Cal
coverage, the facility shall make a reasonable attempt to assist the
resident in contacting the county to obtain an estimate of the
resident's share of cost.
   (f) A resident and his or her agent shall pay to the facility the
share of cost, for which he or she is responsible under the Medi-Cal
program, unless otherwise exempted by law.
   (g) If a resident or his or her agent disputes the amount of share
of cost owed to a facility, the resident or agent may apply for a
state hearing pursuant to Section 10950 for a determination of the
amount of share of cost owed to the facility.
   (h) Any agent who willfully violates the requirements of this
section is guilty of a misdemeanor, and upon conviction thereof,
shall be punished by a fine not to exceed two thousand five hundred
dollars ($2,500) or by imprisonment in the county jail not to exceed
180 days, or both.
14110.9.  No nursing facility or any category of intermediate care
facility for the developmentally disabled may require a security
deposit from a Medi-Cal beneficiary who applies for admission to the
facility.
14111.  (a) As permitted by federal law or regulations, for health
care services provided in a long-term health care facility that are
reimbursed by Medicare, a physician and surgeon may delegate any of
the following to a nurse practitioner:
   (1) Alternating visits required by federal law and regulations
with a physician and surgeon.
   (2) Any duties consistent with federal law and regulations within
the scope of practice of nurse practitioners, so long as all of the
following conditions are met:
   (A) A physician and surgeon approves, in writing, the admission of
the individual to the facility.
   (B) The medical care of each resident is supervised by a physician
and surgeon.
   (C) A physician and surgeon performs the initial visit and
alternate required visits.
   (b) This section does not authorize benefits not otherwise
authorized by federal law or regulation.
   (c) All responsibilities delegated to a nurse practitioner
pursuant to this section shall be performed under the supervision of
the physician and surgeon and pursuant to a standardized procedure
among the physician and surgeon, nurse practitioner, and facility.
   (d) No task that is required by federal law or regulation to be
performed personally by a physician may be delegated to a nurse
practitioner.
   (e) Nothing in this section shall be construed as limiting the
authority of a long-term health care facility to hire and employ
nurse practitioners so long as that employment is consistent with
federal law and within the scope of practice of a nurse practitioner.
14111.5.  (a) As permitted by federal law or regulations, for health
care services provided in a long-term health care facility that are
reimbursed under this chapter, a nurse practitioner may, to the
extent consistent with his or her scope of practice, perform any of
the following tasks otherwise required of a physician and surgeon:
   (1) With respect to visits required by federal law or regulations,
making alternating visits, or more frequent visits if the physician
and surgeon is not available.
   (2) Any duty or task that is consistent with federal and state law
or regulation within the scope of practice of nurse practitioners,
so long as all of the following conditions are met:
   (A) A physician and surgeon approves, in writing, the admission of
the individual to the facility.
   (B) The medical care of each resident is supervised by a physician
and surgeon.
   (C) A physician and surgeon performs the initial visit and
alternate required visits.
   (b) This section does not authorize benefits not otherwise
authorized by federal or state law or regulation.
   (c) All responsibilities undertaken by a nurse practitioner
pursuant to this section shall be performed in collaboration with the
physician and surgeon and pursuant to a standardized procedure among
the physician and surgeon, nurse practitioner, and facility.
   (d) Except as provided in subdivisions (a) to (c), inclusive, any
task that is required by federal law or regulation to be performed
personally by a physician may be delegated to a nurse practitioner
who is not an employee of the long-term health care facility.
   (e) Nothing in this section shall be construed as limiting the
authority of a long-term health care facility to hire and employ
nurse practitioners so long as that employment is consistent with
federal law and with the scope of practice of a nurse practitioner.
14112.  Health care provided pursuant to this chapter shall not
constitute a lien against the property of any recipient or medically
indigent or other person eligible under this chapter.
14113.  The department shall enter into cooperative arrangements
with the Department of Rehabilitation and any other state agency or
department responsible for health or vocational rehabilitation
services in the state to insure the appropriate utilization of such
services in the provision of health care and related remedial
services under this chapter.
14115.  (a) Bills for service under this chapter shall be submitted
not more than six months after the month in which the service is
rendered, and shall be in the form prescribed by the director, except
that in the event the patient does not identify himself or herself
to the provider as a Medi-Cal beneficiary within four months after
the month in which the service was rendered, the provider shall be
entitled to submit his or her statement at any time within 60 days
after that date certified by the provider as the date the patient was
first identified as a Medi-Cal beneficiary.  However, the date
certified by the provider as the date the patient was first so
identified shall not be later than one year after the month in which
the service was rendered.  Whenever a provider has submitted a claim
to a liable third party, the provider shall have one year after the
month in which the service is rendered for submission of the bill.
Whenever a legal proceeding has been commenced with either an
administrative or judicial tribunal concerning a bill for which the
provider is attempting to obtain payment from a liable third party,
the provider shall have one year in which to submit the bill after
the month in which the services have been rendered.  A copy of the
pleadings shall be conclusively presumed to be sufficient evidence of
commencement of a legal proceeding.
   (b) The director may, where he or she finds that delay in the
submission of bills was caused by circumstances beyond the control of
the provider, extend the period for submission of bills for a period
not to exceed one year.
   (c) (1) Reimbursement for an original claim, submitted for payment
between six and 12 months after the month of service, that does not
meet any of the exceptions allowing billing after six months as
specified in subdivisions (a) and (b), or the exception specified in
subdivision (f), shall be reduced as follows:
   (A) The amount otherwise payable by Medi-Cal shall be reduced by
25 percent for claims submitted during the seventh through the ninth
month after the month of service.
   (B) The amount otherwise payable by Medi-Cal shall be reduced by
50 percent for claims submitted during the 10th through the 12th
month after the month of service.
   (2) The director may establish exceptions through regulations, for
claims submitted beyond the one-year billing limitation, to the
extent full federal participation is available.
   (d) For the purposes of this section, identification of a patient
as a Medi-Cal beneficiary shall mean presentation to the provider of
the patient's Medi-Cal card.
   (e) No further followup shall be required, after the provider
receives acknowledgment of a claim inquiry from the fiscal
intermediary, until the claim is paid or denied, except that this
period shall not exceed one year from the date of acknowledgment.
Within one year from the date of acknowledgment the next level of
appeal shall be utilized by the provider.
   (f) To the extent permitted by federal law, when a state of
emergency has been declared by either the President of the United
States or the Governor, the director, in order to ensure continued
access to health care services, may remit payment for services
without the submission of required documentation, to any provider in
good standing under the Medi-Cal program who, due to destruction,
loss, or inaccessibility of data as a result of the emergency
situation, is unable to submit claims.  Emergency payments may be
made for a period of up to six months from the date of the emergency
declaration.  All requests for emergency payment shall include
adequate justification for payment, as required by the director, and
shall be paid based on the previous claims history of the requesting
provider held by the department.
14115.1.  The department may not require that any hospital based
physician submit a combined charge, which includes the physician and
hospital charge, if it is not the customary practice of such
physician to submit a combined charge.  The physician's right to bill
independently shall be respected by the department; provided,
however, this shall not prevent the department from enacting
reasonable regulations to insure that the total charges, when a
hospital and physician bill separately, do not exceed the total
charge when both bill for the same services in a combined charge.
14115.2.  (a) The department shall not require nursing facilities or
any category of intermediate care facility for the developmentally
disabled, as defined in Section 1250 of the Health and Safety Code to
originate monthly bills for beneficiaries if the following
conditions are met:
   (1) A claim on which inpatient per diem days have been billed by
the provider is received by the fiscal intermediary by the fifth
working day of the month following the month being billed; and
   (2) The claim received by the fiscal intermediary does not show a
patient status code that indicates discharge or death on the last day
billed for the recipient for that month.
   (b) When the conditions listed above are met, the fiscal
intermediary shall, by the 20th of the month, mail to the provider a
preimprinted claim to cover the  current month's services to those
beneficiaries.
   (c) The provider shall be required to check the preimprinted claim
for accuracy, to make corrections, and to certify that the
beneficiaries who are listed on the claim received the services
listed.
   (d) The preimprinted claim shall be returned in the manner
required by Section 14115; provided, the preimprinted claim shall be
deemed a late submission no earlier than six months following the end
of the month of service being billed.
   (e) Except as otherwise provided in this section, the rights and
duties of providers and the department with respect to the billing
procedures hereby established shall be governed by the provisions of
this chapter.
14115.3.  The department shall permit a nurse anesthetist to bill
independently for services rendered by such nurse anesthetist.  If a
nurse anesthetist chooses to bill independently for such services,
the department shall make the payment for the services directly to
the nurse anesthetist.
14115.4.  If the Budget Act should in any budget year restrict
payment for pathology services under the Medi-Cal program to only the
provider who actually performs those services, this restriction
shall not prohibit any of the following:
   (a) Reimbursement of a hospital for pathology services performed
by an outside reference laboratory for hospital patients.
   (b) Reimbursement of a clinical laboratory for performance of
pathology services that are referred to another clinical laboratory.
   (c) Reimbursement of a clinical laboratory when pathology services
are performed at a different testing location owned and operated by
the same clinical laboratory.
   Services provided pursuant to subdivision (a), (b), or (c) shall
be reimbursed in accordance with the rules and regulations of the
department.
14115.5.  Moneys payable or rights existing under this chapter shall
be subject to any claim, lien or offset of the State of California,
and any claim of the United States of America made pursuant to
federal statute, but shall not otherwise be subject to enforcement of
a money judgment or other legal process, and no transfer or
assignment, at law or in equity, of any right of a provider of health
care to any payment shall be enforceable against the state, a fiscal
intermediary or carrier.
14115.7.  (a) The department, with the assistance of the Controller,
shall develop a procedure by which approved claims for services
rendered may be reimbursed through a means of electronic transfer of
funds to designated providers of services.
   (b) The department shall make the electronic transfer of funds for
the payment of approved claims for services rendered pursuant to
this chapter available to all interested parties for a reasonable
initial fee, and an annual subscription fee for system updating,
maintenance, and support services provided to users.
   (c) The department shall charge fees pursuant to subdivision (b)
in an amount which shall recover, as nearly as possible, the cost of
provider enrollment, bank transaction charges, and ongoing net
support costs for maintenance of the electronic transfer system.
   (d) The department shall, in charging fees pursuant to subdivision
(b), adjust those fees by the amount of any administrative savings
due to the implementation of this section.
14115.8.  (a) (1) The department shall amend the Medicaid state plan
with respect to the billing option for services by local education
agencies, to ensure that schools shall be reimbursed for all eligible
services that they provide that are not precluded by federal
requirements.
   (2) The department shall examine methodologies for increasing
school participation in the Medi-Cal billing option for local
education agencies so that schools can meet the health care needs of
their students.
   (3) The department, to the extent possible shall simplify claiming
processes for local education agency billing.
   (4) The department shall eliminate and modify state plan and
regulatory requirements that exceed federal requirements when they
are unnecessary.
   (b) If a rate study for the LEA Medi-Cal billing option is
completed pursuant to Section 52 of Chapter 171 of the Statutes of
2001, the department, in consultation with the entities named in
subdivision (c), shall implement the recommendations from the study,
to the extent feasible and appropriate.
   (c) In order to assist the department in formulating the state
plan amendments required by subdivisions (a) and (b), the department
shall regularly consult with the State Department of Education,
representatives of urban, rural, large and small school districts,
and county offices of education, the local education consortium,
local education agencies, and the local education agency technical
assistance project. It is the intent of the Legislature that the
department also consult with staff from Region IX of the federal
Centers for Medicare and Medicaid Services, experts from the fields
of both health and education, and state legislative staff.
   (d) Notwithstanding any other provision of law, or any other
contrary state requirement, the department shall take whatever action
is necessary to ensure that, to the extent there is capacity in its
certified match, a local education agency shall be reimbursed
retroactively for the maximum period allowed by the federal
government for any department change that results in an increase in
reimbursement to local education agency providers.
   (e) The department may undertake all necessary activities to
recoup matching funds from the federal government for reimbursable
services that have already been provided in the state's public
schools. The department shall prepare and take whatever action is
necessary to implement all regulations, policies, state plan
amendments, and other requirements necessary to achieve this purpose.
   (f) The department shall file an annual report with the
Legislature that shall include at least all of the following:
   (1) A copy of the annual comparison required by subdivision (i).
   (2) A state-by-state comparison of school-based Medicaid total and
per eligible child claims and federal revenues. The comparison shall
include a review of the most recent two years for which completed
data is available.
   (3) A summary of department activities and an explanation of how
each activity contributed toward narrowing the gap between California'
s per eligible student federal fund recovery and the per student
recovery of the top three states.
   (4) A listing of all school-based services, activities, and
providers approved for reimbursement by the federal Centers for
Medicare and Medicaid Services in other state plans that are not yet
approved for reimbursement in California's state plan and the service
unit rates approved for reimbursement.
   (5) The official recommendations made to the department by the
entities named in subdivision (c) and the action taken by the
department regarding each recommendation.
   (6) A one-year timetable for state plan amendments and other
actions necessary to obtain reimbursement for those items listed in
paragraph (4).
   (7) Identify any barriers to local education agency reimbursement,
including those specified by the entities named in subdivision (c),
that are not imposed by federal requirements, and describe the
actions that have been, and will be, taken to eliminate them.
   (g) (1) These activities shall be funded and staffed by
proportionately reducing federal Medicaid payments allocable to local
educational agencies for the provision of benefits funded by the
federal Medicaid program under the billing option for services by
local educational agencies specified in this section. Moneys
collected as a result of the reduction in federal Medicaid payments
allocable to local educational agencies shall be deposited into the
Local Education Agency Medi-Cal Recovery Account, which is hereby
established in the Special Deposit Fund established pursuant to
Section 16370 of the Government Code. These funds shall be used only
to support the department to meet all the requirements of this
section. As of January 1, 2010, unless the Legislature enacts a new
statute or extends the date beyond January 1, 2010, all funds in the
Local Education Agency Medi-Cal Recovery Account shall be returned
proportionally to all local educational agencies whose federal
Medicaid funds were used to create this account. The annual amount
funded shall not exceed one million five hundred thousand dollars
($1,500,000).
   (2) Commencing with the 2003-04 fiscal year, funding received
pursuant to paragraph (1) shall derive only from federal Medicaid
funds that exceed the baseline amount of local educational agency
Medicaid billing option revenues for the 2000-01 fiscal year.
   (h) (1) The department may enter into a sole source contract to
comply with the requirements of this section.
   (2) The level of additional staff to comply with the requirements
of this section, including, but not limited to, staff for which the
department has contracted for pursuant to paragraph (1), shall be
limited to that level that can be funded with revenues derived
pursuant to subdivision (g).
   (i) The activities of the department shall include all of the
following:
   (1) An annual comparison of the school-based Medicaid systems in
comparable states.
   (2) Efforts to improve communications with the federal government,
the State Department of Education, and local education agencies.
   (3) The development and updating of written guidelines to local
education agencies regarding best practices to avoid audit
exceptions, as needed.
   (4) The establishment and maintenance of a local education agency
friendly interactive Web site.
  (j) This section shall remain in effect only until January 1, 2010,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2010, deletes or extends that date.
14116.  The director of a county agency which administers the
provisions of this chapter and also administers medical facilities
may not delegate to an employee the decision to authorize or deny aid
under this chapter, if he has also delegated authority to that
employee to operate or participate in the operation of any such
medical facility.
14117.  Information relating to the medication provided to Medi-Cal
recipients, shall be disclosed by the department or its agents, to
physicians who are treating those same recipients as patients, upon
request of the treating physician.
14119.  The director shall employ sufficient consultants to assure
compliance with the provisions of this code and the regulations, and
the protection of the best interests of the state, and no county
shall employ such consultants.  However, if the director finds that
it is not reasonable in specific cases to transfer to state
employment a consultant employed by a county and that the consultant
function is being performed according to statewide standards, he may
authorize the county to continue to provide that particular
consultant service.
   As used in this section, a "consultant" means a person who reviews
the procedures, charges and services of providers under this
chapter, and who grants prior authorizations to providers.
14120.  (a) At the beginning of each fiscal year, for the current
fiscal year, the director shall establish a monthly schedule of
anticipated total payments and anticipated payments for categories of
services, according to the categories established in the Governor's
Budget.  The schedule will be revised quarterly.
   (b) The director shall report actual total payments and payments
for categories of services, as set forth in subdivision (a), monthly
to the Director of Finance and to the Joint Legislative Budget
Committee.
   (c) At any time during the fiscal year, if the director has reason
to believe that the total cost of the program will exceed available
funds, the director may first modify the method or amount of payment
for services provided that no amount shall be reduced more than 10
percent and no modification will conflict with federal law.  If such
modification is not sufficient to bring the program within available
funds, the director may postpone elective services in the schedule of
benefits.  Such postponement of elective services shall be
accomplished by changing the standards for approval of requests for
prior authorizations.  Such changes shall be designed to insure that
those recipients most in need of elective services receive them first
within the funds available, but that no particular service is
completely eliminated.
   (d) At any time during the fiscal year, if the total amounts paid
since the beginning of the fiscal year exceed by 10 percent the
amounts scheduled, the director shall immediately institute the
action set forth in subdivision (c).
   (e) At any time during the fiscal year, if the total amounts paid
for any category of service exceeds by 10 percent the amounts
scheduled (other than services for which the method or amount of
payment is prescribed by the United States Secretary of Health and
Human Services pursuant to Title XIX of the federal Social Security
Act), the director shall modify the method or amount of payment for
such category of service to assure that the total amount paid for
such category of service in the fiscal year shall be less than 10
percent in excess of the total amount scheduled provided the total
cost of the program to the State General Fund  shall not exceed
appropriated state general funds.
   (f) Before any of the above actions are taken by the director, he
or she shall consult with representatives of concerned provider
groups.
   (g) Notwithstanding subdivision (c) or (e), the director shall not
reduce the amount of payment, under the circumstances described in
subdivision (c) or (e), for the ingredient cost component of
pharmaceutical services rendered by pharmacist providers in
California.
14122.  The department may provide, by regulation and consistent
with the requirements of the Federal Social Security Act, for the
care and treatment, or both, of persons eligible for medical
assistance pursuant to Sections 14005.1, 14005.  4, and 14005.7 by
providers in another state in those cases where out-of-state care or
treatment is rendered on an emergency basis or is otherwise in the
best interests of the person under the circumstances.
14123.  Participation in the Medi-Cal program by a provider of
service is subject to suspension in order to protect the health of
the recipients and the funds appropriated to carry out this chapter.
   (a) The director may suspend a provider of service from further
participation under the Medi-Cal program for violation of any
provision of this chapter or Chapter 8 (commencing with Section
14200) or any rule or regulation promulgated by the director pursuant
to those chapters.  Any such suspension may be for an indefinite or
specified period of time and with or without conditions or may be
imposed with the operation of the suspension stayed or probation
granted.  The director shall suspend a provider of service for
conviction of any felony or any misdemeanor involving fraud, abuse of
the Medi-Cal program or any patient, or otherwise substantially
related to the qualifications, functions, or duties of a provider of
service.
   If the provider of service is a clinic, group, corporation, or
other association, conviction of any officer, director, or
shareholder with a 10 percent or greater interest in that
organization, of such a crime shall result in the suspension of that
organization and the individual convicted if the director believes
that suspension would be in the best interest of the Medi-Cal
program.  If the provider of services is a political subdivision of
the state or other government agency, the conviction of the person in
charge of the facility of such a crime may result in the suspension
of that facility.  The record of conviction or a certified copy
thereof, certified by the clerk of the court or by the judge in whose
court the conviction is had, shall be conclusive evidence of the
fact that the conviction occurred.  A plea or verdict of guilty, or a
conviction following a plea of nolo contendere is deemed to be a
conviction within the meaning of this section.
   After conviction, but before the time for appeal has elapsed or
the judgment of conviction has been affirmed on appeal, the director,
if he or she believes that suspension would be in the best interests
of the Medi-Cal program, may order the suspension of a provider of
service.  When the time for appeal has elapsed, or the judgment of
conviction has been affirmed on appeal or when an order granting
probation is made suspending the imposition of sentence irrespective
of any subsequent order under Section 1203.4 of the Penal Code
allowing a person to withdraw his or her plea of guilty and to enter
a plea of not guilty, or setting aside the verdict of guilty, or
dismissing the accusation, information, or indictment, the director
shall order the suspension of a provider of service.  The suspension
shall not take effect earlier than the date of the director's order.
Suspension following a conviction is not subject to the proceedings
required in subdivision (c).  However, the director may grant an
informal hearing at the request of the provider of service to
determine in the director's sole discretion if the circumstances
surrounding the conviction justify rescinding or otherwise modifying
the suspension provided for in this subdivision.
   If the provider of service appeals the conviction and the
conviction is reversed, the provider may apply for reinstatement to
the Medi-Cal program after the conviction is reversed.
Notwithstanding Section 14126.6, the application for reinstatement
shall not be subject to the one-year waiting period for the filing of
a reinstatement petition pursuant to Section 11522 of the Government
Code.
   (b) Whenever the director receives written notification from the
Secretary of the United States Department of Health and Human
Services, that a physician or other individual practitioner has been
suspended from participation in the Medicare or medicaid programs,
the director shall promptly suspend the practitioner from
participation in the Medi-Cal program.  This automatic suspension is
not subject to the proceedings required in subdivision (c).  No
payment from state or federal funds may be made for any item or
service rendered by the practitioner during the period of suspension.
   (c) The proceedings for suspension shall be conducted pursuant to
Section 100171 of the Health and Safety Code.  The director may
temporarily suspend any provider of service prior to any hearing when
in his or her opinion that action is necessary to protect the public
welfare or the interests of the Medi-Cal program.  The director
shall notify the provider of service of the temporary suspension and
the effective date thereof and at the same time serve the provider
with an accusation.  The accusation and all proceedings thereafter
shall be in accordance with Section 100171 of the Health and Safety
Code.  Upon receipt of a notice of defense by the provider, the
director shall set the matter for hearing within 30 days after
receipt of the notice.  The temporary suspension shall remain in
effect until such time as the hearing is completed and the director
has made a final determination on the merits.  The temporary
suspension shall, however, be deemed vacated if the director fails to
make a final determination on the merits within 60 days after the
original hearing has been completed.  This subdivision does not apply
where the suspension of a provider is based upon the conviction of
any crime involving fraud, abuse of the Medi-Cal program, or
suspension from the federal Medicare program.  In those instances,
suspension shall be automatic.
   (d) The suspension by the director of any provider of service
shall preclude the provider from submitting claims for payment,
either personally or through claims submitted by any clinic, group,
corporation, or other association to the Medi-Cal program for any
services or supplies the provider has provided under the program,
except for services or supplies provided prior to the suspension.  No
clinic, group, corporation, or other association which is a provider
of service shall submit claims for payment to the Medi-Cal program
for any services or supplies provided by a person within the
organization who has been suspended or revoked by the director,
except for services or supplies provided prior to the suspension.
   Where the provisions of this chapter or Chapter 8 (commencing with
Section 14200) or the regulations promulgated by the director are
violated by a provider of service which is a clinic, group,
corporation, or other association, the director may suspend the
organization and any individual person within the organization who is
responsible for the violation.
   (e) Notice of the suspension shall be sent by the director to the
provider's state licensing, certifying, or registering authority,
along with the evidence upon which the suspension was based.
   (f) In addition to the bases for suspension contained in
subdivisions (a) and (b), the director may suspend a provider of
service from further participation under the Medi-Cal dental program
for the provision of services that are below or less than the
standard of acceptable quality, as established by the California
Dental Association Guidelines for the Assessment of Clinical Quality
and Professional Performance, Copyright 1995, Third Edition, as
periodically amended.  Any such suspension shall be subject to the
requirements contained in subdivisions (a) to (e), inclusive.
14123.1.  Subdivision (a) of Section 14123 as added by Section 2 of
Chapter 994 of the Statutes of 1969 does not constitute a change in,
but is declaratory of, the preexisting law, and shall be construed
merely as providing a specific statutory basis for suspension.
14123.2.  Any provider or person that presents or causes to be
presented a claim for services to an officer, employee, or agent of
the state, or of any department or agency thereof as defined in
appropriate state law, that the director determines is for a medical
or other item or service that the person knows or has reason to know;
(a) was not provided as claimed, or (b) payment for which may not be
made under the program in the following instances:  (1) when the
person or provider has been suspended from participation in the
program, or (2) when the department determines that the services or
items claimed are substantially in excess of the needs of individuals
or are of a quality that fails to meet professionally recognized
standards of health care, or (3) when the department determines that
a person has demonstrated a pattern of abusive overbilling of the
program, or (4) when the department determines that a person has
intentionally or negligently made a false statement or representation
on any request for payment submitted to the Medi-Cal program; or (c)
is submitted in violation of an agreement between the person and the
state, shall be subject in addition to any other penalties that may
be prescribed by law, to a civil money penalty of not more than three
times the amount claimed for each item or service.  For continuing
intentional violations, a civil money penalty of not more than three
times the amount claimed for each item or service may be imposed for
each day the violation continues.
   The director shall make the determination to assess civil money
penalties and shall be responsible for the collection of the penalty
amounts.
   The provider or person subjected to a civil money penalty may
appeal any decision by the director to assess the penalty pursuant to
Section 100171 of the Health and Safety Code.
   Notwithstanding any other provisions of law, all money collected
pursuant to this section shall be deposited in the General Fund on a
monthly basis.
14123.25.  (a) In lieu of, or in addition to, the imposition of any
other sanction available to it, including the sanctions and penalties
authorized under Section 14123.2 or 14171.6, and as the "single
state agency" for California vested with authority to administer the
Medi-Cal program, the department shall exercise the authority granted
to it in Section 1002.2 of Title 42 of the Code of Federal
Regulations, and may also impose the mandatory and permissive
exclusions identified in Section 1128 of the federal Social Security
Act (42 U.S.C. Sec. 1320a-7), and its implementing regulations, and
impose civil penalties identified in Section 1128A of the federal
Social Security Act (42 U.S.C. Sec. 1320a-7a), and its implementing
regulations, against applicants and providers, as defined in Section
14043.1, or against billing agents, as defined in Section 14040.1.
The department may also terminate, or refuse to enter into, a
provider agreement authorized under Section 14043.2 with an applicant
or provider, as defined in Section 14043.1, upon the grounds
specified in Section 1866(b)(2) of the federal Social Security Act
(42 U.S.C. Sec.  1395cc(b)(2)). Notwithstanding Section 100171 of the
Health and Safety Code or any other provision of law, any appeal by
an applicant, provider, or billing agent of the imposition of a civil
penalty, exclusion, or other sanction pursuant to this subdivision
shall be in accordance with Section 14043.65, except that where the
action is based upon a conviction for any crime involving fraud or
abuse of the Medi-Cal, Medicaid, or Medicare programs, or an
exclusion by the federal government from the Medicaid or Medicare
programs, the action shall be automatic and not subject to appeal or
hearing.
   (b) In addition, the department may impose the intermediate
sanctions identified in Section 1846 of the Social Security Act (42
U.S.C. Sec. 1395w-2), and its implementing regulations, against any
provider that is a clinical laboratory, as defined in Section 1206 of
the Business and Professions Code. The imposition and appeal of this
intermediate sanction shall be in accordance with Article 8
(commencing with Section 1065) of Chapter 2 of Division 1 of Title 17
of the California Code of Regulations.
   (c) (1) In addition, the department may issue a written warning
notice of improper billing or improper cost report computation, which
shall specifically identify the statute, regulation, or rule that is
being violated, to a provider via certified mail, return receipt
requested, whenever a review of the provider's paid claims or a
provider's cost report demonstrates a pattern of improper billing or
improper cost report computation. The review shall not take into
account claims that were denied or payment reductions. The warning
notice shall be in a format that specifically apprises the provider
of the item or service improperly billed and, if applicable, the
deficiencies in the manner in which provider costs were computed. The
warning notice may be issued with annual cost report audit findings,
or in addition to any audit or any other action that the department
is authorized to take. The failure of the department to exercise its
discretion to issue the warning notice shall not limit its authority
to audit or take any action authorized by law. The warning notice
shall provide the provider with the opportunity to contest the
warning notice and explain to the department the correctness of the
provider's bill or cost report computation. If the department accepts
the provider's explanation, in whole or in part, no further action
related to the notice or part of the notice that the department
accepts as correct shall be taken pursuant to this section.
   (2) Civil money penalties may be imposed in the following
circumstances:
   (A) If a provider presents or causes to be presented claims for
payment by the Medi-Cal program that are:
   (i) Billed improperly, and are for a service or item about which
the provider has received two or more warning notices of improper
billing, the provider may, in addition to any other penalties that
may be prescribed by law, be subject to a civil money penalty of one
hundred dollars ($100) per claim, or up to two times the amount
improperly claimed for each item or service, whichever is greater.
   (ii) For a service or item for which the department solicits
provider costs for use in calculating Medi-Cal reimbursement or in
calculating and assigning Medi-Cal reimbursement rates, the cost
reports relevant to the claims are improperly calculated, and the
provider has received two or more warning notices of improper cost
report computation regarding substantially similar errors, the
provider may, in addition to any other penalties that may be
prescribed by law, be subject to a civil money penalty of one hundred
dollars ($100) per adjustment by the department to the costs
submitted by the provider, or up to two times the amount improperly
claimed for each item or service, whichever is greater.
   (B) If a provider presents or causes to be presented claims for
payment by the Medi-Cal program that are:
   (i) Billed improperly, and are for a service or item about which
the provider has received three or more warning notices of improper
billing, or has been assessed a penalty under subparagraph (A), the
provider may, in addition to any other penalties that may be
prescribed by law, be subject to a civil money penalty of one
thousand dollars ($1,000) per claim, or up to three times the amount
improperly claimed for each item or service, whichever is greater.
   (ii) For a service or item for which the department solicits
provider costs for use in calculating Medi-Cal reimbursement or in
calculating and assigning Medi-Cal reimbursement rates, and the cost
reports relevant to the claims are improperly calculated, and the
provider has received three or more warning notices of improper cost
report computation regarding substantially similar errors, or has
been assessed a penalty under subparagraph (A), the provider may, in
addition to any other penalties that may be prescribed by law, be
subject to a civil money penalty of one thousand dollars ($1,000) per
adjustment by the department to the costs submitted by the provider,
or three times the amount claimed for each item or service,
whichever is greater.
   (3) Any provider subjected to civil money penalties under
paragraph (2) may appeal the decision to assess penalties pursuant to
Section 100171 of the Health and Safety Code.
14124.  Notice of any suspension under Section 14123, along with any
information obtained as a result of the director's investigation
shall be sent by the director to the appropriate state licensing,
certifying or registering authority.  The director may in any event
provide information obtained as a result of its investigation to such
appropriate state agency at any time.
   Nothing contained in this section shall limit the state licensing,
certifying or registering authority's power to conduct at any time
independent investigations and proceedings concerning the revocation
or suspension of any person's license, certificate or registration.
No action taken by the state licensing, certifying, or registering
authority shall have any effect upon a suspension under Section
14123.
   The word "suspension" as used in this section shall mean a final
suspension after all administrative and judicial remedies are
exhausted.
14124.1.  Each provider, as defined in Section 14043.1, of health
care services rendered under the Medi-Cal program or any other health
care program administered by the department or its agents or
contractors, shall keep and maintain records of each such service
rendered, the beneficiary or person to whom rendered, the date the
service was rendered, and such additional information as the
department may by regulation require.  Records herein required to be
kept and maintained shall be retained by the provider for a period of
three years from the date the service was rendered.
14124.2.  (a) (1) During normal working hours, the department may
make any examination of the books and records of, and may visit and
inspect the premises or facilities of, those identified in paragraphs
(2) and (3), that it may deem necessary to carry out the provisions
of this chapter or Chapter 8 (commencing with Section 14200) and
regulations adopted thereunder, or the law under which the department
or its agents or contractors administer any other health care
program.
   (2) Any applicant or provider, as defined in Section 14043.1,
pertaining to services, goods, supplies, or merchandise rendered or
supplied, directly or indirectly, or to be rendered or supplied,
directly or indirectly, to any beneficiary under this chapter or
Chapter 8 (commencing with Section 14200).
   (3) Any person or entity that provides services, goods, supplies,
or merchandise, directly or indirectly, under, or seeks reimbursement
from, any other health care program administered by the department
or its agents or contractors.
   (b) (1) Applicants, providers, or others receiving or seeking
reimbursement under the Medi-Cal program or other health care
programs administered by the department or its agents or contractors
shall furnish information or copies of records and documentation upon
request by the department.  Unannounced visits to request this
information shall be reserved for those exceptional situations where
arrangement of an appointment beforehand is clearly not possible or
is clearly inappropriate to the nature of the intended visit.  Only
those related books and records of each service rendered, the
beneficiary to whom rendered, the date, and additional information as
the department may by regulation require shall be subject to the
requirement of furnishing copies.  This information may include
records to support and document the recipient's eligibility for
services and, to the extent necessary, records to provide proof of
the quantity and receipt of the services, and that the services were
provided by proper personnel.  Providers and others subject to this
section shall be reimbursed for reasonable photocopying-related
expenses as determined by the department.  Failure to comply with the
requests for information or records made pursuant to this section
shall be grounds for immediate suspension of the provider or others
subject to this section under subdivision (b) of Section 14123 or
under the other health care programs administered by the department
or its agents or contractors.
   (2) Any copies furnished pursuant to this section shall be used
only to investigate and pursue criminal, civil, or administrative
sanctions for Medi-Cal fraud or abuse, including the provision of
dental services that are below or less than the standard of
acceptable quality as prescribed by subdivision (f) of Section 14123,
or fraud or abuse under any other health care program administered
by the department or its agents or contractors and the copies shall
be destroyed when that purpose has been satisfied.  This section
shall not be construed to prohibit the referral of investigative
findings, including copies of books and records, to the appropriate
federal, state, or local licensing, certifying, regulatory, or
prosecutorial authority.
   (c) For purposes of this section and Section 14124.1, "provider"
shall be defined as follows:
   (1) "Provider" shall have the meaning contained in Section
14043.1.
   (2) "Provider" shall also include any person or entity under
contract with the provider, as defined in paragraph (1), to assist in
the application process or eligibility determination.
14124.3.  Notice of any act of the department required by law or
department regulation to be given may be signed and given by the
director or an authorized employee of the department and may be made
personally or by mail.  If made by mail, service shall be made in the
manner prescribed by Section 1013 of the Code of Civil Procedure.
In the case of service by mail, the service is complete at the time
of deposit in the United States Post Office.
14124.4.  The director may on his own motion at any time before a
suspension is placed into effect and without further proceedings,
review the penalty against a provider, but such review shall be
limited to reduction of such penalty.
14124.5.  (a) The director may, in accordance with the provisions of
Section 10725, adopt, amend or repeal, in accordance with Chapter
4.5 (commencing with Section 11371) of Part 1, Division 3, Title 2 of
the Government Code, such reasonable rules and regulations as may be
necessary or proper to carry out the purposes and intent of this
chapter and to enable it to exercise the powers and perform the
duties conferred upon it by this chapter, not inconsistent with any
of the provisions of any statute of this state.
   (b) All regulations heretofore adopted by the State Department of
Health or any predecessor department pursuant to this chapter and in
effect immediately preceding the operative date of this section,
shall remain in effect and shall be fully enforceable unless and
until readopted, amended, or repealed by the director in accordance
with the provisions of Section 10725.
14124.6.  In the event the director orders that oral argument or a
hearing be held upon a petition for reinstatement or reduction of
penalty filed pursuant to Section 11522 of the Government Code, he or
she may hear and decide the matter himself or herself or may, in his
or her discretion, either (1) sit and hear the matter with an
administrative law judge assigned by the department or (2) assign the
matter to an administrative law judge assigned by the department who
shall proceed in accordance with Section 100171 of the Health and
Safety Code, and who shall prepare a proposed decision for the
department for action pursuant to Section 11517 of the Government
Code.
14124.7.  (a) No long-term health care facility participating as a
provider under the Medi-Cal program shall seek to evict out of the
facility or, effective January 1, 2002, transfer within the facility,
any resident as a result of the resident changing his or her manner
of purchasing the services from private payment or Medicare to
Medi-Cal, except that a facility may transfer a resident from a
private room to a semiprivate room if the resident changes to
Medi-Cal payment status.  This section also applies to residents who
have made a timely and good faith application for Medi-Cal benefits
and for whom an eligibility determination has not yet been made.
   (b) This section does not apply to any resident of a skilled
nursing facility or intermediate care facility, receiving respite
care services, as defined in Section 1418.1 of the Health and Safety
Code, unless it is already being provided through a Medicaid waiver
program pursuant to Section 1396n of Title 42 of the United States
Code, or is already allowed as a covered service by the Medi-Cal
program.
   (c) Nothing in this section shall limit a facility's ability to
transfer a resident within a facility, as provided by law, because of
a change in a resident's health care needs or if the bed retention
would result in there being no available Medicare-designated beds
within a facility.
   (d) This section shall be implemented only to the extent it does
not conflict with federal law.
14124.10.  No licensed long-term health care facility participating
as a provider under the Medi-Cal program shall discriminate against a
Medi-Cal patient on  the basis of the source of payment for the
facility's services that are required to be provided to individuals
entitled to services under the Medi-Cal program.  Nothing in this
section shall be construed to prohibit a facility from charging
private-pay patients for services required to be provided to Medi-Cal
patients or which are in addition to those required under the
Medi-Cal program.  This section applies to licensed long-term health
care facilities, to the extent not prohibited by federal law.


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