2005 California Welfare and Institutions Code Sections 5775-5781 PART 2.5. MENTAL HEALTH MANAGED CARE CONTRACTS

5775.  (a) Notwithstanding any other provision of state law, the
State Department of Mental Health shall implement managed mental
health care for Medi-Cal beneficiaries through fee-for-service or
capitated rate contracts with mental health plans, including
individual counties, counties acting jointly, any qualified
individual or organization, or a nongovernmental entity. A contract
may be exclusive and may be awarded on a geographic basis.
   (b) Two or more counties acting jointly may agree to deliver or
subcontract for the delivery of mental health services. The agreement
may encompass all or any portion of the mental health services
provided pursuant to this part.  This agreement shall not relieve the
individual counties of financial responsibility for providing these
services. Any agreement between counties shall delineate each county'
s responsibilities and fiscal liability.
   (c) The department shall offer to contract with each county for
the delivery of mental health services to that county's Medi-Cal
beneficiary population prior to offering to contract with any other
entity, upon terms at least as favorable as any offered to a
noncounty contract provider. If a county elects not to contract with
the department, does not renew its contract, or does not meet the
minimum standards set by the department, the department may elect to
contract with any other governmental or nongovernmental entity for
the delivery of mental health services in that county and may
administer the delivery of mental health services until a contract
for a mental health plan is implemented. The county may not
subsequently contract to provide mental health services under this
part unless the department elects to contract with the county.
   (d) If a county does not contract with the department to provide
mental health services, the county shall transfer the responsibility
for community Medi-Cal reimbursable mental health services and the
anticipated county matching funds needed for community Medi-Cal
mental health services in that county to the department. The amount
of the anticipated county matching funds shall be determined by the
department in consultation with the county, and shall be adjusted
annually. The amount transferred shall be based on historical cost,
adjusted for changes in the number of Medi-Cal beneficiaries and
other relevant factors. The anticipated county matching funds shall
be used by the department to contract with another entity for mental
health services, and shall not be expended for any other purpose but
the provision of those services and related administrative costs. The
county shall continue to deliver non-Medi-Cal reimbursable mental
health services in accordance with this division, and subject to
subdivision (i) of Section 5777.
   (e) Whenever the department determines that a mental health plan
has failed to comply with this part or any regulations adopted
pursuant to this part that implement this part, the department may
impose sanctions, including, but not limited to, fines, penalties,
the withholding of payments, special requirements, probationary or
corrective actions, or any other actions deemed necessary to prompt
and ensure contract and performance compliance. If fines are imposed
by the department, they may be withheld from the state matching funds
provided to a mental health plan for Medi-Cal mental health
services.
   (f) Notwithstanding any other provision of law, emergency
regulations adopted pursuant to Section 14680 to implement the second
phase of mental health managed care as provided in this part shall
remain in effect until permanent regulations are adopted, or June 30,
2006, whichever occurs first.
   (g) The department shall convene at least two public hearings to
clarify new federal regulations recently enacted by the federal
Centers for Medicare and Medicaid Services that affect the state's
second phase of mental health managed care and shall report to the
Legislature on the results of these hearings through the 2005-06
budget deliberations.
   (h) The department may adopt emergency regulations necessary to
implement Part 438 (commencing with Section 438.1) of Subpart A of
Subchapter C of Chapter IV of Title 42 of the Code of Federal
Regulations, in accordance with Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code. The
adoption of emergency regulations to implement this part, that are
filed with the Office of Administrative Law within one year of the
date on which the act that amended this subdivision in 2003 took
effect, shall be deemed to be an emergency and necessary for the
immediate preservation of the public peace, health, and safety, or
general welfare, and shall remain in effect for no more than 180
days.
5776.  (a) The department and its mental health plan contractors
shall comply with all applicable federal laws, regulations, and
guidelines, and, except as provided in this part, all applicable
state statutes and regulations.
   (b) If federal requirements that affect the provisions of this
part are changed, it is the intent of the Legislature that state
requirements be revised to comply with those changes.
5777.  (a) (1) Except as otherwise specified in this part, a
contract entered into pursuant to this part shall include a provision
that the mental health plan contractor shall bear the financial risk
for the cost of providing medically necessary mental health services
to Medi-Cal beneficiaries irrespective of whether the cost of those
services exceeds the payment set forth in the contract.  If the
expenditures for services do not exceed the payment set forth in the
contract, the mental health plan contractor shall report the
unexpended amount to the department, but shall not be required to
return the excess to the department.
   (2) If the mental health plan is not the county's, the mental
health plan may not transfer the obligation for any mental health
services to Medi-Cal beneficiaries to the county.  The mental health
plan may purchase services from the county.  The mental health plan
shall establish mutually agreed-upon protocols with the county that
clearly establish conditions under which beneficiaries may obtain
non-Medi-Cal reimbursable services from the county.  Additionally,
the plan shall establish mutually agreed-upon protocols with the
county for the conditions of transfer of beneficiaries who have lost
Medi-Cal eligibility to the county for care under Part 2 (commencing
with Section 5600), Part 3 (commencing with Section 5800), and Part 4
(commencing with Section 5850).
   (3) The mental health plan shall be financially responsible for
ensuring access and a minimum required scope of benefits, consistent
with state and federal requirements, to the services to the Medi-Cal
beneficiaries of that county regardless of where the beneficiary
resides.  The department shall require that the definition of medical
necessity used, and the minimum scope of benefits offered, by each
mental health contractor be the same, except to the extent that any
variations receive prior federal approval and are consistent with
state and federal statutes and regulations.
   (b) Any contract entered into pursuant to this part may be renewed
if the plan continues to meet the requirements of this part,
regulations promulgated pursuant thereto, and the terms and
conditions of the contract.  Failure to meet these requirements shall
be cause for nonrenewal of the contract.  The department may base
the decision to renew on timely completion of a mutually agreed upon
plan of correction of any deficiencies, submissions of required
information in a timely manner, or other conditions of the contract.
At the discretion of the department, each contract may be renewed
for a period not to exceed three years.
   (c) (1) The obligations of the mental health plan shall be changed
only by contract or contract amendment.
   (2) A change may be made during a contract term or at the time of
contract renewal, where there is a change in obligations required by
federal or state law or when required by a change in the
interpretation or implementation of any law or regulation.  To the
extent permitted by federal law and except as provided under
subdivision (r) of Section 5778, if any change in obligations occurs
that affects the cost to the mental health plan of performing under
the terms of its contract, the department may reopen contracts to
negotiate the state General Fund allocation to the mental health plan
under Section 5778, if the mental health plan is reimbursed through
a fee-for-service payment system, or the capitation rate to the
mental health plan under Section 5779, if the mental health plan is
reimbursed through a capitated rate payment system.  During the time
period required to redetermine the allocation or rate, payment to the
mental health plan of the allocation or rate in effect at the time
the change occurred shall be considered interim payments and shall be
subject to increase or decrease, as the case may be, effective as of
the date on which the change is effective.
   (3) To the extent permitted by federal law, either the department
or the mental health plan may request that contract negotiations be
reopened during the course of a contract due to substantial changes
in the cost of covered benefits that result from an unanticipated
event.
   (d) The department shall immediately terminate a contract when the
director finds that there is an immediate threat to the health and
safety of Medi-Cal beneficiaries.  Termination of the contract for
other reasons shall be subject to reasonable notice of the department'
s intent to take that action and notification of affected
beneficiaries.  The plan may request a public hearing by the Office
of Administrative Hearings.
   (e) A plan may terminate its contract in accordance with the
provisions in the contract.  The plan shall provide written notice to
the department at least 180 days prior to the termination or
nonrenewal of the contract.
   (f) Upon the request of the Director of Mental Health, the
Director of the Department of Managed Health Care may exempt a mental
health plan contractor or a capitated rate contract from the
Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of Division 2 of the Health and Safety
Code).  These exemptions may be subject to conditions the director
deems appropriate.  Nothing in this part shall be construed to impair
or diminish the authority of the Director of the Department of
Managed Health Care under the Knox-Keene Health Care Service Plan Act
of 1975, nor shall anything in this part be construed to reduce or
otherwise limit the obligation of a mental health plan contractor
licensed as a health care service plan to comply with the
requirements of the Knox-Keene Health Care Service Plan Act of 1975,
and the rules of the Director of the Department of Managed Health
Care promulgated thereunder.  The Director of Mental Health, in
consultation with the Director of the Department of Managed Health
Care, shall analyze the appropriateness of licensure or application
of applicable standards of the Knox-Keene Health Care Service Plan
Act of 1975.
   (g) The department, pursuant to an agreement with the State
Department of Health Services, shall provide oversight to the mental
health plans to ensure quality, access, and cost efficiency.  At a
minimum, the department shall, through a method independent of any
agency of the mental health plan contractor, monitor the level and
quality of services provided, expenditures pursuant to the contract,
and conformity with federal and state law.
   (h) County employees implementing or administering a mental health
plan act in a discretionary capacity when they determine whether or
not to admit a person for care or to provide any level of care
pursuant to this part.
   (i) If a county chooses to discontinue operations as the local
mental health plan, the new plan shall give reasonable consideration
to affiliation with nonprofit community mental health agencies that
were under contract with the county and that meet the mental health
plan's quality and cost efficiency standards.
   (j) Nothing in this part shall be construed to modify, alter, or
increase the obligations of counties as otherwise limited and defined
in Chapter 3 (commencing with Section 5700) of Part 2.  The county's
maximum obligation for services to persons not eligible for Medi-Cal
shall be no more than the amount of funds remaining in the mental
health subaccount pursuant to Sections 17600, 17601, 17604, 17605,
17606, and 17609 after fulfilling the Medi-Cal contract obligations.
5777.5.  (a) (1) The department shall require any mental health plan
that provides Medi-Cal services to enter into a memorandum of
understanding with any Medi-Cal managed care plan that provides
Medi-Cal health services to some of the same Medi-Cal recipients
served by the mental health plan.  The memorandum of understanding
shall comply with applicable regulations.
   (2) For purposes of this section, a "Medi-Cal managed care plan"
means any prepaid health plan or Medi-Cal managed care plan
contracting with the  State Department of Health Services to provide
services to enrolled Medi-Cal beneficiaries under Chapter 7
(commencing with Section 14000) or Chapter 8 (commencing with Section
14200) of Part 3 of Division 9, or Part 4 (commencing with Section
101525) of Division 101 of the Health and Safety Code.
   (b) The department shall require the memorandum of understanding
to include all of the following:
   (1) A process or entity to be designated by the local mental
health plan to receive notice of actions, denials, or deferrals from
the Medi-Cal managed care plan, and to provide any additional
information requested in the deferral notice as necessary for a
medical necessity determination.
   (2) A requirement that the local mental health plan respond by the
close of the business day following the day the deferral notice is
received.
   (c) The department may sanction a mental health plan pursuant to
paragraph (1) of subdivision (e) of Section 5775 for failure to
comply with this section.
   (d) This section shall apply to any contracts entered into,
amended, modified, extended, or renewed on or after January 1, 2001.
5777.6.  (a) Each local mental health plan shall establish a
procedure to ensure access to outpatient mental health services, as
required by the Early Periodic Screening and Diagnostic Treatment
program standards, for any child in foster care who has been placed
outside his or her county of adjudication.
   (b) The procedure required by subdivision (a) may be established
through one or more of the following:
   (1) The establishment of, and federal approval, if required, of, a
  statewide system or procedure.
   (2) An arrangement between local mental health plans for
reimbursement for services provided by a mental health plan other
than the mental health plan in the county of adjudication and
designation of an entity to provide additional information needed for
approval or reimbursement.  This arrangement shall not require
providers who are already credentialed or certified by the mental
health plan in the beneficiary's county of residence to be
credentialed or certified by, or to contract with, the mental health
plan in the county of adjudication.
   (3) Arrangements between the mental health plan in the county of
adjudication and mental health providers in the beneficiary's county
of residence for authorization of, and reimbursement for, services.
This arrangement shall not require providers credentialed or
certified by, and in good standing with, the mental health plan in
the beneficiary's county of residence to be credentialed or certified
by the mental health plan in the county of adjudication.
   (c) The department shall collect and keep statistics that will
enable the department to compare access to outpatient specialty
mental health services by foster children placed in their county of
adjudication with access to outpatient specialty mental health
services by foster children placed outside of their county of
adjudication.
5778.  (a) This section shall be limited to mental health services
reimbursed through a fee-for-service payment system.
   (b) During the initial phases of the implementation of this part,
as determined by the department, the mental health plan contractor
and subcontractors shall submit claims under the Medi-Cal program for
eligible services on a fee-for-service basis.
   (c) A qualifying county may elect, with the approval of the
department, to operate under the requirements of a capitated,
integrated service system field test pursuant to Section 5719.5
rather than this part, in the event the requirements of the two
programs conflict.  A county that elects to operate under that
section shall comply with all other provisions of this part that do
not conflict with that section.
   (d) (1) No sooner than October 1, 1994, state matching funds for
Medi-Cal fee-for-service acute psychiatric inpatient services, and
associated administrative days, shall be transferred to the
department.  No later than July 1, 1997, upon agreement between the
department and the State Department of Health Services, state
matching funds for the remaining Medi-Cal fee-for-service mental
health services and the state matching funds associated with field
test counties under Section 5719.5 shall be transferred to the
department.
   (2) The department, in consultation with the State Department of
Health Services, a statewide organization representing counties, and
a statewide organization representing health maintenance
organizations shall develop a timeline for the transfer of funding
and responsibility for fee-for-service mental health services from
Medi-Cal managed care plans to mental health plans.  In developing
the timeline, the department shall develop screening, referral, and
coordination guidelines to be used by Medi-Cal managed care plans and
mental health plans.
   (e) The department shall allocate the contracted amount at the
beginning of the contract period to the mental health plan.  The
allocated funds shall be considered to be funds of the plan that may
be held by the department.  The department shall develop a
methodology to ensure that these funds are held as the property of
the plan and shall not be reallocated by the department or other
entity of state government for other purposes.
   (f) Beginning in the fiscal year following the transfer of funds
from the State Department of Health Services, the state matching
funds for Medi-Cal mental health services shall be included in the
annual budget for the department.  The amount included shall be based
on historical cost, adjusted for changes in the number of Medi-Cal
beneficiaries and other relevant factors.
   (g) Initially, the mental health plans shall use the fiscal
intermediary of the Medi-Cal program of the State Department of
Health Services for the processing of claims for inpatient
psychiatric hospital services and may be required to use that fiscal
intermediary for the remaining mental health services.  The providers
for other Short-Doyle Medi-Cal services shall not be initially
required to use the fiscal intermediary but may be required to do so
on a date to be determined by the department.  The department and its
mental health plans shall be responsible for the initial incremental
increased matching costs of the fiscal intermediary for claims
processing and information retrieval associated with the operation of
the services funded by the transferred funds.
   (h) The mental health plans, subcontractors, and providers of
mental health services shall be liable for all federal audit
exceptions or disallowances based on their conduct or determinations.
  The mental health plan contractors shall not be liable for federal
audit exceptions or disallowances based on the state's conduct or
determinations.  The department and the State Department of Health
Services shall work jointly with mental health plans in initiating
any necessary appeals.  The State Department of Health Services may
offset the amount of any federal disallowance or audit exception
against subsequent claims from the mental health plan or
subcontractor.  This offset may be done at any time, after the audit
exception or disallowance has been withheld from the federal
financial participation claim made by the State Department of Health
Services.  The maximum amount that may be withheld shall be 25
percent of each payment to the plan or subcontractor.
   (i) The mental health plans shall have sufficient funds on deposit
with the department as the matching funds necessary for federal
financial participation to ensure timely payment of claims for acute
psychiatric inpatient services and associated administrative days.
The department and the State Department of Health Services, in
consultation with a statewide organization representing counties,
shall establish a mechanism to facilitate timely availability of
those funds.  Any funds held by the state on behalf of a plan shall
be deposited in a mental health managed care deposit fund and shall
accrue interest to the plan.  The department shall exercise any
necessary funding procedures pursuant to Section 12419.5 of the
Government Code and Sections 8776.6 and 8790.8 of the State
Administrative Manual regarding county claim submission and payment.
   (j) (1) The goal for funding of the future capitated system shall
be to develop statewide rates for beneficiary, by aid category and
with regional price differentiation, within a reasonable time period.
  The formula for distributing the state matching funds transferred
to the department for acute inpatient psychiatric services to the
participating counties shall be based on the following principles:
   (A) Medi-Cal state General Fund matching dollars shall be
distributed to counties based on historic Medi-Cal acute inpatient
psychiatric costs for the county's beneficiaries and on the number of
persons eligible for Medi-Cal in that county.
   (B) All counties shall receive a baseline based on historic and
projected expenditures up to October 1, 1994.
   (C) Projected inpatient growth for the period October 1, 1994, to
June 30, 1995, inclusive, shall be distributed to counties below the
statewide average per eligible person on a proportional basis.  The
average shall be determined by the relative standing of the aggregate
of each county's expenditures of mental health Medi-Cal dollars per
beneficiary.  Total Medi-Cal dollars shall include both
fee-for-service Medi-Cal and Short-Doyle Medi-Cal dollars for both
acute inpatient psychiatric services, outpatient mental health
services, and psychiatric nursing facility services, both in
facilities that are not designated as institutions for mental disease
and for beneficiaries who are under 22 years of age and
beneficiaries who are over 64 years of age in facilities that are
designated as institutions for mental disease.
   (D) There shall be funds set aside for a self-insurance risk pool
for small counties.  The department may provide these funds directly
to the administering entity designated in writing by all counties
participating in the self-insurance risk pool.  The small counties
shall assume all responsibility and liability for appropriate
administration of these funds.  For purposes of this subdivision,
"small counties" means counties with less than 200,000 population.
Nothing in this paragraph shall in any way obligate the state or the
department to provide or make available any additional funds beyond
the amount initially appropriated and set aside for each particular
fiscal year, unless otherwise authorized in statute or regulations,
nor shall the state or the department be liable in any way for
mismanagement of loss of funds by the entity designated by the
counties under this paragraph.
   (2) The allocation method for state funds transferred for acute
inpatient psychiatric services shall be as follows:
   (A) For the 1994-95 fiscal year, an amount equal to 0.6965 percent
of the total shall be transferred to a fund established by small
counties.  This fund shall be used to reimburse mental health plans
in small counties for the cost of acute inpatient psychiatric
services in excess of the funding provided to the mental health plan
for risk reinsurance, acute inpatient psychiatric services and
associated administrative days, alternatives to hospital services as
approved by participating small counties, or for costs associated
with the administration of these moneys.  The methodology for use of
these moneys shall be determined by the small counties, through a
statewide organization representing counties, in consultation with
the department.
   (B) The balance of the transfer amount for the 1994-95 fiscal year
shall be allocated to counties based on the following formula:
     County                                    Percentage
   Alameda ....................................  3.5991
   Alpine .....................................   .0050
   Amador .....................................   .0490
   Butte ......................................   .8724
   Calaveras ..................................   .0683
   Colusa .....................................   .0294
   Contra Costa ...............................  1.5544
   Del Norte ..................................   .1359
   El Dorado ..................................   .2272
   Fresno .....................................  2.5612
   Glenn ......................................   .0597
   Humboldt ...................................   .1987
   Imperial ...................................   .6269
   Inyo .......................................   .0802
   Kern .......................................  2.6309
   Kings ......................................   .4371
   Lake .......................................   .2955
   Lassen .....................................   .1236
   Los Angeles ................................ 31.3239
   Madera .....................................   .3882
   Marin ......................................  1.0290
   Mariposa ...................................   .0501
   Mendocino ..................................   .3038
   Merced .....................................   .5077
   Modoc ......................................   .0176
   Mono .......................................   .0096
   Monterey ...................................   .7351
   Napa .......................................   .2909
   Nevada .....................................   .1489
   Orange .....................................  8.0627
   Placer .....................................   .2366
   Plumas .....................................   .0491
   Riverside ..................................  4.4955
   Sacramento .................................  3.3506
   San Benito .................................   .1171
   San Bernardino .............................  6.4790
   San Diego .................................. 12.3128
   San Francisco ..............................  3.5473
   San Joaquin ................................  1.4813
   San Luis Obispo ............................   .2660
   San Mateo ..................................   .0000
   Santa Barbara ..............................   .0000
   Santa Clara ................................  1.9284
   Santa Cruz .................................  1.7571
   Shasta .....................................   .3997
   Sierra .....................................   .0105
   Siskiyou ...................................   .1695
   Solano .....................................   .0000
   Sonoma .....................................   .5766
   Stanislaus .................................  1.7855
   Sutter/Yuba ................................   .7980
   Tehama .....................................   .1842
   Trinity ....................................   .0271
   Tulare .....................................  2.1314
   Tuolumne ...................................   .2646
   Ventura ....................................   .8058
   Yolo .......................................   .4043
   (k) The allocation method for the state funds transferred for
subsequent years for acute inpatient psychiatric and other mental
health services shall be determined by the department in consultation
with a statewide organization representing counties.
   (l) The allocation methodologies described in this section shall
only be in effect while federal financial participation is received
on a fee-for-service reimbursement basis.  When federal funds are
capitated, the department, in consultation with a statewide
organization representing counties, shall determine the methodology
for capitation consistent with federal requirements.
   (m) The formula that specifies the amount of state matching funds
transferred for the remaining Medi-Cal fee-for-service mental health
services shall be determined by the department in consultation with a
statewide organization representing counties.  This formula shall
only be in effect while federal financial participation is received
on a fee-for-service reimbursement basis.
   (n) Upon the transfer of funds from the budget of the State
Department of Health Services to the department pursuant to
subdivision (d), the department shall assume the applicable program
oversight authority formerly provided by the State Department of
Health Services, including, but not limited to, the oversight of
utilization controls as specified in Section 14133.  The mental
health plan shall include a requirement in any subcontracts that all
inpatient subcontractors maintain necessary licensing and
certification.  Mental health plans shall require that services
delivered by licensed staff are within their scope of practice.
Nothing in this part shall prohibit the mental health plans from
establishing standards that are in addition to the minimum federal
and state requirements, provided that these standards do not violate
federal and state Medi-Cal requirements and guidelines.
   (o) Subject to federal approval and consistent with state
requirements, the mental health plan may negotiate rates with
providers of mental health services.
   (p) Under the fee-for-service payment system, any excess in the
payment set forth in the contract over the expenditures for services
by the plan shall be spent for the provision of mental health
services and related administrative costs.
   (q) Nothing in this part shall limit the mental health plan from
being reimbursed appropriate federal financial participation for any
qualified services even if the total expenditures for service exceeds
the contract amount with the department.  Matching nonfederal public
funds shall be provided by the plan for the federal financial
participation matching requirement.
   (r) (1) The department shall establish, by regulation, a
risk-sharing arrangement between the department and counties that
contract with the department as mental health plans to provide an
increase in the state General Fund allocation, subject to the
availability of funds, to the mental health plan under this section,
where there is a change in the obligations of the mental health plan
required by federal or state law or regulation, or required by a
change in the interpretation or implementation of any such law or
regulation which significantly increases the cost to the mental
health plan of performing under the terms of its contract.
   (2) During the time period required to redetermine the allocation,
payment to the mental health plan of the allocation in effect at the
time the change occurred shall be considered an interim payment, and
shall be subject to increase effective as of the date on which the
change is effective.
   (3) In order to be eligible to participate in the risk-sharing
arrangement, the county shall demonstrate, to the satisfaction of the
department, its commitment or plan of commitment of all annual
funding identified in the total mental health resource base, from
whatever source, but not including county funds beyond the required
maintenance of effort, to be spent on mental health services.  This
determination of eligibility shall be made annually.  The department
may limit the participation in a risk-sharing arrangement of any
county that transfers funds from the mental health account to the
social services account or the health services account, in accordance
with Section 17600.20 during the year to which the transfers apply
to mental health plan expenditures for the new obligation that exceed
the total mental health resource base, as measured before the
transfer of funds out of the mental health account and not including
county funds beyond the required maintenance of effort.  The State
Department of Mental Health shall participate in a risk-sharing
arrangement only after a county has expended its total annual mental
health resource base.
5779.  (a) This section shall be limited to mental health services
reimbursed through a capitated rate payment system.
   (b) Upon mutual agreement, the department and the State Department
of Health Services may combine the funds transferred under this
part, other funds available pursuant to Chapter 5 (commencing with
Section 17600) of Part 5 of Division 9, and federal financial
participation funds to establish a contract for the delivery of
mental health services to Medi-Cal beneficiaries under a capitated
rate payment system.  The combining of funds shall be done in
consultation with a statewide organization representing counties.
The combined funding shall be the budget responsibility of the
department.
   (c) The department, in consultation with a statewide organization
representing counties, shall establish a methodology for a capitated
rate payment system that is consistent with federal requirements.
   (d) Capitated rate payments shall be made on a schedule specified
in the contract with the mental health plan.
   (e) The department may levy any necessary fines and audit
disallowances to mental health plans relative to operations under
this part.  The mental health plans shall be liable for all federal
audit exceptions or disallowances based on the plan's conduct or
determinations.  The mental health plan shall not be liable for
federal audit exceptions or disallowances based on the state's
conduct or determinations.  The department shall work jointly with
the mental health plan in initiating any necessary appeals.  The
department may offset the amount of any federal disallowance or audit
exception against subsequent payment to the mental health plan at
any time.  The maximum amount that may be withheld shall be 25
percent of each payment to the mental health plan.
5780.  (a) This part shall only be implemented to the extent that
the necessary federal waivers are obtained.  The director shall
execute a declaration, to be retained by the director, that a waiver
necessary to implement any provision of this part has been obtained.
   (b) This part shall become inoperative on the date that, and only
if, the director executes a declaration, to be retained by the
director, that more than 10 percent of all counties fail to become
mental health plan contractors, and no acceptable alternative
contractors are available, or if more than 10 percent of all funds
allocated for Medi-Cal mental health services must be administered by
the department because no acceptable plan is available.
5781.  (a) Notwithstanding any other provision of law, a mental
health plan may enter into a contract for the provision of mental
health services for Medi-Cal beneficiaries with a hospital that
provides for a per diem reimbursement rate for services that include
room and board, routine hospital services, and all hospital-based
ancillary services and that provides separately for the attending
mental health professional's daily visit fee. The payment of these
negotiated reimbursement rates to the hospital by the mental health
plan shall be considered payment in full for each day of inpatient
psychiatric and hospital care rendered to a Medi-Cal beneficiary,
subject to third-party liability and patient share of costs, if any.
   (b) This section shall not be construed to allow a hospital to
interfere with, control, or otherwise direct the professional
judgment of a physician and surgeon in a manner prohibited by Section
2400 of the Business and Professions Code or any other provision of
law.
   (c) For purposes of this section, "hospital" means a hospital that
submits reimbursement claims for Medi-Cal psychiatric inpatient
hospital services through the Medi-Cal fiscal intermediary as
permitted by subdivision (g) of Section 5778.