2009 California Welfare and Institutions Code - Section 5775-5783 :: 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
paragraph (10) of subdivision (c) 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 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 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 Managed Health
Care promulgated thereunder. The Director of Mental Health, in
consultation with the Director 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) (1) The department, pursuant to an agreement with the State
Department of Health Care 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.
   (2) (A) Commencing July 1, 2008, county mental health plans, in
collaboration with the department, the federally required external
review organization, providers, and other stakeholders, shall
establish an advisory statewide performance improvement project (PIP)
to increase the coordination, quality, effectiveness, and efficiency
of service delivery to children who are either receiving at least
three thousand dollars ($3,000) per month in the Early and Periodic
Screening, Diagnosis, and Treatment (EPSDT) Program services or
children identified in the top 5 percent of the county EPSDT cost,
whichever is lowest. The statewide PIP shall replace one of the two
required PIPs that mental health plans must perform under federal
regulations outlined in the mental health plan contract.
   (B) The federally required external quality review organization
shall provide independent oversight and reviews with recommendations
and findings or summaries of findings, as appropriate, from a
statewide perspective. This information shall be accessible to county
mental health plans, the department, county welfare directors,
providers, and other interested stakeholders in a manner that both
facilitates, and allows for, a comprehensive quality improvement
process for the EPSDT Program.
   (C) Each July, the department, in consultation with the federally
required external quality review organization and the county mental
health plans, shall determine the average monthly cost threshold for
counties to use to identify children to be reviewed who are currently
receiving EPSDT services. The department shall consult with
representatives of county mental health directors, county welfare
directors, providers, and the federally required external quality
review organization in setting the annual average monthly cost
threshold and in implementing the statewide PIP. The department shall
provide an annual update to the Legislature on the results of this
statewide PIP by October 1 of each year for the prior fiscal year.
   (D) It is the intent of the Legislature for the EPSDT PIP to
increase the coordination, quality, effectiveness, and efficiency of
service delivery to children receiving EPSDT services and to
facilitate evidence-based practices within the program, and other
high-quality practices consistent with the values of the public
mental health system within the program to ensure that children are
receiving appropriate mental health services for their mental health
wellness.
   (E) This paragraph shall become inoperative on September 1, 2011.
   (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.

5777.7.  (a) In order to facilitate the receipt of medically
necessary specialty mental health services by a foster child who is
placed outside his or her county of original jurisdiction, the State
Department of Mental Health shall take all of the following actions:
   (1) On or before July 1, 2008, create all of the following items,
in consultation with stakeholders, including, but not limited to, the
California Institute for Mental Health, the Child and Family Policy
Institute, the California Mental Health Directors Association, and
the California Alliance of Child and Family Services:
   (A) A standardized contract for the purchase of medically
necessary specialty mental health services from organizational
providers, when a contract is required.
   (B) A standardized specialty mental health service authorization
procedure.
   (C) A standardized set of documentation standards and forms,
including, but not limited to, forms for treatment plans, annual
treatment plan updates, day treatment intensive and day treatment
rehabilitative progress notes, and treatment authorization requests.
   (2) On or before January 1, 2009, use the standardized items as
described in paragraph (1) to provide medically necessary specialty
mental health services to a foster child who is placed outside his or
her county of original jurisdiction, so that organizational
providers who are already certified by a mental health plan are not
required to be additionally certified by the mental health plan in
the county of original jurisdiction.
   (3) (A) On or before January 1, 2009, use the standardized items
described in paragraph (1) to provide medically necessary specialty
mental health services to a foster child placed outside his or her
county of original jurisdiction to constitute a complete contract,
authorization procedure, and set of documentation standards and
forms, so that no additional documents are required.
   (B) Authorize a county mental health plan to be exempt from
subparagraph (A) and have an addendum to a contract, authorization
procedure, or set of documentation standards and forms, if the county
mental health plan has an externally placed requirement, such as a
requirement from a federal integrity agreement, that would affect one
of these documents.
   (4) Following consultation with stakeholders, including, but not
limited to, the California Institute for Mental Health, the Child and
Family Policy Institute, the California Mental Health Directors
Association, the California State Association of Counties, and the
California Alliance of Child and Family Services, require the use of
the standardized contracts, authorization procedures, and
documentation standards and forms as specified in paragraph (1) in
the 2008-09 state-county mental health plan contract and each
state-county mental health plan contract thereafter.
   (5) The mental health plan shall complete a standardized contract,
as provided in paragraph (1), if a contract is required, or another
mechanism of payment if a contract is not required, with a provider
or providers of the county's choice, to deliver approved specialty
mental health services for a specified foster child, within 30 days
of an approved treatment authorization request.
   (b) The California Health and Human Services Agency shall
coordinate the efforts of the State Department of Mental Health and
the State Department of Social Services to do all of the following:
   (1) Participate with the stakeholders in the activities described
in this section.
   (2) During budget hearings in 2008 and 2009, report to the
Legislature regarding the implementation of this section and
subdivision (c) of Section 5777.6.
   (3) On or before July 1, 2008, establish the following, in
consultation with stakeholders, including, but not limited to, the
California Mental Health Directors Association, the California
Alliance of Child and Family Services, and the County Welfare
Directors Association of California:
   (A) Informational materials that explain to foster care providers
how to arrange for mental health services on behalf of the
beneficiary in their care.
   (B) Informational materials that county child welfare agencies can
access relevant to the provision of services to children in their
care from the out-of-county local mental health plan that is
responsible for providing those services, including, but not limited
to, receiving a copy of the child's treatment plan within 60 days
after requesting services.
   (C) It is the intent of the Legislature to ensure that foster
children who are adopted or placed permanently with relative
guardians, and who move to a county outside their original county of
residence, can access mental health services in a timely manner. It
is the intent of the Legislature to enact this section as a temporary
means of ensuring access to these services, while the appropriate
stakeholders pursue a long-term solution in the form of a change to
the Medi-Cal Eligibility Data System that will allow these children
to receive mental health services through their new county of
residence.

5778.  (a) This section shall be limited to specialty mental health
services reimbursed through a fee-for-service payment system.
   (b) The following provisions shall apply to matters related to
specialty mental health services provided under the Medi-Cal
specialty mental health services waiver, including, but not limited
to, reimbursement and claiming procedures, reviews and oversight, and
appeal processes for mental health plans (MHPs) and MHP
subcontractors.
   (1) During the initial phases of the implementation of this part,
as determined by the department, the MHP contractor and
subcontractors shall submit claims under the Medi-Cal program for
eligible services on a fee-for-service basis.
   (2) 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.
   (3) (A) 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 Care 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.
   (B) The department, in consultation with the State Department of
Health Care 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 MHPs. In developing the timeline, the
department shall develop screening, referral, and coordination
guidelines to be used by Medi-Cal managed care plans and MHPs.
   (4) (A) (i) A MHP subcontractor providing specialty mental health
services shall be financially responsible for federal audit
exceptions or disallowances to the extent that these exceptions or
disallowances are based on the MHP subcontractor's conduct or
determinations.
   (ii) The state shall be financially responsible for federal audit
exceptions or disallowances to the extent that these exceptions or
disallowances are based on the state's conduct or determinations. The
state shall not withhold payment from a MHP for exceptions or
disallowances that the state is financially responsible for pursuant
to this clause.
   (iii) A MHP shall be financially responsible for state audit
exceptions or disallowances to the extent that these exceptions or
disallowances are based on the MHP's conduct or determinations. A MHP
shall not withhold payment from a MHP subcontractor for exceptions
or disallowances for which the MHP is financially responsible
pursuant to this clause.
   (B) For purposes of subparagraph (A), a "determination" shall be
shown by a written document expressly stating the determination,
while "conduct" shall be shown by any credible, legally admissible
evidence.
   (C) The department and the State Department of Health Care
Services shall work jointly with MHPs in initiating any necessary
appeals. The department may invoice or offset the amount of any
federal disallowance or audit exception against subsequent claims
from the MHP or MHP 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 Care Services. The maximum amount that may be
withheld shall be 25 percent of each payment to the plan or
subcontractor.
   (5) (A) Oversight by the department of the MHPs and MHP
subcontractors may include client record reviews of Early Periodic
Screening Diagnosis and Treatment (EPSDT) specialty mental health
services under the Medi-Cal specialty mental health services waiver
in addition to other audits or reviews that are conducted.
   (B) The department may contract with an independent,
nongovernmental entity to conduct client record reviews. The contract
awarded in connection with this section shall be on a competitive
bid basis, pursuant to the Department of General Services contracting
requirements, and shall meet both of the following additional
requirements:
   (i) Require the entity awarded the contract to comply with all
federal and state privacy laws, including, but not limited to, the
federal Health Insurance Portability and Accountability Act (HIPAA;
42 U.S.C. Sec. 1320d et seq.) and its implementing regulations, the
Confidentiality of Medical Information Act (Part 2.6 (commencing with
Section 56) of Division 1 of the Civil Code), and Section 1798.81.5
of the Civil Code. The entity shall be subject to existing penalties
for violation of these laws.
   (ii) Prohibit the entity awarded the contract from using, selling,
or disclosing client records for a purpose other than the one for
which the record was given.
   (C) For purposes of this paragraph, the following terms shall have
the following meanings:
   (i) "Client record" means a medical record, chart, or similar
file, as well as other documents containing information regarding an
individual recipient of services, including, but not limited to,
clinical information, dates and times of services, and other
information relevant to the individual and services provided and that
evidences compliance with legal requirements for Medi-Cal
reimbursement.
   (ii) "Client record review" means examination of the client record
for a selected individual recipient for the purpose of confirming
the existence of documents that verify compliance with legal
requirements for claims submitted for Medi-Cal reimbursement.
   (D) The department shall recover overpayments of federal financial
participation from MHPs within the timeframes required by federal
law and regulation and return those funds to the State Department of
Health Care Services for repayment to the federal Centers for
Medicare and Medicaid Services. The department shall recover
overpayments of General Fund moneys utilizing the recoupment methods
and timeframes required by the State Administrative Manual.
   (6) (A) The department, in consultation with mental health
stakeholders, the California Mental Health Directors Association, and
MHP subcontractor representatives, shall provide an appeals process
that specifies a progressive process for resolution of disputes about
claims or recoupments relating to specialty mental health services
under the Medi-Cal specialty mental health services waiver.
   (B) The department shall provide MHPs and MHP subcontractors the
opportunity to directly appeal findings in accordance with procedures
that are similar to those described in Article 1.5 (commencing with
Section 51016) of Chapter 3 of Subdivision 1 of Division 3 of Title
22 of the California Code of Regulations, until new regulations for a
progressive appeals process are promulgated. When an MHP
subcontractor initiates an appeal, it shall give notice to the MHP.
The department shall propose a rulemaking package by no later than
the end of the 2008-09 fiscal year to amend the existing appeals
process. The reference in this subparagraph to the procedures
described in Article 1.5 (commencing with Section 51016) of Chapter 3
of Subdivision 1 of Division 3 of Title 22 of the California Code of
Regulations, shall only apply to those appeals addressed in this
subparagraph.
   (C) The department shall develop regulations as necessary to
implement this paragraph.
   (7) The department shall assume the applicable program oversight
authority formerly provided by the State Department of Health Care
Services, including, but not limited to, the oversight of utilization
controls as specified in Section 14133. The MHP shall include a
requirement in any subcontracts that all inpatient subcontractors
maintain necessary licensing and certification. MHPs shall require
that services delivered by licensed staff are within their scope of
practice. Nothing in this part shall prohibit the MHPs 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.
   (8) Subject to federal approval and consistent with state
requirements, the MHP may negotiate rates with providers of mental
health services.
   (9) 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 specialty mental
health services under the Medi-Cal specialty mental health service
waiver and related administrative costs.
   (10) Nothing in this part shall limit the MHP 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.
   (c) The provisions of this subdivision shall apply to managed
mental health care funding allocations and risk-sharing
determinations and arrangements.
   (1) The department shall allocate the contracted amount at the
beginning of the contract period to the MHP. 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.
   (2) Each fiscal year the state matching funds for Medi-Cal
specialty 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. The appropriation for
funding the state share of the costs for EPSDT specialty mental
health services provided under the Medi-Cal specialty mental health
services waiver shall only be used for reimbursement payments of
claims for those services.
   (3) Initially, the MHP shall use the fiscal intermediary of the
Medi-Cal program of the State Department of Health Care 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 MHPs 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.
   (4) The MHPs 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 Care 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.
   (5) 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.
   (6) 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 MHPs in small counties
for the cost of acute inpatient psychiatric services in excess of
the funding provided to the MHP 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

   (7) The allocation method for the state funds transferred for
subsequent years for acute inpatient psychiatric and other specialty
mental health services shall be determined by the department in
consultation with a statewide organization representing counties.
   (8) 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. The share of
cost ratio arrangement for EPSDT specialty mental health services
provided under the Medi-Cal specialty mental health services waiver
between the state and the counties in existence during the 2007-08
fiscal year shall remain as the share of cost ratio arrangement for
these services unless changed by statute.
   (9) 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.
   (10) (A) For the managed mental health care program, exclusive of
EPSDT specialty mental health services provided under the Medi-Cal
specialty mental health services waiver, the department shall
establish, by regulation, a risk-sharing arrangement between the
department and counties that contract with the department as MHPs to
provide an increase in the state General Fund allocation, subject to
the availability of funds, to the MHP under this section, where there
is a change in the obligations of the MHP 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 MHP of performing under the
terms of its contract.
   (B) During the time period required to redetermine the allocation,
payment to the MHP 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.
   (C) 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 specialty 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 MHP 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.
   (d) The following provisions govern the administrative
responsibilities of the department and the State Department of Health
Care Services:
   (1) It is the intent of the Legislature that the department and
the State Department of Health Care Services consult and collaborate
closely regarding administrative functions related to and supporting
the managed mental health care program in general, and the delivery
and provision of EPSDT specialty mental health services provided
under the Medi-Cal specialty mental health services waiver, in
particular. To this end, the following provisions shall apply:
   (A) Commencing in the 2009-10 fiscal year, and each fiscal year
thereafter, the department shall consult with the State Department of
Health Care Services and amend the interagency agreement between the
two departments as necessary to include improvements or updates to
procedures for the accurate and timely processing of Medi-Cal claims
for specialty mental health services provided under the Medi-Cal
specialty mental health services waiver. The interagency agreement
shall ensure that there are consistent and adequate time limits,
consistent with federal and state law, for claims submitted and the
need to correct errors.
   (B) Commencing in the 2009-10 fiscal year, and each fiscal year
thereafter, upon a determination by the department and the State
Department of Health Care Services that it is necessary to amend the
interagency agreement, the department and the State Department of
Health Care Services shall process the interagency agreement to
ensure final approval by January 1, for the following fiscal year,
and as adjusted by the budgetary process.
   (C) The interagency agreement shall include, at a minimum, all of
the following:
   (i) A process for ensuring the completeness, validity, and timely
processing of Medi-Cal claims as mandated by the federal Centers for
Medicare and Medicaid Services.
   (ii) Procedures and timeframes by which the department shall
submit complete, valid, and timely invoices to the State Department
of Health Care Services, which shall notify the department of
inconsistencies in invoices that may delay payments.
   (iii) Procedures and timeframes by which the department shall
notify MHPs of inconsistencies that may delay payment.
   (2) (A) The department shall consult with the State Department of
Health Care Services and the California Mental Health Directors
Association in February and September of each year to review the
methodology used to forecast future trends in the provision of EPSDT
specialty mental health services provided under the Medi-Cal
specialty mental health services waiver, to estimate these yearly
EPSDT specialty mental health services related costs, and to estimate
the annual amount of funding required for reimbursements for EPSDT
specialty mental health services to ensure relevant factors are
incorporated in the methodology. The estimates of costs and
reimbursements shall include both federal financial participation
amounts and any state General Fund amounts for EPSDT specialty mental
health services provided under the State Medi-Cal specialty mental
health services waiver. The department shall provide the State
Department of Health Care Services the estimate adjusted to a cash
basis.
   (B) The estimate of annual funding described in subparagraph (A)
shall, include, but not be limited to, the following factors:
   (i) The impacts of interactions among caseload, type of services,
amount or number of services provided, and billing unit cost of
services provided.
   (ii) A systematic review of federal and state policies, trends
over time, and other causes of change.
   (C) The forecasting and estimates performed under this paragraph
are primarily for the purpose of providing the Legislature and the
Department of Finance with projections that are as accurate as
possible for the state budget process, but will also be informative
and useful for other purposes. Therefore, it is the intent of the
Legislature that the information produced under this paragraph shall
be taken into consideration under paragraph (10) of subdivision (c).

5778.3.  Notwithstanding any other law, including subdivision (b) of
Section 16310 of the Government Code, the Controller may use the
moneys in the Mental Health Managed Care Deposit Fund for loans to
the General Fund as provided in Sections 16310 and 16381 of the
Government Code. Interest shall be paid on all moneys loaned to the
General Fund from the Mental Health Managed Care Deposit Fund.
Interest payable shall be computed at a rate determined by the Pooled
Money Investment Board to be the current earning rate of the fund
from which loaned. This subdivision does not authorize any transfer
that will interfere with the carrying out of the object for which the
Mental Health Managed Care Deposit Fund was created.

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.

5782.  The provisions of this part are subject to and shall be read
as incorporating the authority and oversight responsibilities of the
State Department of Health Care Services in its role as the single
state agency for the Medicaid program in California. The provisions
of this part shall be implemented only to the extent that federal
financial participation is available.

5783.  (a) Each eligible public agency, as described in subdivision
(b), may, in addition to reimbursement or other payments that the
agency would otherwise receive for Medi-Cal specialty mental health
services, receive supplemental Medi-Cal reimbursement to the extent
provided for in this section.
   (b) A public agency shall be eligible for supplemental
reimbursement only if it is a county, city, city and county, or the
University of California and if, consistent with Section 5778, it
meets either or both of the following characteristics continuously
during a state fiscal year:
   (1) Provides, pursuant to the Medi-Cal Specialty Mental Health
Services Consolidation Waiver (Number CA.17), as approved by the
federal Centers for Medicare and Medicaid Services, specialty mental
health services to Medi-Cal beneficiaries in one or more of its
publically owned and operated facilities.
   (2) Provides or subcontracts for specialty mental health services
to Medi-Cal beneficiaries as a mental health plan (MHP) pursuant to
this part.
   (c) (1) Subject to paragraph (2), an eligible public agency's
supplemental reimbursement pursuant to this section shall be equal to
the amount of federal financial participation received as a result
of the claims submitted pursuant to paragraph (2) of subdivision (f).
   (2) Notwithstanding paragraph (1), in computing an eligible public
agency's reimbursement, in no instance shall the expenditures
certified pursuant to paragraph (1) of subdivision (e), when combined
with the amount received from other sources of payment and with
reimbursement from the Medi-Cal program, including expenditures
otherwise certified for purposes of claiming federal financial
participation, exceed 100 percent of actual, allowable costs, as
determined pursuant to California's Medicaid State Plan, for the
specialty mental health services to which the expenditure relates.
Supplemental payment may be made on an interim basis until the time
when actual, allowable costs are finally determined.
   (3) The supplemental Medi-Cal reimbursement provided by this
section shall be distributed under a payment methodology based on
specialty mental health services provided to Medi-Cal patients by
each eligible public agency, on a per-visit basis, a per-procedure
basis, a time basis, in one or more lump sums, or on any other
federally permissible basis. The State Department of Health Care
Services 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 federal approval.
   (d) (1) It is the intent of the Legislature in enacting this
section to provide the supplemental reimbursement described in this
section without any expenditure from the General Fund. The department
or the State Department of Health Care Services may require an
eligible public agency, as a condition of receiving supplemental
reimbursement pursuant to this section, to enter into, and maintain,
an agreement with the department for the purposes of implementing
this section and reimbursing the department and the State Department
of Health Care Services for the costs of administering this section.
   (2) Expenditures submitted to the department and to the State
Department of Health Care Services for purposes of claiming federal
financial participation under this section shall have been paid only
with funds from the public agencies described in subdivision (b) and
certified to the state as provided in subdivision (e).
   (e) An eligible public agency 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 specialty mental health services are eligible
for federal financial participation.
   (2) Provide evidence supporting the certification as specified by
the department or by the State Department of Health Care Services.
   (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 or by the State Department of Health Care
Services to fully disclose reimbursement amounts to which the
eligible public agency is entitled, and any other records required by
the federal Centers for Medicare and Medicaid Services.
   (f) (1) The State Department of Health Care Services shall
promptly seek any necessary federal approvals for the implementation
of this section. If necessary to obtain federal approval, the program
shall be limited to those costs that the federal Centers for
Medicare and Medicaid Services determines to be 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 not be
implemented.
   (2) The State Department of Health Care Services shall submit
claims for federal financial participation for the expenditures
described in subdivision (e) related to specialty mental health
services that are allowable expenditures under federal law.
   (3) The State Department of Health Care Services shall, on an
annual basis, submit any necessary materials to the federal Centers
for Medicare and Medicaid Services to provide assurances that claims
for federal financial participation will include only those
expenditures that are allowable under federal law.
   (4) The department shall collaborate with the State Department of
Health Care Services to ensure that the department's policies,
procedures, data, and other relevant materials are available to the
State Department of Health Care Services as may be required for the
implementation and administration of this section and for the
claiming of federal financial participation.
   (g) (1) The director may adopt regulations as are necessary to
implement this section. The adoption, amendment, repeal, or
readoption of a regulation authorized by this subdivision shall be
deemed to be necessary for the immediate preservation of the public
peace, health and safety, or general welfare, for purposes of
Sections 11346.1 and 11349.6 of the Government Code, and the
department is hereby exempted from the requirement that it describe
specific facts showing the need for immediate action.
   (2) As an alternative to the adoption of regulations pursuant to
paragraph (1), and notwithstanding Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code, the director may implement and administer this article, in
whole or in part, by means of provider bulletins or similar
instructions, without taking regulatory action, provided that no
bulletin or similar instruction shall remain in effect after June 30,
2011. It is the intent that regulations adopted pursuant to
paragraph (1) shall be in place on or before June 30, 2011.