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California State Auditor Report Number : 2014-130

California Department of Health Care Services
It Should Improve Its Administration and Oversight of School-Based Medi-Cal Programs



As we mention in the Introduction, the Centers for Medicare and Medicaid Services (CMS) required the California Department of Health Care Services (Health Care Services) to implement a reasonableness review of claims for which CMS had deferred payment as a result of its financial management review. In August 2012, Health Care Services implemented a deferral certification process as its reasonableness review. The deferral certification process required claiming units to submit additional documentation to support reimbursement for deferred invoices.21 Once CMS approved the supporting documentation, the claims would be reimbursed. However, CMS suspended the deferral certification process in January 2013—five months after it started— when the process did not result in Health Care Services approving deferred claims for payment. CMS directed California to develop a reasonableness test to assist in the review and approval of the submissions for deferral certification.

As its second attempt to address CMS’s concerns about claims, in October 2013 Health Care Services implemented a review process using reasonableness test criteria, which were benchmark percentages and other limits that Health Care Services established and that claiming units had to meet if they were to receive approval for their reimbursement claims. For instance, Health Care Services limited the proportion of reimbursable time that a claiming unit could spend facilitating Medi-Cal applications to 2 percent of the claiming unit’s total work time. In addition, Health Care Services’ guidance stated that because each claiming unit is unique and represents a unique set of circumstances, Health Care Services would allow them to provide justifications for their claims that fell outside of the requirements imposed by the reasonableness test criteria.

However, the reasonableness test criteria process also failed to result in the payment of many of the deferred claims. Of the approximately 5,300 reasonableness test criteria claims that Health Care Services’ data show were submitted as of February 2015, Health Care Services approved only 504 (fewer than 10 percent).

Another CMS finding pointed out that Health Care Services’ claiming plan did not comply with federal requirements.22 CMS reported that the claiming plan allowed improper coding of certain staff time as 100 percent reimbursable, resulting in inflated claimed amounts, and therefore the plan did not comply with federal regulations and requirements. CMS recommended that Health Care Services amend its claiming plan to fix this issue. Health Care Services agreed and stated it would implement a new time study methodology, the random moment time survey, as part of the revisions to its claiming plan.

According to Health Care Services’ June 2014 California School-Based Medi-Cal Administrative Activities Manual (manual), the random moment time survey methodology polls selected staff from the claiming unit individually to determine what they were doing at randomly selected minutes during the quarter being surveyed, and then it totals the results to identify the proportion of time spent on allowable administrative activities for the entire population of time survey participants. Local educational consortia and local governmental agencies then use this information to calculate the total Medi-Cal reimbursement amount for claiming units in their respective jurisdictions.23 Claiming units that participate in the time study must identify staff that regularly spend their time performing administrative activities and assign them to one of two participant pools: one for staff that perform direct medical services and administrative activities and one for staff that perform only administrative activities. Claiming units must update this information quarterly in the random moment time survey system. Health Care Services refers to the eight entities that perform quarterly time surveys and the Los Angeles Unified School District (LA Unified) as administrative units. Before the beginning of the survey quarter, each administrative unit must certify to Health Care Services a comprehensive list of all claiming unit staff eligible to participate in the time survey. Time study software at each administrative unit generates and issues 2,761 random moment time surveys to participants in each of the two pools each quarter, or a total of 5,522 random moments per quarter per time survey for each administrative unit. We refer to the surveys for both participant pools collectively as the quarterly time survey.

Local educational consortia, local governmental agencies, or their vendors send email messages to the selected staff members from the participant pools notifying them that they have been selected to participate in a survey and informing them of the date and minute for their survey. Each random moment survey asks the participant to answer three specific questions: “What were you doing? Who were you with? Why were you performing this activity?” After receiving survey responses, the local educational consortia, local governmental agencies, or their vendors code—interpret—the answers to the three questions to conclude whether the task was related to Medi-Cal and reimbursable. Using the quarterly survey results and other information, claiming units prepare detailed claims, certify their accuracy, and submit them to their local educational consortium or local governmental agency. The local educational consortia and local governmental agencies then prepare summary claims based on each claiming unit’s detailed claim. The local educational consortia and local governmental agencies submit the summary claims to Health Care Services, which compiles expenditure data from the summary claims into the State’s expenditures report for federal reimbursement.

Local educational consortia and local governmental agencies first used the new time study methodology during the quarter from January 2015 through March 2015. As described in Chapter 2, when Health Care Services began using the methodology, the local educational consortia and local governmental agencies conducted eight separate quarterly surveys covering different geographic regions of the State, along with the preexisting survey conducted by LA Unified. Local educational consortia performed six of the eight quarterly surveys while local governmental agencies performed the remaining two. LA Unified continued to perform its own random moment time survey, the use of which CMS had approved previously in 2010.


21 According to CMS, a claiming unit is typically a school district, or program within a district. California has claiming units that are as diverse as county offices of education, special education local plan areas, local school districts, community colleges, and Healthy Start programs.Go back to text

22 According to the chief of Health Care Services’ Medi-Cal Administrative Claiming Section, CMS’s usage of the term claiming plan appears to mean the manual. The manual describes how claiming units can obtain federal reimbursement under the School-Based Medi-Cal Administrative Activities program (administrative activities program). Health Care Services publishes this manual periodically. Go back to text

23Health Care Services contracts with two types of entities to help it administer the administrative activities program. A local educational consortium is one of the 11 service regions of the California County Superintendents Educational Services Association. Each consortium is led by a county education office within the region. A local governmental agency is an agency of either a county or a chartered city or is a Native American Indian tribe, tribal organization, or subgroup of a Native American Indian tribe or tribal organization. State law requires claiming units to contract with one of these two types of entities to participate in the administrative activities program. Go back to text

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