Response to the Audit
Response From the Department of Health Care Services
August 5, 2015
Ms. Elaine M. Howle
State Auditor
621 Capitol Mail, Suite 1200
Sacramento, CA 95814
Reporting Draft Audit Report
Dear Ms. Howle:
The California Department of Health Care Services (DHCS) hereby provides response to the draft findings of the California State Auditor's (CSA) report entitled, California Department of Health Care Services: It Should Improve Its Administration and Oversight of School-Based Medi-Cal Programs. The CSA conducted this audit and issued eight (8) findings and twenty-one (21) recommendations.
DHCS agrees with fifteen (15) of the recommendations and has prepared corrective action plans to implement them. DHCS appreciates the work performed by CSA and the opportunity to respond to the findings. If you have any questions, please contact Ms. Sarah Hollister, Audit Coordinator, at (916) 650-0298.
Sincerely,
(Original signed by Jennifer Kent)
Jennifer Kent
Director
Department of Health Care Services Response to CSA Draft Report Entitled, California Department of Health Care Services: It Should Improve Its Administration and Oversight of School-Based Medi-Cal Programs
Finding A: DHCS should ensure that it provides claiming units with reasonable opportunities to address concerns with department decisions or actions and should take the following actions within three (3) months.
Recommendation A1:
Begin preparing regulations to establish and implement a formal appeals process that allows claiming units to directly appeal Health Care Services' decisions.
DHCS Response:
DHCS disagrees with the recommendation.
DHCS does not contract with the LEAs directly. LEAs contract with their local LEC or LGA and DHCS contracts with the LEC/LGAs. Therefore, any disputes with DHCS directives must first be addressed at the LEC/LGA level before the issue can be elevated to DHCS. If there is no resolution between the LEA and LEC/LGA, the appeal can be directed to DHCS to work with both the LEA and the LEC/LGA to resolve.
DHCS currently has a formal appeals process that has been distributed to all program stakeholders and posted to the SMAA web page that specifically addresses appeals.
Recommendation A2:
Inform all stakeholders, including claiming units, of the existence of this appeals process.
DHCS Response:
As stated in the previous response, DHCS does not contract with the LEAs directly and all disputes must first be addressed at the LEC/LGA level before the issue can be elevated to DHCS. Policy and Procedure Letter (PPL) 14-006 was issued on April 4, 2014 that outlines the appeal process (this is posted on the SMAA website).
Finding B: Until the Legislature implements the recommendation in Chapter 2, Health Care Services should ensure that local educational consortia and local governmental agencies sufficiently meet their responsibilities under the administrative activities program and meet the terms of their contracts with Health Care Services by immediately resolving weaknesses in its oversight of these entities.
Recommendation B1:
Update its site and desk review procedures to include the following steps:
- A risk based approach to selecting entities for review.
- Verification that local educational consortia and local governmental agencies are adequately meeting the oversight and administrative responsibilities described in their contracts with DHCS.
- Verification that contracts between local educational consortia or local governmental agencies and their claiming units do not include provisions that could result in disallowed costs, such as allowing the inclusion of Health Care Services’ participation fee in the claim calculations.
- An examination of local educational consortia and local governmental agencies’ records to ensure that:
- Costs they claim for federal reimbursement are necessary and reasonable.
- The entities are not inappropriately earning a profit based on fees they collect from claiming units.
- Close scrutiny of the coding performed by local educational consortia that charge claiming units a percentage of their federal reimbursement.
DHCS Response:
DHCS agrees with the recommendation.
- DHCS will work with our audit staff in Audits and Investigation to review current risk-based practices to develop an approach for selecting entities for review.
- DHCS will review the LEC/LGA contracts to determine the oversight and administrative responsibilities and verify these activities are being accomplished.
- Review of the LEA/LEC/LGA contracts is part of the current oversight reviews and DHCS will ensure that they do not include provisions for unallowed costs.
- As part of the oversight review, DHCS will:
- Verify compliance with 42 CFR 433.15 (b)(7) ensuring all costs are necessary and reasonable.
- Meet with our Audits and Investigations Division to research the activities necessary to identify inappropriately charged fees.
- Utilize the real-time access to RMTS to view all coding to ensure that all activities are coded accurately.
Estimated completion date to research, develop and implement the above is March 2016.
Recommendation B2:
Complete the oversight reviews for at least three high-risk local educational consortia or local governmental agencies by December 31, 2015, and post the results to its website.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will work with audit staff in Audits and Investigations to review current risk-based practices and to develop an approach for selecting entities for review.
Since the new methodology for identifying high-risk LEC/LGAs is not yet in place, DHCS will select at least three high – risk LEC/LGAs based on the departments experience in reviewing claims during the Reasonable Test Criteria (RTC) process.
The results of the oversight reviews will supplement the research to create, and implement the over-all risk-based oversight review. In addition, DHCS will look into posting oversite reviews to its website.
Estimated completion date of December 31, 2015.
Recommendation B3:
Complete the oversight reviews for any remaining high-risk local educational consortia or local governmental agencies by June 30, 2016, and post the results to its website.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will work with audit staff in Audits and Investigations to review current risk-based practices and to develop an approach for selecting entities for review. Once the research into best practices for a risk-based site review process has been developed, DHCS will use this criterion to identify high risk LECs/LGAs and set a site review schedule based on that criterion. DHCS will start the oversight review for the top remaining LECs/LGAs by September 2016.
Estimated completion date to establish a risk-based site review schedule is April 2016. DHCS will look into posting oversite reviews to its website.
Finding C: DHCS should minimize the risk that claiming units could include unallowable costs when calculating their reimbursement claims.
Recommendation C1:
Encourage Los Angeles County to revise its contracts with its claiming units to make it clear that claiming units cannot include DHCS’ participation fee as part of their claims.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will review the language in LACOE’s contract, if it is found that the language allows for the claiming of the participation fee, DHCS will require LACOE to revise its contract. DHCS will also review and ensure that all LEC/LGAs, as needed, revise their contracts so that the DHCS participation fees are not included as part of their LEA claims. To allow for contract revisions, review, submission to local boards for approval and signature, the estimated completion date is June 30, 2016.
Recommendation C2:
For all claims that Los Angeles County received and reviewed under its current contracts with its claiming units: Determine whether claiming units included DHCS’ participation fee as part of the claim.
For those paid claims that included participation fee, identify the amount of the inappropriate amount paid and take appropriate action to resolve the improper payment including, if necessary, obtaining a refund from the claiming unit.
For those submitted claims that have not yet been paid, instruct Los Angeles County to reject the claims and direct claiming units to revise the claims to omit DHCS’ participation fee.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will conduct a site visit with LACOE as first priority. As part of the audit file, a schedule details all other costs claimed on the LEA invoice. DHCS will ensure that any participation fees will not be listed as part of the invoice. For any paid claims that include a participation fee, DHCS will take appropriate action to recoup those funds. For those submitted claims that have not yet been paid, DHCS will instruct Los Angeles County to reject the claims and direct claiming units to revise the claims to omit DHCS’ participation fee. To allow schools to return from summer break and allow for the necessary personnel to be available for interviews, DHCS will initiate an entrance letter to LACOE by mid-August 2015 for a site visit in September 2015.
Recommendation C3:
Remind all local educational consortia and local governmental agencies that contracts with their claiming units should prohibit claiming units from seeking federal reimbursement of DHCS’ participation fee.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will re-issue PPL 97-20 by September 30, 2015 reminding all LEC/LGAs of this requirement.
Finding D: To streamline the organizational structure of its administrative program and to improve the program’s cost effectiveness, DHCS should take the following actions to implement a single statewide quarterly random moment time survey.
Recommendation D1:
Develop and implement a plan to take over responsibility for conducting quarterly time surveys and performing related activities as soon as reasonably possible.
DHCS Response:
DHCS disagrees with the recommendation.
DHCS will review the implications and cost effectiveness of taking over the responsibility of conducting quarterly time surveys, and related activities. DHCS will reach out to other states that utilize a single statewide time survey to determine the scope of service involved with this methodology and identify a set of best practices for possible implementation in California.
Recommendation D2:
Develop and issue a request for proposals to identify a responsible vendor to assist in implementing a statewide quarterly random moment survey.
DHCS Response:
DHCS disagrees with the recommendation.
DHCS will reach out to other states that administer a statewide Random Moment Time Study (RMTS) methodology in order to identify a set of best practices for the development and implementation of a statewide RMTS in California, and determine the number and type of resources necessary to administer the program at a statewide level. Once that review is complete, the Department will make a determination of the practicality of a statewide RMTS implementation.
If it can be determined that an increased efficiency and cost savings will result from a statewide RMTS methodology with respect to achieving the overall objectives of the SMAA program, DHCS will reach out to gather stakeholder input in order to develop a Request for Proposal (RFP) to contract with a vendor to implement a statewide quarterly random moment time survey.
Recommendation D3:
Draft revisions to regulations as appropriate and to applicable documents, including the California School Based Medi-Cal Administrative Activities Manual, oversight strategies and plans, and policy and procedures letters.
DHCS Response:
DHCS disagrees with the recommendation.
DHCS staff is currently working on drafting regulations for the SMAA program. Estimated time to submit regulations for the SMAA program is June 30, 2017.
Recommendation D4:
To the extent that local educational consortia and local governmental agencies are no longer involved in the administrative activities program, Health Care Services should develop and issue a standard contract for claiming units to sign to participate in the program.
DHCS Response:
DHCS disagrees with the recommendation.
DHCS currently has standard contracts with the LEC/LGAs. Should DHCS determine the necessity of eliminating the LEC/LGAs from the SMAA program, DHCS will continue to use standard contracts for all claiming units contracting with DHCS. Contracting directly with the LEAs would be dependent upon elimination of LEC/LGAs and the timeframe needed to transition duties to the claiming units.
Recommendation D5:
To improve the clarity and effectiveness of program communication, DHCS should develop and implement feedback mechanisms, such as organized, up – to – date FAQs, through which it can communicate results of relevant inquiries to other stakeholders, including claiming units.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will begin to review emails, notes, meeting comments/agendas to update current FAQs and establish a separate FAQ link on the SMAA home page. This will entail reaching out to stakeholders for issues to address and publish.
Anticipated publication will be March 2016.
Finding E: To better maximize the federal reimbursements for the administrative activities program, DHCS should complete the following actions within six (6) months.
Recommendation E1:
Develop and implement a method to oversee and track the outreach efforts used by local educational consortia and local governmental agencies for ensuring that nonparticipating claiming units understand the benefits and consider participating in the administrative activities program.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will work with its stakeholders to develop a standard training tool and presentation to be used by LEC/LGAs to reach out to nonparticipating schools. DHCS will work with stakeholders to create a tracking tool for LEC/LGAs to use to monitor outreach activities.
Anticipated implementation is March 30, 2016.
Recommendation E2:
Revise reimbursement rates to authorize claiming units to claim the 75 percent reimbursement rate for translation activities as allowed by federal law.
DHCS Response:
DHCS agrees with the recommendation
DHCS is working with CMS to establish a process to claim translation services at the enhanced rate of 75 percent.
Estimated completion date is December 31, 2015.
Recommendation E3:
Determine the extent to which claiming units can claim the unreimbursed difference between the 50 percent and 75 percent reimbursement rate for translation activities for past years and inform claiming units of the results.
DHCS Response:
DHCS agrees with the recommendation.
DHCS is currently working with CMS to incorporate the increased reimbursement for translation services and will ask if retroactive claiming will be allowed.
Estimated completion date is December 31, 2015.
Finding F: DHCS should provide the public with the ability to participate fully in developing the rules governing the administrative activities program.
Recommendation F1:
DHCS should, in accordance with the APA, immediately develop and adopt the regulations cited in the four subdivisions of Section 14132.47 of the California Welfare and Institutions Code.
DHCS Response:
DHCS agrees with the recommendation.
DHCS staff is currently working on drafting regulations for the SMAA program. DHCS meets regularly with our stakeholders and will engage them in the regulatory development process. The public will have time to comment during the public comment period required by the APA.
Estimated time to submit regulations for the SMAA program is June 30, 2017.
Finding G: DHCS should provide stakeholders with timely access to information regarding the billing option program.
Recommendation G1:
Issue the required annual report covering April 2012 to May 2013 immediately.
DHCS Response:
DHCS agrees with the recommendation.
DHCS is working to issue the April 2012 to May 2013 annual report by the end of 2015.
Recommendation G2:
Issue the required annual report covering April 2013 to May 2015 by December 2015 as promised.
DHCS Response:
DHCS agrees with the recommendation.
DHCS is working to issue the April 2013 to May 2015 annual report by December 31, 2015.
Recommendation G3:
Issue all future annual reports in a timely manner.
DHCS Response:
DHCS agrees with the recommendation.
DHCS will work to issue reports timely.
Finding H: The structure of the Administrative Activities Program may prevent some Claiming Units from receiving the full amount of interim payments
Recommendation H1:
To better ensure that some claiming units do not unfairly disadvantage other claiming units in the receipt of interim payments, Health Care Services should explore opportunities to expedite consistent, timely, and fair interim payments to those claiming units with no overpayments. Health Care Services should involve representatives of local educational consortia, local governmental agencies, and claiming units in these efforts and communicate the results to interested stakeholders.
DHCS Response:
DHCS disagrees with the recommendation.
DHCS issued interim settlement payments to all claiming units based on the net difference between the deferred paid claims (amount owed to the state) and the deferred placeholder claims (amount owed to the LEAs). Any money owed to the state by the LEAs through the application of the CMS settlement to previously paid claims was netted against any money owed to the LEA through all unpaid deferred placeholder claims. In order to expedite the payment process, a single payment was issued to each LEC or LGA based on the total amount that was due to the LEAs within the LEC/LGA service regions. Had this process not been implemented, DHCS would have had to issue individual checks for over 800 claiming units, accounting for eight quarters of deferred claims. If an LEA continues to have a net negative balance after all claims are netted, the LEC/LGA is responsible for recouping those funds before they can issue payment to the LEAs with a net positive balance.
Currently there are 34 claiming units with a net negative balance representing approximately $2.7 million.
DHCS is drafting a guidance letter to assist the LEC/LGAs with finalizing the settlement payment process. This letter will be issued by August 14, 2015.
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES
To provide clarity and perspective, we are commenting on the California Department of Health Care Services’ (Health Care Services) response to our audit. The numbers below correspond to the numbers we have placed in the margin of Health Care Services’ response.
Health Care Services’ disagreement with our recommendations regarding its appeals process is perplexing. Although it does not contract directly with claiming units, Health Care Services is the single state agency responsible for administering Medicaid in California, including the School-Based Medi-Cal Administrative Activities program (administrative activities program), and therefore it should strive to ensure that claiming units achieve success under this program. We mention in Chapter 1 that Health Care Services’ process allows claiming units to appeal actions or decisions that local educational consortia and local governmental agencies make and, according to the chief of the Safety Net Financing Division (division chief), the local educational consortia or local governmental agencies can appeal Health Care Services’ actions or decisions on behalf of their claiming units. Health Care Services’ use of an appeals process that allows claiming units to appeal decisions to only their local educational consortium or local governmental agency, and that forces claiming units to rely on these entities to appeal those decisions to Health Care Services on their behalf is unnecessarily convoluted. As we also mention in Chapter 1, that, according to the assistant chief of Health Care Services’ Safety Net Financing Division, no claiming units have ever used the appeals process. The apparent failure of this appeals process for claiming units, which has been in place since April 2014, is clear. We, therefore, stand by our recommendations.
Despite its disagreement with these recommendations, Health Care Services states that it will review the implications and cost-effectiveness of implementing a single statewide random moment time survey and performing related activities. We look forward to reviewing the results of these efforts when Health Care Services submits status reports to us at 60 days, six months, and one year following the issuance of our report. Further, we are confident that once Health Care Services completes its analysis, it will agree that implementing a statewide quarterly time survey will result in a significant savings for claiming units and simplify the oversight of the administrative activities program.
In its response, Health Care Services did not explain why it needs until June 30, 2017, “to submit regulations” (presumably to the Office of Administrative Law), about 22 months after the issuance of our report. As we describe in Chapter 3, because Health Care Services’ policies and manuals could be construed as underground regulations, it could increase the risk of an interruption to future reimbursement payments to claiming units. We look forward to reviewing Health Care Services’ explanation of why it will need so much time when it submits status reports to us at 60 days, six months, and one year following the issuance of our report.
Although Health Care Services disagrees with our recommendation regarding developing a standard contract for claiming units, its additional statements indicate otherwise. Health Care Services acknowledges that it will continue to use standard contracts for all local educational consortia and local governmental agencies with which it contracts and that contracting directly with local educational agencies is dependent upon elimination of local educational consortia and local governmental agencies and the time frame needed to transition duties to claiming units. These statements are in line with our recommendation.
Although we appreciate its agreement with our recommendation, it is unclear why Health Care Services may need until the end of 2015 to issue the required annual report for the Local Educational Agency Medi-Cal Billing Option Program covering April 2012 through May 2013 (the 2013 report). Health Care Services’ response indicates that it will issue the 2013 report at some point during the four months from the end of August 2015 through the end of December 2015. We state in Chapter 3 of our report, the division chief told us in June 2015 that Health Care Services plans to release the 2013 report shortly. In an email dated June 9, 2015, the division chief indicated that his team was revising the report to show updated information and stated that he believed that Health Care Services would be able to finalize and post the 2013 report in the next couple of weeks.
Despite its disagreement with our recommendation, additional statements Health Care Services makes in its response indicate its apparent commitment to ensuring that claiming units receive the full amount of their interim payments. We look forward to reviewing the status of Health Care Services’ efforts in achieving this goal, including updates on the number of claiming units that have not received the full amount of their interim payments, when it submits status reports to us at 60 days, six months, and one year following the issuance of our report.