oversight powers. The bill would prohibit health care service plan

contracts or health insurance policies from being issued for services

covered by the California Healthcare System, subject to

appropriation by the Legislature, and would authorize the collection

of penalty moneys for deposit into the fund.

The bill would create

the Healthcare Fund and the Payments Board to administer the finances

of the California Healthcare System.

The bill would create the

California Healthcare Premium Commission (Premium Commission) to

determine the cost of the California Healthcare System and to develop

a premium structure for the system that complies with specified

standards.

The bill would require the Premium Commission to recommend

a premium structure to the Governor and the Legislature on or before

January 1, 2014, and to make a draft recommendation to the Governor,

the Legislature, and the public 90 days before submitting its final

premium structure recommendation.

The bill would specify that only

its provisions relating to the Premium Commission would become

operative on January 1, 2012, with its remaining provisions becoming

operative on the date the Secretary of California Health and Human

Services notifies the Legislature, as specified, that sufficient

funding exists to implement the California Healthcare System or the

date the secretary receives the necessary federal waiver under the

federal Patient Protection and Affordable Care Act, whichever is

later.

   The bill would extend the application of certain insurance fraud

laws to providers of services and products under the system, thereby

imposing a state-mandated local program by revising the definition of

a crime. The bill would enact other related provisions relative to

budgeting, regional entities, federal preemption, subrogation,

collective bargaining agreements, compensation of health care

providers, conflict of interest, patient grievances, and independent

medical review.

    The California Constitution requires the state to reimburse local

agencies and school districts for certain costs mandated by the

state. Statutory provisions establish procedures for making that

reimbursement.

   This bill would provide that no reimbursement is required by this

act for a specified reason.

   Vote: majority. Appropriation: no. Fiscal committee: yes.

State-mandated local program: yes.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Division 114 (commencing with Section 140000) is added

to the Health and Safety Code, to read:

      DIVISION 114.  CALIFORNIA UNIVERSAL HEALTHCARE ACT

CHAPTER 1.  GENERAL PROVISIONS

140000.  There is hereby established in state government the

California Healthcare System, which shall be administered by the

California Healthcare Agency, an independent agency under the control

of the Healthcare Commissioner.

140000.6.  No health care service plan contract or health

insurance policy, except for the California Healthcare System plan,

may be sold in California for services provided by the system.

140001.  This division shall be known and may be cited as the

California Universal Healthcare Act.

140002.  This division shall be liberally construed to accomplish

its purposes.

140003.  The California Healthcare Agency is hereby created and

designated as the single state agency with full power to supervise

every phase of the administration of the California Healthcare System

and to receive grants-in-aid made by the United States government,

by the state, or by other sources in order to secure full compliance

with the applicable provisions of state and federal law.

140004.  The California Healthcare Agency shall be comprised of

the following entities:

(a) The Healthcare Policy Board.

(b) The Office of Patient Advocacy.

(c) The Office of Health Planning.

(d) The Office of Health Care Quality.

(e) The Healthcare Fund.

(f) The Public Advisory Committee.

(g) The Payments Board.

(h) Partnerships for Health.

140005.  The Legislature finds and declares all of the following:

(a) An estimated 6.6 million Californians were uninsured in 2006,

representing over 20 percent of the nonelderly population.

(b) In California, 763,000 children are currently uninsured, and

an additional 300,000 are significantly at risk for losing their

coverage.

(c) Health care spending has continuously grown two to three times

faster than California's economy, while health insurance premiums

have grown significantly faster than overall health care spending.

(d) Since 2000, health care costs have outpaced increases in wages

by a ratio of four to one.

(e) One-third of California's state budget is devoted to health

care, including direct public programs as well as employee health

benefits. The imbalanced growth in health spending relative to

economic growth which drives public revenues greatly hinders

California's ability to maintain a balanced budget.

(f) On average, the United States spends more than twice as much

as all other industrial nations on health care, both per person and

as a percentage of its gross domestic product. Additionally, the rate

of health care inflation significantly outpaces other industrial

nations.

(g) Despite this high spending, United States healthcare outcomes

consistently rank at the bottom of all industrial nations and the

United States Institute of Medicine has declared an epidemic of

substandard health-care throughout the nation.

(h) Instead of effectively containing costs, costs have been

increasingly shifted to working Californians in the form of a

continual decline in employer-offered coverage, dramatic increases in

premiums, copayments, and deductibles, declining clinical quality,

overall reductions in benefits, and inappropriate utilization review

procedures that deny patients access to needed care.

(i) As a result, one-half of all bankruptcies in the United States

now relate to medical costs, though three-fourths of bankrupted

families had health care coverage at the time of sustaining the

injury or illness.

(j) More than one-half of all Americans report forgoing

recommended health care because of the cost, and Americans are more

likely to report difficulty seeing a doctor on the day they sought.

(k) Health plans and insurers compete to construct patient pools

consisting of the healthiest segments of the population, leaving

higher risk patients to public programs or uninsured.

(l) Segregating patients into groups based on actuarial

assessments of their medical risk guarantees the continuation of

entrenched health care disparities in access and quality, and drives

health care resources toward healthier populations who least need it

for whom more care often does more harm than good.

(m) The Institute of Medicine estimates that 18,000 people die

annually in the United States because of lack of access to care and

that 30,000 die from over treatment.

(n) The RAND Institute estimates that one-third of clinical

procedures performed are of questionable clinical benefit.

(o) Quantitative analyses performed by the Congressional Budget

Office, the General Accounting Office, the Lewin Group, and the

Legislative Analyst's Office indicate that under a single-payer

health care coverage system, the amount currently spent for health

care is adequate to finance comprehensive high quality health care

coverage for every resident of the state.

(p) According to these reports and numerous other studies, by

simplifying administration, achieving bulk purchase discounts on

pharmaceuticals, reducing the use of emergency facilities for primary

care, and better managing health care resources, California could

divert billions of dollars toward direct health care.

(q) Enactment of a single-payer universal health care system would

create 2.6 million jobs in the United States, while infusing three

hundred seventeen billion dollars ($317,000,000,000) in new business

and public revenues and one hundred billion dollars

($100,000,000,000) in wages into the United States economy according

to a recent study by the Institute for Health and Socioeconomic

Policy.

(r) Single-payer health care, exhibited by Medicare and the

Veterans Administration, along with virtually every other industrial

nation in the world, is a well tested model that has been proven to

contain the growth in health care spending while promoting quality

improvements and maintaining comprehensive coverage.

140005.1. 

(a) It is the intent of the Legislature to establish a

system of universal health care coverage in this state that provides

all residents with comprehensive health care benefits, guarantees a

single standard of care for all residents, stabilizes the growth in

health care spending, and improves the quality of health care for all

residents.

(b) It is the intent of the Legislature that, in order to ensure

an adequate supply and distribution of direct care providers in the

state, a just and fair return for providers electing to be

compensated by the health care system, and a uniform system of

payments, the state shall actively supervise and regulate a system of

payments whereby groups of fee-for-service physicians are authorized

to select representatives of their specialties to negotiate with the

health care system, pursuant to Section 140209. Nothing in this

division shall be construed to allow collective action against the

health care system.

140006.  This division shall have all of the following purposes:

(a) To provide affordable and comprehensive health care coverage

with a single standard of care for all California residents.

(b) To control health care costs and the growth of health care

spending, subject to the obligation described in subdivision (a).

(c) To achieve measurable improvement in the quality of care and

the efficiency of care delivery.

(d) To prevent disease and disability and to improve or maintain

health and functionality.

(e) To increase health care provider, consumer, employee, and

employer satisfaction with the health care system.

(f) To implement policies that strengthen and improve culturally

and linguistically sensitive care and sensitive care provided to

disabled persons.

(g) To develop an integrated population-based health care database

to support health care planning.

(h) To provide information and care in an appropriate and

accessible format.

140007.  As used in this division, the following terms have the

following meanings:

(a) "Agency" means the California Healthcare Agency.

(b) "Clinic" means an organized outpatient health facility that

provides direct medical, surgical, dental, optometric, or podiatric

advice, services, or treatment to patients who remain less than 24

hours, and that may also provide diagnostic or therapeutic services

to patients in the home as an alternative to care provided at the

clinic facility, and includes those facilities defined under Sections

1200 and 1200.1.

(c) "Commissioner" means the Healthcare Commissioner.

(d) "Direct care provider" means any licensed health care

professional that provides health care services through direct

contact with a patient, either in person or using approved

telemedicine modalities as identified in Section 2290.5 of the

Business and Professions Code.

(e) "Essential community provider" means a health facility that

has served as part of the state's health care safety net for

low-income and traditionally underserved populations in California

and that is one of the following:

(1) A "community clinic" as defined under subparagraph (A) of

paragraph (1) of subdivision (a) of Section 1204.

(2) A "free clinic" as defined under subparagraph (B) of paragraph

(1) of subdivision (a) of Section 1204.

(3) A "federally qualified health center" as defined under Section

1395x (aa)(4) or 1396d (l)(2)(B) of Title 42 of the United States

Code.

(4) A "rural health clinic" as defined under Section 1395x (aa)(2)

or 1396d (l)(1) of Title 42 of the United States Code.

(5) Any clinic conducted, maintained, or operated by a federally

recognized Indian tribe or tribal organization, as defined in Section

1603 of Title 25 of the United States Code.

(6) Any clinic exempt from licensure under subdivision (h) of

Section 1206.

(f) "Health care provider" means any professional person, medical

group, independent practice association, organization, health

facility, or other person or institution licensed or authorized by

the state to deliver or furnish health care services.

(g) "Health facility" means any facility, place, or building that

is organized, maintained, and operated for the diagnosis, care,

prevention, and treatment of human illness, physical or mental,

including convalescence and rehabilitation and including care during

and after pregnancy, or for any one or more of these purposes, for

one or more persons, and includes those facilities defined under

subdivision (d) of Section 15432 of the Government Code.

(h) "Hospital" means all health facilities to which persons may be

admitted for a 24-hour stay or longer, as defined in Section 1250,

with the exception of nursing, skilled nursing, intermediate care,

and congregate living health facilities.

(i) "Integrated health care delivery system" means a provider

organization that meets both of the following criteria:

(1) Is fully integrated operationally and clinically to provide a

broad range of health care services, including preventative care,

prenatal and well-baby care, immunizations, screening diagnostics,

emergency services, hospital and medical services, surgical services,

and ancillary services.

(2) Is compensated using capitation or facility budgets, except

for copayments, for the provision of health care services.

(j) "Large employer" means a person, firm, proprietary or

nonprofit corporation, partnership, public agency, or association

that is actively engaged in business or service, that, on at least 50

percent of its working days during the preceding calendar year

employed at least 50 employees, or, if the employer was not in

business during any part of the preceding calendar year, employed at

least 50 employees on at least 50 percent of its working days during

the preceding calendar quarter.

(k) "Premium Commission" means the California Healthcare Premium

Commission.

(l) "Primary care provider" means a direct care provider that is a

family physician, internist, general practitioner, pediatrician, an

obstetrician-gynecologist, or a family nurse practitioner or

physician assistant practicing under supervision as defined in the

California codes, or essential community providers who employ primary

care providers.

(m) "Small employer" means a person, firm, proprietary or

nonprofit corporation, partnership, public agency, or association

that is actively engaged in business or service and that, on at least

50 percent of its working days during the preceding calendar year

employed at least two but no more than 49 employees, or, if the

employer was not in business during any part of the preceding

calendar year, employed at least two but no more than 49 eligible

employees on at least 50 percent of its working days during the

preceding calendar quarter.

(n) "System" means the California Healthcare System.

140008.  The definitions contained in Section 140007 shall govern

the construction of this division, unless the context requires

otherwise.

CHAPTER 2.  GOVERNANCE

140100. 

(a)

(1) The commissioner shall be appointed by the

Governor on or before July 1 of the fiscal year following the date

that this section becomes operative pursuant to Section 140700,

subject to confirmation by the Senate. If in session, the Senate

shall act on the appointment within 30 days of the appointment date.

If the Senate does not act on the appointment within that period, the

nominee shall be deemed confirmed and may take office. If the Senate

is not in session at the time of the appointment, the Senate shall

act on the appointment within 30 days of the commencement of the next

legislative session. If the Senate does not act on the appointment

within that period, the appointee shall be deemed confirmed and may

take office.

(2) If the Senate by a vote fails to confirm the nominee for

commissioner, the Governor shall make a new appointment within 30

days of the Senate's vote. The appointment is subject to confirmation

by the Senate, and the procedures described in paragraph (1) shall

apply to the confirmation process.

(b) The commissioner is exempt from the State Civil Service Act

(Part 2 (commencing with Section 18500) of Division 5 of Title 2 of

the Government Code).

(c) The commissioner may not be a state legislator or a Member of

the United States Congress while holding the position of

commissioner.

(d) The commissioner shall not have been employed in any capacity

by a for-profit insurance, pharmaceutical, or medical equipment

company that sells products to the system for a period of two years

prior to appointment as commissioner.

(e) For two years after completing service in the system, the

commissioner may not receive payments of any kind from, or be

employed in any capacity or act as a paid consultant to, a for-profit

insurance, pharmaceutical, or medical equipment company that sells

products to the system.

(f) The compensation and benefits of the commissioner shall be

established by the California Citizens Compensation Commission in

accordance with Section 8 of Article III of the California

Constitution.

(g) The commissioner shall be subject to Title 9 (commencing with

Section 81000) of the Government Code.

140101. 

(a) The commissioner shall be the chief officer of the

agency and shall administer all aspects of the agency.

(b) The commissioner shall be responsible for the performance of

all duties, the exercise of all power and jurisdiction, and the

assumption and discharge of all responsibilities vested by law in the

agency. The commissioner shall perform all duties imposed upon him

or her by this division and other laws related to health care, and

shall enforce the execution of any law related to the system, and

shall enforce the execution of those provisions and laws to promote

their underlying aims and purposes. These broad powers shall include,

but are not limited to, the power to establish the system's budget

and to set rates, to establish the system's goals, standards, and

priorities, to hire, terminate, and fix the compensation of agency

personnel, to make allocations and reallocations to the health

planning regions, and to promulgate generally binding regulations

concerning any and all matters related to the implementation of this

division and its purposes.

(c) The commissioner shall appoint a deputy commissioner, the

Director of the Healthcare Fund, the patient advocate of the Office

of Patient Advocacy, the chief medical officer, the Director of the

Payments Board, the Director of the Office of Health Planning, the

Director of the Partnerships for Health, the regional health planning

directors, the chief enforcement counsel, and legal counsel in any

action brought by or against the commissioner under or pursuant to

any provision of any law under the commissioner's jurisdiction, or in

which the commissioner joins or intervenes as to a matter within the

commissioner's jurisdiction, as a friend of the court or otherwise,

and stenographic reporters to take and transcribe the testimony in

any formal hearing or investigation before the commissioner or before

a person authorized by the commissioner.

(d) The commissioner, in accordance with the State Civil Service

Act (Part 2 (commencing with Section 18500) of Division 5 of Title 2

of the Government Code), may appoint and fix the compensation of

clerical, inspection, investigation, evaluation, and auditing

personnel as may be necessary to implement this division.

(e) The personnel of the agency shall perform duties as assigned

to them by the commissioner. The commissioner shall designate certain

employees by rule or order that are to take and subscribe to the

constitutional oath within 15 days after their appointments, and to

file that oath with the Secretary of State. The commissioner shall

also designate those employees that are to be subject to Title 9

(commencing with Section 81000) of the Government Code.

(f) The commissioner shall adopt a seal bearing the inscription:

"Commissioner, California Healthcare Agency, State of California."

The seal shall be affixed to, or imprinted on, all orders and

certificates issued by him or her and other instruments as he or she

directs. All courts shall take notice of this seal.

(g) The administration of the agency shall be supported from the

Healthcare Fund created pursuant to Section 140200.

(h) The commissioner, as a general rule, shall publish or make

available for public inspection any information filed with or

obtained by the agency, unless the commissioner finds that this

availability or publication is contrary to law. No provision of this

division authorizes the commissioner or any of the commissioner's

assistants, clerks, or deputies to disclose any information withheld

from public inspection except among themselves or when necessary or

appropriate in a proceeding or investigation under this division or

to other federal or state regulatory agencies. No provision of this

division either creates or derogates from any privilege that exists

at common law or otherwise when documentary or other evidence is

sought under a subpoena directed to the commissioner or any of his or

her assistants, clerks, and deputies.

(i) It is unlawful for the commissioner or any of his or her

assistants, clerks, or deputies to use for personal benefit any

information that is filed with, or obtained by, the commissioner and

that is not then generally available to the public.

(j) The commissioner shall avoid political activity that may

create the appearance of political bias or impropriety. Prohibited

activities shall include, but not be limited to, leadership of, or

employment by, a political party or a political organization; public

endorsement of a political candidate; contribution of more than five

hundred dollars ($500) to any one candidate in a calendar year or a

contribution in excess of an aggregate of one thousand dollars

($1,000) in a calendar year for all political parties or

organizations; and attempting to avoid compliance with this

prohibition by making contributions through a spouse or other family

member.

(k) The commissioner shall not participate in making or in any way

attempt to use his or her official position to influence a

governmental decision in which he or she knows or has reason to know

that he or she or a family member, business partner, or colleague has

a financial interest.

(l) The commissioner, in pursuit of his or her duties, shall have

unlimited access to all nonconfidential and all nonprivileged

documents in the custody and control of the agency.

(m) The Attorney General shall render to the commissioner opinions

upon all questions of law, relating to the construction or

interpretation of any law under the commissioner's jurisdiction or

arising in the administration thereof, that may be submitted to the

Attorney General by the commissioner and, upon the commissioner's

request, shall act as the attorney for the commissioner in actions

and proceedings brought by or against the commissioner or under or

pursuant to any provision of any law under the commissioner's

jurisdiction.

140102.  The commissioner shall do all of the following:

(a) Oversee the establishment, as part of the administration of

the agency, of all of the following:

(1) The Healthcare Policy Board, pursuant to Section 140103.

(2) The Office of Patient Advocacy, pursuant to Section 140105.

(3) The Office of Health Planning, pursuant to Section 140602.

(4) The Office of Healthcare Quality, pursuant to Section 140605.

(5) The Healthcare Fund, pursuant to Section 140200.

(6) The Public Advisory Committee, pursuant to Section 140104.

(7) The Payments Board, pursuant to Section 140208.

(8) Partnerships for Health.

(b) Determine goals, standards, guidelines, and priorities for the

system.

(c) Establish health planning regions, pursuant to Section 140112.

(d) Oversee the establishment of locally based integrated service

networks, including those that provide services through medical

technologies such as telemedicine, that include physicians in

fee-for-service, solo and group practice, essential community, and

ancillary care providers and facilities in order to pool and align

resources and form interdisciplinary teams that share responsibility

and accountability for patient care and provide a continuum of

coordinated high quality primary to tertiary care to all California

residents while preserving patient choice. This shall be accomplished

in collaboration with the chief medical officer, the Director of the

Office of Health Planning, the regional medical officers, the

regional planning boards, and the patient advocate.

(e) Annually assess projected revenues and expenditures and assure

financial solvency of the system pursuant to Section 140203.

(f) Develop the system's budget pursuant to Section 140206 to

ensure adequate funding to meet the health care needs of the

population. Review all budgets and locations annually to ensure they

address disparities in service availability and health care outcomes

and for sufficiency of rates, fees, and prices.

(g) Establish a capital management framework for the system

pursuant to Section 140216, including, but not limited to, a

standardized process and format for the development and submission of

regional operating and regional capital budget requests and ensure a

smooth transition to system oversight.

(h) Establish standards and criteria for the development and

submission of provider operating and capital budget requests.

(i) Establish standards and criteria for the allocation of funds

from the Healthcare Fund as described in Chapter 3 (commencing with

Section 140200).

(j) During transition and annually thereafter, determine the

appropriate level for a reserve fund for the system and implement

policies needed to establish the appropriate reserve.

(k) Establish an enrollment system that ensures all eligible

California residents, including those who travel out of state; those

who have disabilities that limit their mobility, hearing, or vision

or their mental or cognitive capacity; those who cannot read; and

those who do not speak or write English, are aware of their right to

health care and are formally enrolled in the system. The commissioner

may contract with a third party for eligibility and enrollment

services if the commissioner finds that doing so would meet the

system's goals and standards, and result in greater efficiency and

cost savings to the system.

(l) Establish an electronic claims and payments system for the

system where all claims under the system shall be filed and paid, and

implement, to the extent permitted by federal law, standardized

claims and reporting methods. The commissioner may contract with a

third party for claims and payment services if the commissioner finds

that doing so would meet the system's goals and standards, and

result in greater efficiency and cost savings to the system.

(m) Establish a system of secure electronic medical records that

comply with state and federal privacy laws and that are compatible

across the system.

(n) Establish an electronic referral system that is accessible to

providers and to patients.

(o) Establish standards based on clinical efficacy to guide

delivery of care and a process to identify areas where no such

standards exist, set priorities and a timetable for their

development, and ensure a smooth transition to clinical

decisionmaking under statewide standards.

(p) Implement policies to ensure that all Californians receive

culturally and linguistically sensitive care, pursuant to Section

140604, and that all disabled Californians receive care in accordance

with the federal Americans with Disabilities Act (42 U.S.C. Sec.

12101 et seq.) and Section 504 of the federal Rehabilitation Act of

1973 (29 U.S.C. Sec. 794) and develop mechanisms and incentives to

achieve these purposes and a means to monitor the effectiveness of

efforts to achieve these purposes.

(q) Create a systematic approach to the measurement, management,

and accountability for care quality and access, including a system of

performance contracts that contain measurable goals and outcomes and

appropriate statewide and regional health care databases to assure

the delivery of quality care to all patients.

(r) Establish standards for mandatory reporting by health care

providers and penalties for failure to report.

(s) Develop methods and a framework to measure the performance of

health care coverage and health delivery system upper level managers,

including a system of performance contracts that contain measurable

goals and outcomes.

   (t) Implement policies to ensure that all residents of this

state have access to medically appropriate, coordinated mental health

services.

(u) Ensure the establishment of policies that support the public

health.

(v) Meet regularly with the chief medical officer, the patient

advocate for the Office of Patient Advocacy, the Public Advisory

Committee, the Director of the Office of Health Planning, the

Director of the Payments Board, the Director of the Partnerships for

Health, regional planning directors, and regional medical officers to

review the impact of the agency and its policies on the health of

the population and on satisfaction with the system.

(w) Negotiate for or set rates, fees, and prices involving any

aspect of the system and establish procedures thereto.

(x) Establish a formulary based on clinical efficacy for all

prescription drugs and durable and nondurable medical equipment for

use by the system.

(y) Establish guidelines for prescribing medications and durable

medical equipment that are not included in the system's formularies.

(z) Utilize the purchasing power of the state to negotiate price

discounts for prescription drugs and durable and nondurable medical

equipment for use by the system.

(aa) Ensure that use of state purchasing power achieves the lowest

possible prices for the system without adversely affecting needed

pharmaceutical research.

(ab) Create incentives and guidelines for research needed to meet

the goals of the system and disincentives for research that does not

achieve the system goals.

(ac) Implement eligibility standards for the system, including

guidelines to prevent an influx of persons to the state for the

purpose of obtaining medical care.

(ad) Determine an appropriate level of, and provide support during

the transition for, training and job placement for persons who are

displaced from employment as a result of the initiation of the

system.

(ae) Oversee the establishment of a system for resolution of

disputes pursuant to Sections 140608 and 140610.

(af) Investigate the costs and benefits to the health of the

population of advances in information technology, including those

that support data collection, analysis, and distribution.

(ag) Ensure that consumers of health care have access to

information needed to support their choice of a physician.

(ah) Collaborate with the licensing entities of health facilities

to ensure that facility performance is monitored and that deficient

practices are recognized and corrected in a timely fashion and that

consumers and providers of health care have access to information

needed to support their choice of facility.

(ai) Establish an Internet Web site that provides information to

the public about the system that includes, but is not limited to,

information that supports choice of providers and facilities and

informs the public about meetings of state and regional health

planning boards and activities of the Partnerships for Health.

(aj) Procure funds, including loans, for the system, enter into

leases, and obtain insurance for the system and its employees and

agents.

(ak) Collaborate with state and local authorities, including

regional planning directors, to plan for needed earthquake retrofits

in a manner that does not disrupt patient care.

(al  ) Establish a process that is accessible to all

Californians for the system to receive the concerns, opinions, ideas,

and recommendation of the public regarding all aspects of the

system.

(am) Annually report to the Legislature and the Governor, on or

before October of each year and at other times pursuant to this

division, on the performance of the system, its fiscal condition and

need for rate adjustments, consumer copayments or consumer deductible

payments, recommendations for statutory changes, receipt of payments

from the federal government and other sources, whether current year

goals and priorities are met, future goals, and priorities, and major

new technology or prescription drugs or other circumstances that may

affect the cost of health care.

140103. 

(a) The commissioner shall establish a Healthcare Policy

Board and shall serve as the president of the board.

(b) The board shall do all of the following:

(1) Establish goals and priorities for the system, including

research and capital investment priorities.

(2) Establish the scope of services to be provided to the

population in accordance with Chapter 5 (commencing with Section

140500).

(3) Establish guidelines for evaluating the performance of the

system, its officers, health planning regions, and health care

providers.

(4) Establish guidelines for ensuring public input on the system's

policy, standards, and goals.

(c) The board shall consist of the following members:

(1) The commissioner.

(2) The deputy commissioner.

(3) The Director of the Healthcare Fund.

(4) The patient advocate of the Office of Patient Advocacy.

(5) The chief medical officer.

(6) The Director of the Office of Health Planning.

(7) The Director of the Partnerships for Health.

(8) The Director of the Payments Board.

(9) The State Public Health Officer.

(10) One member of the Public Advisory Committee who shall serve

on a rotating basis to be determined by the Public Advisory

Committee.

(11) Two representatives from regional planning boards.

(A) A regional representative shall serve a term of one year and

terms shall be rotated in order to allow every region to be

represented within a five-year period.

(B) A regional planning director shall appoint the regional

representative to serve on the board.

(d) It is unlawful for the board members or any of their

assistants, clerks, or deputies to use for personal benefit any

information that is filed with or obtained by the board and that is

not then generally available to the public.

140104. 

(a) The commissioner shall establish the Public Advisory

Committee to advise the Healthcare Policy Board on all matters of

policy for the system.

(b) Members of the Public Advisory Committee shall include all of

the following:

(1) Four physicians all of whom shall be board certified in their

field and at least one of whom shall be a psychiatrist. The Senate

Committee on Rules and the Governor shall each appoint one member.

The Speaker of the Assembly shall appoint two of these members, both

of whom shall be primary care providers.

(2) One registered nurse, to be appointed by the Senate Committee

on Rules.

(3) One licensed vocational nurse, to be appointed by the Senate

Committee on Rules.

(4) One licensed allied health practitioner, to be appointed by

the Speaker of the Assembly.

(5) One mental health care provider, to be appointed by the Senate

Committee on Rules.

(6) One dentist, to be appointed by the Governor.

(7) One representative of private hospitals, to be appointed by

the Governor.

(8) One representative of public hospitals, to be appointed by the

Governor.

(9) One representative of an integrated health care delivery

system, to be appointed by the Governor.

(10) Four consumers of health care. The Governor shall appoint two

of these members, one of whom shall be a member of the disability

community. The Senate Committee on Rules shall appoint a member who

is 65 years of age or older. The Speaker of the Assembly shall

appoint the fourth member.

(11) One representative of organized labor, to be appointed by the

Speaker of the Assembly.

(12) One representative of essential community providers, to be

appointed by the Senate Committee on Rules.

(13) One union member, to be appointed by the Senate Committee on

Rules.

(14) One representative of small business, to be appointed by the

Governor.

(15) One representative of large business, to be appointed by the

Speaker of the Assembly.

(16) One pharmacist, to be appointed by the Speaker of the

Assembly.

(c) In making appointments pursuant to this section, the Governor,

the Senate Committee on Rules, and the Speaker of the Assembly shall

make good faith efforts to assure that their appointments, as a

whole, reflect, to the greatest extent feasible, the social and

geographic diversity of the state.

(d) Any member appointed by the Governor, the Senate Committee on

Rules, or the Speaker of the Assembly shall serve a four-year term.

These members may be reappointed for succeeding four-year terms.

(e) Vacancies that occur shall be filled within 30 days after the

occurrence of the vacancy, and shall be filled in the same manner in

which the vacating member was initially selected or appointed. The

commissioner shall notify the appropriate appointing authority of any

expected vacancies on the board.

(f) Members of the Public Advisory Committee shall serve without

compensation, but shall be reimbursed for actual and necessary

expenses incurred in the performance of their duties to the extent

that reimbursement for those expenses is not otherwise provided or

payable by another public agency or agencies, and shall receive one

hundred dollars ($100) for each full day of attending meetings of the

committee. For purposes of this section, "full day of attending a

meeting" means presence at, and participation in, not less than 75

percent of the total meeting time of the committee during any

particular 24-hour period.

(g) The Public Advisory Committee shall meet at least six times a

year in a place convenient to the public. All meetings of the board

shall be open to the public, pursuant to the Bagley-Keene Open

Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1

of Part 1 of Division 3 of Title 2 of the Government Code).

(h) The Public Advisory Committee shall elect a chair who shall

serve for two years and who may be reelected for an additional two

years.

(i) Appointed committee members shall have worked in the field

they represent on the committee for a period of at least two years

prior to being appointed to the committee.

(j) The Public Advisory Committee shall elect a member to serve on

the Healthcare Policy Board. The elected member shall serve for one

year, and may be recalled by the Public Advisory Committee for cause.

In that case, a new member shall be elected to serve on that board.

The Public Advisory Committee representative shall represent to the

board the views of the committee members.

(k) It is unlawful for the committee members or any of their

assistants, clerks, or deputies to use for personal benefit any

information that is filed with, or obtained by, the committee and

that is not generally available to the public.

140105. 

(a)

(1) There is within the agency an Office of Patient

Advocacy to represent the interests of the consumers of health care.

The goal of the office shall be to help residents of the state secure

the health care services and benefits to which they are entitled

under the laws administered by the agency and to advocate on behalf

of and represent the interests of consumers in governance bodies

created by this division and in other forums.

(2) The office shall be headed by a patient advocate appointed by

the commissioner.

(3) The patient advocate shall establish an office in the City of

Sacramento and other offices throughout the state that shall provide

convenient access to residents.

(b) The patient advocate shall do all the following:

(1) Administer all aspects of the Office of Patient Advocacy.

(2) Assure that services of the Office of Patient Advocacy are

available to all California residents.

(3) Serve on the Healthcare Policy Board and participate in the

regional Partnerships for Health.

(4) Oversee the establishment and maintenance of the grievance

process pursuant to Sections 140608 and 140610.

(5) Participate in the grievance process and independent medical

review system on behalf of consumers pursuant to Section 140610.

(6) Receive, evaluate, and respond to consumer complaints about

the system.

(7) Provide a means to receive recommendations from the public

about ways to improve the system and hold public hearings at least

once annually to discuss problems and receive recommendations from

the public.

(8) Develop educational and informational guides for consumers

describing their rights and responsibilities and informing them about

effective ways to exercise their rights to secure health care

services and to participate in the system. The guides shall be easy

to read and understand, available in English and other languages,

including Braille and formats suitable for those with hearing

limitations, and shall be made available to the public by the agency,

including access on the agency's Internet Web site and through

public outreach and educational programs, and displayed in provider

offices and health care facilities.

(9) Establish a toll-free telephone number, including a TDD

number, to receive complaints regarding the agency and its services.

Those with hearing and speech limitations may use the California

Relay Service's toll-free telephone numbers to contact the Office of

Patient Advocacy. The agency's Internet Web site shall have complaint

forms and instructions on their use.

(10) Report annually to the public, the commissioner, and the

Legislature about the consumer perspective on the performance of the

system, including recommendations for needed improvements.

(c) Nothing in this division shall prohibit a consumer or class of

consumers or the patient advocate from seeking relief through the

judicial system.

(d) The patient advocate in pursuit of his or her duties shall

have unlimited access to all nonconfidential and all nonprivileged

documents in the custody and control of the agency.

(e) It is unlawful for the patient advocate or any of his or her

assistants, clerks, or deputies to use for personal benefit any

information that is filed with, or obtained by, the agency and that

is not then generally available to the public.

140106. 

(a) There is within the Office of the Attorney General an

Office of the Inspector General for the California Healthcare

System. The Inspector General shall be appointed by the Governor and

subject to Senate confirmation.

(b) The Inspector General shall have broad powers to investigate,

audit, and review the financial and business records of individuals,

public and private agencies and institutions, and private

corporations that provide services or products to the system, the

costs of which are reimbursed by the system.

(c) The Inspector General shall investigate allegations of

misconduct on the part of an employee or appointee of the agency and

on the part of any health care provider of services that are

reimbursed by the system and shall report any findings of misconduct

to the Attorney General.

(d) The Inspector General shall investigate patterns of medical

practice that may indicate fraud and abuse related to over or under

utilization or other inappropriate utilization of medical products

and services.

(e) The Inspector General shall arrange for the collection and

analysis of data needed to investigate the inappropriate utilization

of these products and services.

(f) The Inspector General shall conduct additional reviews or

investigations of financial and business records when requested by

the Governor or by any Member of the Legislature and shall report

findings of the review or investigation to the Governor and the

Legislature.

(g) The Inspector General shall establish a telephone hotline for

anonymous reporting of allegations of failure to make health

insurance premium payments established by this division. The

Inspector General shall investigate information provided to the

hotline and shall report any findings of misconduct to the Attorney

General.

(h) The Inspector General shall annually report recommendations

for improvements to the system or the agency to the Governor, the

Legislature, and the commissioner.

140107.  The provisions of the Insurance Frauds Prevention Act

(Chapter 12 (commencing with Section 1871) of Part 2 of Division 1 of

the Insurance Code), and the provisions of Article 6 (commencing

with Section 650) of Chapter 1 of Division 2 of the Business and

Professions Code shall be applicable to health care providers who

receive payments for services through the system under this division.

140108. 

(a) Nothing contained in this division is intended to

repeal any legislation or regulation governing the professional

conduct of any person licensed by the State of California or any

legislation governing the licensure of any facility licensed by the

State of California.

(b) All federal legislation and regulations governing referral

fees and fee-splitting, including, but not limited to, Sections

1320a-7b and 1395nn of Title 42 of the United States Code, shall be

applicable to all health care providers of services reimbursed under

this division, whether or not the health care provider is paid with

funds coming from the federal government.

140110. 

(a) The system shall be operational no later than two

years after the date this division, other than Article 2 (commencing

with Section 140230) of Chapter 3, becomes operative, as described in

Section 140700.

(b) The commissioner shall assess health plans and insurers for

care provided by the system in those cases in which a person's health

care coverage extends into the time period in which the new system

is operative.

(c) The commissioner shall implement means to assist persons who

are displaced from employment as a result of the initiation of the

system, including determination of the period of time during which

assistance shall be provided and possible sources of funds, including

funds from the system, to support retraining and job placement. That

support shall be provided for a period of five years from the date

that this division becomes operative.

140111. 

(a) The commissioner shall appoint a transition advisory

group, which shall include, but not be limited to, the following

members:

(1) The commissioner.

(2) The patient advocate of the Office of Patient Advocacy.

(3) The chief medical officer.

(4) The Director of the Office of Health Planning.

(5) The Director of the Healthcare Fund.

(6) The State Public Health Officer.

(7) Experts in health care financing and health care

administration.

(8) Direct care providers.

(9) Representatives of retirement boards.

(10) Employer and employee representatives.

(11) Hospital, integrated health care delivery system, essential

community provider, and long-term care facility representatives.

(12) Representatives from state departments and regulatory bodies

that shall or may relinquish some or all parts of their delivery of

health care services to the system.

(13) Representatives of counties.

(14) Consumers of health care services.

(b)  The transition advisory group shall advise the commissioner

on all aspects of the implementation of this division.

(c) The transition advisory group shall make recommendations to

the commissioner, the Governor, and the Legislature on how to

integrate health care delivery services and responsibilities relating

to the delivery of the services of the following departments and

agencies into the system:

(1) The State Department of Health Care Services.

(2) The Department of Managed Health Care.

(3) The Department of Aging.

(4) The Department of Developmental Services.

(5) The Health and Welfare Data Center.

(6) The State Department of Mental Health.

(7) The State Department of Alcohol and Drug Programs.

(8) The Department of Rehabilitation.

(9) The Emergency Medical Services Authority.

(10) The Managed Risk Medical Insurance Board.

(11) The Office of Statewide Health Planning and Development.

(12) The Department of Insurance.

(13) The State Department of Public Health.

(d) The transition advisory group shall make recommendations to

the Governor, the Legislature, and the commissioner regarding

research needed to support transition to the system.

140112. 

(a)  The transition advisory group shall make

recommendations to the commissioner relative to how the system shall

be regionalized for the purposes of local and community-based

planning for the delivery of high quality cost-effective care and

efficient service delivery.

(b) The commissioner, in consultation with the Director of the

Office of Health Planning, shall establish up to 10 health planning

regions composed of geographically contiguous counties grouped on the

basis of the following considerations:

(1) Patterns of utilization of health care services.

(2) Health care resources, including workforce resources.

(3) Health needs of the population, including public health needs.

(4) Geography.

(5) Population and demographic characteristics.

(6) Other considerations as determined by the commissioner, the

Director of the Office of Health Planning, or the chief medical

officer.

(c) The commissioner shall appoint a director for each region.

Regional planning directors shall serve at the will of the

commissioner and may serve up to two eight-year terms to coincide

with the terms of the commissioner.

(d) Each regional planning director shall appoint a regional

medical officer.

(e) Compensation for officers of the system and appointees who are

exempt from the civil service shall be established by the California

Citizens Commission in accordance with Section 8 of Article III of

the California Constitution, and shall take into consideration

regional differences in the cost of living.

(f) The regional planning director and the regional medical

officer shall be subject to Title 9 (commencing with Section 81000)

of the Government Code and shall comply with the qualifications for

office described in subdivisions (c), (d), and (e) of Section 140100

and subdivisions (j) and (k) of Section 140101.

140113. 

(a) Regional planning directors shall administer the

health planning region. The regional planning director shall be

responsible for all duties, the exercise of all powers and

jurisdiction, and the assumptions and discharge of all

responsibilities vested by law in the regional agency. The regional

planning director shall perform all duties imposed upon him or her by

this division and by other laws related to health care, and shall

enforce execution of those provisions and laws to promote their

underlying aims and purposes.

(b) The regional planning director shall reside in the region in

which he or she serves.

(c) The regional planning director shall do all of the following:

(1) Establish and administer a regional office of the state

agency. Each regional office shall include, at minimum, an office of

each of the following: Patient Advocacy, Health Care Quality, Health

Planning, and Partnerships for Health.

(2) Appoint regional planning board members and serve as president

of the board.

(3) Identify and prioritize regional health care needs and goals,

in collaboration with the regional medical officer, regional health

care providers, the regional planning board, and regional director of

Partnerships for Health pursuant to the priorities and goals of the

system established by the commissioner.

(4) Regularly assess projected revenues and expenditures to ensure

fiscal solvency of the regional planning system and advise the

commissioner of potential revenue shortfalls and the possible need

for cost controls.

(5) Assure that regional administrative costs meet standards

established by the division and seek innovative means to lower the

costs of administration of the regional planning office and those of

regional providers.

(6) Plan for the delivery of, and equal access to, high quality

and culturally and linguistically sensitive care and such care for

disabled persons that meets the needs of all regional residents

pursuant to standards established by the commissioner.

(7) Seek innovative and systemic means to improve care quality and

efficiency of care delivery and to achieve access to programs for

all state residents.

(8) Recommend means to implement policies established by the

commissioner to provide support to persons displaced from employment

as a result of the initiation of the new system.

(9) Make needed revenue sharing arrangements so that

regionalization does not limit a patient's choice of provider.

(10) Implement procedures established by the commissioner for the

resolution of disputes.

(11) Implement processes established by the commissioner and

recommend needed changes to permit the public to share concerns,

provide ideas, opinions, and recommendations regarding all aspects of

the system's policies.

(12) Report regularly to the public and, at intervals determined

by the commissioner and pursuant to this division, to the

commissioner on the status of the regional planning system, including

evaluating access to care, quality of care delivered, and provider

performance, and other issues related to regional health care needs,

and recommending needed improvements.

(13) Identify or establish guidelines for providers to identify,

maintain, and provide to the regional planning director inventories

of regional health care assets.

(14) Establish and maintain regional health care databases that

are coordinated with other regional and statewide databases.

(15) In collaboration with the regional medical officer, enforce

reporting requirements established by the system and make

recommendations to the commissioner, the Director of the Office of

Health Planning, and the chief medical officer for needed changes in

reporting requirements.

(16) Establish and implement a regional capital management plan

pursuant to the capital management plan established by the

commissioner for the system.

(17) Implement standards and formats established by the

commissioner for the development and submission of operating and

capital budget requests and make recommendations to the commissioner

and the Director of the Office of Health Planning for needed changes.

(18) Support regional providers in developing operating and

capital budget requests.

(19) Receive, evaluate, and prioritize provider operating and

capital budget requests pursuant to standards and criteria

established by the commissioner.

(20) Prepare a three-year regional operating and capital budget

request that meets the health care needs of the region pursuant to

this division, for submission to the commissioner.

(21) Establish a comprehensive three-year regional planning budget

using funds allocated to the region by the commissioner.

140114.  The regional medical officers shall do all of the following:

(a) Administer all aspects of the regional office of health care

quality.

(b) Serve as a member of the regional planning board.

(c) In collaboration with the commissioner, the chief medical

officer, the regional medical officer, regional planning boards, the

patient advocate of the Office of Patient Advocacy, regional

providers, and patients, oversee the establishment of integrated

service networks, including those that provide services through

medical technologies such as telemedicine, that include physicians in

fee-for-service, solo and group practice, essential community, and

ancillary care providers and facilities that pool and align resources

and form interdisciplinary teams that share responsibility and

accountability for patient care and provide a continuum of

coordinated high quality primary to tertiary care to all residents of

the region.

(d) Ensure the evaluation and measurement of the quality of care

delivered in the region, including assessment of the performance of

individual providers, pursuant to standards and methods established

by the chief medical officer to ensure a single standard of high

quality care is delivered to all state residents.

(e) In collaboration with the chief medical officer and regional

providers, evaluate standards of care in use at the time the system

becomes operative.

(f) Ensure a smooth transition toward use of standards based on

clinical efficacy that guide clinical decision making. Identify areas

of medical practice where standards have not been established and

collaborated with the chief medical officer and health care

providers, to establish priorities in developing needed standards.

(g) Support the development and distribution of user-friendly

software for use by providers in order to support the delivery of

high quality care.

(h) Provide feedback to, and support and supervision of, health

care providers to ensure the delivery of high quality care pursuant

to standards established by the system.

(i) Collaborate with the regional Partnerships for Health to

develop patient education to assist consumers in evaluating and

appropriately utilizing health care providers and facilities.

(j) Collaborate with regional public health officers to establish

regional health policies that support the public health.

(k) Establish a regional program to monitor and decrease medical

errors and their causes pursuant to standards and methods established

by the chief medical officer.

(l) Support the development and implementation of innovative means

to provide high quality care and assist providers in securing funds

for innovative demonstration projects that seek to improve care

quality.

(m) Establish means to assess the impact of the system's policies

intended to assure the delivery of high quality care.

(n) Collaborate with the chief medical officer, the Director of

the Office of Health Planning, the regional planning director, and

health care providers in the development and maintenance of regional

health care databases.

(o) Ensure the enforcement of, and recommend needed changes in,

the system's reporting requirements.

(p) Support providers in developing regional budget requests.

(q) Annually report to the commissioner, the public, the regional

planning board, and the chief medical officer on the status of

regional health care programs, needed improvements, and plans to

implement and evaluate delivery of care improvements.

140115. 

(a) Each region shall have a regional planning board

consisting of 13 members who shall be appointed by the regional

planning director. Members shall serve eight-year terms that coincide

with the term of the regional planning director and may be

reappointed for a second term.

(b) Regional planning board members shall have resided for a

minimum of two years in the region in which they serve prior to

appointment to the board.

(c) Regional planning board members shall reside in the region

they serve while on the board.

(d) The board shall consist of the following members:

(1) The regional planning director, the regional medical officer,

the regional director of the Partnerships for Health, and a public

health officer from one of the counties in the region.

(2) When there is more than one county in a region, the public

health officer board position shall rotate among the public health

county officers on a timetable to be established by each regional

planning board.

(3) A representative from the Office of Patient Advocacy.

(4) One expert in health care financing.

(5) One expert in health care planning.

(6) Two members who are direct care providers in the region, one

of whom shall be a registered nurse.

(7) One member who represents ancillary health care workers in the

region.

(8) One member representing hospitals in the region.

(9) One member representing essential community providers in the

region.

(10) One member representing the public.

(e) The regional planning director shall serve as chair of the

board.

(f) The purpose of the regional planning boards is to advise and

make recommendations to the regional planning director on all aspects

of regional health policy.

(g) Meetings of the board shall be open to the public pursuant to

the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section

11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the

Government Code).

140116.  The following conflict-of-interest prohibitions shall

apply to all appointees of the commissioner or transition advisory

group, including, but not limited to, the patient advocate, the

Director of the Healthcare Fund, the purchasing director, the

Director of the Office of Health Planning, the Director of the

Payments Board, the chief medical officer, the Director of

Partnerships for Health, regional planning directors, and the

Inspector General:

(a) The appointee shall not have been employed in any capacity by

a for-profit insurance, pharmaceutical, or medical equipment company

that sells products to the system for a period of two years prior to

appointment.

(b) For two years after completing service in the system, the

appointee may not receive payments of any kind from, or be employed

in any capacity or act as a paid consultant to, a for-profit

insurance, pharmaceutical, or medical equipment company that sells

products to the system.

(c) The appointee shall avoid political activity that may create

the appearance of political bias or impropriety. Prohibited

activities shall include, but not be limited to, leadership of, or

employment by, a political party or a political organization; public

endorsement of a political candidate; contribution of more than five

hundred dollars ($500) to any one candidate in a calendar year or a

contribution in excess of an aggregate of one thousand dollars

($1,000) in a calendar year for all political parties or

organizations; and attempting to avoid compliance with this

prohibition by making contributions through a spouse or other family

member.

(d) The appointee shall not participate in making or in any way

attempt to use his or her official position to influence a

governmental decision in which he or she or a family member, business

partner, or colleague has a financial interest.

CHAPTER 3.  FUNDING

Article 1.  General Provisions

140200. 

(a) In order to support the agency effectively in the

administration of this division, there is hereby established in the

State Treasury the Healthcare Fund. The fund shall be administered by

a director appointed by the commissioner.

(b) All moneys collected, received, and transferred pursuant to

this division shall be transmitted to the State Treasury to be

deposited to the credit of the Healthcare Fund for the purpose of

financing the California Healthcare System.

(c) Moneys deposited in the Healthcare Fund shall be used

exclusively to support this division, subject to appropriation by the

Legislature.

(d) All claims for health care services rendered pursuant to the

system shall be made to the Healthcare Fund through an electronic

claims and payment system. The commissioner shall investigate the

costs, benefits, and means of supporting health care providers in

obtaining electronic systems for claims and payments transactions;

however, alternative provisions shall be made for health care

providers without electronic systems.

(e) All payments made for health care services shall be disbursed

from the Healthcare Fund through an electronic claims and payments

system; however, alternative provisions shall be made for health care

providers without electronic systems.

(f) The director of the fund shall serve on the Healthcare Policy

Board.

140201. 

(a) The Director of the Healthcare Fund shall establish

the following accounts within the Healthcare Fund:

(1) A system account to provide for all annual state expenditures

for health care.

(2) A reserve account.

(b) Premiums collected each year shall be roughly sufficient to

cover that year's projected costs.

(c) The system shall at all times hold an actuarially sound

reserve that is consistent with appropriate risk-based capital

standards to assure financial solvency of the system.

(d) During the transition, the commissioner shall work with the

Department of Insurance, the Department of Managed Health Care, and

other experts to determine an appropriate level of reserves for the

system for the first year and for future years of its operation.

(e) Moneys currently held in reserve by state health programs,

city and county contributions as determined by the commissioner

pursuant to subdivision (c) of Section 140240, and federal moneys for

health care held in reserve in federal trust accounts shall be

transferred to the reserve account when the state assumes financial

responsibility for health care under this division that is currently

provided by those programs.

(f) The commissioner may implement arrangements to self-insure the

system against unforeseen expenditures or revenue shortfalls not

covered by reserves and may borrow funds to cover temporary revenue

shortfalls not covered by system reserves, including the issuance of

bonds for this purpose, whichever is the more cost effective.

(g) Funds held in the reserve account and other Healthcare Fund

accounts may be prudently invested to increase their value according

to the Department of Managed Health Care's standards for financial

solvency.

140203. 

(a) The Director of the Healthcare Fund shall immediately

notify the commissioner when regional or statewide revenue and

expenditure trends indicate that expenditures may exceed revenues.

(b) If the commissioner determines that statewide revenue trends

indicate the need for statewide cost control measures, the

commissioner shall convene the Healthcare Policy Board to discuss the

need for cost control measures and shall immediately report to the

Legislature and the public regarding the possible need for cost

control measures.

(c) Cost control measures include any or all of the following:

(1) Changes in the system or health facility administration that

improve efficiency.

(2) Changes in the delivery of health care services that improve

efficiency and care quality.

(3) Postponement of introduction of new benefits or benefit

improvements.

(4) Seeking statutory authority for a temporary decrease in

benefits.

(5) Postponement of planned capital expenditures.

(6) Adjustments of health care provider payments to correct for

deficiencies in care quality and failure to meet compensation

contract performance goals, pursuant to subdivisions (a) to (f),

inclusive, of Section 140106, paragraph (4) of subdivision (a) of

Section 140204, subdivision (a) of Section 140213, and subdivisions

(c) and (d) of Section 140606.

(7) Adjustments to the compensation of managerial employees and

upper level managers under contract with the system to correct for

deficiencies in management and failure to meet contract performance

goals.

(8) Limitations on the reimbursement budgets of the system's

providers and upper level managers whose compensation is determined

by the Payments Board.

(9) Limitations on aggregate reimbursements to manufacturers of

pharmaceutical and durable and nondurable medical equipment.

(10) Deferred funding of the reserve account.

(11) Imposition of copayments or deductible payments. Any

copayment or deductible payments imposed under this section shall be

subject to all of the following requirements:

(A) No copayment or deductible may be established when prohibited

by federal law.

(B) All copayments and deductibles shall meet federal guidelines

for copayments and deductible payments that may lawfully be imposed

on persons with low income.

(C) The commissioner shall establish standards and procedures for

waiving copayments or deductible payments and a waiver card that

shall be issued to a patient or to a family to indicate the waiver.

Procedures for copayment waiver may include a determination by a

patient's primary care provider that imposition of a copayment would

be a financial hardship. Copayment and deductible waivers shall be

reviewed annually by the regional planning director.

(D) Waivers shall not affect the reimbursement of health care

providers.

(E) Any copayments or deductible payments established pursuant to

this section shall be transmitted to the Treasurer to be deposited to

the credit of the Healthcare Fund.

(12) Imposition of an eligibility waiting period and other means

if the commissioner determines that large numbers of people are

immigrating to the state for the purpose of obtaining health care

through the system.

(d) Nothing in this division shall be construed to diminish the

benefits that an individual has under a collective bargaining

agreement or statute.

(e) Nothing in this division shall preclude employees from

receiving benefits available to them under a collective bargaining

agreement or other employee-employer agreement or a statute that are

superior to benefits under this division.

(f) Cost control measures implemented by the commissioner and the

Healthcare Policy Board shall remain in place in the state until the

commissioner and the Healthcare Policy Board determine that the cause

of a revenue shortfall has been corrected.

(g) If the Healthcare Policy Board determines that cost control

measures described in subdivision (c) will not be sufficient to meet

a revenue shortfall, the commissioner shall report to the Legislature

and to the public on the causes of the shortfall and the reasons for

the failure of cost controls and shall recommend measures to correct

the shortfall, including an increase in premium payments to the

system.

140204. 

(a) If the commissioner or a regional planning director

determines that regional revenue and expenditure trends indicate a

need for regional cost control measures, the regional planning

director shall convene the regional planning board to discuss the

possible need for cost control measures and to make a recommendation

about appropriate measures to control costs. These may include any of

the following:

(1) Changes in the administration of the system or in health

facility administration that improve efficiency.

(2) Changes in the delivery of health care services and health

system management that improve efficiency or care quality.

(3) Postponement of planned regional capital expenditures.

(4) Adjustment of payments to health care providers to reflect

deficiencies in care quality and failure to meet compensation

contract performance goals and payments to upper level managers to

reflect deficiencies in management and failure to meet compensation

contract performance goals.

(5) Adjustment of payments to health care providers and upper

level managers above a specified amount of aggregate billing.

(6) Adjustment of payments to pharmaceutical and medical equipment

manufacturers and others selling goods and services to the system

above a specified amount of aggregate billing.

(b) If a regional planning board is convened to implement cost

control measures, the commissioner shall participate in the regional

planning board meeting.

(c) The regional planning director, in consultation with the

commissioner, shall determine if cost control measures are warranted

and those measures that shall be implemented.

(d) Imposition of copayments or deductibles, postponement of new

benefits or benefit improvements, deferred funding of the reserve

account, establishment of eligibility waiting periods, and increases

in premium payments under the system may occur on a statewide basis

only and with the concurrence of the commissioner and the Healthcare

Policy Board.

(e) If a regional planning director and regional planning board

are considering imposition of cost control measures, the regional

planning director shall immediately report to the residents of the

region regarding the possible need for cost control measures.

(f) Cost control measures shall remain in place in a region until

the regional planning director and the commissioner determine that

the cause of a revenue shortfall has been corrected.

140205. 

(a) If, on June 30 of any year, the Budget Act for the

fiscal year beginning on July 1 has not been enacted, all moneys in

the reserve account of the Healthcare Fund shall be used to implement

this division until funds are available through the Budget Act.

(b) Notwithstanding any other provision of law and without regard

to fiscal year, if the annual Budget Act is not enacted by June 30 of

any fiscal year preceding the fiscal year to which the budget would

apply and if the commissioner determines that funds in the reserve

account are depleted, the following shall occur:

(1) The Controller shall annually transfer from the General Fund,

in the form of one or more loans, an amount to the Healthcare Fund

for the purpose of making payments to health care providers and to

persons and businesses under contract with the system or with health

care providers to provide services, medical equipment, and

pharmaceuticals to the system.

(2) Upon enactment of the Budget Act in any fiscal year to which

paragraph (1) applies, the Controller shall transfer all expenditures

and unexpected funds loaned to the Healthcare Fund to the

appropriate Budget Act item.

(3) The amount of any loan made pursuant to paragraph (1) for

which moneys were expended from the Healthcare Fund shall be repaid

by debiting the appropriate Budget Act item in accordance with

procedures prescribed by the Department of Finance.

140206. 

(a) The commissioner annually shall prepare a budget for

the system that includes all expenditures, specifies a limit on total

annual state expenditures, and establishes allocations for each

health care region that shall cover a three-year period and that

shall be disbursed on a quarterly basis.

(b) The commissioner shall limit the growth of spending on a

statewide and on a regional basis, by reference to average growth in

state domestic product across multiple years; population growth,

actuarial demographics and other demographic indicators; differences

in regional costs of living; advances in technology and their

anticipated adoption into the benefit plan; improvements in

efficiency of administration and care delivery; improvements in the

quality of care; and projected future state domestic product growth

rates.

(c) The commissioner shall adjust the system's budget so that

aggregate spending in the state on health care shall not exceed

spending under this division by more than 5 percent.

(d) The commissioner shall project the system's revenues and

expenditures for 3, 6, 9, and 12 years pursuant to parameters

prescribed in subdivision (f).

(e) The budget for the system shall include all of the following:

(1) Transition budget.

(2) Providers and managers budget.

(3) Capitated operating budgets.

(4) Noncapitated operating budgets.

(5) Capital investment budget.

(6) Purchasing budget, including prescription drugs and durable

and nondurable medical equipment pursuant to Section 140220.

(7) Research and innovation budget pursuant to Section 140221.

(8) Workforce training and development budget pursuant to Section

140222.

(9) Reserve account pursuant to Section 140223.

(10) System administration budget pursuant to Section 140224.

(11) Regional budgets.

(f)  In establishing budgets, the commissioner shall make

adjustments based on all of the following:

(1) Costs of transition to the new system.

(2) Projections regarding the health care services anticipated to

be used by California residents.

(3) Differences in cost of living between the regions, including

the overhead costs of maintaining medical practices.

(4) Health risk of enrollees.

(5) Scope of services provided.

(6) Innovative programs that improve care quality, administrative

efficiency, and workplace safety.

(7) Unrecovered cost of providing care to persons who are not

enrollees of the system. The commissioner shall seek to recover the

costs of care provided to persons who are not enrollees of the

system.

(8) Costs of workforce training and development.

(9) Costs of correcting health outcome disparities and the unmet

needs of previously uninsured and underinsured enrollees.

(10) Relative usage of different health care providers.

(11) Needed improvements in access to care.

(12) Projected savings in administrative costs.

(13) Projected savings due to provision of primary and preventive

care to the population, including savings from decreases in

preventable emergency room visits and hospitalizations.

(14) Projected savings from improvements in care quality.

(15) Projected savings from decreases in medical errors.

(16) Projected savings from systemwide management of capital

expenditures.

(17) Cost of incentives and bonuses to support the delivery of

high quality care, including incentives and bonuses needed to recruit

and retain an adequate supply of needed providers and managers and

to attract health care providers to medically underserved areas.

(18) Costs of treating complex illnesses, including disease

management programs.

(19) Cost of implementing standards of care, care coordination,

electronic medical records, and other electronic initiatives.

(20) Costs of new technology.

(21) Technology research and development costs and costs related

to the system's use of new technologies.

(g) Moneys in the reserve account shall not be considered as

available revenues for the purposes of preparing the system's budget,

except when the annual Budget Act has not been enacted by June 30 of

any fiscal year.

140207.  The commissioner shall annually establish the total funds

to be allocated for provider and manager compensation pursuant to

this section. In establishing the provider and manager budgets, the

commissioner shall allot sufficient funds to assure that California

can attract and retain those providers and managers needed to meet

the health care needs of the population. In establishing provider and

manager budgets, the commissioner shall allocate funds for both

salaries, incentives, bonuses, and benefits to be provided to

officers and upper level managers of the system who are exempt from

state civil service statutes.

140208. 

(a) The commissioner shall establish the Payments Board

and shall appoint a director and members of the board.

(b) The commissioner shall retain the authority to review,

approve, reject, and modify all payment contracts and compensation

plans established pursuant to this section.

(c) The Payments Board shall be composed of experts in health care

finance and insurance systems, a designated representative of the

commissioner, a designated representative of the Healthcare Fund, and

a representative of the regional planning directors. The position of

regional representative shall rotate among the directors of the

regional planning boards every two years.

(d) The board shall establish and supervise a uniform payments

system for health care providers and managers and shall maintain a

compensation plan for all of the following health care providers and

managers pursuant to the provider and manager budget established by

the commissioner:

(1) Upper level managers employed by, or under contract with,

private health care facilities, including, but not limited to,

hospitals, integrated health care delivery systems, group and solo

medical practices, and essential community facilities.

(2) Managers and officers of the system who are exempt from

statutes governing civil service employment.

(3) Health care providers including, but not limited to,

physicians, osteopathic physicians, dentists, podiatrists, nurse

practitioners, physician assistants, chiropractors, acupuncturists,

psychologists, social workers, marriage, family and child counselors,

and other professional health care providers who are required by law

to be licensed to practice in California and who provide services

pursuant to the system.

(4) Compensation for employees of the system that was determined

through employer-union negotiations before implementation of this

division shall be determined by negotiations between the system and

the unions after implementation of this division.

(5) Health care providers licensed and accredited to provide

services in California may choose to be compensated for their

services either by the system or by a person to whom they provide

services.

(6) Health care providers electing to be compensated by the system

shall enter into a contract with the system pursuant to provisions

of this section.

(7) Health care providers electing to be compensated by persons to

whom they provide services, instead of by the system, may establish

charges for their services.

(8) Health care providers who accept any payment from the system

under this division shall not bill a patient for any covered service,

except as authorized by the commissioner.

(e) Health care providers licensed or accredited to provide

services in California, who choose to be compensated by the system

instead of by patients to whom they provide services, may choose how

they wish to be compensated under this division, as fee-for-service

providers or as providers employed by, or under contract with, health

care systems that provide comprehensive, coordinated services.

(f) Notwithstanding provisions of the Business and Professions

Code, nurse practitioners, physician assistants, and others who under

California law must be supervised by a physician and surgeon,

                                   an osteopathic physician, a

dentist, or a podiatrist, may choose fee-for-service compensation

while under lawfully required supervision. However, nothing in this

section shall interfere with the right of a supervising health care

provider to enter into a contractual arrangement that provides for

salaried compensation for employees who must be supervised under the

law by a physician and surgeon, an osteopathic physician, a dentist,

or a podiatrist.

(g) The compensation plan shall include all of the following:

(1) Actuarially sound payments that include a just and fair return

for health care providers in the fee-for-service sector and for

health care providers working in health systems where comprehensive

and coordinated services are provided, including the actuarial basis

for the payment.

(2) Payment schedules that shall be in effect for three years.

(3) Bonus and incentive payments, including, but not limited to,

all the following:

(A) Bonus payments for health care providers and upper level

managers who, in providing services and managing facilities,

practices, and integrated health systems pursuant to this division,

meet performance standards and outcome goals established by the

system.

(B) Incentive payments for health care providers and upper level

managers who provide services to the system in areas identified by

the Office of Health Planning as medically underserved.

(C) Incentive payments required to achieve the ratio of generalist

to specialist health care providers needed in order to meet the

standards of care and health needs of the population.

(D) Incentive payments required to recruit and retain nurse

practitioners and physician assistants in order to provide primary

and preventive care to the population.

(E)  No bonus or incentive payment may be made in excess of the

total allocation for health care provider and manager incentive and

bonus reimbursement established by the commissioner in the system's

budget.

(F) No incentive may adversely affect the care a patient receives

or the care a health care provider recommends.

(h) Health care providers shall be paid for all services provided

pursuant to this division, including care provided to persons who are

subsequently determined to be ineligible for the system.

(i) Licensed health care providers who deliver services not

covered under the system may establish rates and charge patients for

those services.

(j) Reimbursement to health care providers and compensation to

managers may not exceed the amount allocated by the commissioner to

provider and manager annual budgets.

140209. 

            (a) Fee-for-service health care providers shall choose

representatives of their specialties to negotiate reimbursement rates

with the Payments Board on their behalf.

(b) The Payments Board shall establish a uniform system of

payments for all services provided pursuant to this division.

(c) Payment schedules shall be available to health care providers

in printed and in electronic documents.

(d) Payment schedules shall be in effect for three years, at which

time payment schedules may be renegotiated. Payment adjustments may

be made at the discretion of the Payments Board to meet the goals of

the system.

(e) In establishing a uniform system of payments, the Payments

Board shall collaborate with regional planning directors and health

care providers and shall take into consideration regional differences

in the cost of living and the need to recruit and retain skilled

health care providers in the region.

(f) Fee-for-service health care providers shall submit claims

electronically to the Healthcare Fund and shall be paid within 30

business days for claims filed in compliance with procedures

established by the Healthcare Fund.

140210. 

(a) Compensation for health care providers and upper

level managers employed by, or under contract with, integrated health

care delivery systems, group medical practices, and essential

community providers that provide comprehensive, coordinated services

shall be determined according to the following guidelines:

(b) Health care providers and upper level managers employed by, or

under contract with, systems that provide comprehensive, coordinated

health care services shall be represented by their respective

employers or contractors for the purposes of negotiating

reimbursement with the Payments Board.

(c) In negotiating reimbursement with systems providing

comprehensive, coordinated services, the Payments Board shall take

into consideration the need for comprehensive systems to have

flexibility in establishing health care provider and upper level

manager reimbursement.

(d) Payment schedules shall be in effect for three years. However,

payment adjustments may be made at the discretion of the Payments

Board to meet the goals of the system.

(e) The Payments Board shall take into consideration regional

differences in the cost of living and the need to recruit and retain

skilled health care providers and upper level managers to the

regions.

(f) The Payments Board shall establish a timetable for

reimbursement for fee-for-service health care provider's

negotiations. If an agreement on reimbursement is not reached

according to the timetable established by the Payments Board, the

Payments Board shall establish reimbursement rates, which shall be

binding.

(g) Reimbursement negotiations shall be conducted consistent with

the state action doctrine of the antitrust laws.

140211. 

(a) The Payments Board shall annually report to the

commissioner on the status of health care provider and upper level

manager reimbursement, including satisfaction with reimbursement

levels and the sufficiency of funds allocated by the commissioner for

provider and upper level manager reimbursement. The Payments Board

shall recommend needed adjustments in the allocation for health care

provider payments.

(b) The Office of Health Care Quality shall annually report to the

commissioner on the impact of the bonus payments in improving

quality of care, health outcomes, and management effectiveness. The

Payments Board shall recommend needed adjustments in bonus

allocations.

(c) The Office of Health Planning shall annually report to the

commissioner on the impact of the incentive payments in recruiting

health care providers and upper level managers to underserved areas,

in establishing the needed ratio of generalist to specialist health

care providers and in attracting and retaining nurse practitioners

and physician assistants to the state and shall recommend needed

adjustments.

140212. 

(a) The commissioner shall establish an allocation for

each region to fund regional operating and capital budgets for a

period of three years. Allocations shall be disbursed to the regions

on a quarterly basis.

(b) Integrated health care delivery systems, essential community

providers, and group medical practices that provide comprehensive,

coordinated services may choose to be reimbursed on the basis of a

capitated system operating budget or a noncapitated system operating

budget that covers all costs of providing health care services.

(c) Health care providers choosing to function on the basis of a

capitated or a noncapitated system operating budget shall submit

three-year operating budget requests to the regional planning

director, pursuant to standards and guidelines established by the

commissioner.

(1) Health care providers may include in their operating budget

requests reimbursement for ancillary health care or social services

that were previously funded by money now received and disbursed by

the Healthcare Fund.

(2) No payment may be made from a capitated or noncapitated budget

for a capital expense except as provided in Section 140216.

(d) Regional planning directors shall negotiate operating budgets

with regional health care entities, which shall cover a period of

three years.

(e) Operating and capitated budgets shall include health care

workforce labor costs other than those described in paragraphs (1),

(2), and (3) of subdivision (d) of Section 140208. If unions

represent employees working in systems functioning under capitated or

noncapitated budgets, unions shall represent those employees in

negotiations with the regional planning director and the Payments

Board for the purpose of establishing their reimbursement.

140213. 

(a) Health systems and medical practices functioning

under capitated and noncapitated operating budgets shall immediately

report any projected operating deficit to the regional planning

director. The regional planning director shall determine whether

projected deficits reflect appropriate increases in expenditures, in

which case the director shall make an adjustment to the operating

budget. If the director determines that deficits are not justifiable,

no adjustment shall be made.

(b) If a regional planning director determines that adjustments to

operating budgets will cause a regional revenue shortfall and that

cost control measures may be required, the regional planning director

shall report the possible revenue shortfall to the commissioner and

take actions required pursuant to Section 140203.

140215. 

(a) Margins generated by a facility operating under a

system operating budget may be retained and used to meet the health

care needs of the population.

(b) No margin may be retained if that margin was generated through

inappropriate limitations on access to health care or compromises in

the quality of care or in any way that adversely affected or is

likely to adversely affect the health of the persons receiving

services from a facility, integrated health care delivery system,

group medical practice, or essential community provider functioning

under a system operating budget.

(1) The chief medical officer shall evaluate the source of margin

generation and report violations of this section to the commissioner.

(2) The commissioner shall establish and enforce penalties for

violations of this section.

(3) Penalty payments collected pursuant to violations of this

section shall be remitted to the Healthcare Fund for use in the

California Healthcare System.

(c) Facilities operating under system operating budgets of the

California Healthcare System may raise and expend funds from sources

other than the system including, but not limited to, private or

foundation donors for purposes related to the goals of this division

and in accordance with provisions of this division.

140216. 

(a) During the transition, the commissioner shall develop

a capital management plan that shall include conflict-of-interest

standards and that shall govern all capital investments and

acquisitions undertaken in the system. The plan shall include a

framework, standards, and guidelines for all of the following:

(1) Standards whereby the Office of Health Planning shall oversee,

assist in the implementation of, and ensure that the provisions of

the capital management plan are enforced.

(2) Assessment and prioritization of short- and long-term capital

needs of the system on statewide and regional bases.

(3) Assessment of capital health care assets and capital health

care asset shortages on a regional and statewide basis at the time

this division is first implemented.

(4) Development by the commissioner of a multiyear system capital

development plan that supports the system's goals, priorities, and

performance standards and meets the health care needs of the

population.

(5) Development, as part of the system's capital budget, of

regional capital allocations that shall cover a period of three

years.

(6)  Evaluation of, and support for, noninvestment means to meet

health care needs, including, but not limited to, improvements in

administrative efficiency, care quality, and innovative service

delivery, use, adaptation or refurbishment of existing land and

property, and identification of publicly owned land or property that

may be available to the system and that may meet a capital need.

(7) Development and maintenance of capital inventories on a

regional basis, including the condition, utilization capacity,

maintenance plan and costs, deferred maintenance of existing capital

inventory, and excess capital capacity.

(8) A process whereby those intending to make capital investments

or acquisitions shall prepare a business case for making the

investment or acquisition, including the full life-cycle costs of the

project or acquisition, an environmental impact report that meets

existing state standards, and a demonstration of how the investment

or acquisition meets the health care needs of the population it is

intended to serve. Acquisitions include, but are not limited to, the

acquisition of land, operational property, or administrative office

space.

(9) Standards and a process whereby the regional planning

directors shall evaluate, accept, reject, or modify a business plan

for a capital investment or acquisition. Decisions of a regional

planning director may be appealed through a dispute resolution

process established by the commissioner.

(10) Standards for binding project contracts between the system

and the party developing a capital project or making a capital

acquisition that shall govern all terms and conditions of capital

investments and acquisitions, including terms and conditions for

grants, loans, lines of credit, and lease-purchase arrangements by

the system.

(11) A process and standards whereby the Director of the

Healthcare Fund shall negotiate terms and conditions of the liens,

grants, lines of credit, and lease-purchase arrangements for capital

investments and acquisitions by the system. Terms and conditions

negotiated by the Director of the Healthcare Fund shall be included

in project contracts.

(12) A plan for the commissioner and for the regional planning

directors to issue requests for proposals and to oversee a process of

competitive bidding for the development of capital projects that

meet the needs of the system and to fund, partially fund, or

participate in seeking funding for, those capital projects.

(13) Responses to requests for proposals and competitive bids

shall include a description of how a project meets the service needs

of the region and addresses the environmental impact report and shall

include the full life cycle costs of a capital asset.

(14) Requests for proposals shall address how intellectual

property will be handled and shall include conflict-of-interest

guidelines that meet standards established by the commissioner as

part of the capital management plan.

(15) A process and standards for periodic revisions in the capital

management plan, including annual meetings in each region to discuss

the plan and make recommendations for improvements in the plan.

(16) Standards for determining when a violation of these

provisions shall be referred to the Attorney General for

investigation and possible prosecution of the violation.

(b) No registered lobbyist shall participate in, or in any way

attempt to influence, the request for proposals or competitive bid

process.

(c) Development of performance standards and a process to monitor

and measure performance of those making capital health care

investments and acquisitions, including those making capital

investments pursuant to a state competitive bidding process.

(d) A process for earned autonomy from state capital investment

oversight for those who demonstrate the ability to manage capital

investment and capital assets effectively in accordance with the

system's standards, and standards for loss of earned autonomy when

capital management is ineffective.

(e) Terms and conditions of capital project oversight by the

system shall be based on the performance history of the project

developer. Health care providers may earn autonomy from oversight if

they demonstrate effective capital planning and project management,

pursuant to the goals and guidelines established by the commissioner.

Health care providers who do not demonstrate that proficiency shall

remain subject to oversight by the regional planning director or

shall lose autonomy from oversight.

(f) In general, no capital investment may be made from an

operating budget. However, guidelines shall be established for the

types and levels of small capital investments that may be undertaken

from an operating budget without the approval of the regional

planning director.

(g) Any capital investments required for compliance with federal,

state, or local regulatory requirements or quality assurance

standards shall be exempt from paragraph (2) of subdivision (c) of

Section 140212.

140217. 

(a) Regional planning directors shall develop a regional

capital development plan pursuant to the system's capital management

plan established by the commissioner. In developing the regional

capital development plan, the regional planning director shall do all

of the following:

(1) Implement the standards and requirements of the capital

management plan established by the commissioner.

(2) Develop a multiyear regional capital health management plan

that supports regional goals and the state capital management plan.

(3) Assist regional health care providers to develop capital

budget requests pursuant to the regional capital budget plan and the

system's capital management plan established by the commissioner.

(4) Receive and evaluate capital budget requests from regional

health care providers.

(5) Establish ranking criteria to assess competing demands for

capital.

(6) Participate in planning for needed earthquake retrofits.

However, the cost of mandatory earthquake retrofits of health care

facilities shall not be the responsibility of the system.

(7) Conduct ongoing project evaluation to assure that terms and

conditions of project funding are met.

(b) Services provided as a result of capital investments or

acquisitions that do not meet the terms of the regional capital

development plan and the capital management plan developed by the

commissioner shall not be reimbursed by the system.

140218. 

(a) Assets financed by state grants, loans, lines of

credit, and lease-purchase arrangements shall be owned, operated, and

maintained by the recipient of the grant, loan, line of credit, or

lease-purchase arrangement, according to terms established at the

time of issuance of the grant, loan, line of credit, or

lease-purchase arrangement.

(b) Assets financed under long-term leases with the system shall

be transferred to public ownership at the end of the lease, unless

the commissioner determines that an alternative disposition would be

of greater benefit to the system, in which case the commissioner may

authorize an alternative disposition.

(c) When an asset, which was in whole or in part financed by the

system, is to be sold or transferred by a party that received

financing from the system for purchase, lease, or construction of the

asset, an impartial estimate of the fair market value of the asset

shall be undertaken. The system shall receive a share of the fair

market value of the asset at the time of its sale or transfer that is

in proportion to the system's original investment. The system may

elect to postpone receipt of its share of the value of the asset if

the commissioner determines that the postponement meets the needs of

the system.

140219.  The regional planning directors shall make financial

information available to the public when the system's contribution to

a capital project is greater than twenty-five million dollars

($25,000,000). Information shall include the purpose of the project

or acquisition, its relation to the system's goals, the project

budget and the timetable for completion, environmental impact

reports, any terms-related conflicts of interest, and performance

standards and benchmarks.

140220. 

(a) The commissioner shall establish a budget for the

purchase of prescription drugs and durable and nondurable medical

equipment for the system.

(b) The commissioner shall use the purchasing power of the state

to obtain the lowest possible prices for prescription drugs and

durable and nondurable medical equipment.

(c) The commissioner shall make discounted prices available to all

California residents, licensed and accredited providers and

facilities under the terms of their licenses and accreditation,

health care providers, prescription drug and medical equipment

wholesalers, and retailers of products approved for use and included

in the benefit package of the system.

140221. 

(a) The commissioner shall establish a budget to support

research and innovation that has been recommended by the chief

medical officer, the Director of the Office of Health Planning, the

patient advocates, the Partnerships for Health, and others as

required by the commissioner.

(b) The research and innovation budget shall support the goals and

standards of the system.

140222. 

(a) The commissioner shall establish a budget to support

the training, development, and continuing education of health care

providers and the health care workforce needed to meet the health

care needs of the population and the goals and standards of the

system.

(b)  During the transition, the commissioner shall determine an

appropriate level and duration of spending to support the retraining

and job placement of persons who have been displaced from employment

as a result of the transition to the system.

(c) The commissioner shall establish guidelines for giving special

consideration for employment to persons who have been displaced as a

result of the transition to the system.

140223. 

(a) The commissioner shall establish a reserve account

pursuant to this section.

(b) The reserve budget may be used only for purposes set forth in

this division.

140224. 

(a) The commissioner shall establish a budget that covers

all costs of administering the system.

(b) Administrative costs on a systemwide basis shall be limited to

10 percent of system costs within five years of completing the

transition to the system.

(c) Administrative costs on a systemwide basis shall be limited to

5 percent of system costs within 10 years of completing the

transition to the system.

(d) The commissioner shall ensure that the percentage of the

budget allocated to support system administration stays within the

allowable limits and shall continually seek means to lower system

administrative costs.

(e) The commissioner shall report to the public, the regional

planning directors, and others attending the annual system revenue

and expenditure conference pursuant to Section 140206 on the costs of

administering the system and the regions and shall make

recommendations for reducing administrative costs and receive

recommendations for reducing administrative costs.

Article 2.  California Healthcare Premium Commission

140230. 

(a) There is hereby created the California Healthcare

Premium Commission, referred to in this division as the Premium

Commission.

(b) The Premium Commission shall be composed of the following

members:

(1) Three health economists with experience relevant to the

functions of the Premium Commission. One shall be appointed by the

Speaker of the Assembly, one shall be appointed by the Senate

Committee on Rules, and one shall be appointed by the Governor.

(2) Two representatives of California's business community, with

one representing small business. One shall be appointed by the

Governor, and the representative of small business shall be appointed

by the Senate Committee on Rules.

(3) Two representatives from organized labor. One shall be

appointed by the Senate Committee on Rules, and one shall be

appointed by the Speaker of the Assembly.

(4) Two representatives of nonprofit organizations whose principal

purpose includes promoting the establishment of a system of

universal health care in California. One shall be appointed by the

Senate Committee on Rules and one shall be appointed by the Speaker

of the Assembly.

(5) One representative of a nonprofit advocacy organization with

expertise in taxation policy whose principal purpose includes

advocating for sustainable funding for the public infrastructure.

This person shall be appointed by the Speaker of the Assembly.

(6) Two members of the Legislature. One shall be appointed by the

Senate Committee on Rules and one shall be appointed by the Speaker

of the Assembly.

(7) The Executive Officer of the Franchise Tax Board.

(8) The Chair of the State Board of Equalization.

(9) The Director of the Employment Development Department.

(10) The Legislative Analyst.

(11) The Secretary of California Health and Human Services.

(12) The Director of the Department of Finance.

(13) The Controller.

(14) The Treasurer.

(15) The Lieutenant Governor.

(c) Upon appointment, the Premium Commission shall meet at least

once a month. The Premium Commission shall elect a chair from its

membership during its first meeting. The Premium Commission shall

receive public comments during a portion of each of its meetings, and

all of its meetings shall be conducted pursuant to the Bagley-Keene

Open Meeting Act (Article 9 (commencing with Section 11120) of

Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code).

140231. 

(a) The Premium Commission shall perform the following

functions:

(1) Determine the aggregate costs of providing health care

coverage pursuant to this division.

(2) Develop an equitable and affordable premium structure that

will generate adequate revenue for the Healthcare Fund established

pursuant to Section 140200 and ensure stable and actuarially sound

funding for the system.

(b) The Premium Commission shall perform the functions described

in this section by considering existing financial simulations and

analyses of universal health care proposals, including, but not

limited to, the analysis completed by the Lewin Group in January

2005, pertaining to Senate Bill N. 921 of the 2003-04 Regular

Session.

140232. 

(a) The premium structure developed by the Premium

Commission shall satisfy the following criteria:

(1) Be means-based and generate adequate revenue to implement this

division.

(2) To the greatest extent possible, ensure that all income

earners and all employers contribute a premium amount that is

affordable and that is consistent with existing funding sources for

health care in California.

(3) Maintain the current ratio for aggregate health care

contributions among the traditional health care funding sources,

including employers, individuals, government, and other sources.

(4) Provide a fair distribution of monetary savings achieved from

the establishment of a universal health care system.

  (5) Coordinate with existing, ongoing funding sources from

federal and state programs.

(6) Be consistent with state and federal requirements governing

financial contributions for persons eligible for existing public

programs.

(7) Comply with federal requirements.

(8) Include an exemption for employers and employees who are

subject to a collective bargaining agreement and participate in a

Taft-Hartley Trust Fund that pays the employer and employee share of

the premium to the Healthcare Fund.

(b) The Premium Commission shall seek expert and legal advice

regarding the best method to structure premium payments consistent

with existing employer-employee health care financing structures.

140233.  The Premium Commission may take all of the following

actions:

(a) Obtain grants from, and contract with, individuals and

private, local, state, and federal agencies, organizations, and

institutions, including institutions of higher education.

(b) Receive charitable contributions or any other source of income

that may be lawfully received.

140234. 

(a) The Premium Commission may consult with additional

persons, advisory entities, governmental agencies, Members of the

Legislature, and legislative staff as it deems necessary to perform

its functions.

(b) The Premium Commission shall seek structured input from

representatives of stakeholder organizations, policy institutes, and

other persons with expertise in health care, health care financing,

or universal health care models in order to ensure that it has the

necessary information, expertise, and experience to perform its

functions.

(c) The Premium Commission shall be supported by a reasonable

amount of staff time, which shall be provided by the state agencies

with membership on the Premium Commission. The Premium Commission may

request data from, and utilize the technical expertise of, other

state agencies.

140235. 

(a) On or before January 1, 2014, the Premium Commission

shall submit to the Governor and the Legislature a detailed

recommendation for a premium structure.

(b) The Premium Commission shall submit a draft recommendation to

the Governor, Legislature, and the public at least 90 days prior to

submission of the final recommendation described in subdivision (a).

The Premium Commission shall seek input from the public on the draft

recommendation.

140236.  The Premium Commission shall be funded upon an

appropriation by the Legislature in the Budget Act of 2012.

Article 3.  Governmental Payments

140240. 

(a)

(1) The commissioner shall seek all necessary

waivers, exemptions, agreements, or legislation, so that all current

federal payments to the state for health care services be paid

directly to the system, which shall then assume responsibility for

all benefits and services previously paid for by the federal

government with those funds.

(2) In obtaining the waivers, exemptions, agreements, or

legislation, the commissioner shall seek from the federal government

a contribution for health care services in California that shall not

decrease in relation to the contribution to other states as a result

of the waivers, exemptions, agreements, or legislation.

(b)

(1) The commissioner shall seek all necessary waivers,

exemptions, agreements, or legislation, so that all current state

payments for health care services shall be paid directly to the

system, which shall then assume responsibility for all benefits and

services previously paid for by state government with those funds.

(2) In obtaining the waivers, exemptions, agreements, or

legislation, the commissioner shall seek from the Legislature a

contribution for health care services that shall not decrease in

relation to state government expenditures for health care services in

the year that this division was enacted, except that it may be

corrected for change in state gross domestic product, the size and

age of population, and the number of residents living below the

federal poverty level.

(c) The commissioner shall establish formulas for equitable

contributions to the system from all California counties and other

local government agencies.

(d) The commissioner shall seek all necessary waivers, exemptions,

agreements, or legislation, so that all county or other local

government agency payments shall be paid directly to the system.

140241.  The system's responsibility for providing health care

services shall be secondary to existing federal, state, or local

governmental programs for health care services to the extent that

funding for these programs is not transferred to the Healthcare Fund

or that the transfer is delayed beyond the date on which initial

benefits are provided under the system.

140242.  In order to minimize the administrative burden of

maintaining eligibility records for programs transferred to the

system, the commissioner shall strive to reach an agreement with

federal, state, and local governments in which their contributions to

the Healthcare Fund shall be fixed to the rate of change of the

state gross domestic product, the size and age of population, and the

number of residents living below the federal poverty level.

140243.  If and to the extent that federal law and regulations

allow the transfer of Medi-Cal program funding to the system, the

commissioner shall pay from the Healthcare Fund all premiums,

deductible payments, and coinsurance for qualified beneficiaries who

are receiving benefits pursuant to Chapter 3 (commencing with Section

12000) of Part 3 of Division 9 of the Welfare and Institutions Code.

140244.  If and to the extent that the commissioner obtains

authorization to incorporate Medicare revenues into the Healthcare

Fund, Medicare Part B payments that previously were made by

individuals or the commissioner shall be paid by the system for all

individuals eligible for both the system and the Medicare Program.

Article 4.  Federal Preemption

140300. 

(a) The commissioner shall pursue all reasonable means to

secure a repeal or a waiver of any provision of federal law that

preempts any provision of this division.

(b) If a repeal or a waiver of law or regulations cannot be

secured, the commissioner shall exercise his or her powers to

promulgate rules and regulations, or seek conforming state

legislation, consistent with federal law, in an effort to best

fulfill the purposes of this division.

140301. 

(a) To the extent permitted by federal law, an employee

entitled to health or related benefits under a contract or plan that,

under federal law, preempts provisions of this division, shall first

seek benefits under that contract or plan before receiving benefits

from the system under this division.

(b) No benefits shall be denied under the system created by this

division unless the employee has failed to take reasonable steps to

secure like benefits from the contract or plan, if those benefits are

available.

(c) Nothing in this section shall preclude a person from receiving

benefits from the system under this division that are superior to

benefits available to the person under an existing contract or plan.

(d) Nothing in this division is intended, nor shall this division

be construed, to discourage recourse to contracts or plans that are

protected by federal law.

(e) To the extent permitted by federal law, a health care provider

shall first seek payment from the contract or plan, before

submitting bills to the system.

Article 5.  Subrogation

140302. 

(a) It is the intent of the Legislature in enacting this

division to establish a single public payer for all health care

services in the State of California. However, until such time as the

role of all other payers for health care services has been

terminated, costs for health care services shall be collected from

collateral sources whenever health care services provided to an

individual are, or may be, covered services under a policy of

insurance, health care service plan, or other collateral source

available to that individual, or for which the individual has a right

of action for compensation to the extent permitted by law.

(b) As used in this article, collateral source includes all of the

following:

(1) Insurance policies written by insurers, including the medical

components of automobile, homeowners, and other forms of insurance.

(2) Health care service plans and pension plans.

(3) Employers.

(4) Employee benefit contracts.

(5) Government benefit programs.

(6) A judgment for damages for personal injury.

(7) Any third party who is or may be liable to an individual for

health care services or costs.

(c) "Collateral source" does not include either of the following:

(1) A contract or plan that is subject to federal preemption.

(2) Any governmental unit, agency, or service, to the extent that

subrogation is prohibited by law.

(d) An entity described in subdivision (b) is not excluded from

the obligations imposed by this article by virtue of a contract or

relationship with a governmental unit, agency, or service.

(e) The commissioner shall attempt to negotiate waivers, seek

federal legislation, or make other arrangements to incorporate

collateral sources in California into the system.

140303.  Whenever an individual receives health care services

under the system and he or she is entitled to coverage,

reimbursement, indemnity, or other compensation from a collateral

source, he or she shall notify the health care provider and provide

information identifying the collateral source, the nature and extent

of coverage or entitlement, and other relevant information. The

health care provider shall forward this information to the

commissioner. The individual entitled to coverage, reimbursement,

indemnity, or other compensation from a collateral source shall

provide additional information as requested by the commissioner.

140304. 

(a) The system shall seek reimbursement from the

collateral source for services provided to the individual and may

institute appropriate action, including suit, to recover the

reimbursement. Upon demand, the collateral source shall pay to the

Healthcare Fund the sums it would have paid or expended on behalf of

the individual for the health care services provided by the system.

(b) In addition to any other right to recovery provided in this

article, the commissioner shall have the same right to recover the

reasonable value of benefits from a collateral source as provided to

the Director of Health Care Services by Article 3.5 (commencing with

Section 14124.70) of Chapter 7 of Part 3 of Division 9 of the Welfare

and Institutions Code, in the manner so provided.

140305. 

(a) If a collateral source is exempt from subrogation or

the obligation to reimburse the system as provided in this article,

the commissioner may require that an individual who is entitled to

health care services from the source first seek those services from

that source before seeking those services from the system.

(b) To the extent permitted by federal law, contractual retiree

health benefits provided by employers shall be subject to the same

subrogation as other contracts, allowing the system to recover the

cost of health care services provided to individuals covered by the

retiree benefits, unless and until arrangements are made to transfer

the revenues of the benefits directly to the system.

140306. 

(a) Default, underpayment, or late payment of any tax or

other obligation imposed by this division shall result in the

remedies and penalties provided by law, except as provided in this

section.

(b) Eligibility for benefits under Chapter 4 (commencing with

Section 140400) shall not be impaired by any default, underpayment,

or late payment of any tax or other obligation imposed by this

chapter.

140307.  The agency and the commissioner shall be exempt from the

regulatory oversight and review of the Office of Administrative Law

pursuant to Chapter 3.5 (commencing with Section 11340) of Part 1 of

Division 3 of Title 2 of the Government Code. Actions taken by the

agency, including, but not limited to, the negotiating or setting of

rates, fees, or prices, and the promulgation of any and all

regulations, shall be exempt from any review by the Office of

Administrative Law, except for Sections 11344.1, 11344.2, 11344.3,

and 11344.6 of the Government Code, addressing the publication of

regulations.

140308.  The agency shall adopt regulations to implement the

provisions of this division. The regulations may initially be adopted

as emergency regulations in accordance with the Administrative

Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1

of Division 3 of Title 2 of the Government Code), but those emergency

regulations shall be in effect only from the effective date of this

division until the conclusion of the transition period.

CHAPTER 4.  ELIGIBILITY

140400.  All California residents shall be eligible for the

system. Residency shall be based upon physical presence in the state

with the intent to reside. The commissioner shall establish standards

and a simplified procedure to demonstrate proof of residency.

140401.  The commissioner shall establish a procedure to enroll

eligible residents and provide each eligible individual with

identification that can be used by health care providers to determine

eligibility for services.

140402. 

(a) It is the intent of the Legislature for the system to

provide health care coverage to California residents who are

temporarily out of the state. The commissioner shall determine

eligibility standards for residents temporarily out of state for

longer than 90 days who intend to return and reside in California and

for nonresidents temporarily employed in California. The

commissioner may establish financial arrangements with medical

providers in other states and foreign countries in order to

facilitate coverage for California residents who are temporarily out

of the state.

(b) Coverage for emergency care obtained out of state shall be at

prevailing local rates. Coverage for nonemergency care obtained out

of state shall be according to rates and conditions established by

the commissioner. The commissioner may require that a resident be

transported back to California when prolonged treatment of an

emergency condition is necessary and when that transport will not

adversely affect a patient's care or condition.

140403.  Visitors to California shall be billed for all services

received under the system. The commissioner may establish

intergovernmental arrangements with other states and countries to

provide reciprocal coverage for temporary visitors.

140404.  All persons eligible for health care benefits from

California employers but who are working in another jurisdiction

shall be eligible for health care benefits under this division

provided that they make payments equivalent to the payments they

would be required to make if they were residing in California.

140404.1.  All persons who under an employer-employee contract or

under statute are eligible for retiree health care benefits,

including retirees who elect to reside outside of California, shall

remain eligible for those benefits in accordance with the contract or

the statute.

140405.  Unmarried, unemancipated minors shall be deemed to have

the residency of their parent or guardian. If a minor's parents are

deceased and a legal guardian has not been appointed, or if a minor

has been emancipated by court order, the minor may establish his or

her own residency.

140406. 

(a) An individual shall be presumed to be eligible if he

or she arrives at a health facility and is unconscious, comatose, or

otherwise unable, because of his or her physical or mental condition,

to document eligibility or to act on his or her own behalf, or if

the patient is a minor, the patient shall be presumed to be eligible,

and the health facility shall provide care as if the patient were

eligible.

(b) Any individual shall be presumed to be eligible when brought

to a health facility pursuant to any provision of Section 5150 of the

Welfare and Institutions Code.

(c) Any individual involuntarily committed to an acute psychiatric

facility or to a hospital with psychiatric beds pursuant to Section

5150 of the Welfare and Institutions Code, providing for involuntary

commitment, shall be presumed eligible.

(d) All health facilities subject to state and federal provisions

governing emergency medical treatment shall continue to comply with

those provisions.

(e) In the event of an influx of people into the state for the

purposes of receiving medical care, the commissioner shall establish

an eligibility waiting period and other criteria needed to ensure the

fiscal stability of the system.

CHAPTER 5.  BENEFITS

140500.  Any eligible individual may choose to receive services

under the system from any willing professional health care provider

participating in the system. No health care provider may refuse to

care for a patient solely on any basis that is specified in the

prohibition of employment discrimination contained in the Fair

Employment and Housing Act (Part 2.8 (commencing with Section 12900)

of Division 3 of Title 2 of the Government Code).

140500.01.  A resident of the state in a family with an annual or

monthly net nonexempt household income equal to or less than 200

percent of the federal poverty level is eligible for no-cost Medi-Cal

and shall be entitled to not less than the full scope of benefits

available under the Medi-Cal program, pursuant to Section 14021 of,

and Article 4 (commencing with Section 14131) of Chapter 7 of

Division 9 of, the Welfare and Institutions Code, as provided on

January 1, 2010.

140501.  Covered benefits under this chapter shall include all

medical care determined to be medically appropriate by the individual'

s health care provider, but are subject to limitations set forth in

Section 140503. Covered benefits include, but are not limited to, all

of the following:

(a) Inpatient and outpatient health facility services.

(b) Inpatient and outpatient professional health care provider

services by licensed health care professionals.

(c) Diagnostic imaging, laboratory services, and other diagnostic

and evaluative services.

(d) Durable medical equipment, appliances, and assistive

technology, including prosthetics, eyeglasses, and hearing aids and

their repair.

(e) Rehabilitative care.

(f) Emergency transportation and necessary transportation for

health care services for disabled and indigent persons.

(g) Language interpretation and translation for health care

services, including sign language for those unable to speak, or hear,

or who are language impaired, and Braille translation or other

services for those with no or low vision.

(h) Child and adult immunizations and preventive care.

(i) Health education.

(j) Hospice care.

(k) Home health care.

(l) Prescription drugs that are listed on the system's formulary.
       Nonformulary prescription drugs may be included if

       standards and criteria established by the commissioner are met.

(m) Mental and behavioral health care.

(n) Dental care.

(o) Podiatric care.

(p) Chiropractic care.

(q) Acupuncture.

(r) Blood and blood products.

(s) Emergency care services.

(t) Vision care.

(u) Adult day care.

(v) Case management and coordination to ensure services necessary

to enable a person to remain safely in the least restrictive setting.

(w) Substance abuse treatment.

(x) Care of up to 100 days in a skilled nursing facility following

hospitalization.

(y) Dialysis.

(z) Benefits offered by a bona fide church, sect, denomination, or

organization whose principles include healing entirely by prayer or

spiritual means provided by a duly authorized and accredited

practitioner or nurse of that bona fide church, sect, denomination,

or organization.

(aa) Chronic disease management.

(ab) Family planning services and supplies.

(ac) For persons under 21 years of age, early and periodic

screening, diagnostic, and treatment services, as defined in Section

1396d(r) of Title 42 of the United States Code, whether or not those

services are covered benefits for persons who are 21 years of age or

older.

140502.  The commissioner may expand benefits beyond the minimum

benefits described in this chapter when expansion meets the intent of

this division and when there are sufficient funds to cover the

expansion.

140503.  The following health care services shall be excluded from

coverage by the system:

(a) Health care services determined to have no medical indication

by the commissioner and the chief medical officer.

(b) Surgery, dermatology, orthodontia, prescription drugs, and

other procedures primarily for cosmetic purposes, unless required to

correct a congenital defect, restore or correct a part of the body

that has been altered as a result of injury, disease, or surgery, or

determined to be medically necessary by a qualified, licensed health

care provider in the system.

(c) Private rooms in inpatient health facilities where appropriate

nonprivate rooms are available, unless determined to be medically

necessary by a qualified, licensed health care provider in the

system.

(d) Services of a health care provider or facility that is not

licensed or accredited by the state except for approved services

provided to a California resident who is temporarily out of the

state.

140504. 

(a) During the initial two years of the system's

operation, the commissioner shall not impose a deductible payment or

copayment other than for treatment by a specialist if no referral was

made by the primary care provider pursuant to Section 140601. The

commissioner shall determine the amount of the copayment or

deductible imposed pursuant to this subdivision. The commissioner and

the Healthcare Policy Board shall review the deductible and

copayment provisions annually, commencing in the third year of the

system's operation, to determine whether they should be included in

the system.

(b) Commencing in the third year of the system's operation, the

commissioner may impose a deductible payment and copayment pursuant

to the determination made under subdivision (a), except as specified

under subdivisions (c) and (d). The amount of the deductible payment

and the copayment combined shall not exceed two hundred fifty dollars

($250) per person each year and five hundred dollars ($500) per

family each year, except the deductible payment and copayment for

treatment by a specialist without a referral from the primary care

provider pursuant to Section 140601 shall not be subject to this

limitation and shall be established by the commissioner.

(c) No copayments or deductible payments may be established for

preventive care as determined by a patient's primary care provider.

(d) No copayments or deductible payments may be established when

prohibited by federal law.

(e) No deductible payments or copayments may be imposed on a

person who is eligible for benefits under the Medi-Cal program

(Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of

the Welfare and Institutions Code), except for treatment by a

specialist without a referral from the primary care provider pursuant

to Section 140601.

(f) The commissioner shall establish standards and procedures for

waiving copayments or deductible payments for a person who

demonstrates, to the commissioner's satisfaction, that the person

lacks the financial means to pay the copayment or deductible. Waivers

of copayments or deductible payments shall not affect the

reimbursement of health care providers.

(g) Any copayments established pursuant to this section and

collected by health care providers shall be transmitted to the

Treasurer to be deposited to the credit of the Healthcare Fund.

(h) Nothing in this division shall be construed to diminish the

benefits that an individual has under a collective bargaining

agreement.

(i) Nothing in this division shall preclude employees from

receiving benefits available to them under a collective bargaining

agreement or other employee-employer agreement that are superior to

benefits under this division.

CHAPTER 6.  DELIVERY OF CARE

140600. 

(a) All health care providers licensed or accredited to

practice in California may participate in the system.

(b) No health care provider whose license or accreditation is

suspended or revoked may participate in the system.

(c) If a health care provider is on probation, the licensing or

the accrediting agency shall monitor the health care provider in

question, pursuant to applicable California law. The licensing or

accrediting agency shall report to the chief medical officer at

intervals established by the chief medical officer, on the status of

health care providers who are on probation and on measures undertaken

to assist health care providers to return to practice and to resolve

complaints made by patients.

(d) Health care providers may accept eligible persons for care

according to the health care provider's ability to provide services

needed by the patient and according to the number of patients a

health care provider can treat without compromising safety and care

quality. A health care provider may accept patients in the order of

time of application.

(e) A health care provider shall not refuse to care for a patient

solely on any basis that is specified in the prohibition of

employment discrimination contained in the Fair Employment and

Housing Act (Part 2.8 (commencing with Section 12900) of Division 3

of Title 2 of the Government Code).

(f) Choice of health care provider:

(1) Persons eligible for health care services under this division

may choose a primary care provider.

(A) Primary care providers include family practitioners, general

practitioners, internists and pediatricians, nurse practitioners and

physician assistants practicing under supervision as defined in

California codes, and doctors of osteopathy licensed to practice as

general doctors.

(B) Women may choose an obstetrician-gynecologist, in addition to

a primary care provider.

(2) Persons who choose to enroll with integrated health care

delivery systems, group medical practices, or essential community

providers that offer comprehensive services, shall retain membership

for at least one year after an initial three-month evaluation period

during which time they may withdraw for any reason.

(A) The three-month period shall commence on the date when an

enrollee first sees a primary care provider.

(B) Persons who want to withdraw after the initial three-month

period shall request a withdrawal pursuant to dispute resolution

procedures established by the commissioner and may

                       request assistance from the patient advocate

in the dispute process. The dispute shall be resolved in a timely

fashion and shall have no adverse effect on the care a patient

receives.

(3) Persons needing to change primary care providers because of

health care needs that their primary care provider cannot meet may

change primary care providers at any time.

140601. 

(a) Primary care providers shall coordinate the care a

patient receives or shall ensure that a patient's care is

coordinated.

(b)

(1) Patients shall have a referral from their primary care

provider, or from a health care provider rendering care to them in

the emergency room or other accredited emergency setting, or from a

health care provider treating a patient for an emergency condition in

any setting, or from their obstetrician-gynecologist, to see a

physician or nonphysician specialist whose services are covered by

this division, unless the patient agrees to assume the costs of care

or pay a copayment, if implemented by the commissioner pursuant to

Section 140504. A referral shall not be required to see a dentist or

to see an ophthalmologist or optometrist for a routine vision

examination.

(2) Referrals shall be based on the medical needs of the patient

and on guidelines, which shall be established by the chief medical

officer to support clinical decisionmaking.

(3) Referrals shall not be restricted or provided solely because

of financial considerations. The chief medical officer shall monitor

referral patterns and intervene as necessary to assure that referrals

are neither restricted nor provided solely because of financial

considerations.

(4) For the first six months of the system's operation, no

specialist referral or copayment shall be required for patients who

had been receiving care from a specialist prior to the initiation of

the system. Beginning with the seventh month of the system's

operation, all patients shall be required to obtain a referral from a

primary or emergency care provider for specialty care if the care is

to be paid for by the system. No referral is required if a patient

pays the full cost of the specialty care and the specialist accepts

that payment arrangement.

(5) Where referral processes are in place prior to the initiation

of the system, the chief medical officer shall review the referral

processes to assure that they meet the system's standards for care

quality and shall assure needed changes are implemented so that all

Californians receive the same standards of care quality and access to

specialty care.

(6) A specialist may serve as the primary care provider if the

patient and the provider agree to this arrangement and if the

provider agrees to coordinate the patient's care or to ensure that

the care the patient receives is coordinated.

(7) The commissioner shall establish or ensure the establishment

of a computerized referral registry to facilitate the referral

process and to allow a specialist and a patient to easily determine

whether a referral has been made pursuant to this division.

(8) A patient may appeal the denial of a referral through the

dispute resolution procedures established by the commissioner and may

request the assistance of the patient advocate during the dispute

resolution process.

140602. 

(a) The purpose of the Office of Health Planning is to

plan for the short- and long-term health care needs of the population

pursuant to the health care and finance standards established by the

commissioner and by this division.

(b) The office shall be headed by a director appointed by the

commissioner. The director shall serve pursuant to provisions of

subdivisions (c), (d), and (e) of Section 140100 and subdivisions (j)

and (k) of Section 140101.

(c) The director shall do all the following:

(1) Administer all aspects of the Office of Health Planning.

(2) Serve on the Healthcare Policy Board.

(3) Establish performance criteria in measurable terms for health

care goals in consultation with the chief medical officer, the

regional planning directors, and regional medical officers and others

with experience in health care outcomes measurement and evaluation.

(4) Evaluate the effectiveness of performance criteria in

accurately measuring quality of care, administration, and planning.

(5) Assist the health care regions to develop operating and

capital requests pursuant to health care and financial guidelines

established by the commissioner and by this division. In assisting

regions, the director shall do all of the following:

(A) Identify medically underserved areas and health care service

and asset shortages.

(B) Identify disparities in health outcomes.

(C) Establish conventions for the definition, collection, storage,

analysis, and transmission of data for use by the system.

(D) Establish electronic systems that support dissemination of

information to health care providers and patients about integrated

health network and integrated health care delivery systems and

community-based health care resources.

(E) Support establishment of comprehensive health care databases

using uniform methodology that is compatible among the regions and

between the regions and the agency.

(F) Provide information to support effective regional planning and

innovation.

(G) Provide information to support interregional planning,

including planning for access to specialized centers that perform a

high volume of procedures for conditions requiring highly specialized

treatments, including emergency and trauma, and other interregional

access to needed care, and planning for coordinated interregional

capital investment.

(H) Provide information for, and participate in, earthquake

retrofit planning.

(I) Evaluate regional budget requests and make recommendations to

the commissioner about regional revenue allocations.

(6) Estimate the health care workforce required to meet the health

care needs of the population pursuant to the standards and goals

established by the commissioner, the costs of providing the needed

workforce, and, in collaboration with regional planners, educational

institutions, the Governor, and the Legislature, develop short- and

long-term plans to meet those needs, including a plan to finance

needed training.

(7) Estimate the number and types of health facilities required to

meet the short- and long-term health care needs of the population

and the projected costs of needed facilities. In collaboration with

the commissioner, regional planning directors and regional medical

officers, the chief medical officer, the Governor, and the

Legislature, develop plans to finance and build needed facilities.

140603.  The Technology Advisory Group shall explore the

feasibility and the value to the health of the population of the

following electronic initiatives:

(a) Establish integrated statewide health care databases to

support health care planning and determine which databases should be

established on a statewide basis and which should be established on a

regional basis.

(b) Assure that databases have uniform methodology and formats

that are compatible among the regions and between the regions and the

agency.

(c) Establish mandatory database reporting requirements and

penalties for noncompliance. Monitor the effectiveness of reporting

and make needed improvements.

(d) Establish means for anonymous reporting to the chief medical

officer and regional medical officers of medical errors and other

related problems, and for anonymous reporting to the commissioner and

regional planning directors of problems related to ineffective

management, and establish guidelines for the protection of persons

coming forward to report these problems.

(e) In collaboration with the chief medical officer, the Office of

Patient Advocacy, and regional patient advocates, investigate the

costs and benefits of electronic and online scheduling systems and

means of health care provider-patient communication that allow for

electronic visits, and make recommendations to the chief medical

officer regarding the use of these concepts in the system.

(f) In collaboration with the chief medical officer, establish

electronic systems and other means that support the use of standards

of care based on clinical efficacy to guide clinical decision making

by all who provide services in the system.

(g) In collaboration with the chief medical officer, support the

development of disease management programs and their use in the

system.

(h) Establish electronic initiatives that reduce administration

costs.

(i) Collaborate with the chief medical officer and regional

medical officers to assure the development of software systems that

link clinical guidelines to individual patient conditions, and guide

clinicians through diagnosis and treatment algorithms derived from

research based on clinical efficacy and best medical practices.

(j) Collaborate with the chief medical officer and regional

medical officers to assure the development of software systems that

offer health care providers access to guidelines that are appropriate

for their specialty and that include current information on

prevention and treatment of disease.

(k) In collaboration with the Partnerships for Health and regional

medical officers, establish Web-based, patient-centered information

systems that assist people to promote and maintain health and provide

information on health conditions and recent developments in

treatment.

(l) Establish electronic systems and other means to provide

patients with easily understandable information about the performance

of health care providers. This shall include, but not be limited to,

information about the experience that health care providers have in

the field or fields in which they deliver care, the number of years

they have practiced in their field and, in the case of medical and

surgical procedures, the number of procedures they have performed in

their area or areas of specialization.

(m) Establish electronic systems that facilitate health care

provider continuing medical education that meets licensure

requirements.

(n) Recommend to the commissioner means to link health care

research with the goals and priorities of the system.

140604. 

(a) The Director of the Office of Health Planning shall

establish standards for culturally and linguistically competent care,

which shall include, but not be limited to, all of the following:

(1) State Department of Health Care Services and the Department of

Managed Health Care guidelines for culturally and linguistically

sensitive care.

(2) Medi-Cal Managed Care Division (MMCD) Policy Letters 99-01 to

99-04 and MMCD All Plan Letter 99005.

(3) Subchapter 5 of the federal Civil Rights Act of 1964 (42

U.S.C. Sec. 2000d).

(4) United States Department of Health and Human Services' Office

of Civil Rights; Title VI of the Civil Rights Act of 1964; Policy

Guidance on Prohibition Against National Origin Discrimination as It

Affects Persons with Limited English Proficiency (February 1, 2002).

(5) United States Department of Health and Human Services' Office

of Minority Health; National Standards on Culturally and

Linguistically Appropriate Services (CLAS) in Health Care--Final

Report (December 22, 2000).

(b) The director shall annually evaluate the effectiveness of

standards for culturally and linguistically competent care and make

recommendations to the commissioner, the Office of Patient Advocacy,

and the chief medical officer for needed improvements. In evaluating

the standards for culturally and linguistically sensitive care, the

director shall establish a process to receive concerns and comments

from consumers.

(c) The director shall pursue available federal financial

participation for the provision of a language services program that

supports the system's goals.

140605. 

(a) Within the agency, the commissioner shall establish

the Office of Health Care Quality.

(b) The office shall be headed by the chief medical officer who

shall serve pursuant to provisions of subdivisions (c), (d), and (e)

of Section 140100 and subdivisions (j) and (k) of Section 140101

regarding qualifications for appointed officers of the system.

(c) The purpose of the Office of Health Care Quality is the

following:

(1) Support the delivery of high quality, coordinated health care

services that enhance health; prevent illness, disease, and

disability; slow the progression of chronic diseases; and improve

personal health management.

(2) Promote efficient care delivery.

(3) Establish processes for measuring, monitoring, and evaluating

the quality of care delivered in the system, including the

performance of individual health care providers.

(4) Establish means to make changes needed to improve health care

quality, including innovative programs that improve quality.

(5) Promote patient, health care provider, and employer

satisfaction with the system.

(6) Assist regional planning directors and medical officers in the

development and evaluation of regional operating and capital budget

requests.

140606. 

(a) In supporting the goals of the Office of Health Care

Quality, the chief medical officer shall do all of the following:

(1) Administer all aspects of the office.

(2) Serve on the Healthcare Policy Board.

(3) Collaborate with regional medical officers, regional planning

directors, health care providers, consumers, the Director of the

Office of Health Planning, the patient advocate of the Office of

Patient Advocacy, and directors of Partnerships for Health to develop

community-based networks of solo providers, small group practices,

essential community providers, and providers of patient care support

services in order to offer comprehensive, multidisciplinary,

coordinated services to patients.

(4) Establish standards of care based on clinical efficacy for the

system that shall serve as guidelines to support health care

providers in the delivery of high quality care. Standards shall be

based on the best evidence available at the time and shall be

continually updated. Standards are intended to support the clinical

judgment of individual health care providers, not to replace it, and

to support clinical decisions based on the needs of individual

patients.

(b) In establishing standards, the chief medical officer shall do

all of the following:

(1) Draw on existing standards established by California health

care institutions, on peer-created standards, and on standards

developed by other institutions that have had a positive impact on

care quality, such as the Centers for Disease Control and Prevention,

the National Quality Forum, and the Agency for Health Care Quality

and Research.

(2) Collaborate with regional medical officers in establishing

regional goals, priorities, and a timetable for implementation of

standards of care.

(3) Assure a process for patients to provide their views on

standards of care to the patient advocate of the Office of Patient

Advocacy who shall report those views to the chief medical officer.

(4) Collaborate with the Director of the Office of Health Planning

and regional medical officers to support the development of computer

software systems that link clinical guidelines to individual patient

conditions, guide clinicians through diagnosis and treatment

algorithms based on research and best medical practices based on

clinical efficacy, offer access to guidelines appropriate to each

medical specialty and to current information on disease prevention

and treatment, and that support continuing medical education.

(5) Where referral processes for access to specialty care are in

place prior to the initiation of the system, the chief medical

officer shall review the referral processes to assure that they meet

the system's standards for care quality and shall ensure that needed

changes are implemented, so that all Californians receive the same

standards of care quality.

(c) In collaboration with the Director of the Office of Health

Planning and regional medical officers, the chief medical officer

shall implement means to measure and monitor the quality of care

delivered in the system. Monitoring systems shall include, but shall

not be limited to, peer and patient performance reviews.

(d) The chief medical officer shall establish means to support

individual health care providers and health systems in correcting

quality of care problems, including timeframes for making needed

improvements and means to evaluate the effectiveness of

interventions.

(e) In collaboration with regional medical officers, regional

planning directors, and the Director of the Office of Health

Planning, the chief medical officer shall establish means to identify

medical errors and their causes and develop plans to prevent them.

Means shall include a process for anonymous reporting of errors and

guidelines to protect those who report the errors against

recrimination, including job demotion, promotion discrimination, or

job loss.

(f) The chief medical officer shall convene an annual statewide

conference to discuss medical errors that occurred during the year,

their causes, means to prevent errors, and the effectiveness of

efforts to decrease errors.

(g) The chief medical officer shall recommend to the commissioner

a benefits package based on clinical efficacy for the system,

including priorities for needed benefit improvements. In making

recommendations, the chief medical officer shall do all of the

following:

(1) Identify safe and effective treatments.

(2) Evaluate and draw on existing benefit packages.

(3) Receive comments and recommendations from health care

providers about benefits that meet the needs of their patients.

(4) Receive comments and recommendations made directly by patients

or indirectly through the Office of Patient Advocacy.

(5) Identify and recommend to the commissioner and the Healthcare

Policy Board innovative approaches to health promotion, disease and

injury prevention, education, research, and care delivery for

possible inclusion in the benefit package.

(6) Identify complementary and alternative modalities that have

been shown by the National Institutes of Health, Division of

Complementary and Alternative Medicine to be safe and effective for

possible inclusion as covered benefits.

(7) Recommend to the commissioner and update as appropriate,

pharmaceutical and durable and nondurable medical equipment

formularies based on clinical efficacy. In establishing the

formularies, the chief medical officer shall establish a Pharmacy and

Therapeutics Committee composed of pharmacy and health care

providers, representatives of health facilities and organizations

having system formularies in place at the time the system is

implemented, and other experts that shall do all the following:

(A) Identify safe and effective pharmaceutical agents for use in

the system.

(B) Draw on existing standards and formularies.

(C) Identify experimental drugs and drug treatment protocols for

possible inclusion in the formulary.

(D) Review formularies in a timely fashion to ensure that safe and

effective drugs are available and that unsafe drugs are removed from

use.

(E) Assure the timely dissemination of information needed to

prescribe safely and effectively to all California health care

providers and the development and utilization of electronic

dispensing systems that decrease pharmaceutical dispensing errors.

(8) Establish standards and criteria and a process for health care

providers to seek authorization for prescribing pharmaceutical

agents and durable and nondurable medical equipment that are not

included in the system's formulary. No standard or criteria shall

impose an undue administrative burden on patients or health care

providers, including pharmacies and pharmacists, and none shall delay

care a patient needs.

(9) Develop standards and criteria and a process for health care

providers to request authorization for services and treatments,

including experimental treatments that are not included in the system'

s benefit package.

(A) Where such processes are in place when the system is

initiated, the chief medical officer shall review those processes to

ensure that they meet the system's standards for care quality and

shall ensure that needed changes are implemented so that all

Californians receive the same standards of care quality.

(B) No standard or criteria shall impose an undue administrative

burden on a health care provider or a patient and none shall delay

the care a patient needs.

(10) In collaboration with the Director of the Office of Health

Planning, regional planning directors and regional medical officers,

identify on a regional basis appropriate ratios of general medical

providers to specialty medical providers and appropriate ratios of

medical providers to patients in order to meet the health care needs

of the population and the goals of the system.

(11) Recommend to the commissioner and to the Payments Board,

financial and nonfinancial incentives and other means to achieve

recommended provider ratios.

(12) Collaborate with the Director of the Office of Health

Planning and regional medical officers and patient advocates in the

development of electronic initiatives, pursuant to Section 140603.

(13) Collaborate with the commissioner, the regional medical

officers, and the directors of the Payments Board and the Healthcare

Fund to formulate a health care provider reimbursement model that

promotes the delivery of coordinated, high quality health care

services in all sectors of the system and creates financial and other

incentives for the delivery of high quality health care.

(14) Establish or assure the establishment of continuing medical

education programs about advances in the delivery of high quality

health care.

(15) Annually report to the commissioner, the Healthcare Policy

Board, and the public on the quality of health care delivered in the

system, including improvements that have been made and problems that

have been identified during the year, goals for care improvement in

the coming year, and plans to meet these goals.

(h) No person working within the agency or a member of the

Pharmacy and Therapeutics Committee or serving as a consultant to the

agency or to the Pharmacy and Therapeutics Committee, may receive

fees or remuneration of any kind from a pharmaceutical company.

140607. 

(a) The patient advocate of the Office of Patient

Advocacy, in collaboration with the chief medical officer, the

regional patient advocates, medical officers, and planning directors

shall establish a program in the agency and in each region called the

Partnerships for Health.

(b) The purpose of the Partnerships for Health is to improve

health through community health initiatives, to support the

development of innovative means to improve health care quality, to

promote efficient coordinated care delivery, and to educate the

public about the following:

(1) Personal maintenance of health.

(2) Prevention of disease.

(3) Improvement in communication between patients and providers.

(4) Improving quality of care.

(c) The patient advocate shall work with the community and health

care providers in proposing Partnerships for Health projects and in

developing project budget requests that shall be included in the

regional budget request to the commissioner.

(d) In developing educational programs, the Partnerships for

Health shall collaborate with educators in the region.

(e) Partnerships for Health shall support the coordination of

system and public health programs.

140610. 

(a) The patient advocate of the Office of Patient

Advocacy, in consultation with the chief medical officer, shall

establish a grievance system for all grievances involving the delay,

denial, or modification of health care services. The patient advocate

shall do all of the following with regard to the grievance regarding

delay, denial, or modification of health care services:

(1) Establish and maintain a grievance system approved by the

commissioner under which enrollees of the system may submit their

grievances to the system. The system shall provide reasonable

procedures that shall ensure adequate consideration of enrollee

grievances and rectification when appropriate.

(2) Inform enrollees upon enrollment in the system and annually

hereafter of the procedure for processing and resolving grievances.

The information shall include the location and telephone number where

grievances may be submitted.

(3) Provide printed and electronic access for enrollees who wish

to register grievances. The forms used by the system shall be

approved by the commissioner in advance as to format.

(4)

(A) Provide for a written acknowledgment within five calendar

days of the receipt of a grievance. Grievances received by telephone,

by facsimile, by e-mail, or online through the system's Internet Web

site that are resolved by the next business day following receipt

are exempt from the requirements of this subparagraph and paragraph

(5). The acknowledgment shall advise the complainant of the

following:

(i) That the grievance has been received.

(ii) The date of receipt.

(iii) The name, telephone number, and address of the system

representative who may be contacted about the grievance.

(B) The patient advocate shall maintain a log of all grievances.

The log shall be periodically reviewed by the patient advocate and

shall include the following information for each complaint:

(i) The date of the call.

(ii) The name of the enrollee.

(iii) The enrollee's system identification number.

(iv) The nature of the grievance.

(v) The nature of the resolution.

(vi) The name of the system representative who took the call and

resolved the grievance.

(5) Provide enrollees of the system with written responses to

grievances, with a clear and concise explanation of the reasons for

the system's response. The system response shall describe the

criteria used and the clinical reasons for its decision, including

all criteria and clinical reasons related to medical necessity.

(6) Keep in its files copies of all grievances, and the responses

thereto, for a period of five years.

(7) Establish and maintain an Internet Web site that shall provide

an online form that enrollees of the system can use to file with a

grievance online.

(b) In any case determined by the patient advocate to be a case

involving an imminent and serious threat to the health of the

enrollee, including, but not limited to, severe pain or the potential

loss of life, limb, or major bodily function, or in any other case

where the patient advocate determines that an earlier review is

warranted, an enrollee shall not be required to complete the grievance process.

(c) If the enrollee is a minor, or is incompetent or

incapacitated, the parent, guardian, conservator, relative, or other

designee of the enrollee, as appropriate, may submit the grievance to

the patient advocate as a designated agent of the enrollee. Further,

a health care provider may join with, or otherwise assist, an

enrollee, or the agent, to submit the grievance to the patient

advocate. In addition, following submission of the grievance to the

patient advocate, the enrollee, or the agent, may authorize the

health care provider to assist, including advocating on behalf of the

enrollee. For purposes of this section, a "relative" includes the

parent, stepparent, spouse, domestic partner, adult son or daughter,

grandparent, brother, sister, uncle, or aunt of the enrollee.

(d) The patient advocate shall review the written documents

submitted with the enrollee's grievance. The patient advocate may ask

for additional information, and may hold an informal meeting with

the involved parties, including health care providers who have joined

in submitting the grievance or who are otherwise assisting or

advocating on behalf of the enrollee. If after reviewing the record,

the patient advocate concludes that the grievance, in whole or in

part, is eligible for review under the independent medical review

system, the patient advocate shall immediately notify the enrollee of

that option and shall, if requested orally or in writing, assist the

enrollee in participating in the independent medical review system.

(e) The patient advocate shall send a written notice of the final

disposition of the grievance, and the reasons therefor, to the

enrollee, to any health care provider that has joined with or is

otherwise assisting the enrollee, and to the commissioner within 30

calendar days of receipt of the grievance, unless the patient

advocate, in his or her discretion, determines that additional time

is reasonably necessary to fully and fairly evaluate the grievance.

In any case not eligible for independent medical review, the patient

advocate's written notice shall include, at a minimum, the following:

(1) A summary of findings and the reasons why the patient advocate

found the system to be, or not to be, in compliance with any

applicable laws, regulations, or orders of the commissioner.

(2) A discussion of the patient advocate's contact with any health

care provider, or any other independent expert relied on by the

patient advocate, along with a summary of the views and

qualifications of that health care provider or expert.

(3) If the enrollee's grievance is sustained in whole or in part,

information about any corrective action taken.

(f) The patient advocate's order shall be binding on the system.

(g) The patient advocate shall establish and maintain a system of

aging of grievances that are pending and unresolved for 30 days or

more that shall include a brief explanation of the reasons each

grievance is pending and unresolved for 30 days or more.

(h) The grievance or resolution procedures authorized by this

section shall be in addition to any other procedures that may be

available to any person, and failure to pursue, exhaust, or engage in

the procedures described in this section shall not preclude the use

of any other remedy provided by law.

(i) Nothing in this section shall be construed to allow the

submission to the patient advocate of any health care provider

grievance under this section. However, as part of a health care

provider's duty to advocate for medically appropriate health care for

his or her patients pursuant to Sections 510 and 2056 of the

Business and Professions Code, nothing in this subdivision shall be

construed to prohibit a health care provider from contacting and

informing the patient advocate about any concerns he or she has

regarding compliance with or enforcement of this division.

140612. 

(a) The patient advocate shall establish an independent

medical review system to act as an independent, external medical

review process for the system to provide timely examinations of

disputed health care services and coverage decisions regarding

experimental and investigational therapies to ensure the system

provides efficient, appropriate, high quality health care, and that

the system is responsive to enrollee disputes.

(b) For the purposes of this section, "disputed health care

service" means any health care service eligible for coverage and

payment under the system that has been denied, modified, or delayed

by a decision of the system, or by one of its contracting health care

providers, in whole or in part due to a finding that the service is

not medically necessary. A decision regarding a disputed health care

service relates to the practice of medicine and is not a coverage

decision. If the system, or one of its contracting providers, issues

a decision denying, modifying, or delaying health care services,

based in whole or in part on a finding that the proposed health care

services are not a covered benefit under the system, the statement of

decision shall clearly specify the provisions of the system that

exclude coverage.

(c) For the purposes of this section, "coverage decision" means

the approval or denial of the system, or by one of its contracting

entities, substantially based on a finding that the provision of a

particular service is included or excluded as a covered benefit under

the terms and conditions of the system.

(d) Coverage decisions regarding experimental or investigational

therapies for individual enrollees who meet all of the following

criteria are eligible for review by the independent medical review

system:

(1)

(A) The enrollee has a life-threatening or seriously

debilitating condition.

(B) For purposes of this section, "life-threatening" means either

or both of the following:

(i) Diseases or conditions where the likelihood of death is high

unless the course of the disease is interrupted.

(ii) Diseases or conditions with potentially fatal outcomes, where

the end point of clinical intervention is survival.

(C) For purposes of this section, "seriously debilitating" means

diseases or conditions that cause major irreversible morbidity.

(2) The enrollee's physician certifies that the enrollee has a

condition, as defined in paragraph (1), for which standard therapies

have not been effective in improving the condition of the enrollee,

for which standard therapies would not be medically appropriate for

the enrollee, or for which there is no more beneficial standard

therapy covered by the system than the therapy proposed pursuant to

paragraph (3).

(3) Either

(A) the enrollee's physician, who is under contract

with the system, has recommended a drug, device, procedure, or other

therapy that the physician certifies in writing is likely to be more

beneficial to the enrollee than any available standard therapies, or

(B) the enrollee, or the enrollee's physician who is a licensed,

board-certified or board-eligible physician qualified to practice in

the area of practice appropriate to treat the enrollee's condition,

has requested a therapy that, based on two documents from the medical

and scientific evidence, is likely to be more beneficial for the

enrollee than any available standard therapy. The physician

certification pursuant to this section shall include a statement of

the evidence relied upon by the physician in certifying his or her

recommendation. Nothing in this subdivision shall be construed to

require the system to pay for the services of a nonparticipating

physician provided pursuant to this division, that are not otherwise

covered pursuant to the system's benefits package.

(4) The enrollee has been denied coverage by the system for a

drug, device, procedure, or other therapy recommended or requested

pursuant to paragraph (3).

(5) The specific drug, device, procedure, or other therapy

recommended pursuant to paragraph (3) would be a covered service,

except for the system's determination that the therapy is

experimental or investigational.

(e)

(1) All enrollee grievances involving a disputed health care

service are eligible for review under the independent medical review

system if the requirements of this section are met. If the patient

advocate finds that a grievance involving a disputed health care

service does not meet the requirements of this section for review

under the independent medical review system, the enrollee's grievance

shall be treated as a request for the patient advocate to review the

grievance. All other enrollee grievances, including grievances

involving coverage decisions, remain eligible for review by the

patient advocate.

(2) In any case in which an enrollee or health care provider

asserts that a decision to deny, modify, or delay health care

services was based, in whole or in part, on consideration of medical

appropriateness, the patient advocate shall have the final authority

to determine whether the grievance is more properly resolved pursuant

to an independent medical review as provided under this section.

(3) The patient advocate shall be the final arbiter when there is

a question as to whether an enrollee grievance is a disputed health

care service or a coverage decision. The patient advocate shall

establish a process to complete an initial screening of an enrollee

grievance. If there appears to be any medical appropriateness issue,

the grievance shall be resolved pursuant to an independent medical

review.

(f) For purposes of this chapter, an enrollee may designate an

agent to act on his or her behalf. The agent may join with or

otherwise assist the enrollee in seeking an independent medical

review, and may advocate on behalf of the enrollee.

(g) The independent medical review process authorized by this

section is in addition to any other procedures or remedies that may

be available.

(h) The Office of Patient Advocacy shall prominently display in

every relevant informational brochure, on copies of the system's

procedures for resolving grievances, on letters of denials issued by

either the system or its contracting providers, on the grievance

forms, and on all written responses to grievances, information

concerning the right of an enrollee to request an independent medical

review in cases where the enrollee believes that health care

services have been improperly denied, modified, or delayed by the

system, or by one of its contracting providers.

(i) An enrollee may apply to the patient advocate for an

independent medical review when all of the following conditions are

met:

(1)

(A) The enrollee's health care provider has recommended a

health care service as medically appropriate.

(B) The enrollee has received urgent care or emergency services

that a health care provider determined was medically appropriate.

(C) The enrollee seeks coverage for experimental or

investigational therapies.

(D) The enrollee, in the absence of a health care provider

recommendation under subparagraph (A) or the receipt of urgent care

or emergency services by a health care provider under subparagraph

(B), has been seen by a system health care provider for the diagnosis

or treatment of the medical condition for which the enrollee seeks

independent review. The system shall expedite access to a system

health care provider upon request of an enrollee. The system health

care provider need not recommend the disputed health care service as

a condition for the enrollee to be eligible for an independent

medical review.

(2) The disputed health care service has been denied, modified, or

delayed by the system, or by one of its contracting providers, based

in whole or in part on a decision that the health care service is

not medically appropriate.

(3) The enrollee has filed a grievance with the patient advocate

and the disputed decision is upheld or the grievance remains

unresolved after 30 days. The enrollee shall not be required to

participate in the system's grievance process for more than 30 days.

In the case of a grievance that requires expedited review, the

enrollee shall not be required to participate in the system's

grievance process for more than three days.

(j) An enrollee may apply to the patient advocate for an

independent medical review of a decision to deny, modify, or delay

health care services, based in whole or in part on a finding that the

disputed health care services are not medically appropriate, within

six months of any of the qualifying periods or events. The patient

advocate may extend the application deadline beyond six months if the

circumstances of a case warrant the extension.

(k) The enrollee shall pay no application or processing fees of

any kind.

(l) Upon notice from the patient advocate that the enrollee has

applied for an independent medical review, the system or its

contracting providers shall provide to the independent medical review

organization designated by the patient advocate a copy of all of the

following documents within three business days of the system's

receipt of the patient advocate's notice of a request by an enrollee

for an independent medical review:

(1)

(A) A copy of all of the enrollee's medical records in the

possession of the system or its contracting providers relevant to

each of the following:

(i) The enrollee's medical condition.

(ii) The health care services being provided by the system and its

contracting providers for the condition.

(iii) The disputed health care services requested by the enrollee

for the condition.

(B) Any newly developed or discovered relevant medical records in

the possession of the system or its contracting providers after the

initial documents are provided to the independent medical review

organization shall be forwarded immediately to the independent

medical review organization. The system shall concurrently provide a

copy of medical records required by this subparagraph to the enrollee

or the enrollee's health care provider, if authorized by the

enrollee, unless the offer of medical records is declined or

otherwise prohibited by law. The confidentiality of all medical

record information shall be maintained pursuant to applicable state

and federal laws.

(2) A copy of all information provided to the enrollee by the

system and any of its contracting providers concerning their

decisions regarding the enrollee's condition and care, and a copy of

any materials the enrollee or the enrollee's health care provider

submitted to the system and to the system's contracting providers in

support of the enrollee's request for disputed health care service.

This documentation shall include the written response to the enrollee'

s grievance. The confidentiality of any enrollee medical information

shall be maintained pursuant to applicable state and federal laws.

(3) A copy of any other relevant documents or information used by

the system or its contracting providers in determining whether

disputed health care services should have been provided, and any

statements by the system and its contracting providers explaining the

reasons for the decision to deny, modify, or delay disputed health

care services on the basis of medical necessity. The system shall

concurrently provide a copy of documents required by this paragraph,

except for any information found by the patient advocate to be

legally privileged information, to the enrollee and the enrollee's

health care provider.

   The patient advocate and the independent review organization shall

maintain the confidentiality of any information found by the patient

advocate to be the proprietary information of the system.

140614. 

(a) If there is an imminent and serious threat to the

health of the enrollee, all necessary information and documents shall

be delivered to an independent medical review organization within 24

hours of approval of the request for review. In reviewing a request

for review, the patient advocate may waive the requirement that the

enrollee follow the system's grievance process in extraordinary and

compelling cases, if the patient advocate finds that the enrollee has

acted reasonably.

(b) The patient advocate shall expeditiously review requests and

immediately notify the enrollee in writing as to whether the request

for an independent medical review has been approved, in whole or in

part, and, if not approved, the reasons therefore. The system shall

promptly issue a notification to the enrollee, after submitting all

of the required material to the independent medical review

organization that includes an annotated list of documents submitted

and offer the enrollee the opportunity to request copies of those

documents from the system. The patient advocate shall promptly

approve an enrollee's request whenever the system has agreed that the

case is eligible for an independent medical review. To the extent an

enrollee's request for independent review is not approved by the

patient advocate, the enrollee's request shall be treated as an

immediate request for the patient advocate to review the grievance.

(c) An independent medical review organization shall conduct the

review in accordance with a process approved by the patient advocate.

The review shall be limited to an examination of the medical

necessity of the disputed health care services and shall not include

any consideration of coverage decisions or other issues.

(d) The patient advocate shall contract with one or more

independent medical review organizations in the state to conduct

reviews for purposes of this section. The independent medical review

organizations shall be independent of the system. The patient

advocate may establish additional requirements, including

conflict-of-interest standards, consistent with the purposes of this

section that an organization shall be required to meet in order to

qualify for participation in the independent medical review system

and to assist the patient advocate in carrying out its

responsibilities.

(e) The independent medical review organizations and the medical

professionals retained to conduct reviews shall be deemed to be

medical consultants for purposes of Section 43.98 of the Civil Code.

(f) The independent medical review organization, any experts it

designates to conduct a review, or any officer, patient advocate, or

employee of the independent medical review organization shall not

have any material professional, familial, or financial affiliation,

as determined by the patient advocate, with any of the following:

(1) The system.

(2) Any officer or employee of the system.

(3) A physician, the physician's medical group, or the independent

practice association involved in the health care service in dispute.

(4) The facility or institution at which either the proposed

health care service, or the alternative service, if any, recommended

by the system, would be provided.

(5) The development or manufacture of the principal drug, device,

procedure, or other therapy proposed by the enrollee whose treatment

is under review, or the alternative therapy, if any, recommended by

the system.

(6) The enrollee or the enrollee's immediate family.

(g) In order to contract with the patient advocate for purposes of

this section, an independent medical review organization shall meet

all of the requirements pursuant to subdivision (d) of Section

1374.32.

140616. 

(a) Upon receipt of information and documents related to

a case, the medical professional reviewer or reviewers selected to

conduct the review by the independent medical review organization

shall promptly review all pertinent medical records of the enrollee,

provider reports, as well as any other information submitted to the

organization as authorized by the patient advocate or requested from

any of the parties to the dispute by the reviewers. If reviewers

request information from any of the parties, a copy of the request

and the response shall be provided to all of the parties. The

reviewer or reviewers shall also review relevant information related

to the criteria set forth in subdivision (b).

(b) Following its review, the reviewer or reviewers shall

determine whether the disputed health care service was medically

appropriate based on the specific medical needs of the patient and

any of the following:

(1) Peer-reviewed scientific and medical evidence regarding the

effectiveness of the disputed service.

(2) Nationally recognized professional standards.

(3) Expert opinion.

(4) Generally accepted standards of medical practice.

(5) Treatments likely to provide a benefit to an enrollee for

conditions for which other treatments are not clinically efficacious.

(c) The organization shall complete its review and make its

determination in writing, and in layperson's terms to the maximum

extent practicable, within 30 days of the receipt of the application

for review and supporting documentation, or within less time as

prescribed by the patient advocate. If the disputed health care

service has not been provided and the enrollee's health care provider

or the patient advocate certifies in writing that an imminent and

serious threat to the health of the enrollee may exist, including,

but not limited to, serious pain, the potential loss of life, limb,

or major bodily function, or the immediate and serious deterioration

of the health of the enrollee, the analyses and determinations of the

reviewers shall be expedited and rendered within three days of the

receipt of the information. Subject to the approval of the patient

advocate, the deadlines for analyses and determinations involving

both regular and expedited reviews may be extended by the patient

advocate for up to three days in extraordinary circumstances or for

good cause.

(d) The medical professionals' analyses and determinations shall

state whether the disputed health care service is medically

appropriate. Each analysis shall cite the enrollee's medical

condition, the relevant documents in the record, and the relevant

findings associated with the provisions of subdivision (b) to support

the determination. If more than one medical professional reviews the

case, the recommendation of the majority shall prevail. If the

medical professionals reviewing the case are evenly split as to

whether the disputed health care service should be provided, the

decision shall be in favor of providing the service.

(e) The independent medical review organization shall provide the

patient advocate, the system, the enrollee, and the enrollee's health

care provider with the analyses and determinations of the medical

professionals reviewing the case, and a description of the

qualifications of the medical professionals. The independent medical

review organization shall keep the names of the reviewers

confidential in all communications with entities or individuals

outside the independent medical review organization, except in cases

where the reviewer is called to testify and in response to court

orders. If more than one medical professional reviewed the case and

the result was differing determinations, the independent medical

review organization shall provide each of the separate reviewer's

analyses and determinations.

(f) The patient advocate shall immediately adopt the determination

of the independent medical review organization and shall promptly

issue a written decision to the parties that shall be binding on the

system.

(g) After removing the names of the parties, including, but not

limited to, the enrollee and all medical providers, the patient

advocate's decisions adopting a determination of an independent

medical review organization shall be made available by the patient

advocate to the public upon request, at the patient advocate's cost

and after considering applicable laws governing disclosure of public

records, confidentiality, and personal privacy.

140618. 

(a) Upon receiving the decision adopted by the patient

advocate that a disputed health care service is medically

appropriate, the system shall promptly implement the decision. In the

case of reimbursement for services already rendered, the health care

provider or enrollee, whichever applies, shall be paid within five

working days. In the case of services not yet rendered, the system

shall authorize the services within five working days of receipt of

the written decision from the patient advocate, or sooner if

appropriate for the nature of the enrollee's medical condition, and

shall inform the enrollee and health care provider of the

authorization.

(b) The system shall not engage in any conduct that has the effect

of prolonging the independent medical review process.

(c) The patient advocate shall require the system to promptly

reimburse the enrollee for any reasonable costs associated with those

services when the patient advocate finds that the disputed health

care services were a covered benefit and the services are found by

the independent medical review organization to have been medically

appropriate and the enrollee's decision to secure the services

outside of the system was reasonable under the emergency or urgent

medical circumstances.

140619. 

(a) The patient advocate shall utilize a competitive

bidding process and use any other information on program costs

reasonable to establish a per case reimbursement schedule to pay the

costs of independent medical review organization reviews, which may

vary depending on the type of medical condition under review and on

other relevant factors.

(b) The costs of the independent medical review system for

enrollees shall be borne by the system.

140620.  The patient advocate shall, on a biannual basis, report

to the chief medical officer on the number, types, and outcomes of

all patient grievances relating to the denial, delay, or modification

of health care services.

CHAPTER 7.  OTHER PROVISIONS

140700.  Notwithstanding any other provision of law, the operative

date of this division, other than Article 2 (commencing with Section

140230) of Chapter 3, shall be the date the Secretary of California

Health and Human Services notifies the Secretary of the Senate and

the Chief Clerk of the Assembly that he or she has determined that

the Healthcare Fund will have sufficient revenues to fund the costs

of implementing this division or the date the Secretary of California

Health and Human Services receives the necessary waiver referenced

in Section 140701, whichever is later.

   No state entity shall incur any transition or planning costs prior

to that date. However, this prohibition shall not apply to

activities of the California Healthcare Premium Commission, and

Article 2 (commencing with Section 140230) of Chapter 3 of this

division shall become operative on January 1, 2012.

No table of contents entries found.140701.  The Secretary of California

Health and Human Services shall seek the necessary waiver under

Section 1332 of the federal Patient Protection and Affordable Care

Act (Public Law 111-148) in order for this division to be

implemented, pursuant to Section 140700.

  SEC. 2.   No reimbursement is required by this act pursuant to

Section 6 of Article XIII B of the California Constitution because

the only costs that may be incurred by a local agency or school

district will be incurred because this act creates a new crime or

infraction, eliminates a crime or infraction, or changes the penalty

for a crime or infraction, within the meaning of Section 17556 of the

Government Code, or changes the definition of a crime within the

meaning of Section 6 of Article XIII B of the California

Constitution.

                

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