FINAL REPORT OF ROUTINE EXAMINATION OF CALIFORNIA … · Edmund G. Brown Jr., Governor State of...

Edmund G. Brown Jr., Governor State of California Health and Human Services Agency

980 9th Street, Suite 500 Sacramento, CA 95814 (916) 255-2441 (916) 255-2280 fax [email protected]

June 16, 2016

Greg Buchert, M.D. President and Chief Executive Officer California Health and Wellness Plan 1740 Creekside Oaks Drive Sacramento, CA 95833

FINAL REPORT OF ROUTINE EXAMINATION OF CALIFORNIA HEALTH AND WELLNESS PLAN

Dear Dr. Buchert:

Enclosed is the Final Report of a routine examination of the fiscal and administrative affairs of California Health and Wellness Plan (Plan), conducted by the Department of Managed Health Care (Department), pursuant to Section 1382(a) of the Knox-Keene Health Care Service Plan Act of 1975.1 The Department issued a Preliminary Report to the Plan on March 3, 2016. The Department accepted the Plan’s electronically filed response on April 20, 2016.

This Final Report includes a description of the compliance efforts included in the Plan’s April 20, 2016 response, in accordance with Section 1382(c).

Section 1382(d) states, “If requested in writing by the plan, the director shall append the plan’s response to the final report issued pursuant to subdivision (c). The plan may modify its response or statement at any time and provide modified copies to the department for public distribution not later than 10 days from the date of notification from the department that the final report will be made available to the public. The addendum to the response or statement shall also be made available to the public.”

Please indicate within ten (10) days from the date of the Plan’s receipt of this letter whether the Plan requests the Department to append its response to the Final Report. If so, please indicate which portions of the Plan’s response shall be appended, and electronically file copies of those portions of the Plan’s response excluding information

1 References throughout this report to “Section” are to sections of the Knox-Keene Health Care Service Plan Act of 1975, as codified in the California Health and Safety Code, Section 1340, et seq. References to “Rule” are to the regulations promulgated pursuant to the Knox-Keene Health Care Service Plan Act, found at Chapter 2 of Division 1, Title 28, of the California Code of Regulations, beginning with Section 1300.43.

mailto:[email protected]

Dr. Greg Buchert, President and Chief Executive Officer June 16, 2016 Final Report of Routine Examination Page 2 California Health and Wellness Plan

held confidential pursuant to Section 1382(c). If the Plan requests the Department to append a brief statement summarizing the Plan’s response to the Report or wishes to modify any information provided to the Department in its April 20, 2016 response, please provide the electronically filed documentation no later than ten (10) days from the date of the Plan’s receipt of this letter through the eFiling web portal. Please file this addendum electronically via the Corrective Action Plan system (CAP system) within the Online Forms Section of the Department's eFiling web portal https://wpso.dmhc.ca.gov/secure/login/, as follows:

• From the main menu, select “eFiling”. • From the eFiling (Home) menu, select “Online Forms”. • From the Existing Online Forms menu click on the “Details” for the DFO

Corrective Action Plan S16-R-493 • Go to the “Messages” tab

o Select “Addendum to Final Report” (note this option will only be available for 10 days after the Final Report has been issued)

o Select the deficiency(ies) that are applicableo Create a message for the Departmento Attach and Upload all documents with the name “Addendum to Final

Report”o Select “Send Message”

The Department finds the Plan’s compliance efforts are responsive to the deficiencies cited and the corrective actions required. Therefore, no further response is required.

Questions or problems related to the electronic transmission of the response should be directed to Susan Levitt at (916) 255-2443 or email at [email protected]. You may also email inquiries to [email protected].

The Department will make the attached Final Report available to the public in ten (10) days from the Plan’s receipt of this letter through the eFiling system. TheReport will be located at the Department’s web site at View Financial ExaminationReports.

mailto:[email protected]:[email protected]://wpso.dmhc.ca.gov/secure/login


If there are any questions regarding this Report, please contact me.

Sincerely,

ORIGINAL SIGNED BY

Bill Chang, CPA Supervising Examiner Office of Financial Review Division of Financial Oversight

cc: Gelmy Ruiz, Manager Compliance & Reporting, California Health and Wellness Plan Gil Riojas, Deputy Director, Office of Financial Review Sang Le, Examiner IV (Supervisor), Division of Financial Oversight John Yin, Examiner, Division of Financial Oversight Evan Lo, Examiner, Division of Financial Oversight Jonathon Williams, Attorney, Office of Plan Licensing Laura Dooley-Beile, Chief, Division of Plan Surveys Dan Southard, Health Program Manager III, Help Center Paula Hood, Staff Services Manager I, Help Center

STATE OF CALIFORNIA DEPARTMENT OF MANAGED HEALTH CARE

DIVISION OF FINANCIAL OVERSIGHT

FINAL REPORT OF ROUTINE EXAMINATION

OF

CALIFORNIA HEALTH AND WELLNESS PLAN

FILE NO. 933-0493

DATE OF FINAL REPORT: JUNE 16, 2016

SUPERVISING EXAMINER: BILL CHANG

OVERSIGHT EXAMINER: SANG LE

EXAMINER-IN-CHARGE: JOHN YIN

FINANCIAL EXAMINERS: TOM CHAN

GETACHEW TAREKE

SULLY WONG-GUERRERO

BACKGROUND INFORMATION FOR CALIFORNIA HEALTH AND WELLNESS

Date Plan Licensed: October 2, 2013.

Organizational Structure: California Health and Wellness Plan (Plan) is a wholly owned subsidiary of Centene Corporation, a publicly traded company. The Plan was incorporated for the purpose of providing comprehensive Medi-Cal managed healthcare services to the California market.

Type of Plan: Full service health care service plan.

Provider Network: The Plan contracts with its affiliate, Celtic Insurance Company, for a provider network. Physicians and the Independent Physician Association services are compensated on a fee-for-service basis. Hospital services are compensated on a per diem basis and/or fee-for-service basis. Pharmaceutical services are compensated on a fee-for-service basis. The Plan compensates Opticare Vision Company on a fee-for-service basis plus administrative service fees. Ancillary and specialty providers are compensated on a fee-for-service basis. Non-contracting providers are compensated on a fee-for-service or per diem basis.

Plan Enrollment: As of September 30, 2015, the Plan reported 183,337 enrollees. All Plan enrollees are Medi-Cal.

Service Area: Alpine, Amador, Butte, Calaveras, Colusa, El Dorado, Glenn, Imperial, Inyo, Mariposa, Mono, Nevada, Placer, Plumas, Sierra, Sutter, Tehama, Tuolumne, and Yuba County.

Date of last Final Report This is the first Routine Examination of the Plan. of Routine Examination:

FINAL REPORT OF A ROUTINE EXAMINATION OF CALIFORNIA HEALTH AND WELLNESS

This is the Final Report of a routine examination of the fiscal and administrative affairs of California Health and Wellness (Plan), conducted by the Department of Managed Health Care (Department) pursuant to Section 1382(a) of the Knox-Keene Health Care Service Plan Act of 1975.1 The Department issued a Preliminary Report to the Plan on March 3, 2016. The Department accepted the Plan’s electronically filed response on April 20, 2016.

This Final Report includes a description of the compliance efforts included in the Plan’s April 20, 2016 response to the Preliminary Report, in accordance with Section 1382(c). The Plan’s response is noted in italics.

The Plan is hereby advised that any violations listed in this report may be referred to the Office of Enforcement for appropriate administrative action upon the issuance of this report.

The Department examined the Plan’s financial report filed with the Department for the quarter ended September 30, 2015 as well as other selected accounting records and controls related to the Plan’s various fiscal and administrative transactions. The Department’s findings are presented in this Report as follows:

Section I. Financial Statements Section II. Calculation of Tangible Net Equity Section III. Compliance Issues Section IV. Non-Routine Examination

The Department finds the Plan’s compliance efforts are responsive to the deficiencies cited and the corrective actions required. Therefore, no further response is required.

1 References throughout this report to “Section” are to sections of the Knox-Keene Health Care Service Plan Act of 1975, as codified in the California Health and Safety Code, Section 1340, et seq. References to “Rule” are to the regulations promulgated pursuant to the Knox-Keene Health Care Service Plan Act, found at Chapter 2 of Division 1, Title 28, of the California Code of Regulations, beginning with Section 1300.43.


Net Worth as reported by the Plan as of quarter ended September 30, 2015 $50,989,280

Required TNE 23,282,025

TNE Excess per Examination $27,707,255

SECTION I. FINANCIAL REPORT

The Department’s examination did not result in any adjustments or reclassifications to the Plan’s financial statements for the quarter ended September 30, 2015, as filed with the Department. A copy of the Plan’s financial statements can be viewed at the Department’s website by typing the link http://wpso.dmhc.ca.gov/fe/search/#top and selecting California Health & Wellness Plan on the second drop down menu.

No response was required to this Section.

SECTION II. CALCULATION OF TANGIBLE NET EQUITY (TNE)

The Plan is in compliance with the TNE requirement of Section 1376 and Rule 1300.76 as of September 30, 2015.

No response was required to this Section.

SECTION III. COMPLIANCE ISSUES

A. CLAIM SETTLEMENT PRACTICES

1. INTEREST AND PENALTY ON LATE PAID EMERGENCY ROOM (ER) CLAIMS

Section 1371 requires a health care service plan to reimburse uncontested claims no later than 45 working days after the date of receipt of the claim by the plan. This section also requires that if an uncontested claim is not reimbursed within 45 working days after receipt, interest shall accrue at the rate of 15 percent per annum beginning with the first calendar day after the 45 working day period.

Section 1371 and Rules 1300.71 (i) and (j) require that all interest that has accrued shall be automatically included in the claim payment. The penalty for failure to comply with this requirement shall be a fee of ten ($10) dollars paid to the claimant.

Section 1371.35 and Rule 1300.71(i)(1), which refer to claims for emergency services, require that if an uncontested claim is not reimbursed within 45 working days after receipt by a health care service plan, the plan shall pay the greater of fifteen ($15) dollars for each 12-month period or portion thereof on a non-prorated basis, or interest at the rate of 15 percent per

http://wpso.dmhc.ca.gov/fe/search/#top


annum, beginning with the first calendar day after the 45 working day period. The penalty for failure to comply with this requirement shall be a fee of ten ($10) dollars paid to the claimant.

Rule 1300.71 (a)(5) provides that “Date of payment” means the date of post mark or electronic mark accurately setting forth the date when the payment was electronically transmitted or deposited in the U.S. Mail or another mail or delivery service, correctly addressed to the claimant’s office or other address of record.

Rule 1300.71(a)(8)(K) describes one unfair payment pattern as the failure to reimburse at least 95 percent of complete claims with the correct payment including the automatic payment of all interest and penalties due and owing over the course of any three month period.

The Department’s examination disclosed that the Plan did not pay interest and penalty on ER claims correctly. Section 1371.35 and Rule 1300.71(i)(1) require the Plan to pay the greater of fifteen ($15) dollars or interest at the rate of 15 percent per annum. The penalty for not paying the correct amount of interest due shall be a fee of ten ($10) dollars paid to the claimant. The Plan initially paid calculated interest amounts that were less than fifteen ($15) dollars for late paid ER claims. The Plan subsequently made an adjustment and paid the fifteen ($15) dollars ER interest amount. Since the initial interest payment was either not paid or underpaid, the ten ($10) dollar penalty was applied. When the Plan made the subsequent adjustment to pay additional interest, it should have paid the fifteen ($15) dollars minus the interest amount that was previously paid plus the ten ($10) dollar penalties.

Underpayments of ER interests and penalties were found in the following samples:

a. For the three month period ended September 30, 2015, four (4) of the 50 late paid claim samples reviewed had ER interest or penalties that were underpaid (a compliance rate of 92 percent). The underpayment of interest was found in the Late Paid Claim Samples numbers LP-14, LP-17, LP-33, and LP-46.

b. For the period of November 1, 2013 to September 30, 2015, six (6) of the 50 late paid claim samples reviewed had ER interest or penalties that were underpaid (a compliance rate of 88 percent). The underpayment of interest or penalties was found in Late Paid Claim Samples numbers LP-15, LP-24, LP-30, LP-34, LP-35, and LP-36.

The Plan was required to submit a detailed Corrective Action Plan (CAP) to bring the Plan into compliance with the above Sections and Rules that should include, but not be limited to, the following:

a. Identification of all late ER claims processed from November 1, 2013 (date the Plan began operation) through the date corrective action has been implemented by the Plan, where ER interest and penalties were not paid or underpaid.


b. Evidence that ER interest and penalties, as appropriate, were paid retroactively for theclaims identified in paragraph “a” above. This evidence was to include an electronic datafile/schedule (Excel or dBase) that identified the following:

• Claim number • PDR tracking number (if resulted from PDR process) • Date of service • Date original claim received • Date new information received (date claim was complete) • Date of receipt of complete claim • Total billed • Original total paid • Original paid date • Amount of adjustment paid (with check number) • Date adjustment paid/mailed • Amount of original interest paid • Original interest paid date • Number of days used to calculate interest • Amount of additional interest paid (with formula) • Amount of additional interest paid in remediation (total interest owed minus

previous interest paid) • Penalty amount paid • Date additional interest and penalty paid • Check number for additional interest and/or penalty • Provider name • ER or Non-ER indicator

The data file was to provide the detail of all claims remediated, including the total number of claims and the total additional interest and penalty paid as a result of remediation.

c. Policies and procedures implemented to ensure that the payment of all late adjusted ERclaims include interest and penalties, if applicable, in compliance with the above Sectionsand Rules.

d. Date the policies and procedures were implemented and the management positionresponsible for overseeing the CAP and ensuring continued compliance.

The Plan responded that it has undertaken the following steps in connection with this deficiency as follows:

Requirement a.: 1. The Plan conducted a review of all uncontested late paid ER claims processed after

45 working days beginning on November 1, 2013 through December 31, 2015 to


determine complete reimbursement of interest and penalty payments, and to assess the extent to which interest and penalties were either not paid or underpaid.

2. The Plan undertook this review by taking the following steps: a. The Data Analytics team completed claims data extraction of Emergency

Department services processed for 2013 through December 31, 2015. b. All claims were evaluated to determine if interest was due by calculating the

number of days between the date the claim was complete (clean) and the date the claim was originally paid.

c. A comparison analysis of actual interest paid for each late claim to the interest due on the claim was completed on April 12, 2016.

d. The Manager of Data Analytics & Reporting provided a final claims adjustment spreadsheet for claim dates from November 1, 2013 through December 31, 2015 that identified those claims in which interest was underpaid and the $10 penalty should be applied. The spreadsheet was submitted as an attachment to the Plan’s response.

e. The Senior Director of Operations and the Claims Implementation Analyst reviewed the analysis and validated the accuracy of the methodology used in compiling the report.

3. On December 10, 2015 a claims system configuration was performed to automatically apply the interest to all late paid ER claims. The update was necessary to calculate the greater of fifteen ($15) dollars for each 12 month period or portion thereof on a non-prorated basis, or interest at the rate of 15 percent per annum, beginning with the first calendar day after the 45 working day period.

4. The Plan will continue to monitor the efficacy of this December 10, 2015 system update to ensure that timely payment and processing occurs. Further, the Plan will conduct ongoing monitoring of the system to ensure other necessary updates are put in place to ensure timely and accurate payments of interest and penalties.

5. The Plan has created a policy and procedure, Claims Processing and Payment Overview (CPCO), to include the requirement to pay the $10 penalty for failure to automatically include the interest due on a late claim payment. A policy and procedure was submitted with Plan’s response.

6. The Plan has conducted training on this policy change to ensure a full understanding of the applicable California standards. Training was conducted on January 26, 2016.

Requirement b.: The Plan provided a spreadsheet containing the identified claims, which includes evidence that ER interest and penalties, as appropriate, will be processed retroactively for the claims identified. Plan submitted with its response a spreadsheet ER Interest and Penalties Report showing that it has remediated 38,184 claims with additional interest


payment of $530,945.41 and penalty of $381,840.00, or a total remediation of $912,785.41.

Requirement c.: The Plan has created a policy and procedure to address this deficiency. Plan submitted with its response a policy and procedure, CPCO, that states that interest for ER claims is to be applied at the greater of fifteen ($15) dollars for each 12 month period or portion thereof on a non-prorated basis, or interest at the rate of 15 percent per annum, beginning with the first calendar day after the 45 working day period.

Requirement d.: CPCO was approved and became effective on April 11, 2016. The management person responsible for overseeing the CAP and ensuring continued compliance is the Senior Director of Operations, and the claims team.

Requirement e.: The Plan submitted with its response a work plan report. The Plan will validate the established fix by conducting a bi-monthly review of Late ER claims to ensure systems are properly calculating interest and applying the penalty when applicable.

The Department finds that the Plan’s compliance effort is responsive to the corrective action required. Therefore, no further response is required.

2. INCORRECT CLAIM DENIALS

Rule 1300.71(d)(1) states that a plan shall not improperly deny, adjust, or contest a claim. For each claim that is denied, adjusted or contested, the plan shall provide an accurate and clear written explanation of the specific reasons for the action taken.

The Department’s examination disclosed that two (2) out of 30 claims in the “High Dollar Claims Samples” reviewed were improperly denied. The deficiencies were noted in samples HD-7, and HD-10. Both claims had a number of specific authorization days for Day of Service (DOS). The Plan denied these claims because the provider’s bill did not match the Plan’s authorization records for the authorized days. The Plan should have paid the authorized days and denied the remaining days instead of denying the claim entirely.

The Plan was required to submit a CAP to address the deficiency cited above. The CAP was to include evidence that the above claims have been paid with interest and penalties, as appropriate. The CAP also was to include policies and procedures implemented to ensure compliance with the above Rule. The Plan was to state the date of implementation of the corrective action, the management position(s) responsible for ensuring compliance and the controls implemented for monitoring continued compliance.

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The Plan responded that it has undertaken the following steps in connection with this Required Action:

1. The Plan submitted with its response an Excel document that shows evidence of High Dollar Samples HD-7 and HD-10 being reprocessed based on authorized days and full payment of these claims were made during January and February, 2016 for HD-7 and HD-10 totaling $211,953.20.

2. To correct this deficiency, the Plan updated its Claims Processing Guidelines to reimburse providers according to days authorized.

3. The Plan conducted training on this policy change on January 26, 2016.


3. ACCURATE WRITTEN EXPLANATION

Rule 1300.71(d)(1) requires a health care service plan to provide a clear and accurate written explanation of the specific reasons for the action taken on claims received from providers of health care services.

The Department’s examination found that in three (3) out of 30 claims in the High Dollar Claims Samples reviewed had misleading denial reasons that did not include a complete or accurate explanation for the denial. The deficiencies were noted in samples HD-3, HD-7, and HD-10. The authorized days did not match the service dates on the claims and were denied for no authorizations when authorizations were on file.

The Plan was required to implement policies and procedures to ensure that all remittance advices are prepared with complete and accurate denial information for compliance with Rule 1300.71(a)(8)(F). The Plan was also required to provide the date of implementation and the management position(s) responsible for ensuring continued compliance.


1. The Plan acknowledges the issues identified regarding its denial codes and the need for clear and accurate explanations.

2. The Plan uses Remark Code Lists to ensure consistent and appropriate language in its denials.

3. The Plan conducted a thorough review of the existing Remark Code List. This was conducted on the following date: March 18, 2016. The Senior Director of Operations led the review workgroup. The workgroup consisted of representatives from the Claims Operations Team and Claims Projects Team. This workgroup will

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meet on a monthly basis, during the first quarter, and annually thereafter, to ensure EX codes are being used appropriately and accurately.

4. Based upon the internal review. modifications were made to accurately apply explanations that make clear distinctions between claim denials for no authorization vs. claim denials for days not authorized when an authorization exists. Code “A1” was found to not be specific enough. The Plan has decided to use code “DZ” as a more appropriate replacement, with the description of “DENY: SERVICE HAS EXCEEDED THE AUTHORIZED LIMIT.” This will allow for the authorized days to be paid and the non-authorized days to be denied.

5. These modifications are reflected in policy and a copy of this policy was submitted with Plan’s response.

6. These modifications were implemented and effective on April 5, 2016.

7. On April 5, 2016 the Plan modified its process to apply remark DZ (Deny: Service Has Exceeded the Authorized Limit) when authorized dates do not match submitted claim dates.

8. The Plan also created policies and procedures to detail the authorization process for creating new or modifying existing remark codes.

9. The Senior Director of Operations and Director of Claims Operations are responsible for overseeing the corrective action and for ensuring ongoing compliance.


4. RESCIND OR MODIFY AN AUTHORIZATION

Section 1371.8 states that a health care service plan that authorizes a specific type of treatment by a provider shall not rescind or modify this authorization after the provider renders the health care service in good faith and pursuant to the authorization for any reason, including, but not limited to, the plan’s subsequent rescission, cancellation, or modification of the enrollee’s or subscriber’s contract or the plan’s subsequent determination that it did not make an accurate determination of the enrollee’s or subscriber’s eligibility.

The Department found that the Plan rescinded its authorization in the review of High Dollar Claims Sample number 27. The case involved a patient who was admitted to a hospital on 8/1/2013 and discharged on 3/5/2014. During this period, the patient was enrolled with two (2) health plans as well as Medi-Cal. The Provider sent a split-bill to the Plan for dates of service from 1/1/2014 to 2/28/2014 based on its determination that the patient was enrolled with the Plan during this period.


The Plan’s authorization records shows that on 1/2/2014, the Plan received an authorization request from the Provider for service dates from 1/1/2014 to 3/5/2014. Within the authorization, 12 days from 1/1/2014 to 1/13/2014 were approved per nurse review, and 51 days from 1/13/2014 to 3/5/2014 were denied as not meeting acute care criteria. The “Member Eligibility and Benefits Verified?” box was checked on the Plan’s Trucare Authorization Form.

The Plan’s records also show that during January 2014 it received an updated eligibility list that voided the member’s coverage from 1/1/2014 to 1/31/2014.

Subsequent to its claim being denied for “coverage not in effect when services provided,” from 9/9/2014 to 3/11/2015, the Provider submitted three (3) consecutive Provider Dispute Resolutions (PDR) and they were all upheld by the Plan. On the third PDR, the Plan informed the Provider that the “Member was not eligible on date of admission; please bill primary insurance for entire stay.”

The Department found that the Plan had confirmed to the Provider that the patient was its enrollee when it authorized the 12 days of service. In accordance with Section 1371.8 above, the Provider rendered the health care service in good faith pursuant to the authorization; the Plan therefore should not rescind its authorization for the 12 days that it had authorized.

In response to this report, the Plan was required to provide evidence of payment for the authorized service for the claim sample number 27 along with interest and penalties as appropriate, and in compliance with the above Section. The Plan was also required to submit a CAP that included policies and procedures implemented to ensure that authorizations are not rescinded or modified after services are performed. The Plan was to state the date of implementation of the corrective action, the management position(s) responsible for ensuring compliance and the controls implemented for monitoring continued compliance.


1. The Plan reprocessed the inpatient hospital claim referenced.

2. The Plan submitted with its response a Claims Payment Details report which provides evidence of payment for authorized services, including applicable interest. On July 17, 2014, the surgery portion of the claim was paid with the additional room and board charges left unpaid. On April 14, 2016, the additional room and board charges were paid to include applicable interest. This report shows that the Plan made an additional payment of $19,658.44 for this claim.

3. The Plan amended its policies and procedures for Covered Benefits and Services and policies and procedures to detail Plan’s obligation to not rescind or modify authorizations after the provider renders the health care service in good faith and

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pursuant to the authorization for any reason. Plan submitted these documents with its response to the Preliminary Report.

4. The Plan conducted training of the following departments to ensure a full and complete understanding of this policy on January 26 and April 12, 2016.

5. On January 26, 2016, the Plan implemented the process referenced above to address this deficiency.

6. The Director of Operations along with the Director of Utilization Management is responsible for ensuring compliance with this corrective action.


5. REJECTION OF CLAIMS

Section 1300.77.4 states that every plan shall institute procedures whereby all claim forms received by the plan from providers of health care services for reimbursement on a fee-for-service basis and from subscribers and enrollees for reimbursement are maintained and accounted for in a manner which permits the determination of the date of receipt of any claim, the status of any claim, the dollar amount of unpaid claims at any time, and rapid retrieval of any claim.

The Department’s examination found that the Plan rejected about five (5) percent of claims that were submitted. These rejected claims were not accounted for in the Plan's claims system. Rule 1300.77.4 requires that every plan shall institute procedures whereby all claims on a fee-for-service basis received by a plan are maintained and accounted for in a manner which permits the determination of the date of receipt of any claim, the status of any claim, the dollar amount of unpaid claims at any time, and rapid retrieval of any claim. By rejecting claims outright, the Plan would not be able to meet the requirements of this Rule.

The Plan was required to submit a CAP to address the deficiency cited above. The CAP was to include evidence that all claims rejected from November 1, 2013 (date the Plan began operation) through the date of corrective action have been maintained and accounted for in a manner which permits the determination of the date of receipt, the status, and the dollar amount of unpaid claims, and rapid retrieval of any claim at any time. The Plan was to state the date of implementation of the corrective action, the management position(s) responsible for ensuring compliance, and the controls implemented for monitoring continued compliance.



The Plan maintains a log of all electronic claims batches submitted by its trading partners (Provider, Vendor and Clearinghouse). The log allows Plan to identify all rejected claims for reporting and servicing of provider inquiries. This log allows the Plan to maintain and account for the date of receipt of any claim, the status of any claim, the dollar amount of unpaid claims at any time, and rapid retrieval of any claim. The Plan believes its log of all submitted claims ensures compliance with the requirement that Plan ‘maintain and account for’ the determination of the date of receipt of any claim, the status of any claim, the dollar amount of unpaid claims at any time, and rapid retrieval of any claim.

The Plan’s procedures for accepting electronic claims are based on and compliant with the requirements set forth in the Health Insurance Portability and Accountability Act (HIPAA) for electronic claim submissions.

In alignment with the Centers for Medicare and Medicaid Services (CMS) electronic claim submission requirements, which are compliant with the HIPAA mandate, Plan rejects claims that are ‘unprocessable’, which according to CMS are claims with incomplete or missing required information, or any claim that contains complete and necessary information, but the information provided is invalid.

To ensure that the Plan and its trading partners maintain compliance with the mandate, the Plan has documented trading partner agreements that define the standards by which the Plan will accept and process electronic claims, which is further enumerated in the Plan’s EDI companion guide, Centene 837 Companion Guide. If the submitted claims fall outside of the HIPAA 5010 Technical Report 3 standard, the trading partner understands the claims will be rejected.

With respect to tracking rejected claims, the Plan maintains a log (referenced above) of all electronic claims batches submitted by Plan’s trading partners. The log allows the Plan to identify all rejected claims in a manner which permits the determination of the date of receipt, the status, and the dollar amount of unpaid claims, and rapid retrieval of any claim at any time. The Plan can access all claim and acknowledgement data less than 37 months old within an hour, and data older than 37 months is accessible within a week. The Plan submitted a sample rejection log for staff review in its response to the Preliminary Report.

The Department finds that the Plan’s compliance effort is responsive to the corrective action required. Therefore no further response is required.

B. PROVIDER DISPUTE RESOLUTION MECHANISM

1. PROVIDER DISPUTE DETERMINATION LETTER

Rule 1300.71.38(f) requires all health care service plans and their capitated providers that pay claims to resolve each provider dispute or amended provider dispute and issue a written determination stating the pertinent facts and explaining the reasons for its determination.


Rule 1300.71(a)(8)(S) sets forth practices, policies, and procedures that may constitute a basis for finding that a plan has engaged in a “demonstrable and unjust payment pattern” if it fails to issue a written determination letter for at least 95% of the provider disputes it receives, consistent with Rule 1300.71.38(e), over the course of any three month period.

The Department’s examination randomly selected 50 provider disputes with determination dates from July 1, 2015 through September 30, 2015. In all 50 provider disputes reviewed, the Plan did not provide a determination letter or a complete determination reason. The Plan sent an explanation of payments (EOP) or an incomplete utilization review nurse (URN) letter to the provider receiving payment without sending a determination letter. The information provided in the Plan’s EOP or URN letter did not provide sufficient information explaining the reasons for its determination.

The Plan was required to submit a CAP to address the deficiency cited above. The CAP was to include the policy and procedures implemented to ensure that each provider dispute is explained through the issuance of a determination letter. The Plan was to state the date of implementation of the corrective action, the management position(s) responsible for ensuring compliance, and the controls implemented for monitoring continued compliance.


1. The Plan enhanced its work process to provide a detailed claim disposition notice for all Provider Dispute Requests (PDR) received effective January 13, 2016. The Plan submitted a new notice, CHW Determination Letter Template, with its response to the Preliminary Report.

2. The Plan conducted training with the Claims Operations Team on the new policy on January 26 and February 12, 2016.

3. The Plan submitted modified Policies and Procedures with its response to indicate Evidence of Payment (EOP) documents are not provided in lieu of a formal PDR determination letter.

4. The Senior Director of Operations will be responsible for ongoing monitoring of compliance relating to the new processes.

5. Effective January 12, 2016, the Plan discontinued the process of sending a corrected EOP as notice of dispute determination for Provider Dispute Requests received.

6. As of January 13, 2016, the Plan enhanced its process to send formal determination letters which detail our position on the request. The Director of Claims Administration and Senior Director of Operations are responsible for oversight of the CAP to ensure compliance.


7. The Senior Director of Operations and Director of Claims Operations will be responsible for ensuring ongoing compliance.

8. The Plan’s Policies and Procedures are reviewed annually or as needed, depending on compliance and process improvement needs.


2. PROVIDER DISPUTE INTEREST AND PENALTY

Rule 1300.71.38 requires all health care service plans and their capitated providers that pay claims to establish a fast, fair and cost-effective dispute resolution mechanism to process and resolve contracted and non-contracted provider disputes. This rule requires that each mechanism comply with sections 1367(h), 1371, 1371.1, 1371.2, 1371.22, 1371.35, 1371.36, 1371.37, 1371.4, and 1371.8 of the Health and Safety Code and sections 1300.71, 1300.71.38, 1300.71.4, and 1300.77.4 of title 28.

Rule 1300.71.38(g) requires all health care service plans and their capitated providers that pay claims to pay any outstanding monies determined to be due, and all interest and penalties required under section 1371 and 1371.35 of the Health and Safety Code and Section 1300.71 of Title 28, if the provider dispute or amended provider dispute involves a claim and is determined in whole or in part in favor of the provider.

Rule 1300.71(i) requires health care service plans and their capitated providers that pay claims to pay interest when clean claims were processed late.

Rule 1300.71(j) requires health care service plans and their capitated providers that pay claims to pay the provider $10 for the late claim in addition to any amounts due when they failed to automatically include interest due on a late claim payment.

Rule 1300.71(a)(2) defines a complete claim as a claim or portion thereof, if separable, including attachments and supplemental information or documentation, which provides: “reasonable relevant information” and “information necessary to determine payer liability” as defined by Rule 1300.71(a)(10) and 1300.71(a)(11), respectively.

Rule 1300.71(a)(8)(K) sets forth practices, policies, and procedures that may constitute a basis for finding that a plan has engaged in a “demonstrable and unjust payment pattern”, if it fails to reimburse at least 95% of complete claims with the correct payment including the automatic payment of all interest and penalties due and owing over the course of any three month period.

The Department’s examination randomly selected 50 provider disputes with determination dates from July 1, 2015 through September 30, 2015. In three (3) of 50 provider disputes reviewed (a compliance rate of 94%), the Plan did not pay claims with interest and/or penalty. The deficiencies were noted in samples PDR-11, PDR-12, and PDR-40.

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The Plan was required to submit a CAP to substantiate the corrective actions implemented to comply with the above Rules. The CAP was to address the deficiencies cited above and include the following:

a. Identification of all provider disputes for which interest and penalties were notcorrectly paid, from November 1, 2013 through the date the corrective action wasimplemented by the Plan.

b. Evidence that interest and penalties, as appropriate, were paid retroactively for theclaims in provider disputes identified in paragraph “a”, above. This evidence was toinclude an electronic data file (Excel or dBase) or schedule that identified thefollowing:

• Claim number • PDR tracking number (if resulted from PDR process) • Date of service • Date original claim received • Date new information received (date claim was complete) • Date of receipt of complete claim • Total billed • Original total paid • Original paid date • Amount of adjustment paid (with check number) • Date adjustment paid/mailed • Amount of original interest paid • Original interest paid date • Number of days used to calculate interest • Amount of additional interest paid (with formula) • Amount of additional interest paid in remediation (total interest owed minus

previous interest paid) • Penalty amount paid • Date additional interest and penalty paid • Check number for additional interest and/or penalty • Provider name • ER or Non-ER indicator

c. The data file was to include the total number of claims and the total additional interestand late fee paid as a result of remediation.

d. Policy and procedures implemented to ensure the correct payment of interest and latefees on all late PDR claims, as a result of the deficiencies cited above, pursuant toSections 1371 and 1371.35.


e. State the date of implementation for each of the items in the above CAP, the management position(s) responsible for overseeing the CAP, and a description of the monitoring system implemented to ensure ongoing compliance.


Requirement a.: 1. The Plan conducted a review of claims accompanying a PDR from November 1, 2013

through December 31, 2015 to determine complete reimbursement of interest and penalty payments and to assess the extent to which interest and penalties were either not paid or underpaid. Any interest and penalty payments related to ER are being addressed and handled through the interest and penalty project for deficiency #A.1. This project represents PDR adjustments that are non-ER related.

2. The Plan undertook this review by taking the following steps: a. Data Analytics completed claims data extraction of PDR’s processed from 2013

through December 31, 2015.

b. All claims were evaluated to determine if interest was due by calculating the number of days between the date the ‘Corrected information was received’ and the date the claim was originally paid.

c. A comparison analysis of actual interest paid for each claim to the interest due on the claim was completed on April 12, 2016.

d. The Manager of Data Analytics & Reporting provided a final claims adjustment spreadsheet for claim dates from November 1, 2013 through December 31, 2015 which identified those claims in which interest was underpaid and the $10 penalty should be applied. The Plan submitted a Provider Dispute Interest and Penalties Report with its response to the Preliminary Report.

e. The Director of Claims Operations reviewed the analysis and validated the accuracy of the methodology used in compiling the report.

3. The Plan will conduct ongoing monitoring of the system to ensure that it puts in place any other system updates to ensure timely and accurate payments of interest and penalties.

4. The Plan has conducted training on this policy change to ensure a full understanding of the applicable California standards. Training was conducted on January 26, 2016.

Requirement b.: The Plan provided an Excel spreadsheet, Provider Dispute Interest and Penalties Report, containing the PDR claims identified above, which are complete and include evidence that interest and penalties, as appropriate, will be processed retroactively for the PDR claims identified.


Requirement c.: As indicated in Plan’s response in Requirement a. 1 above, any interest and penalty payments related to ER are being addressed and handled through the interest and penalty project for deficiency #A.1. The Plan processed 47 PDR adjustments that are non-ER related and paid additional interest of $1,008.85 and penalty of $730.00, or a total remediation of $1,738.85.

Requirement d.: The Plan submitted with its response a policy and procedure that was updated and approved on April 11, 2016 to address application of interest and penalty payments for late PDR claims.

The Plan also updated and submitted with its response policy and procedure, Provider Dispute Resolution, to reflect the requirement to send a final disposition letter on PDR’s. Section #7 under Submission of Provider Disputes addressees this deficiency to add interest and penalties required under section 1371 and 1371.35 of the Health and Safety Code.

Requirement e.: The Plan will validate the fix by conducting a weekly review of PDR claims for which interest was applied to confirm the system correction. The management person responsible for overseeing the CAP and ensuring continued compliance is the Senior Director of Operations, and the claims team.

The Plan submitted with its response a work plan timeline to detail actions being taken to complete the CAP by May 30, 2016. The Plan stated that it will validate the established fix by conducting a bi-monthly review of late PDR claims to ensure systems are properly calculating interest and applying the penalty when applicable.


C. OTHER COMPLIANCE ISSUES

1. FIDELITY BOND

Section 1351(q) and Rule 1300.76.3 require each plan to maintain at all times a fidelity bond. The fidelity bond shall provide for thirty (30) days’ notice to the Director prior to cancellation. The fidelity bond shall provide at least the minimum coverage for the plan, as required by the schedule in this Rule, and may contain a provision for a deductible amount that is not in excess of ten (10) percent of the required minimum bond coverage, but in no event shall the deductible amount be in excess of $100,000.

The Department’s examination disclosed that the Plan’s fidelity bond was not in compliance with the above Section and Rule. The Plan was covered under an umbrella policy of Centene Corporation, the Plan’s parent company. The policy did not specifically

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provide the Plan with an exclusive right to the minimum required coverage of $2,000,000, based on the Plan’s annual gross income, and maximum deductible of $100,000 as required by the above Section and Rule.

The Plan was required to submit to the Department a copy of a fidelity bond that provides $2,000,000 exclusive coverage to the Plan, with a maximum deductible of $100,000. The Plan was also required to state the management position(s) responsible for overseeing and ensuring continued compliance.

The Plan submitted a copy of its own fidelity bond, independent of the umbrella policy held by Centene Corporation. The fidelity bond obtained by the Plan meets the requirements of Section 1351(q) and Rule 1300.76.3.


2. MANAGEMENT CHANGES

Section 1352(c) provides that a plan shall, within five days, give written notice to the Director in the form as by rule may be prescribed, of any change in the officers, directors, partners, controlling shareholders, principal creditors, or persons occupying similar positions or performing similar functions, of the plan and of any management company of the plan, and of any parent company of the plan or management company. The Director may by rule define the positions, duties, and relationships which are referred to in this subdivision.

The Plan did not file an amendment with the Department in a timely manner, as required by Section 1352(c), for the personnel changes as indicated below:

a. On June 2, 2015, the Plan filed a notice of Resignation of Officers and Directors withthe Department via eFiling Number 20151437 for the following officers of the Plan:

• Wright Lassiter’s resignation from the Director position on December 12, 2014. The filing was 116 days late.

• Elaine Batchlor was appointed as Director effective May 7, 2015. The filing was 17 days late.

b. On July, 24 2015, the Plan filed a notice of Election of Officers and Directors withthe Department via eFiling Number 20151437-1 for the following officers of the Plan:

• Farid Hassan was appointed as Chief Medical Officer effective July 13, 2015. The filing was 9 days late.

The Plan was required to state the policies and procedures implemented to ensure that any changes in personnel are filed within five (5) working days as required by Section


1352(c). The Plan was also required to state the date of implementation and the management position(s) responsible for ensuring continued compliance with the Section stated above.


1. The Plan submitted with its response policy CA.COMP.XX: Regulatory Reporting of Personnel Changes, which defines the process and timelines for reporting personnel changes to both DMHC and Department of Health Care Services (DHCS), when applicable.

2. The management position responsible for ensuring the personnel changes are reported timely and accurately is the Compliance Officer.

3. The policy was implemented on April 11, 2016.

The Department finds that the Plan’s compliance effort is responsive to the corrective action required. Therefore no further response is required.

3. MONTHLY REPORTS

Rule 1300.84.3 sets forth the requirements for the filing of monthly reports with the Department. This rule requires that:

a) Each plan shall maintain internal procedures which provide one or more of its principal officers on at least a monthly basis with the information necessary for the report required pursuant to this section.

b) Each plan shall report to the Director the increase during any calendar quarter of the amount owed by the plan to providers for health care services, if the amount of such increase exceeds 10 percent of the amount owed at the close of the previous quarter. In the event the amount owed to a provider is disputed, the amount claimed as due by the provider shall control for the purposes of this section. This report shall be filed within 30 days after the close of the quarter for which the report is made.

The Department’s examination disclosed the Plan's total amount owed to providers increased by more than 10 percent from the preceding quarter for quarters ending: 3/31/2014 - 156% increase, 6/30/14 - 18% increase, 9/30/14 - 36% increase, and 3/31/15 - 60% increase.

The Plan was required to have policies and procedures that provide its principal officer(s) on at least a monthly basis, with the information necessary for the reports required by rule 1300.84.3 (b). On a going forward basis, the Plan was also required to report to the Director within 30 days after the close of the quarter for which the report is made, the increase during any calendar quarter of the amount owed by the plan to providers for


health care services, if the amount of such increase exceeds 10 percent of the amount owed at the close of the previous quarter. In addition, the Plan was also required to state the date of implementation, and the management position(s) responsible for ensuring continued compliance with the Rule stated above.


1. The Plan filed its first set of monthly financial statements on April 29, 2016 for the month ending March 31, 2016.

2. The Plan has drafted a new policy and procedure to address this process. The Plan provided a copy of the policy and procedure as an attachment to its response.

3. The Plan reviewed the general ledger, once all accounting entries were in, and did not note a change in amount due to providers of 10% or more, nor did its TNE fall below the minimum requirement.


4. INVESTMENT POLICY

Section 1346(a)(11) requires a plan to invest assets to meet the requirements of Section 1376. Investment s including any obligations set forth in Article 3 (commencing with Section 1170) of, and Article 4 (commencing with Section 1190) of, Chapter 2 Part 2 of Division 1 of the Insurance Code shall be considered acceptable. All other assets must be invested in a prudent manner.

The Department’s examination disclosed that the Plan did not have investment policies and procedures in place to ensure the Plan’s assets are invested in accordance with Section 1346(a)(11). The Plan’s Board of Directors approved and adopted the use of Centene Corporation’s Investment Policy on April 11, 2014. This investment policy did not incorporate and had no reference to any of the requirements of Section 1346(a)(11).

The Plan was required to develop its own investment policy and procedure or amend the adopted Centene Corporation’s Investment Policies and Procedures to reflect the requirements of the above cited Section. The Plan was also required to provide the Department with a copy of the revised investment policy in its response to the Preliminary Report. In addition, the Plan was required to state the date of implementation and the management position(s) responsible for ensuring continued compliance.

The Plan submitted an addendum to the adopted Centene Corporation’s Investment Policy and Procedures that reflected the requirements of the above sections with effective date of April 26, 2016.


The Department finds that the Plan’s compliance effort responsive to the corrective action required.

SECTION IV. NON-ROUTINE EXAMINATION

The Plan is advised that the Department may conduct a non-routine examination, in accordance with Rule 1300.82.1, to verify representations made to the Department by the Plan in response to this report. The cost of such examination will be charged to the Plan in accordance with Section 1382 (b).

No response is required to this Section.

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