Report 2006-035 All Recommendation Responses

Report 2006-035: Department of Health Services: It Has Not Yet Fully Implemented Legislation Intended to Improve the Quality of Care in Skilled Nursing Facilities (Release Date: February 2007)

Recommendation #1 To: Health Care Services, Department of

To provide more complete information to the Legislature on the reimbursement rate and fee systems, Health Services should include information on any savings to the General Fund in the reports its licensing division is required to prepare.

Agency Response*

DHCS will not be able to implement recommendation No 1 (2006-035, February 2007), the recommendation that general fund savings associated with the AB1629 rate-setting methodology and quality assurance fee (QAF) be noted in report the licensing division is required to prepare. General fund savings can no longer be determined as a result of the AB1629 methodology having significantly changed facility spending practices when compared to the previous rate setting methodology. Specifically, the previous methodology, which was a flat-rate methodology, reimbursed facilities at the same rate, regardless of their spending patterns, whereas the AB 1629 methodology, which is a facility-specific methodology, reimburses facilities based on their individual costs, which encourages facilities to increase spending to improve their infrastructure. Since the AB 1629 methodology has been in place for six years and current spending patterns have changed significantly from the previous methodology, a comparison of the two different methodologies is no longer valid.

  • Response Type†: Annual Follow Up
  • Response Date: October 2012

California State Auditor's Assessment of Status: Will Not Implement


Recommendation #2 To: Health Services, Department of

To reduce the risk of using flawed data to calculate reimbursement rates, Health Services should conduct all the audits of skilled nursing facilities called for in the Reimbursement Act.

Agency Response*

The Department has substantially complied with the audit requirements in the Reimbursement Act- Beginning in the 2007/2008 production year, the Department has made every effort to audit 100 percent of the Medi-Cal level B facilities on an annual basis, including a field audit once every three years- Facilities that undergo a change of ownership (CHOW) are not audited until the new owners file a qualifying cost report. The State Plan requires that when a CHOW occurs and the new owner does not file a cost report within six months, the facility receives the rate of the prior owner. (2009-041, p. 65)

  • Response Type†: Annual Follow Up
  • Response Date: January 2010

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #3 To: Health Services, Department of

To reduce the risk of using flawed data to calculate reimbursement rates, Health Services should Identify which audits conducted in fiscal years 2004-05 and 2005-06 were field audits to determine whether it met the field audit requirement of the Reimbursement Act.

Agency Response*

The attached worksheet lists the facilities audited by the Department during the last three production years and also indicates whether the audit performed was a field or desk audit. Reports for production year 2007 can be downloaded at www.dhcs.ca.gov/dataandstats. Prior production year audit reports can be provided upon request. (2009-041, p. 65)

  • Response Type†: Annual Follow Up
  • Response Date: January 2010

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #4 To: Health Services, Department of

To ensure that it collects the Quality Assurance Fees (fees) it is entitled to, Health Services should promptly initiate collection efforts for facilities that are delinquent in making their fee payments by either offsetting amounts owed against Medi-Cal reimbursements or levying a penalty against facilities that do not participate in Medi-Cal.

Agency Response*

The Department of Health Care Services (DHCS) has fully implemented this recommendation.

DHCS collection efforts are performed on a continuous basis. DHCS continues notifying facilities of outstanding fee balances and is receiving regular responses from those facilities. In addition, DHCS has completed reconciling its fee payment records for the 2006/07 rate year and has a process in place for collecting aged fee receivables. (2008-041, p. 42)

  • Response Type†: Annual Follow Up
  • Response Date: January 2009

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #5 To: Health Services, Department of

To ensure that it collects the Quality Assurance Fees (fees) it is entitled to, Health Services should reconcile the fee payments made by facilities to the estimated payments due and follow-up on all significant variances.

Agency Response*

The Department of Health Care Services (DHCS) has fully implemented this recommendation.

DHCS collection efforts are performed on a continuous basis. DHCS continues notifying facilities of outstanding fee balances and is receiving regular responses from those facilities. In addition, DHCS has completed reconciling its fee payment records for the 2006/07 rate year and has a process in place for collecting aged fee receivables. (2008-041, p. 42)

  • Response Type†: Annual Follow Up
  • Response Date: January 2009

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #6 To: Health Services, Department of

To hold the consultant contracted by Health Services to the intended terms and conditions of the contract to develop and administer the reimbursement rate system, Health Services should amend the contract to clearly describe the scope of work and to include a statement that Health Services will obtain the logic and business rules of the reimbursement rate system and a specific date that Health Services will take over developing reimbursement rates for facilities.

Agency Response*

The Department of Health Care Services (DHCS) has fully implemented this recommendation.

In its one year progress report, DHCS reported that it had prepared a contract amendment that included a turnover plan. The turnover plan required the consultant to provide the logic and business rules of the reimbursement rate system and train DHCS employees to operate the system.

DHCS staff has received the training necessary to operate the reimbursement rate system and has created a software application capable of calculating reimbursement rates for the upcoming 2009-10 rate year. (2008-041, pp. 42-43)

  • Response Type†: Annual Follow Up
  • Response Date: January 2009

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #7 To: Health Services, Department of

To hold the consultant contracted by Health Services to the intended terms and conditions of the contract to develop and administer the reimbursement rate system, Health Services should Include in its 60-day response to this audit report or sooner, formal and detailed documentation that includes all of the complexities of the reimbursement rate development methodology and evidence that the methodology, when used, produces the reimbursement rates Health Services published for fiscal year 2005-06.

Agency Response*

The Department of Health Care Services (DHCS) has fully implemented this recommendation.

In its one year progress report, DHCS reported that it had prepared a contract amendment that included a turnover plan. The turnover plan required the consultant to provide the logic and business rules of the reimbursement rate system and train DHCS employees to operate the system.

DHCS staff has received the training necessary to operate the reimbursement rate system and has created a software application capable of calculating reimbursement rates for the upcoming 2009-10 rate year. (2008-041, pp. 42-43)

  • Response Type†: Annual Follow Up
  • Response Date: January 2009

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #8 To: Health Services, Department of

To hold the consultant contracted by Health Services to the intended terms and conditions of the contract to develop and administer the reimbursement rate system, Health Services should follow best practices for contracting in the future by including clear language to describe the products or services it expects from the agreement.

Agency Response*

The Department of Health Care Services (DHCS) has fully implemented this recommendation.

In its one year progress report, DHCS reported that it had prepared a contract amendment that included a turnover plan. The turnover plan required the consultant to provide the logic and business rules of the reimbursement rate system and train DHCS employees to operate the system.

DHCS staff has received the training necessary to operate the reimbursement rate system and has created a software application capable of calculating reimbursement rates for the upcoming 2009-10 rate year. (2008-041, pp. 42-43)

  • Response Type†: Annual Follow Up
  • Response Date: January 2009

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #9 To: Health Services, Department of

To reduce its costs and maximize savings to the General Fund, Health Services should continue to learn how to use the database and then train its staff to calculate the rates for fiscal year 2007-08.

Agency Response*

The Department of Health Care Services (DHCS) has fully implemented this recommendation.

In its one year progress report, DHCS reported that it had prepared a contract amendment that included a turnover plan. The turnover plan required the consultant to provide the logic and business rules of the reimbursement rate system and train DHCS employees to operate the system.

DHCS staff has received the training necessary to operate the reimbursement rate system and has created a software application capable of calculating reimbursement rates for the upcoming 2009-10 rate year. (2008-041, pp. 42-43)

  • Response Type†: Annual Follow Up
  • Response Date: January 2009

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #10 To: Health Services, Department of

To reduce its costs and maximize savings to the General Fund, Health Services should amend the contract with Navigant to include training Health Services staff in using the rate calculation database and facilitate staff takeover of managing the annual calculations.

Agency Response*

The Department of Health Care Services (DHCS) has fully implemented this recommendation.

In its one year progress report, DHCS reported that it had prepared a contract amendment that included a turnover plan. The turnover plan required the consultant to provide the logic and business rules of the reimbursement rate system and train DHCS employees to operate the system.

DHCS staff has received the training necessary to operate the reimbursement rate system and has created a software application capable of calculating reimbursement rates for the upcoming 2009-10 rate year. (2008-041, pp. 42-43)

  • Response Type†: Annual Follow Up
  • Response Date: January 2009

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #11 To: Health Services, Department of

To develop a mechanism to formally document changes, Health Services should formalize a rate change process that documents the reason for a rate change and provides a notification of the rate change to EDS.

Agency Response*

Health Services reported that it has implemented a system that provides an audit trail for any facility rate change. It further stated that it has developed and implemented procedure changes in the systems programming language. (2008-406, p. 6)

  • Response Type†: 6-Month
  • Response Date: August 2007

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #12 To: Health Services, Department of

To develop a mechanism to formally document changes, Health Services should formalize a change process that documents and records any changes either it or Navigant makes to the reimbursement rate systems programming language.

Agency Response*

Health Services reported that it has implemented a system that provides an audit trail for any facility rate change. It further stated that it has developed and implemented procedure changes in the systems programming language. (2008-406, p. 6)

  • Response Type†: 6-Month
  • Response Date: August 2007

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #13 To: Health Services, Department of

To ensure that its contract consultant authorizes disbursements of Medi-Cal funds only to facilities entitled to them, Health Services should further investigate the possibility that duplicate payments were authorized by the contractor beyond those we noted to ensure that the magnitude of the problem is identified and corrected. This would include researching all payment types authorized by the contractor since at least October 2005.

Agency Response*

After learning that its contractor, EDS, issued duplicate payments, Health Services reported that it took immediate corrective action by implementing a special processing guideline that discontinued the procedure to override suspended claims. It also conducted an investigation to determine the magnitude of the flawed procedure. In its six-month response, Health Services stated that it has also completed its investigation of Medical, Outpatient, and Vision claims and found a similar processing error that resulted in additional erroneous duplicate payments of certain claims. It further reported that it immediately issued a special processing guideline to temporarily correct the processing error and, as of September 2007, has developed the criteria that will permanently correct the error. (2009-406, p. 13).

  • Response Type†: 1-Year
  • Response Date: February 2008

California State Auditor's Assessment of Status: Fully Implemented


Recommendation #14 To: Health Services, Department of

To ensure that its contract consultant authorizes disbursements of Medi-Cal funds only to facilities entitled to them, Health Services should research and identify all the duplicate payments authorized by its contractor and recoup those payments.

Agency Response*

Recovery from one overpaid Medi-Cal provider remains outstanding. Recovery is dependent upon offsetting any future state income taxes overpayments which normally take place during the month of April. The provider has been unresponsive to the Departments demands for voluntary repayment.

The Third Party Liability Recovery Division has an offset in place to obtain any State Income Tax Refund the provider may receive in the future until the debt is fully satisfied. To date, this offset has resulted in the recovery of $1,181.00 of the original $2,344.32 identified as a duplicate overpayment. The current balance being pursued is $1,643.49 including interest.

A total of 63 separate provider overpayment cases were referred to the Third Party Liability Recovery Division (TPLRD) for collection action. A total of $197,355.71 has been recovered by the TPLRD as of October 14, 2011. (2011-041, p. 50)

  • Response Type†: Annual Follow Up
  • Response Date: January 2012

California State Auditor's Assessment of Status: Fully Implemented


All Recommendations in 2006-035

Response Type refers to the interval in which the auditee is providing the State Auditor with their status in implementing recommendations made in an audit report. Auditees must submit a response regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year or subsequent to one year.

*Agency responses received after June 2013 are posted verbatim.


Report type

Report type
















© 2013, California State Auditor | Privacy Policy | Conditions of Use | Download Adobe PDF Reader